1.1 	A bill for an act
1.2 	relating to taxation; providing filing requirements
1.3 	for use tax; limiting the de minimus exemption;
1.4 	providing instructions to the commissioner; amending
1.5 	Minnesota Statutes 2004, sections 289A.11, subdivision
1.6 	1; 289A.18, subdivision 4, by adding a subdivision;
1.7 	297A.67, subdivision 21; 297A.83, subdivision 1.
1.8 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.9 	Section 1. Minnesota Statutes 2004, section 289A.11,
1.10 	subdivision 1, is amended to read:
1.11 		Subdivision 1.Return required.  Except as provided in
1.12 	section 289A.18, subdivision subdivisions 4 and 4a, for the
1.13 	month in which taxes imposed by chapter 297A are payable, or for
1.14 	which a return is due, a return for the preceding reporting
1.15 	period must be filed with the commissioner in the form and
1.16 	manner the commissioner prescribes.  A person making sales at
1.17 	retail at two or more places of business may file a consolidated
1.18 	return subject to rules prescribed by the commissioner.  In
1.19 	computing the dollar amount of items on the return, the amounts
1.20 	are rounded off to the nearest whole dollar, disregarding
1.21 	amounts less than 50 cents and increasing amounts of 50 cents to
1.22 	99 cents to the next highest dollar.
1.23 	Notwithstanding this subdivision, a person who is not
1.24 	required to hold a sales tax permit under chapter 297A and who
1.25 	makes annual purchases of less than $18,500 that are subject to
1.26 	the use tax imposed by section 297A.63, may file an annual use
2.1 	tax return on a form prescribed by the commissioner.  If a
2.2 	person who qualifies for an annual use tax reporting period is
2.3 	required to obtain a sales tax permit or makes use tax purchases
2.4 	in excess of $18,500 during the calendar year, the reporting
2.5 	period must be considered ended at the end of the month in which
2.6 	the permit is applied for or the purchase in excess of $18,500
2.7 	is made and a return must be filed for the preceding reporting
2.8 	period.
2.9 	
EFFECTIVE DATE. This section is effective for purchases
2.10 	made on and after July 1, 2005.

2.11 	Sec. 2. Minnesota Statutes 2004, section 289A.18,
2.12 	subdivision 4, is amended to read:
2.13 		Subd. 4.Sales and use tax returns.  (a) Sales and use
2.14 	tax returns must be filed on or before the 20th day of the month
2.15 	following the close of the preceding reporting period,
2.16 	except that annual use tax returns provided for under section
2.17 	289A.11, subdivision 1, must be filed by April 15 following the
2.18 	close of the calendar year subdivision 4a, in the case of
2.19 	individuals.  Annual use tax returns of businesses, including
2.20 	sole proprietorships, and annual sales tax returns must be filed
2.21 	by February 5 following the close of the calendar year.
2.22 	(b) Returns for the June reporting period filed by
2.23 	retailers required to remit their June liability under section
2.24 	289A.20, subdivision 4, paragraph (b), are due on or before
2.25 	August 20.
2.26 	(c) If a retailer has an average sales and use tax
2.27 	liability, including local sales and use taxes administered by
2.28 	the commissioner, equal to or less than $500 per month in any
2.29 	quarter of a calendar year, and has substantially complied with
2.30 	the tax laws during the preceding four calendar quarters, the
2.31 	retailer may request authorization to file and pay the taxes
2.32 	quarterly in subsequent calendar quarters.  The authorization
2.33 	remains in effect during the period in which the retailer's
2.34 	quarterly returns reflect sales and use tax liabilities of less
2.35 	than $1,500 and there is continued compliance with state tax
2.36 	laws.
3.1 	(d) If a retailer has an average sales and use tax
3.2 	liability, including local sales and use taxes administered by
3.3 	the commissioner, equal to or less than $100 per month during a
3.4 	calendar year, and has substantially complied with the tax laws
3.5 	during that period, the retailer may request authorization to
3.6 	file and pay the taxes annually in subsequent years.  The
3.7 	authorization remains in effect during the period in which the
3.8 	retailer's annual returns reflect sales and use tax liabilities
3.9 	of less than $1,200 and there is continued compliance with state
3.10 	tax laws.
3.11 	(e) The commissioner may also grant quarterly or annual
3.12 	filing and payment authorizations to retailers if the
3.13 	commissioner concludes that the retailers' future tax
3.14 	liabilities will be less than the monthly totals identified in
3.15 	paragraphs (c) and (d).  An authorization granted under this
3.16 	paragraph is subject to the same conditions as an authorization
3.17 	granted under paragraphs (c) and (d).
3.18 	(f) A taxpayer who is a materials supplier may report gross
3.19 	receipts either on:
3.20 	(1) the cash basis as the consideration is received; or
3.21 	(2) the accrual basis as sales are made.
3.22 	As used in this paragraph, "materials supplier" means a person
3.23 	who provides materials for the improvement of real property; who
3.24 	is primarily engaged in the sale of lumber and building
3.25 	materials-related products to owners, contractors,
3.26 	subcontractors, repairers, or consumers; who is authorized to
3.27 	file a mechanics lien upon real property and improvements under
3.28 	chapter 514; and who files with the commissioner an election to
3.29 	file sales and use tax returns on the basis of this paragraph.
3.30 	(g) Notwithstanding paragraphs (a) to (f), a seller that is
3.31 	not a Model 1, 2, or 3 seller, as those terms are used in the
3.32 	Streamlined Sales and Use Tax Agreement, that does not have a
3.33 	legal requirement to register in Minnesota, and that is
3.34 	registered under the agreement, must file a return by February 5
3.35 	following the close of the calendar year in which the seller
3.36 	initially registers, and must file subsequent returns on
4.1 	February 5 on an annual basis in succeeding years.
4.2 	Additionally, a return must be submitted on or before the 20th
4.3 	day of the month following any month by which sellers have
4.4 	accumulated state and local tax funds for the state in the
4.5 	amount of $1,000 or more.
4.6 	
EFFECTIVE DATE. This section is effective for purchases
4.7 	on and after July 1, 2005.

4.8 	Sec. 3. Minnesota Statutes 2004, section 289A.18, is
4.9 	amended by adding a subdivision to read:
4.10 		Subd. 4a.Use tax returns for individuals. Individuals
4.11 	who are subject to the use tax imposed under section 297A.63 may
4.12 	file and pay use tax owed on purchases for personal use under
4.13 	their Social Security number as follows:
4.14 	(1) on the individual income tax return for the calendar
4.15 	year in which the purchases are made;
4.16 	(2) on the form for making payments of the individual
4.17 	income tax estimated payments under section 289A.25 for the
4.18 	calendar quarter in which the purchases are made; or 
4.19 	(3) on the individual use tax return, in the form
4.20 	prescribed by the commissioner, for purchases made in a calendar
4.21 	quarter, to be filed on or before the 20th day of the month
4.22 	following the close of the preceding quarter.
4.23 	
EFFECTIVE DATE. This section is effective for purchases
4.24 	made on and after July 1, 2005, and for income tax returns
4.25 	required to be filed for tax years beginning after December 31,
4.26 	2004.

4.27 	Sec. 4. Minnesota Statutes 2004, section 297A.67,
4.28 	subdivision 21, is amended to read:
4.29 		Subd. 21.De minimis exemption.  A purchase subject to
4.30 	use tax under section 297A.63 is exempt if (1) the purchase is
4.31 	made by an individual for personal use, and (2) the total
4.32 	purchases that are subject to the use tax do not exceed $770 in
4.33 	the calendar year, and (3) the gross income as defined in
4.34 	section 290.01, subdivision 20, of the individual does not
4.35 	exceed $40,000 for a single individual, or $60,000 for married
4.36 	individuals filing a joint income tax return.  For purposes of
5.1 	this subdivision, "personal use" includes purchases for gifts.
5.2 	If an individual makes purchases subject to use tax of more than
5.3 	$770 in the calendar year, the individual must pay the use tax
5.4 	on the entire amount.  This exemption does not apply to
5.5 	purchases made from retailers who are required or registered to
5.6 	collect taxes under this chapter.
5.7 	
EFFECTIVE DATE. This section is effective for purchases
5.8 	on and after July 1, 2005.

5.9 	Sec. 5. Minnesota Statutes 2004, section 297A.83,
5.10 	subdivision 1, is amended to read:
5.11 		Subdivision 1.Persons applying.  (a) A retailer required
5.12 	to collect and remit sales taxes under section 297A.66 shall
5.13 	file with the commissioner an application for a permit.
5.14 	(b) A retailer making retail sales from outside this state
5.15 	to a destination within this state who is not required to obtain
5.16 	a permit under paragraph (a) may nevertheless voluntarily file
5.17 	an application for a permit.
5.18 	(c) The commissioner may require any person or class of
5.19 	persons obligated to file a use tax return under section
5.20 	289A.11, subdivision 3, to file an application for a permit,
5.21 	except an individual allowed to file and pay use tax under
5.22 	section 289A.18, subdivision 4a, is not required to obtain a
5.23 	permit.
5.24 	
EFFECTIVE DATE. This section is effective for purchases
5.25 	on and after July 1, 2005.

5.26 	Sec. 6. USE TAX ENFORCEMENT.
 5.27 	The commissioner shall establish a use tax enforcement unit
5.28 	within the Department of Revenue to conduct direct compliance
5.29 	activities that will increase payment of use tax.  The
5.30 	commissioner shall inform and educate taxpayers about the
5.31 	requirement to pay use tax.  The commissioner shall also conduct
5.32 	an information campaign targeted to higher income individuals,
5.33 	attorneys, accountants, and tax preparers to advise individuals
5.34 	and tax professionals of the obligation to report and pay use
5.35 	tax.

5.36 	EFFECTIVE DATE. This section is effective July 1, 2005.