Minnesota – Sales and Use Tax Legislative Bulletin

SALT Report 2741 – The Minnesota Department of Revenue released a bulletin that summarizes the 2013 legislative changes to the State’s sales and use tax laws.

Drop Shipment Sales

Minnesota Statute 297A.665 (b) has been amended to provides that in the case of drop shipment sales, a seller engaged in drop shipping may claim a resale exemption based on an exemption certificate provided by its customer or reseller, or any other acceptable information that will verify the resale exemption.  This applies regardless of whether the customer or reseller is registered to collect and remit sales and use taxes in the state. These provisions were effective June 30, 2013.

Multiple Points of Use

Minnesota Statute 297A.668 has been amended to add subsection (6a).  This subsection allows a purchaser of digital goods, computer software that is delivered electronically, or a service to source the sales to multiple locations, provided that at the time of sale the purchaser knows that these items will be concurrently used in more than one taxing jurisdiction.  The purchaser must provide the seller with an exemption certificate indicating multiple points of use at the time of purchase.  The purchaser must use a reasonable and consistent apportionment method to allocate the tax and be able to document their method in their books and records. These provisions were effective June 30, 2013.

Expanded Sales Tax Base

Digital Products – Minnesota Statutes 2977A.61 (3) (4) (10) (38) (45) and (50 – 56) and 297A.68 (2) have been amended to reflect that:

  • Sales tax is imposed on the retail sale and purchase of specified and other digital products
  • Tangible personal property now includes specified and other digital products, unless specifically exempted
  • Specified and other digital products transferred electronically are not tangible personal property
  • Other digital products means greeting cards, and online video or electronic games when transferred electronically

These provisions were effective June 30, 2013.

Repair and Maintenance Services – Minnesota Statute 297A.61 (3) has been amended to reflect that sales and use tax is imposed on services purchased by businesses for the repair and maintenance of electronic and precision equipment and commercial/industrial machinery and equipment. These provisions were effective June 30, 2013.

Exemptions

Detective, Security, Burglar, Fire Alarm, and Armored Car Services – Minnesota Statute 297A.61 3(g)(6)(iv) has been amended to provide that electronic surveillance services provided by any organization that monitors persons place on in-home detention are exempt from sales and use tax. Previously, only non-profit organizations that provided these services were exempt. These provisions were effective June 30, 2013.

Drugs and Medical Devices – Minnesota Statute 297A.67 (7) and (7a) have been amended to reflect that purchases of all drugs and medical devices covered by Medicare and Medicaid are exempt.  The definition of durable medical equipment now includes equipment used to repair or replace parts in equipment for single patient use.  The exemption also applies to accessories and supplies required for the effective use of durable medical equipment. These provisions were effective June 30, 2013.

Capital Equipment – Minnesota Statute 297A.68 (5) has been amended to provide an upfront exemption for capital equipment.  The amendment also deletes references to sales tax refunds, eligible person, and applications as they are unnecessary with an upfront exemption. These provisions are effective August 31, 2014.

Biopharmaceutical Manufacturing Facility – Minnesota Statute 297A.71 (45) and 297A.75 have been amended to reflect that materials, supplies, and capital equipment incorporated into the construction, improvement, or expansion of a Biopharmaceutical Manufacturing Facility are exempt.  The facility must manufacture biologics and make a total capital investment of at least $50 million and create and maintain 190 full time employees. This exemption is retroactive to December 31, 2012 and expires July 1, 2019.

For Further Information

Minnesota Department of Revenue – Sales and Use Tax Legislative Bulletin