297A.68 Business exemptions.
Subdivision 1. Scope. The gross receipts from the sale of, and storage, distribution, use, or consumption of the items contained in this section are specifically exempted from the taxes imposed by this chapter.
Subd. 2. Materials consumed in industrial production. (a) Materials stored, used, or consumed in industrial production of personal property intended to be sold ultimately at retail are exempt, whether or not the item so used becomes an ingredient or constituent part of the property produced. Materials that qualify for this exemption include, but are not limited to, the following:
(1) chemicals, including chemicals used for cleaning food processing machinery and equipment;
(2) materials, including chemicals, fuels, and electricity purchased by persons engaged in industrial production to treat waste generated as a result of the production process;
(3) fuels, electricity, gas, and steam used or consumed in the production process, except that electricity, gas, or steam used for space heating, cooling, or lighting is exempt if (i) it is in excess of the average climate control or lighting for the production area, and (ii) it is necessary to produce that particular product;
(4) petroleum products and lubricants;
(5) packaging materials, including returnable containers used in packaging food and beverage products;
(6) accessory tools, equipment, and other items that are separate detachable units with an ordinary useful life of less than 12 months used in producing a direct effect upon the product; and
(7) the following materials, tools, and equipment used in metalcasting: crucibles, thermocouple protection sheaths and tubes, stalk tubes, refractory materials, molten metal filters and filter boxes, degassing lances, and base blocks.
(b) This exemption does not include:
(1) machinery, equipment, implements, tools, accessories, appliances, contrivances and furniture and fixtures, except those listed in paragraph (a), clause (6); and
(2) petroleum and special fuels used in producing or generating power for propelling ready-mixed concrete trucks on the public highways of this state.
(c) Industrial production includes, but is not limited to, research, development, design or production of any tangible personal property, manufacturing, processing (other than by restaurants and consumers) of agricultural products (whether vegetable or animal), commercial fishing, refining, smelting, reducing, brewing, distilling, printing, mining, quarrying, lumbering, generating electricity, the production of road building materials, and the research, development, design, or production of computer software. Industrial production does not include painting, cleaning, repairing or similar processing of property except as part of the original manufacturing process.
Subd. 3. Materials used in providing certain taxable services. (a) Materials stored, used, or consumed in providing a taxable service listed in section 297A.61, subdivision 3, paragraph (g), clause (6), intended to be sold ultimately at retail are exempt.
(b) This exemption includes, but is not limited to:
(1) chemicals, lubricants, packaging materials, seeds, trees, fertilizers, and herbicides, if these items are used or consumed in providing the taxable service;
(2) chemicals used to treat waste generated as a result of providing the taxable service;
(3) accessory tools, equipment, and other items that are separate detachable units used in providing the service and that have an ordinary useful life of less than 12 months; and
(4) fuel, electricity, gas, and steam used or consumed in the production process, except that electricity, gas, or steam used for space heating, cooling, or lighting is exempt if (i) it is in excess of average climate control or lighting, and (ii) it is necessary to produce that particular service.
(c) This exemption does not include machinery, equipment, implements, tools, accessories, appliances, contrivances, furniture, and fixtures used in providing the taxable service.
Subd. 4. Taconite production materials. Mill liners, grinding rods, and grinding balls that are substantially consumed in the production of taconite are exempt when sold to or stored, used, or consumed by persons taxed under the in-lieu provisions of chapter 298.
Subd. 5. Capital equipment. (a) Capital equipment is exempt. The tax must be imposed and collected as if the rate under section 297A.62, subdivision 1, applied, and then refunded in the manner provided in section 297A.75.
"Capital equipment" means machinery and equipment purchased or leased, and used in this state by the purchaser or lessee primarily for manufacturing, fabricating, mining, or refining tangible personal property to be sold ultimately at retail if the machinery and equipment are essential to the integrated production process of manufacturing, fabricating, mining, or refining. Capital equipment also includes machinery and equipment used to electronically transmit results retrieved by a customer of an on-line computerized data retrieval system.
(b) Capital equipment includes, but is not limited to:
(1) machinery and equipment used to operate, control, or regulate the production equipment;
(2) machinery and equipment used for research and development, design, quality control, and testing activities;
(3) environmental control devices that are used to maintain conditions such as temperature, humidity, light, or air pressure when those conditions are essential to and are part of the production process;
(4) materials and supplies used to construct and install machinery or equipment;
(5) repair and replacement parts, including accessories, whether purchased as spare parts, repair parts, or as upgrades or modifications to machinery or equipment;
(6) materials used for foundations that support machinery or equipment;
(7) materials used to construct and install special purpose buildings used in the production process;
(8) ready-mixed concrete equipment in which the ready-mixed concrete is mixed as part of the delivery process regardless if mounted on a chassis and leases of ready-mixed concrete trucks; and
(9) machinery or equipment used for research, development, design, or production of computer software.
(c) Capital equipment does not include the following:
(1) motor vehicles taxed under chapter 297B;
(2) machinery or equipment used to receive or store raw materials;
(3) building materials, except for materials included in paragraph (b), clauses (6) and (7);
(4) machinery or equipment used for nonproduction purposes, including, but not limited to, the following: plant security, fire prevention, first aid, and hospital stations; support operations or administration; pollution control; and plant cleaning, disposal of scrap and waste, plant communications, space heating, cooling, lighting, or safety;
(5) farm machinery and aquaculture production equipment as defined by section 297A.61, subdivisions 12 and 13;
(6) machinery or equipment purchased and installed by a contractor as part of an improvement to real property; or
(7) any other item that is not essential to the integrated process of manufacturing, fabricating, mining, or refining.
(d) For purposes of this subdivision:
(1) "Equipment" means independent devices or tools separate from machinery but essential to an integrated production process, including computers and computer software, used in operating, controlling, or regulating machinery and equipment; and any subunit or assembly comprising a component of any machinery or accessory or attachment parts of machinery, such as tools, dies, jigs, patterns, and molds.
(2) "Fabricating" means to make, build, create, produce, or assemble components or property to work in a new or different manner.
(3) "Integrated production process" means a process or series of operations through which tangible personal property is manufactured, fabricated, mined, or refined. For purposes of this clause, (i) manufacturing begins with the removal of raw materials from inventory and ends when the last process prior to loading for shipment has been completed; (ii) fabricating begins with the removal from storage or inventory of the property to be assembled, processed, altered, or modified and ends with the creation or production of the new or changed product; (iii) mining begins with the removal of overburden from the site of the ores, minerals, stone, peat deposit, or surface materials and ends when the last process before stockpiling is completed; and (iv) refining begins with the removal from inventory or storage of a natural resource and ends with the conversion of the item to its completed form.
(4) "Machinery" means mechanical, electronic, or electrical devices, including computers and computer software, that are purchased or constructed to be used for the activities set forth in paragraph (a), beginning with the removal of raw materials from inventory through completion of the product, including packaging of the product.
(5) "Machinery and equipment used for pollution control" means machinery and equipment used solely to eliminate, prevent, or reduce pollution resulting from an activity described in paragraph (a).
(6) "Manufacturing" means an operation or series of operations where raw materials are changed in form, composition, or condition by machinery and equipment and which results in the production of a new article of tangible personal property. For purposes of this subdivision, "manufacturing" includes the generation of electricity or steam to be sold at retail.
(7) "Mining" means the extraction of minerals, ores, stone, or peat.
(8) "On-line data retrieval system" means a system whose cumulation of information is equally available and accessible to all its customers.
(9) "Primarily" means machinery and equipment used 50 percent or more of the time in an activity described in paragraph (a).
(10) "Refining" means the process of converting a natural resource to an intermediate or finished product, including the treatment of water to be sold at retail.
Subd. 6. Special tooling. Special tooling is exempt. "Special tooling" means tools, dies, jigs, patterns, gauges, and other special tools that have value and use only for the buyer and for the use for which they are made. An item has value and use only to the buyer if the item is not standard enough to be stocked or ordered from a catalog or other sales literature, but must be produced in accordance with special requirements peculiar to the buyer and not common to someone else whose conditions for possible use of the material are reasonably similar to the buyer's.
Subd. 7. Air cooling equipment. Equipment used for air cooling is exempt, if the equipment is purchased for conversion or replacement of an existing groundwater-based once-through cooling system as required under section 103G.271, subdivision 5.
Subd. 8. Pollution control equipment; steel reprocessing. Pollution control equipment purchased by a steel reprocessing firm is exempt if the equipment is necessary to meet state or federal emission standards. For purposes of this subdivision:
(1) "pollution control equipment" means equipment used for the purpose of eliminating, preventing, or reducing air, land, or water pollution during or as a result of the manufacturing process; and
(2) "steel reprocessing firm" means a firm whose primary business is the recovery of steel from automobiles, appliances, and other steel products and the rerefining of this recovered metal into new steel products.
Subd. 9. Super Bowl admissions. The granting of the privilege of admission to a world championship football game sponsored by the National Football League is exempt.
Subd. 10. Publications; publication materials. Tangible personal property that is used or consumed in producing any publication regularly issued at average intervals not exceeding three months is exempt, and any such publication is exempt. "Publication" includes, but is not limited to, a qualified newspaper as defined by section 331A.02, together with any supplements or enclosures. "Publication" does not include magazines and periodicals sold over the counter. Tangible personal property that is used or consumed in producing a publication does not include machinery, equipment, implements, tools, accessories, appliances, contrivances, furniture, and fixtures used in the publication, or fuel, electricity, gas, or steam used for space heating or lighting.
Advertising contained in a publication is a nontaxable service and is exempt. Persons who publish or sell newspapers are engaging in a nontaxable service with respect to gross receipts realized from such news-gathering or news-publishing activities, including the sale of advertising.
Subd. 11. Advertising materials. Materials designed to advertise and promote the sale of merchandise or services are exempt if these materials are mailed or transferred to a person outside the state for use solely outside the state. Mailing and reply envelopes and cards used exclusively in connection with these advertising and promotional materials are included in this exemption. The exemption applies regardless of where the mailing occurs. The storage of these materials in the state for the purpose of subsequently shipping or otherwise transferring the material out of state is also exempt if the other conditions in this subdivision are met.
Subd. 12. Wind energy conversion systems. Wind energy conversion systems, as defined in section 216C.06, subdivision 19, that are used as an electric power source are exempt, and the materials used to manufacture, install, construct, repair, or replace them are exempt.
Subd. 13. Outstate transport or delivery. (a) Tangible personal property is exempt if all of the following conditions are met:
(1) the property, without intermediate use, is shipped or transported outside Minnesota by the purchaser or is stored, processed, fabricated or manufactured into, attached to or incorporated into other tangible personal property that is transported or shipped outside Minnesota; and
(2) the property is used in a trade or business outside Minnesota after being shipped or transported outside of Minnesota, and is not returned to Minnesota, except in the course of interstate commerce; and
(3) the property is either (i) not subject to tax in the state or country to which it is transported for storage or use, or (ii) to be used in other states or countries as part of a maintenance contract.
(b) For purposes of this subdivision, storage or processing, fabricating, manufacturing, attaching to, or incorporating into other property is not intermediate use.
Subd. 14. Property in transit. Tangible personal property is exempt if all of the following conditions are met:
(1) it is shipped or brought into Minnesota by a for-hire carrier;
(2) without use, it is kept in a public warehouse;
(3) it is kept for the purpose of being later transported outside Minnesota; and
(4) after storage, it is used solely outside Minnesota, except in the course of interstate commerce.
Subd. 15. Outstate delivery by seller. Property is exempt if:
(1) it is delivered in one of the following ways:
(i) delivery by the seller to a common carrier for delivery outside Minnesota;
(ii) placement in the United States mail or parcel post directed to the purchaser outside Minnesota; or
(iii) delivery to the purchaser outside Minnesota by means of the seller's own delivery vehicles; and
(2) it is not later returned to a point within Minnesota, except in the course of interstate commerce.
Subd. 16. Packing materials. Packing materials used to pack and ship household goods are exempt if the ultimate destination of the goods is outside Minnesota and if the goods are not later returned to a point within Minnesota, except in the course of interstate commerce.
Subd. 17. Ships used in interstate commerce. Repair, replacement, and rebuilding parts and materials, and lubricants, for ships or vessels used or to be used principally in interstate or foreign commerce are exempt. Vessels with a gross registered tonnage of at least 3,000 tons are exempt.
Subd. 18. Custom computer software. The design, development, writing, translation, fabrication, lease, or transfer for a consideration of title or possession of a custom computer program is exempt. "Custom computer program" means a computer program prepared to the special order of the customer, either in the form of written procedures or contained on tapes, discs, cards, or another device, or any required documentation or manuals designed to facilitate the use of the custom computer program transferred. It includes those services represented by separately stated charges for modifications to an existing prewritten program that are prepared to the special order of the customer. It does not include a "canned" or prewritten computer program that is held or existing for general or repeated sale or lease, even if the prewritten or "canned" program was initially developed on a custom basis or for in-house use. Modification to an existing prewritten program to meet the customer's needs is custom computer programming only to the extent of the modification.
Subd. 19. Petroleum products. The following petroleum products are exempt:
(1) products upon which a tax has been imposed and paid under chapter 296A, and for which no refund has been or will be allowed because the buyer used the fuel for nonhighway use;
(2) products that are used in the improvement of agricultural land by constructing, maintaining, and repairing drainage ditches, tile drainage systems, grass waterways, water impoundment, and other erosion control structures;
(4) products purchased by an ambulance service licensed under chapter 144E;
(5) products used in a passenger snowmobile, as defined in section 296A.01, subdivision 39, for off-highway business use as part of the operations of a resort as provided under section 296A.16, subdivision 2, clause (2); or
(6) products purchased by a state or a political subdivision of a state for use in motor vehicles exempt from registration under section 168.012, subdivision 1, paragraph (b).
Subd. 20. Natural gas in vehicles. Natural gas to be used as a fuel in vehicles propelled by natural gas is exempt.
Subd. 21. Repealed, 1Sp2001 c 5 art 12 s 95
Subd. 22. Copies of court reporter documents. Transcripts or copies of transcripts of verbatim testimony are exempt if produced and sold by court reporters or other transcribers of legal proceedings to individuals or entities that are parties to or representatives of parties to the proceeding to which the transcript relates.
Subd. 23. Automatic fire-safety sprinkler systems. Automatic fire-safety sprinkler systems described in section 273.11, subdivision 6a, are exempt.
Subd. 24. Waste processing equipment. Equipment used for processing solid or hazardous waste at a resource recovery facility, as defined in section 115A.03, subdivision 28, is exempt, including pollution control equipment at a resource recovery facility that burns refuse-derived fuel or mixed municipal solid waste as its primary fuel. An electric generation facility that processes and utilizes waste tires as its primary fuel is a resource recovery facility for the purposes of this section.
Subd. 25. Sale of property used in a trade or business. (a) The sale of tangible personal property primarily used in a trade or business is exempt if the sale is not made in the normal course of business of selling that kind of property and if one of the following conditions is satisfied:
(1) the sale occurs in a transaction subject to or described in section 118, 331, 332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, or 1033 of the Internal Revenue Code;
(2) the sale is between members of a controlled group as defined in section 1563(a) of the Internal Revenue Code;
(3) the sale is a sale of farm machinery;
(4) the sale is a farm auction sale;
(5) the sale is a sale of substantially all of the assets of a trade or business; or
(6) the total amount of gross receipts from the sale of trade or business property made during the calendar month of the sale and the preceding 11 calendar months does not exceed $1,000.
The use, storage, distribution, or consumption of tangible personal property acquired as a result of a sale exempt under this subdivision is also exempt.
(b) For purposes of this subdivision, the following terms have the meanings given.
(1) A "farm auction" is a public auction conducted by a licensed auctioneer if substantially all of the property sold consists of property used in the trade or business of farming and property not used primarily in a trade or business.
(2) "Trade or business" includes the assets of a separate division, branch, or identifiable segment of a trade or business if, before the sale, the income and expenses attributable to the separate division, branch, or identifiable segment could be separately ascertained from the books of account or record (the lease or rental of an identifiable segment does not qualify for the exemption).
(3) A "sale of substantially all of the assets of a trade or business" must occur as a single transaction or a series of related transactions within the 12-month period beginning on the date of the first sale of assets intended to qualify for the exemption provided in paragraph (a), clause (5).
Subd. 26. Repealed, 2002 c 377 art 3 s 26
Subd. 27. Renumbered 297A.67, subd 30
Subd. 28. Medical supplies. Medical supplies purchased by a licensed health care facility or licensed health care professional to provide medical treatment to residents or patients are exempt. The exemption does not apply to medical equipment or components of medical equipment, laboratory supplies, radiological supplies, and other items used in providing medical services. For purposes of this subdivision, "medical supplies" means adhesive and nonadhesive bandages, gauze pads and strips, cotton applicators, antiseptics, nonprescription drugs, eye solution, and other similar supplies used directly on the resident or patient in providing medical services.
Subd. 29. Prizes. Tangible personal property that will be given as prizes to players in games of skill or chance is exempt if the games are conducted at events such as community festivals, fairs, and carnivals and if the events last less than six days. This exemption does not apply to property awarded as prizes in connection with lawful gambling as defined in section 349.12 or the state lottery.
Subd. 30. Television commercials. Tangible personal property primarily used or consumed in the preproduction, production, or postproduction of a television commercial is exempt. Any such commercial, regardless of the medium in which it is transferred, is exempt. "Preproduction" and "production" include, but are not limited to, all activities related to the preparation for shooting and the shooting of television commercials, including film processing. Equipment rented for the preproduction and production activities is exempt. "Postproduction" includes, but is not limited to, all activities related to the finishing and duplication of television commercials. This exemption does not apply to tangible personal property used primarily in administration, general management, or marketing. Machinery and equipment purchased for use in producing such commercials and fuel, electricity, gas, or steam used for space heating or lighting are not exempt under this subdivision.
Subd. 31. Waste management containers and compactors. Compactors and waste collection containers are exempt if they are purchased by a waste management service provider and are used in providing waste management services as defined in section 297H.01, subdivision 12. A waste management service provider that does not remit tax on customer charges or lease or rental payments for compactors and waste collection containers under chapter 297H is ineligible for this exemption.
Subd. 32. Events located outside Minnesota. Tickets or admissions to places of amusement located outside Minnesota or to athletic events to be held outside Minnesota are exempt.
Subd. 33. Patent, trademark, and copyright drawings and documents. A drawing, diagram, or similar or related document or a copy of such a document is exempt if the document:
(1) is produced and sold by a patent drafter; and
(2) is for use in:
(i) a patent, trademark, or copyright application to be filed with government agencies;
(ii) an application to the federal Food and Drug Administration for approval of a medical device; or
(iii) a judicial or quasi-judicial proceeding, including mediation and arbitration, relating to the validity of or legal rights under a patent, trademark, or copyright.
For purposes of this subdivision, a "patent drafter" is a person who prepares illustrative documents required in the preparation of intellectual property applications.
Subd. 34. Machinery and equipment for ski areas. Tangible personal property used or consumed primarily and directly for tramways at ski areas or in snowmaking and snow-grooming operations at ski hills, ski slopes, or ski trails, including machinery, equipment, fuel, electricity, and water additives used in the production and maintenance of machine-made snow, is exempt.
Subd. 35. Telecommunications equipment. (a) Telecommunications machinery and equipment purchased or leased for use directly by a telecommunications service provider primarily in the provision of telecommunications services that are ultimately to be sold at retail are exempt, regardless of whether purchased by the owner, a contractor, or a subcontractor.
(b) For purposes of this subdivision, "telecommunications machinery and equipment" includes, but is not limited to:
(1) machinery, equipment, and fixtures utilized in receiving, initiating, amplifying, processing, transmitting, retransmitting, recording, switching, or monitoring telecommunications services, such as computers, transformers, amplifiers, routers, bridges, repeaters, multiplexers, and other items performing comparable functions;
(2) machinery, equipment, and fixtures used in the transportation of telecommunications services, radio transmitters and receivers, satellite equipment, microwave equipment, and other transporting media, but not wire, cable, fiber, poles, or conduit;
(3) ancillary machinery, equipment, and fixtures that regulate, control, protect, or enable the machinery in clauses (1) and (2) to accomplish its intended function, such as auxiliary power supply, test equipment, towers, heating, ventilating, and air conditioning equipment necessary to the operation of the telecommunications equipment; and software necessary to the operation of the telecommunications equipment; and
(4) repair and replacement parts, including accessories, whether purchased as spare parts, repair parts, or as upgrades or modifications to qualified machinery or equipment.
(c) For purposes of this subdivision, "telecommunications services" means telecommunications services as defined in section 297A.61, subdivision 24, paragraph (a), only.
Subd. 36. Delivery or distribution charges; direct mail. Charges for the delivery or distribution of direct mail are exempt if the charges are separately stated on an invoice or similar billing document given to the purchaser.
Subd. 37. Job opportunity building zones. (a) Purchases of tangible personal property or taxable services by a qualified business, as defined in section 469.310, are exempt if the property or services are primarily used or consumed in a job opportunity building zone designated under section 469.314.
(b) Purchase and use of construction materials and supplies for construction of improvements to real property in a job opportunity building zone are exempt if the improvements after completion of construction are to be used in the conduct of a qualified business, as defined in section 469.310. This exemption applies regardless of whether the purchases are made by the business or a contractor.
(c) The exemptions under this subdivision apply to a local sales and use tax regardless of whether the local sales tax is imposed on the sales taxable as defined under this chapter.
(d) This subdivision applies to sales, if the purchase was made and delivery received during the duration of the zone.
Subd. 38. Biotechnology and health sciences industry zone. (a) Purchases of tangible personal property or taxable services by a qualified business, as defined in section 469.330, are exempt if the property or services are primarily used or consumed in a biotechnology and health sciences industry zone designated under section 469.334.
(b) Purchase and use of construction materials and supplies for construction of improvements to real property in a biotechnology and health sciences industry zone are exempt if the improvements after completion of construction are to be used in the conduct of a qualified business, as defined in section 469.330. This exemption applies regardless of whether the purchases are made by the business or a contractor.
(c) The exemptions under this subdivision apply to a local sales and use tax regardless of whether the local sales tax is imposed on the sales taxable as defined under this chapter.
(d)(1) The tax on sales of goods or services exempted under this subdivision are imposed and collected as if the applicable rate under section 297A.62 applied. Upon application by the purchaser, on forms prescribed by the commissioner, a refund equal to the tax paid must be paid to the purchaser. The application must include sufficient information to permit the commissioner to verify the sales tax paid and the eligibility of the claimant to receive the credit. No more than two applications for refunds may be filed under this subdivision in a calendar year. The provisions of section 289A.40 apply to the refunds payable under this subdivision.
(2) The amount required to make the refunds is annually appropriated to the commissioner of revenue.
(3) The aggregate amount refunded to a qualified business must not exceed the amount allocated to the qualified business under section 469.335.
(e) This subdivision applies only to sales made during the duration of the designation of the zone.
Subd. 39. Preexisting bids or contracts. (a) The sale of tangible personal property or services is exempt from tax for a period of six months from the effective date of the law change that results in the imposition of the tax under this chapter if:
(1) the act imposing the tax does not have transitional effective date language for existing construction contracts and construction bids; and
(2) the requirements of paragraph (b) are met.
(b) A sale is tax exempt under paragraph (a) if it meets the requirements of either clause (1) or (2):
(1) For a construction contract:
(i) the goods or services sold must be used for the performance of a bona fide written lump sum or fixed price construction contract;
(ii) the contract must be entered into before the date the goods or services become subject to the sales tax;
(iii) the contract must not provide for allocation of future taxes; and
(iv) for each qualifying contract the contractor must give the seller documentation of the contract on which an exemption is to be claimed.
(2) For a bid:
(i) the goods or services sold must be used pursuant to an obligation of a bid or bids;
(ii) the bid or bids must be submitted and accepted before the date the goods or services became subject to the sales tax;
(iii) the bid or bids must not be able to be withdrawn, modified, or changed without forfeiting a bond; and
(iv) for each qualifying bid, the contractor must give the seller documentation of the bid on which an exemption is to be claimed.
HIST: 2000 c 418 art 1 s 12,44 subd 3; 2000 c 490 art 8 s 8,14,15; 1Sp2001 c 5 art 12 s 6,45-54,93; 2002 c 377 art 3 s 11; art 9 s 12; 2003 c 127 art 1 s 23-25; art 6 s 10,11; 1Sp2003 c 21 art 1 s 13; art 2 s 8
Official Publication of the State of Minnesota
Revisor of Statutes