Minnesota – Omnibus Tax Bill Provides New Exemptions

SALT Report 2545 – On May 23, 2013 Minnesota Governor Mark Dayton signed an omnibus tax bill that that creates several new sales and use tax exemptions. The provisions are generally effective for sales and purchases made after June 30, 2013, unless otherwise noted.

Greater Minnesota Businesses

A qualified business operating in a greater Minnesota city for at least one year may qualify for a sales tax exemption for purchases of tangible personal property and taxable services that are primarily used or consumed in greater Minnesota. The exemption is effective for sales and purchases made after June 30, 2014. To qualify for exemption, a business must:

  • Pay or agree to pay in the future to each employee, compensation and benefits in an amount that is equal to at least 120% of the federal poverty level for a family of four,
  • Plan and agree to expand its employment in one or more cities in greater Minnesota by a specified minimum number of employees,
  • Enter into a business agreement that pledges to satisfy minimum expansion requirements within three years of executing the agreement, and
  • Receive certification from the Commissioner of Employment and Economic Development
  • The tangible personal property or services must be primarily used or consumed in greater Minnesota, and the purchase must be made and delivery received during the period the business is certified as a qualified business

The purchase and use of construction materials, supplies, and equipment used to improve real property in greater Minnesota are exempt if the improvements will be used by the qualified business in the course of business. This exemption applies regardless of whether the purchases are made by the business or a contractor.

The exemption requires that the tax on eligible purchases must be imposed and collected, and then refunded to the business. However, no more than $7 million may be refunded in a fiscal year for all purchases under this exemption. Refunds will be disbursed in the order in which they are received.

Aircraft Equipment and Parts

Sales or purchases of the following items and any related installation charges are exempt from sales and use tax: equipment and parts necessary for the repair and maintenance of aircraft, and equipment and parts necessary to upgrade and improve the aircraft. The exemption applies to aircraft operated under Federal Aviation Regulations, Parts 91 and 135.

Capital Equipment

The exemption for capital equipment is amended to allow taxpayers to purchase the equipment tax-free, rather than paying tax and applying for a refund. This applies to sales and purchases made after August 31, 2014.

Drugs and Medical Devices

The exemption for drugs and medical devices has been expanded to include purchases covered by Medicare and Medicaid; single patient use items of durable medical equipment; accessories and supplies required for durable medical equipment for at-home use; and accessories and supplies required for prosthetic devices.

Qualified Refurbished Data Centers

The exemption for qualified data centers is expanded to include “qualified refurbished data centers.” The amendment also reduces the minimum investment costs and minimum square footage requirements.

Critical Access Dental Providers

The exemption for hospitals and outpatient surgical centers has been expanded to exempt sales to critical access dental providers. The exemption covers items used to provide critical access dental care services. This exemption is effective retroactively for sales and purchases made after June 30, 2007, with refund claims allowed until June 30, 2014.

Construction Exemptions

Materials, supplies, and capital equipment used in the construction, improvement, or expansion of a bio-pharmaceutical manufacturing facility that meets certain employment and investment requirements are exempt from sales and use tax. This exemption is effective retroactively to capital investments made and jobs created after December 31, 2012, and for sales and purchases made after December 31, 2012, and before July 1, 2019.

Materials, supplies, and equipment used to construct or improve a research and development facility that meets certain requirements are exempt from sales and use tax. This exemption applies to sales and purchases made after June 30, 2013, and before September 1, 2015.

Materials, supplies, capital equipment, fixtures, and privately owned infrastructure used to construct, improve, or expand an industrial measurement manufacturing and controls facility that meets certain requirements are exempt from sales and use tax. This exemption applies to sales and purchases made after June 30, 2013, and before December 31, 2015.

Materials, supplies, and equipment used to construct and improve publicly owned buildings that are included in a development plan for a destination medical center in Rochester are exempt from sales and use tax. This exemption applies to sales and purchases made after June 30, 2015, and before July 1, 2049.

For Further Information

Minnesota State Legislature – House Finance 677, Laws 2013