1.1                          A bill for an act 
  1.2             relating to taxation; repealing the sales tax on 
  1.3             health club memberships; amending Minnesota Statutes 
  1.4             1997 Supplement, sections 297A.01, subdivision 3; and 
  1.5             297A.44, subdivision 1, as amended. 
  1.6   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.7      Section 1.  Minnesota Statutes 1997 Supplement, section 
  1.8   297A.01, subdivision 3, is amended to read: 
  1.9      Subd. 3.  A "sale" and a "purchase" includes, but is not 
  1.10  limited to, each of the following transactions: 
  1.11     (a) Any transfer of title or possession, or both, of 
  1.12  tangible personal property, whether absolutely or conditionally, 
  1.13  and the leasing of or the granting of a license to use or 
  1.14  consume tangible personal property other than manufactured homes 
  1.15  used for residential purposes for a continuous period of 30 days 
  1.16  or more, for a consideration in money or by exchange or barter; 
  1.17     (b) The production, fabrication, printing, or processing of 
  1.18  tangible personal property for a consideration for consumers who 
  1.19  furnish either directly or indirectly the materials used in the 
  1.20  production, fabrication, printing, or processing; 
  1.21     (c) The furnishing, preparing, or serving for a 
  1.22  consideration of food, meals, or drinks.  "Sale" or "purchase" 
  1.23  does not include: 
  1.24     (1) meals or drinks served to patients, inmates, or persons 
  1.25  residing at hospitals, sanitariums, nursing homes, senior 
  2.1   citizens homes, and correctional, detention, and detoxification 
  2.2   facilities; 
  2.3      (2) meals or drinks purchased for and served exclusively to 
  2.4   individuals who are 60 years of age or over and their spouses or 
  2.5   to the handicapped and their spouses by governmental agencies, 
  2.6   nonprofit organizations, agencies, or churches or pursuant to 
  2.7   any program funded in whole or part through 42 USCA sections 
  2.8   3001 through 3045, wherever delivered, prepared or served; or 
  2.9      (3) meals and lunches served at public and private schools, 
  2.10  universities, or colleges. 
  2.11  Notwithstanding section 297A.25, subdivision 2, taxable food or 
  2.12  meals include, but are not limited to, the following:  
  2.13     (i) food or drinks prepared by the retailer for immediate 
  2.14  consumption either on or off the retailer's premises.  For 
  2.15  purposes of this subdivision, "food or drinks prepared for 
  2.16  immediate consumption" includes any food product upon which an 
  2.17  act of preparation including, but not limited to, cooking, 
  2.18  mixing, sandwich making, blending, heating, or pouring has been 
  2.19  performed by the retailer so the food product may be immediately 
  2.20  consumed by the purchaser.  For purposes of this subdivision, 
  2.21  "premises" means the total space and facilities, including 
  2.22  buildings, grounds, and parking lots that are made available or 
  2.23  that are available for use by the retailer or customer for the 
  2.24  purpose of sale or consumption of prepared food and drinks.  
  2.25  Food and drinks sold within a building or grounds which require 
  2.26  an admission charge for entrance are presumed to be sold for 
  2.27  consumption on the premises.  The premises of a caterer is the 
  2.28  place where the catered food or drinks are served; 
  2.29     (ii) ice cream, ice milk, or frozen yogurt products 
  2.30  including novelties, cones, sundaes, and snow cones, sold in 
  2.31  single or individual servings.  For purposes of this 
  2.32  subdivision, "single or individual servings" does not include 
  2.33  products prepackaged and sold in bulk containers or packaging; 
  2.34     (iii) soft drinks and other beverages including all 
  2.35  carbonated and noncarbonated beverages or drinks sold in liquid 
  2.36  form except beverages or drinks which contain milk or milk 
  3.1   products, beverages or drinks containing 15 or more percent 
  3.2   fruit juice, or noncarbonated and noneffervescent bottled water 
  3.3   sold in individual containers of one-half gallon or more in 
  3.4   size; 
  3.5      (iv) gum, candy, and candy products, except when sold for 
  3.6   fundraising purposes by a nonprofit organization that provides 
  3.7   educational and social activities primarily for young people 18 
  3.8   years of age and under; 
  3.9      (v) ice; 
  3.10     (vi) all food sold from vending machines, pushcarts, lunch 
  3.11  carts, motor vehicles, or any other form of vehicle except home 
  3.12  delivery vehicles; 
  3.13     (vii) party trays; 
  3.14     (viii) all meals and single servings of packaged snack food 
  3.15  sold in restaurants and bars; and 
  3.16     (ix) bakery products prepared by the retailer for 
  3.17  consumption on the retailer's premises; 
  3.18     (d) The granting of the privilege of admission to places of 
  3.19  amusement, recreational areas, or athletic events, except a 
  3.20  world championship football game sponsored by the national 
  3.21  football league, and the privilege of having access to and the 
  3.22  use of amusement devices, tanning facilities, reducing salons, 
  3.23  steam baths, turkish baths, health clubs, and spas or athletic 
  3.24  facilities; 
  3.25     (e) The furnishing for a consideration of lodging and 
  3.26  related services by a hotel, rooming house, tourist court, motel 
  3.27  or trailer camp and of the granting of any similar license to 
  3.28  use real property other than the renting or leasing thereof for 
  3.29  a continuous period of 30 days or more; 
  3.30     (f) The furnishing for a consideration of electricity, gas, 
  3.31  water, or steam for use or consumption within this state, or 
  3.32  local exchange telephone service, intrastate toll service, and 
  3.33  interstate toll service, if that service originates from and is 
  3.34  charged to a telephone located in this state.  Telephone service 
  3.35  does not include services purchased with prepaid telephone 
  3.36  calling cards.  Telephone service includes paging services and 
  4.1   private communication service, as defined in United States Code, 
  4.2   title 26, section 4252(d), as amended through December 31, 1991, 
  4.3   except for private communication service purchased by an agent 
  4.4   acting on behalf of the state lottery.  The furnishing for a 
  4.5   consideration of access to telephone services by a hotel to its 
  4.6   guests is a sale under this clause.  Sales by municipal 
  4.7   corporations in a proprietary capacity are included in the 
  4.8   provisions of this clause.  The furnishing of water and sewer 
  4.9   services for residential use shall not be considered a sale.  
  4.10  The sale of natural gas to be used as a fuel in vehicles 
  4.11  propelled by natural gas shall not be considered a sale for the 
  4.12  purposes of this section; 
  4.13     (g) The furnishing for a consideration of cable television 
  4.14  services, including charges for basic service, charges for 
  4.15  premium service, and any other charges for any other 
  4.16  pay-per-view, monthly, or similar television services; 
  4.17     (h) The furnishing for a consideration of parking services, 
  4.18  whether on a contractual, hourly, or other periodic basis, 
  4.19  except for parking at a meter; 
  4.20     (i) The furnishing for a consideration of services listed 
  4.21  in this paragraph: 
  4.22     (i) laundry and dry cleaning services including cleaning, 
  4.23  pressing, repairing, altering, and storing clothes, linen 
  4.24  services and supply, cleaning and blocking hats, and carpet, 
  4.25  drapery, upholstery, and industrial cleaning.  Laundry and dry 
  4.26  cleaning services do not include services provided by coin 
  4.27  operated facilities operated by the customer; 
  4.28     (ii) motor vehicle washing, waxing, and cleaning services, 
  4.29  including services provided by coin-operated facilities operated 
  4.30  by the customer, and rustproofing, undercoating, and towing of 
  4.31  motor vehicles; 
  4.32     (iii) building and residential cleaning, maintenance, and 
  4.33  disinfecting and exterminating services; 
  4.34     (iv) detective services, security services, burglar, fire 
  4.35  alarm, and armored car services; but not including services 
  4.36  performed within the jurisdiction they serve by off-duty 
  5.1   licensed peace officers as defined in section 626.84, 
  5.2   subdivision 1, or services provided by a nonprofit organization 
  5.3   for monitoring and electronic surveillance of persons placed on 
  5.4   in-home detention pursuant to court order or under the direction 
  5.5   of the Minnesota department of corrections; 
  5.6      (v) pet grooming services; 
  5.7      (vi) lawn care, fertilizing, mowing, spraying and sprigging 
  5.8   services; garden planting and maintenance; tree, bush, and shrub 
  5.9   pruning, bracing, spraying, and surgery; indoor plant care; 
  5.10  tree, bush, shrub and stump removal; and tree trimming for 
  5.11  public utility lines.  Services performed under a construction 
  5.12  contract for the installation of shrubbery, plants, sod, trees, 
  5.13  bushes, and similar items are not taxable; 
  5.14     (vii) massages, except when provided by a licensed health 
  5.15  care facility or professional or upon written referral from a 
  5.16  licensed health care facility or professional for treatment of 
  5.17  illness, injury, or disease; and 
  5.18     (viii) the furnishing for consideration of lodging, board 
  5.19  and care services for animals in kennels and other similar 
  5.20  arrangements, but excluding veterinary and horse boarding 
  5.21  services. 
  5.22  The services listed in this paragraph are taxable under section 
  5.23  297A.02 if the service is performed wholly within Minnesota or 
  5.24  if the service is performed partly within and partly without 
  5.25  Minnesota and the greater proportion of the service is performed 
  5.26  in Minnesota, based on the cost of performance.  In applying the 
  5.27  provisions of this chapter, the terms "tangible personal 
  5.28  property" and "sales at retail" include taxable services and the 
  5.29  provision of taxable services, unless specifically provided 
  5.30  otherwise.  Services performed by an employee for an employer 
  5.31  are not taxable under this paragraph.  Services performed by a 
  5.32  partnership or association for another partnership or 
  5.33  association are not taxable under this paragraph if one of the 
  5.34  entities owns or controls more than 80 percent of the voting 
  5.35  power of the equity interest in the other entity.  Services 
  5.36  performed between members of an affiliated group of corporations 
  6.1   are not taxable.  For purposes of this section, "affiliated 
  6.2   group of corporations" includes those entities that would be 
  6.3   classified as a member of an affiliated group under United 
  6.4   States Code, title 26, section 1504, as amended through December 
  6.5   31, 1987, and who are eligible to file a consolidated tax return 
  6.6   for federal income tax purposes; and 
  6.7      (j) A "sale" and a "purchase" includes the transfer of 
  6.8   computer software, meaning information and directions that 
  6.9   dictate the function performed by data processing equipment.  A 
  6.10  "sale" and a "purchase" does not include the design, 
  6.11  development, writing, translation, fabrication, lease, or 
  6.12  transfer for a consideration of title or possession of a custom 
  6.13  computer program; and. 
  6.14     (k) The granting of membership in a club, association, or 
  6.15  other organization if: 
  6.16     (1) the club, association, or other organization makes 
  6.17  available for the use of its members sports and athletic 
  6.18  facilities (without regard to whether a separate charge is 
  6.19  assessed for use of the facilities); and 
  6.20     (2) use of the sports and athletic facilities is not made 
  6.21  available to the general public on the same basis as it is made 
  6.22  available to members.  
  6.23  Granting of membership includes both one-time initiation fees 
  6.24  and periodic membership dues.  Sports and athletic facilities 
  6.25  include golf courses, tennis, racquetball, handball and squash 
  6.26  courts, basketball and volleyball facilities, running tracks, 
  6.27  exercise equipment, swimming pools, and other similar athletic 
  6.28  or sports facilities.  The provisions of this paragraph do not 
  6.29  apply to camps or other recreation facilities owned and operated 
  6.30  by an exempt organization under section 501(c)(3) of the 
  6.31  Internal Revenue Code of 1986, as amended through December 31, 
  6.32  1992, for educational and social activities for young people 
  6.33  primarily age 18 and under.  
  6.34     Sec. 2.  Minnesota Statutes 1997 Supplement, section 
  6.35  297A.44, subdivision 1, as amended by Laws 1997, Third Special 
  6.36  Session chapter 3, section 24, is amended to read: 
  7.1      Subdivision 1.  (a) Except as provided in paragraphs (b) to 
  7.2   (d), all revenues, including interest and penalties, derived 
  7.3   from the excise and use taxes imposed by sections 297A.01 to 
  7.4   297A.44 shall be deposited by the commissioner in the state 
  7.5   treasury and credited to the general fund.  
  7.6      (b) All excise and use taxes derived from sales and use of 
  7.7   property and services purchased for the construction and 
  7.8   operation of an agricultural resource project, from and after 
  7.9   the date on which a conditional commitment for a loan guaranty 
  7.10  for the project is made pursuant to section 41A.04, subdivision 
  7.11  3, shall be deposited in the Minnesota agricultural and economic 
  7.12  account in the special revenue fund.  The commissioner of 
  7.13  finance shall certify to the commissioner the date on which the 
  7.14  project received the conditional commitment.  The amount 
  7.15  deposited in the loan guaranty account shall be reduced by any 
  7.16  refunds and by the costs incurred by the department of revenue 
  7.17  to administer and enforce the assessment and collection of the 
  7.18  taxes.  
  7.19     (c) All revenues, including interest and penalties, derived 
  7.20  from the excise and use taxes imposed on sales and purchases 
  7.21  included in section 297A.01, subdivision 3, paragraphs 
  7.22  paragraph (d) and (k), clauses (1) and (2), must be deposited by 
  7.23  the commissioner in the state treasury, and credited as follows: 
  7.24     (1) first to the general obligation special tax bond debt 
  7.25  service account in each fiscal year the amount required by 
  7.26  section 16A.661, subdivision 3, paragraph (b); and 
  7.27     (2) after the requirements of clause (1) have been met, the 
  7.28  balance must be credited to the general fund. 
  7.29     (d) The revenues, including interest and penalties, 
  7.30  collected under section 297A.135, subdivision 5, shall be 
  7.31  deposited by the commissioner in the state treasury and credited 
  7.32  to the general fund.  By July 15 of each year the commissioner 
  7.33  shall transfer to the highway user tax distribution fund an 
  7.34  amount equal to the excess fees collected under section 
  7.35  297A.135, subdivision 5, for the previous calendar year. 
  7.36     Sec. 3.  [EFFECTIVE DATE.] 
  8.1      Sections 1 and 2 are effective for sales and purchases 
  8.2   occurring after June 30, 1998.