Bill Text: MN HF1908 | 2011-2012 | 87th Legislature | Introduced
Bill Title: Individual income, corporate franchise, petroleum and motor fuels, gambling, cigarette and tobacco, solid waste management, minerals occupation, and insurance taxes repealed; lost revenue replaced with a comprehensive general tax; and constitutional amendment proposed.
Sponsorship: Partisan Bill (Republican 1)
Status: (Introduced - Dead) 2012-01-24 - Introduction and first reading, referred to Taxes [HF1908 Detail]
Download: Minnesota-2011-HF1908-Introduced.html
1.2relating to taxes; repealing the individual income and corporate franchise tax,
1.3petroleum and motor fuels taxes, gambling taxes, cigarette and tobacco taxes,
1.4solid waste management taxes, minerals occupation tax, and insurance taxes; and
1.5replacing the lost revenue with a comprehensive general sales tax;amending
1.6Minnesota Statutes 2010, sections 297A.62, subdivisions 1, 1a; 297A.66,
1.7subdivision 3; proposing coding for new law in Minnesota Statutes, chapter
1.8297A; repealing Minnesota Statutes 2010, sections 297A.61, subdivisions
1.92, 4, 10, 12, 13, 16a, 16b, 16c, 17, 17a, 17b, 18, 30, 31, 32, 33, 34, 36, 37,
1.1038, 46; 297A.62, subdivision 3; 297A.63, subdivision 2; 297A.64; 297A.65;
1.11297A.67; 297A.68, subdivisions 1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 16,
1.1217, 19, 20, 22, 23, 24, 25, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40,
1.1341; 297A.69; 297A.70, subdivisions 4, 5, 7, 8, 9, 11, 12, 13, 14, 15, 16, 17;
1.14297A.71, subdivisions 1, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 17, 18, 20, 22,
1.1532, 34, 35, 38, 40, 41, 42; 297A.75, subdivisions 4, 5; 297A.87, subdivision 3;
1.16297A.89, subdivision 1; Minnesota Statutes 2011 Supplement, sections 297A.61,
1.17subdivision 3; 297A.68, subdivisions 4, 42, 43; 297A.70, subdivisions 1, 2, 3, 6;
1.18297A.71, subdivision 23; 297A.75, subdivisions 1, 2, 3; 297A.89, subdivision 2.
1.19BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.23 Section 1. CONSTITUTIONAL AMENDMENTS PROPOSED.
1.24An amendment to the Minnesota Constitution is proposed to the people. If the
1.25amendment is adopted, article X, section 3, will be repealed
1.26a section shall be added to article X, to read:
1.27Sec. 9. (a) For all tax years beginning on or after January 1, 2014, no tax shall be
1.28imposed upon any income derived from any source within this state, including corporate
1.29and personal income taxes, franchise taxes, or occupation taxes. Beginning on January
2.11, 2014, no tax shall be imposed on gross receipts or consumption other than a general
2.2comprehensive sales and use tax. All revenue lost as a result of the prohibition under this
2.3section must be replaced by expanding the base of the general sales and use tax in this
2.4state to all sales of taxable property and services, regardless of the location of the seller or
2.5method of transfer, and increasing the general sales and use tax rate to a rate necessary to
2.6replace the estimated revenues that, absent the prohibition, would have been collected
2.7in the first year of the prohibition. "Taxable property and services" means any tangible
2.8property, digital goods, or service, including leaseholds of any term or rents with respect
2.9to the property, consumed or used in this state.
2.10(b) Taxable property and services excludes property or services:
2.11(1) purchased as a component part or ingredient of taxable property or service to be
2.12sold at retail;
2.13(2) purchased for a business purpose in a trade or business, including agriculture; and
2.14(3) purchased for investment purposes. For purposes of this section, "purchased for
2.15a business purpose in a trade or business" means purchased by a person engaged in a trade
2.16or business and used in that trade or business for resale; to produce, provide, render, or sell
2.17taxable property or services; or in furtherance of other bona fide business purposes. For
2.18purposes of this section, "purchased for an investment purpose" means property purchased
2.19exclusively for purposes of appreciation or the production of income, and tuition and fees
2.20paid to an accredited institution of higher education for educational services. All sales
2.21tax exemptions in place as of the effective date of this section exempting purchases other
2.22than the purchases enumerated in this section are repealed.
2.23(c) The Department of Revenue shall determine a method for providing a sales tax
2.24rebate for each duly registered qualified household of the state beginning January 1, 2014.
2.25The monthly amount of the rebate equals the product of (1) the combined sales tax rate
2.26established under this section and under article XI, section 15, and (2) 1/12 of the annual
2.27poverty guidelines updated periodically by the United States Department of Health and
2.28Human Services or its successor agency. For purposes of this section, "qualified family"
2.29means one or more relatives sharing a common residence. All relatives sharing a common
2.30residence are considered part of one qualified family.
2.31article XI, section 15, will read:
2.32Sec. 15. Beginning July 1, 2009, until June 30, 2034, the sales and use tax rate shall be
2.33increased by three-eighths of one percent on sales and uses taxable under the general state
2.34sales and use tax law. Receipts from the increase, plus penalties and interest and reduced
2.35by the share of the rebate under article X, section 9 due to the sales tax rate in this section,
2.36and by any refunds, are dedicated, for the benefit of Minnesotans, to the following funds:
3.133 percent of the receipts shall be deposited in the outdoor heritage fund and may be spent
3.2only to restore, protect, and enhance wetlands, prairies, forests, and habitat for fish, game,
3.3and wildlife; 33 percent of the receipts shall be deposited in the clean water fund and may
3.4be spent only to protect, enhance, and restore water quality in lakes, rivers, and streams
3.5and to protect groundwater from degradation, and at least five percent of the clean water
3.6fund must be spent only to protect drinking water sources; 14.25 percent of the receipts
3.7shall be deposited in the parks and trails fund and may be spent only to support parks and
3.8trails of regional or statewide significance; and 19.75 percent shall be deposited in the arts
3.9and cultural heritage fund and may be spent only for arts, arts education, and arts access
3.10and to preserve Minnesota's history and cultural heritage. An outdoor heritage fund; a
3.11parks and trails fund; a clean water fund and a sustainable drinking water account; and
3.12an arts and cultural heritage fund are created in the state treasury. The money dedicated
3.13under this section shall be appropriated by law. The dedicated money under this section
3.14must supplement traditional sources of funding for these purposes and may not be used
3.15as a substitute. Land acquired by fee with money deposited in the outdoor heritage
3.16fund under this section must be open to the public taking of fish and game during the
3.17open season unless otherwise provided by law. If the base of the sales and use tax is
3.18changed, the sales and use tax rate in this section may be proportionally adjusted by law
3.19to within one-thousandth of one percent in order to provide as close to the same amount
3.20of revenue as practicable for each fund as existed before the change to the sales and use
3.21tax. The sales and use tax rate in this section must be proportionally adjusted on January
3.221, 2014, to within .001 percent in order to provide as close to the same amount of revenue
3.23as practicable for each fund as existed before the change to the sales and use tax under
3.24article X, section 9.
3.25 Sec. 2. SUBMISSION TO VOTERS.
3.26The proposed amendment must be submitted to the people at the 2012 general
3.27election. The question submitted must be:
3.28"Shall the Minnesota Constitution be amended beginning January 1, 2014, to
3.29eliminate individual and corporate income taxes and state gross receipts and sales taxes,
3.30other then a fair tax which is a comprehensive sales and use tax imposed at a rate that
3.31would offset lost revenue from the eliminated taxes and would be included in the gross
3.32price on all new purchases of goods and services, including Internet sales and sales of
3.33digital products, except for property purchased for business or investment; and to provide
4.1each qualified family with a sales tax rebate to ensure that no state sales tax is paid on
4.2purchases up to the federal poverty level?
4.5 Sec. 3. EFFECTIVE DATE.
4.6Sections 1 and 2 apply to taxes and tax years beginning on or after January 1, 2014.
4.9 Section 1. [297A.611] ADDITIONAL FAIR TAX DEFINITIONS.
4.10 Subdivision 1. Applicability. When used in this chapter, the following words,
4.11terms, and phrases have the meanings given them in this section, unless the context clearly
4.12indicates a different meaning.
4.13 Subd. 2. Fair tax. "Fair tax" means the sales and use tax imposed under this chapter
4.14and incorporated into the gross sales price of all taxable property and services.
4.15 Subd. 3. Basic interest rate. "Basic interest rate" means:
4.16(1) in the case of a debt instrument, investment, financing lease, or account with a
4.17term of not over three years, the applicable interest rate is a short-term rate based on the
4.18average market yield during any one month on outstanding marketable obligations of the
4.19United States with remaining periods of maturity of three years or fewer;
4.20(2) in the case of a debt instrument, investment, financing lease, or account with a
4.21term of over three years but not over nine years, the applicable interest rate is a midterm
4.22rate based on the average market yield during any one month on outstanding marketable
4.23obligations of the United States with remaining periods to maturity of more than three
4.24years but not over nine years; or
4.25(3) in the case of a debt instrument, investment, financing lease, or account with a
4.26term over nine years, the applicable interest rate is a long-term rate based on the average
4.27market yield during any one month on outstanding marketable obligations of the United
4.28States with remaining periods to maturity of over nine years.
4.29 Subd. 4. Business purpose. "Business purpose" means a purchase made by a
4.30person engaged in a trade or business and used in that trade or business for resale; to
4.31produce, provide, render, or sell taxable property or services; or in furtherance of other
4.32bona fide business purposes.
5.1 Subd. 5. Business use conversion. "Business use conversion" means the use
5.2of taxable property or services upon which tax was imposed and actually paid that
5.3commenced to be 95 percent or more used for business purposes.
5.4 Subd. 6. Commissioner. "Commissioner" means the commissioner of revenue.
5.5 Subd. 7. Digital products. (a) "Digital products" means all specified digital
5.6products and all other digital products transferred electronically to the purchaser, including
5.7a digital code or access to a digital code for receiving, accessing, or otherwise obtaining
5.8the digital product.
5.9(b) "Digital code" means a code that provides a purchaser with a right to obtain
5.10one or more specified digital products or other digital products. A digital code may be
5.11transferred electronically, such as through email, or it may be transferred on a tangible
5.12medium such as a plastic card or paper invoice. A digital code is not a code that represents
5.13stored monetary value that is deducted from a total as it is used by the purchaser, or a code
5.14that represents a redeemable card, gift card, or gift card that entitles the holder to select a
5.15digital product of an indicated cash value.
5.16(c) "Specified digital product" means:
5.17(1) digital audiovisual works that are a series of related images that, when shown in
5.18succession, impart an impression of motion and accompanying sounds, if any;
5.19(2) digital audio works that are works that result from the fixation of a series of
5.20musical, spoken, or other sounds, including ringtones; and
5.21(3) digital books that are works that are generally recognized in the ordinary and
5.22usual sense as books.
5.23(d) "Other digital products" means products other than specified digital products
5.24that are transferred electronically to the purchaser and would otherwise be taxable if
5.25delivered in a tangible form, including but not limited to art, greeting cards, and video
5.26and electronic games.
5.27(e) "Transferred electronically" means obtained by the purchaser by means other
5.28than tangible storage media. It is not necessary that a copy of the product be physically
5.29transferred to the purchaser. A product shall be considered delivered electronically to a
5.30purchaser if the purchaser has access to the product.
5.31 Subd. 8. Education and training costs. "Education and training costs" includes
5.32tuition for primary, secondary, or postsecondary education and job-related training
5.33courses. Education and training does not include costs for room, board, sports activities,
5.34recreational activities, hobbies, games, arts or crafts, or cultural activities.
5.35 Subd. 9. Explicitly charged fees. "Explicitly charged fees" means:
5.36(1) brokerage fees;
6.1(2) explicitly stated banking, loan origination, processing, documentation, credit
6.2check fees, or other similar fees;
6.3(3) safe deposit box fees;
6.4(4) trustees' fees; and
6.5(5) other financial services fees, including mutual fund management, sales, and
6.6exit fees.
6.7 Subd. 10. Family member. "Family member" means any resident of this state
6.8with a valid Social Security number who is:
6.9(1) an individual;
6.10(2) the individual's spouse;
6.11(3) a lineal ancestor or descendant of the individual or the individual's spouse;
6.12(4) a legally adopted child of the individual or the individual's spouse;
6.13(5) a child under legal guardianship of the individual or of the individual's spouse; or
6.14(6) a child living away from home. For purposes of this clause, "a child living away
6.15from home" means any person who was a registered student during not fewer than five
6.16months in a calendar year while living away from a common residence of a qualified
6.17family but who receives over 50 percent of that person's support during a calendar year
6.18from members of the qualified family. For purposes of this clause, a child living away
6.19from home whose parents are divorced or legally separated is treated as part of the
6.20qualified family of the custodial parent, and in cases of joint custody, the custodial parent
6.21is the parent who has custody of the child for more than one-half of the time during a given
6.22calendar year. A parent entitled to be treated as the custodial parent under this clause may
6.23release the claim to the other parent if the release is in writing.
6.24 Subd. 11. Financial intermediation services. "Financial intermediation services"
6.25means the sum of (1) explicitly charged fees for financial intermediation services, and (2)
6.26implicitly charged fees for financial intermediation services.
6.27 Subd. 12. Government enterprise. "Government enterprise" means an entity
6.28owned and operated by a federal, state, or local governmental unit or political subdivision
6.29that receives gross payments from private persons, provided that in any quarter in the
6.30calendar year it has revenues from selling taxable property or services that exceed $2,500.
6.31 Subd. 13. Gross imputed amount. "Gross imputed amount" means:
6.32(1) with respect to any underlying interest-bearing investment or account, the
6.33product of:
6.34(i) the excess of the basic interest rate over the rate paid on the investment; and
6.35(ii) the amount of the investment or account; or
6.36(2) with respect to any underlying interest-bearing debt, the product of:
7.1(i) the excess of the rate paid on the debt over the basic interest rate; and
7.2(ii) the amount of the debt.
7.3 Subd. 14. Gross payment. "Gross payment" means the total amount charged for
7.4taxable property and services, including the taxes imposed under this chapter.
7.5 Subd. 15. Implicitly charged fees. "Implicitly charged fees" means the gross
7.6imputed amount in relation to any underlying interest-bearing investment, account, or debt.
7.7 Subd. 16. Intangible property. "Intangible property" includes copyrights,
7.8trademarks, patents, goodwill, financial instruments, securities, commercial paper, debts,
7.9notes and bonds, and other property deemed intangible under state law. Intangible
7.10property does not include tangible personal property or rents or a leasehold of any term
7.11on the tangible personal property, real property or rents or leaseholds of any term on
7.12the real property, or computer software.
7.13 Subd. 17. Investment purpose. "Investment purpose" means the purchase of
7.14property exclusively for the purpose of appreciation or the production of income but not
7.15entailing more than minor personal efforts.
7.16 Subd. 18. Mixed-use property. "Mixed-use property" means a taxable property or
7.17service used for both taxable use or consumption and for a business purpose.
7.18 Subd. 19. Net payment. "Net payment" means the total amount charged for taxable
7.19property or services, excluding the taxes imposed under this chapter.
7.20 Subd. 20. Nonprofit organization. "Nonprofit organization" means any
7.21corporation, society, association, foundation, or institution organized and operated
7.22exclusively for charitable, religious, fraternal, civic, or educational purposes and is exempt
7.23from federal income taxation pursuant to section 501(c) of the Internal Revenue Code.
7.24 Subd. 21. Person. "Person" means any natural person, and unless the context
7.25clearly does not allow it, any corporation, partnership, limited liability company, trust,
7.26estate, government, agency, administration, organization, association, or other legal
7.27domestic or foreign entity.
7.28 Subd. 22. Produce, provide, render, or sell taxable property or services.
7.29"Produce, provide, render, or sell taxable property or services" includes the following:
7.30(1) a taxable property or service is used to produce, provide, render, or sell a taxable
7.31property or service if the property or service is purchased by a person engaged in a trade
7.32or business for the purpose of employing or using the taxable property or service in the
7.33production, provision, rendering, or sale of other taxable property or services in the
7.34ordinary course of that trade or business;
8.1(2) taxable property or services used in a trade or business for the purpose of
8.2research, experimentation, testing, and development is treated as used to produce, provide,
8.3render, or sell taxable property or services;
8.4(3) taxable property or services purchased by an insurer on behalf of an insured is
8.5treated as used to produce, provide, render, or sell taxable property or services if the
8.6premium for the insurance contract giving rise to the insurer's obligation was subject to
8.7tax on financial intermediation services under this section; and
8.8(4) education and training are treated as services used to produce, provide, render, or
8.9sell taxable property or services.
8.10 Subd. 23. Qualified family. "Qualified family" means one or more family members
8.11sharing a common residence. All family members sharing a common residence are
8.12considered part of one qualified family.
8.13 Subd. 24. Taxable employer. (a) "Taxable employer" includes, but is not limited to,
8.14the following:
8.15(1) any household employing domestic servants; and
8.16(2) any government except for government enterprises.
8.17(b) Taxable employer does not include any employer that is:
8.18(1) engaged in a trade or business;
8.19(2) a nonprofit organization; or
8.20(3) a government enterprise.
8.21(c) Taxable employer also does not include the federal government or its agencies,
8.22until such time as federal law allows state taxation of the federal government.
8.23 Subd. 25. Taxable property; taxable service. (a) "Taxable property" means
8.24any tangible personal property and all digital products, including but not limited to the
8.25following:
8.26(1) property purchased for business use but subsequently converted to personal use,
8.27that is subject to the tax imposed by this section at the fair market value of the converted
8.28property as of the date of conversion;
8.29(2) leaseholds of any term;
8.30(3) rents with respect to the property;
8.31(4) property exchanged in barter transactions, that must be taxed as if the transaction
8.32were made in cash; and
8.33(5) mixed use property, to the extent the property is used for a personal and not
8.34a business purpose.
8.35(b) "Taxable service" means any service, including any financial intermediation
8.36service, performed by an employee for which the employee is paid wages by a taxable
9.1employer, or any service performed by an employee for which the employee is paid
9.2wages by:
9.3(1) an employer in the regular course of the employer's trade or business;
9.4(2) an employer that is a nonprofit organization;
9.5(3) an employer that is a government enterprise; or
9.6(4) taxable employers to employees directly providing education and training.
9.7(c) Taxable property or taxable service does not include any intangible property
9.8or used property or property held exclusively for an investment purpose, or any state
9.9government functions that do not constitute the final consumption of property or services.
9.10 Subd. 26. Used property. "Used property" means property for which the tax under
9.11this section has been collected and for which no credit has been allowed, or property that
9.12was held other than for a business purpose on December 31, 2013.
9.13 Subd. 27. Wages. "Wages" means all compensation paid for employment service
9.14including salaries, cash compensation, employee benefits, disability insurance, wage
9.15replacement insurance payments, unemployment compensation insurance, workers'
9.16compensation insurance, and the fair market value of any other consideration paid by an
9.17employer to an employee in consideration for employment services rendered.
9.18EFFECTIVE DATE.This section is effective for sales and purchases made on or
9.19after January 1, 2014, provided the constitutional amendment in article 1 passes.
9.20 Sec. 2. Minnesota Statutes 2010, section 297A.62, subdivision 1, is amended to read:
9.21 Subdivision 1. Generally. Except as otherwise provided insubdivision 3 or in this
9.22chapter, a sales taxof 6.5 percent at the rate calculated under section 8 is imposed on the
9.23gross receipts from retail sales as defined in section
297A.61, subdivision 4, net payments
9.24on the production, provision, rendering, or selling of taxable property or services made in
9.25this state or to a destination in this state by a person who is required to have or voluntarily
9.26obtains a permit under section297A.83, subdivision 1 .
9.27EFFECTIVE DATE.This section is effective for sales and purchases made on or
9.28after January 1, 2014, provided the constitutional amendment in article 1 passes.
9.29 Sec. 3. Minnesota Statutes 2010, section 297A.62, subdivision 1a, is amended to read:
9.30 Subd. 1a. Constitutionally required sales tax increase. Except as otherwise
9.31provided insubdivision 3 or in this chapter, an additional sales tax of 0.375 percent, as
9.32required under the Minnesota Constitution, article XI, section 15, is imposed on thegross
9.33receipts from retail sales as defined in section
297A.61, subdivision 4, the net payments on
10.1the production, provision, rendering, or selling of taxable property or services made in this
10.2state or to a destination in this state by a person who is required to have or voluntarily
10.3obtains a permit under section297A.83, subdivision 1 . This additional tax expires July
10.41, 2034.
10.5EFFECTIVE DATE.This section is effective for sales and purchases made on or
10.6after January 1, 2014, provided the constitutional amendment in article 1 passes.
10.7 Sec. 4. Minnesota Statutes 2010, section 297A.66, subdivision 3, is amended to read:
10.8 Subd. 3. Retailer not maintaining place of business in this state. (a) To the
10.9extent allowed by the United States Constitution and the laws of the United States, a
10.10retailer making retail sales from outside this state to a destination within this state and
10.11not maintaining a place of business in this state shall collect sales and use taxes and remit
10.12them to the commissioner under section297A.77 , if the retailer engages in the regular or
10.13systematic soliciting of sales from potential customers in this state by:.
10.14(1) distribution, by mail or otherwise, of catalogs, periodicals, advertising flyers, or
10.15other written solicitations of business to customers in this state;
10.16(2) display of advertisements on billboards or other outdoor advertising in this state;
10.17(3) advertisements in newspapers published in this state;
10.18(4) advertisements in trade journals or other periodicals the circulation of which is
10.19primarily within this state;
10.20(5) advertisements in a Minnesota edition of a national or regional publication or
10.21a limited regional edition in which this state is included as part of a broader regional or
10.22national publication which are not placed in other geographically defined editions of the
10.23same issue of the same publication;
10.24(6) advertisements in regional or national publications in an edition which is not
10.25by its contents geographically targeted to Minnesota but which is sold over the counter
10.26in Minnesota or by subscription to Minnesota residents;
10.27(7) advertisements broadcast on a radio or television station located in Minnesota; or
10.28(8) any other solicitation by telegraphy, telephone, computer database, cable, optic,
10.29microwave, or other communication system.
10.30This paragraph (a) must be construed without regard to the state from which
10.31distribution of the materials originated or in which they were prepared.
10.32(b) The location within or without this state of independent vendors that provide
10.33products or services to the retailer in connection with its solicitation of customers within
10.34this state, including such products and services as creation of copy, printing, distribution,
11.1and recording, is not considered in determining whether the retailer is required to collect
11.2tax.
11.3(c) A retailer not maintaining a place of business in this state is presumed, subject to
11.4rebuttal, to be engaged in regular solicitation within this state if it engages in any of the
11.5activities in paragraph (a) and:
11.6(1) makes 100 or more retail sales from outside this state to destinations in this state
11.7during a period of 12 consecutive months; or
11.8(2) makes ten or more retail sales totaling more than $100,000 from outside this state
11.9to destinations in this state during a period of 12 consecutive months.
11.10(b) A retailer that is not subject to paragraph (a) that does not maintain a place of
11.11business in this state but made taxable sales of at least $1,000,000 in the previous year
11.12from outside this state to destinations within this state shall collect sales and use taxes but
11.13shall be compensated for the administrative costs related to the collection and remittance
11.14of the sales tax. The commissioner shall develop a method for calculating and paying the
11.15compensation required under this paragraph. If a retailer subject to this paragraph and the
11.16commissioner are unable to agree on the method for calculating compensation and the
11.17retailer demands arbitration, the matter must be submitted to binding arbitration according
11.18to sections 572B.01 to 572B.31 and the rules of the American Arbitration Association.
11.19Retailers subject to this paragraph may choose to combine into a single group and jointly
11.20request that their objections be combined and dealt with in a single arbitration. Within 30
11.21days after the demand for arbitration, the parties shall each select an arbitrator or agree
11.22on a single arbitrator. If the parties each select an arbitrator, the two arbitrators shall
11.23select a third arbitrator within 45 days after the demand for arbitration. Each party shall
11.24pay the fees and expenses of the selected arbitrator, and the parties shall share equally the
11.25expenses of the third arbitrator or an arbitrator mutually agreed on by the parties.
11.26EFFECTIVE DATE.This section is effective for sales and purchases made on or
11.27after January 1, 2014, provided the constitutional amendment in article 1 passes.
11.28 Sec. 5. [297A.712] EXEMPTIONS.
11.29 Subdivision 1. Scope. The net payments from the sale of and storage, distribution,
11.30use, or consumption of the taxable property and services in this section are specifically
11.31exempted from the taxes imposed under this chapter.
11.32 Subd. 2. Purchased for business purpose. Taxable property or services purchased
11.33by a person engaged in a trade or business are exempt if used in that trade or business:
11.34(1) for resale;
11.35(2) to produce, provide, render, or sell taxable property or services; or
12.1(3) in furtherance of other bona fide business purposes.
12.2 Subd. 3. Purchased for use outside state. Taxable property or services purchased
12.3for export from the state of Minnesota for use or consumption outside of the state are
12.4exempt.
12.5 Subd. 4. Purchased for investment purpose. Taxable property purchased
12.6exclusively for appreciation or the production of income with minor personal effort are
12.7exempt.
12.8 Subd. 5. Purchases by government enterprise. Taxable property and services
12.9purchased by a government enterprise are exempt.
12.10 Subd. 6. Higher education costs. Education and training costs paid to an accredited
12.11institution of higher education are exempt.
12.12EFFECTIVE DATE.This section is effective for sales and purchases made on or
12.13after January 1, 2014, provided the constitutional amendment in article 1 passes.
12.14 Sec. 6. [297A.755] CREDITS AND REFUNDS.
12.15 Subdivision 1. Generally. Each person shall be allowed a credit with respect to the
12.16taxes imposed under this chapter for each month equal to the sum of:
12.17(1) the business use conversion credit under subdivision 2;
12.18(2) the intermediate and export sales credit under subdivision 3;
12.19(3) the insurance proceeds credit under subdivision 4;
12.20(4) the bad debt credit under section 297A.81; or
12.21(5) any amount paid in excess of the amount due.
12.22Only one credit paid may be taken with respect to the sale or purchase of any
12.23particular taxable property or service.
12.24 Subd. 2. Business use conversion credit. A person is eligible for a credit for the
12.25fair tax paid on taxable property and services if the property or service is subsequently
12.26used at least 95 percent for business purposes. The credit is equal to the tax included in the
12.27gross payment on the taxable property or service.
12.28 Subd. 3. Intermediate and export sales credit. A person is eligible for a credit
12.29for the fair tax paid on the purchase of any taxable property or service purchased for a
12.30business purpose in a trade or business or exported from the state for use or consumption
12.31outside of the United States.
12.32 Subd. 4. Insurance proceeds credit. (a) Any person receiving a payment from an
12.33insurer pursuant to an insurance contract, if the insurance premium is subject to the tax
12.34under this chapter, shall be entitled to a credit in an amount equal to the product of the tax
12.35rates imposed under section 297A.62 and the amount of the payment made by the insurer,
13.1adjusted as required in paragraphs (b) and (c). For purposes of this section, "insurance
13.2contract" includes the following insurance contracts:
13.3(1) life;
13.4(2) health;
13.5(3) property and casualty loss;
13.6(4) general liability;
13.7(5) marine;
13.8(6) fire;
13.9(7) accident;
13.10(8) disability;
13.11(9) long-term care; or
13.12(10) any combination of clauses (1) to (9).
13.13(b) The credit under paragraph (a) shall be paid by the insurer to the insured, and the
13.14insurer shall be entitled to the credit in lieu of the insured, except that the insurer may
13.15elect, in a form prescribed by the commissioner, not to pay the credit and require the
13.16insured to apply for the credit. In the event of such election, the insurer must provide the
13.17commissioner and the insured the name and tax identification number of the insurer and of
13.18the insured and indicate the proper amount of the credit.
13.19(c) If taxable property or services purchased by an insurer on behalf of the insured
13.20are purchased free of tax as a purchase for use in a trade or business, then the credit is
13.21not available for that purchase.
13.22EFFECTIVE DATE.This section is effective for sales and purchases made on or
13.23after January 1, 2014, provided the constitutional amendment in article 1 passes.
13.24 Sec. 7. PROHIBITION ON CERTAIN TAXES; IMPOSITION OF FAIR TAX.
13.25(a) For taxable years beginning after December 31, 2013, the following taxes are
13.26repealed:
13.27(1) the individual income and corporate franchise tax under Minnesota Statutes,
13.28chapter 290;
13.29(2) gross revenue and gross receipt taxes under Minnesota Statutes, chapter 295;
13.30(3) petroleum and fuels taxes under Minnesota Statutes, chapter 296A;
13.31(4) motor vehicle sales taxes under Minnesota Statutes, chapter 297B;
13.32(5) gambling taxes under Minnesota Statutes, chapter 297E;
13.33(6) cigarette and tobacco taxes under Minnesota Statutes, chapter 297F;
13.34(7) solid waste management taxes under Minnesota Statutes, chapter 297H;
13.35(8) insurance taxes under Minnesota Statutes, chapter 297I; and
14.1(9) occupation taxes under Minnesota Statutes, section 298.01.
14.2(b) For taxable years beginning after December 31, 2013, all revenues lost as a result
14.3of the repeal of the taxes under paragraph (a) shall be replaced by the levy and imposition
14.4of a sales tax upon all final use or consumption of taxable property or services in this
14.5state. The sales tax under Minnesota Statutes, chapter 297A, shall be renamed the "fair
14.6tax" and modified to expand the base and increase the rate as required by the constitution.
14.7The fair tax shall be incorporated into the gross payment and sales price for all taxable
14.8goods and services.
14.9EFFECTIVE DATE.This section is effective the day after passage of the
14.10constitutional amendment in article 1.
14.11 Sec. 8. FAIR TAX LEGISLATION.
14.12No later than February 1, 2013, the commissioner of revenue shall submit legislation
14.13to the chairs and ranking minority members of the legislative committees having
14.14jurisdiction over taxes in the senate and the house of representatives recommending the
14.15repeal of any provision of law as necessary to comply with this act; the modification,
14.16repeal, or enactment of any provision of law relating to sales and use tax under chapter
14.17297A to comply with this act; and the enactment of any provision of law relating to
14.18implementing the provisions of this act. The sourcing of sales, the duty to collect and remit
14.19the tax, penalties, and other administrative provisions related to the fair tax shall follow
14.20as closely as practical the sourcing, collection, remittance, penalties, and administrative
14.21provisions of the existing sales tax with the exception that the fair tax must be included in
14.22the sales price and not stated separately by the retailer. The legislation shall include, at a
14.23minimum, the following:
14.24(1) the repeal of any provision of law relating to withholding taxes;
14.25(2) the repeal of any provision of law related to the repealed taxes under section 7;
14.26(3) the repeal of the tax exemptions and deductions related to the repealed taxes
14.27under section 6;
14.28(4) the fair tax rate necessary to replace the current sales and use tax revenue and the
14.29revenues lost as a result of the repealed taxes under section 7, paragraph (a);
14.30(5) any modifications necessary to include the fair tax in the reported sale price
14.31of all taxable property, including reporting and remittance requirements for the fair tax
14.32collected by sellers;
14.33(6) the method for collecting the fair tax;
14.34(7) record-keeping requirements for all sellers;
15.1(8) the method for providing each qualified taxpayer with a payment to offset the
15.2burden of taxation of basic necessities as required by section 9;
15.3(9) any provisions necessary for administering the credits allowed in section 6;
15.4(10) provisions for reporting wages to the Social Security Administration;
15.5(11) the statutory, language, and cross-reference changes necessary to effect the
15.6provisions of this act, including the repeal of all sections related to the repeal of the taxes
15.7in section 7, paragraph (a);
15.8(12) recommendations for changes in rate or duration for all local sales taxes to
15.9reflect the expanded tax base under the fair tax;
15.10(13) recommendations for changes to existing local sales tax laws to allow their
15.11administration with the fair tax; and
15.12(14) any other recommendation or provision necessary to effect the provisions
15.13of this act.
15.14EFFECTIVE DATE.This section is effective the day after passage of the
15.15constitutional amendment in article 1.
15.16 Sec. 9. FAIR TAX RATE.
15.17The commissioner shall determine a method for setting the fair tax rate for the tax
15.18required under this act to replace the anticipated state revenue loss due to the repeal of
15.19the taxes in section 7, paragraph (a), and the change from the existing sales tax to the fair
15.20tax in section 8. The commissioner shall determine the rate change necessary to comply
15.21with the Minnesota Constitution, article XI, section 15.
15.22EFFECTIVE DATE.This section is effective the day after passage of the
15.23constitutional amendment in article 1.
15.24 Sec. 10. MONTHLY SALES TAX REBATE.
15.25The commissioner shall determine a method for providing a monthly sales tax
15.26rebate for each qualified family. The sales tax rebate must be distributed to each qualified
15.27family on or before the first business day of the month for which the sales tax rebate is
15.28being provided. The amount of the sales tax rebate must be determined annually and be
15.29equal to the product of the rate of the sales tax established under section 9 and 1/12 of
15.30the annual poverty guidelines updated periodically in the Federal Register by the United
15.31States Department of Health and Human Services under the authority of United States
15.32Code, title 42, section 9902(2), as amended.
16.1EFFECTIVE DATE.This section is effective the day after passage of the
16.2constitutional amendment in article 1.
16.3 Sec. 11. REPEALER.
16.4Minnesota Statutes 2010, sections 297A.61, subdivisions 2, 4, 10, 12, 13, 16a, 16b,
16.516c, 17, 17a, 17b, 18, 30, 31, 32, 33, 34, 36, 37, 38, and 46; 297A.62, subdivision 3;
16.6297A.63, subdivision 2; 297A.64; 297A.65; 297A.67; 297A.68, subdivisions 1, 2, 3, 5, 6,
16.77, 8, 9, 10, 11, 12, 13, 14, 16, 17, 19, 20, 22, 23, 24, 25, 28, 29, 30, 31, 32, 33, 34, 35, 36,
16.837, 38, 39, 40, and 41; 297A.69; 297A.70, subdivisions 4, 5, 7, 8, 9, 11, 12, 13, 14, 15,
16.916, and 17; 297A.71, subdivisions 1, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 17, 18, 20, 22,
16.1032, 34, 35, 38, 40, 41, and 42; 297A.75, subdivisions 4 and 5; 297A.87, subdivision 3;
16.11and 297A.89, subdivision 1, are repealed.
16.12Minnesota Statutes 2011 Supplement, sections 297A.61, subdivision 3; 297A.68,
16.13subdivisions 4, 42, and 43; 297A.70, subdivisions 1, 2, 3, and 6; 297A.71, subdivision 23;
16.14297A.75, subdivisions 1, 2, and 3; and 297A.89, subdivision 2, are repealed.
16.15EFFECTIVE DATE.This section is effective for sales and purchases made on or
16.16after January 1, 2014, provided the constitutional amendment in article 1 passes.
1.3petroleum and motor fuels taxes, gambling taxes, cigarette and tobacco taxes,
1.4solid waste management taxes, minerals occupation tax, and insurance taxes; and
1.5replacing the lost revenue with a comprehensive general sales tax;amending
1.6Minnesota Statutes 2010, sections 297A.62, subdivisions 1, 1a; 297A.66,
1.7subdivision 3; proposing coding for new law in Minnesota Statutes, chapter
1.8297A; repealing Minnesota Statutes 2010, sections 297A.61, subdivisions
1.92, 4, 10, 12, 13, 16a, 16b, 16c, 17, 17a, 17b, 18, 30, 31, 32, 33, 34, 36, 37,
1.1038, 46; 297A.62, subdivision 3; 297A.63, subdivision 2; 297A.64; 297A.65;
1.11297A.67; 297A.68, subdivisions 1, 2, 3, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 16,
1.1217, 19, 20, 22, 23, 24, 25, 28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40,
1.1341; 297A.69; 297A.70, subdivisions 4, 5, 7, 8, 9, 11, 12, 13, 14, 15, 16, 17;
1.14297A.71, subdivisions 1, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 17, 18, 20, 22,
1.1532, 34, 35, 38, 40, 41, 42; 297A.75, subdivisions 4, 5; 297A.87, subdivision 3;
1.16297A.89, subdivision 1; Minnesota Statutes 2011 Supplement, sections 297A.61,
1.17subdivision 3; 297A.68, subdivisions 4, 42, 43; 297A.70, subdivisions 1, 2, 3, 6;
1.18297A.71, subdivision 23; 297A.75, subdivisions 1, 2, 3; 297A.89, subdivision 2.
1.19BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.21CONSTITUTIONAL AMENDMENT; PROHIBITING INCOME TAXES AND
1.22GROSS RECEIPTS TAXES AND REQUIRING A COMPREHENSIVE SALES TAX
1.22GROSS RECEIPTS TAXES AND REQUIRING A COMPREHENSIVE SALES TAX
1.23 Section 1. CONSTITUTIONAL AMENDMENTS PROPOSED.
1.24An amendment to the Minnesota Constitution is proposed to the people. If the
1.25amendment is adopted, article X, section 3, will be repealed
1.26a section shall be added to article X, to read:
1.27Sec. 9. (a) For all tax years beginning on or after January 1, 2014, no tax shall be
1.28imposed upon any income derived from any source within this state, including corporate
1.29and personal income taxes, franchise taxes, or occupation taxes. Beginning on January
2.11, 2014, no tax shall be imposed on gross receipts or consumption other than a general
2.2comprehensive sales and use tax. All revenue lost as a result of the prohibition under this
2.3section must be replaced by expanding the base of the general sales and use tax in this
2.4state to all sales of taxable property and services, regardless of the location of the seller or
2.5method of transfer, and increasing the general sales and use tax rate to a rate necessary to
2.6replace the estimated revenues that, absent the prohibition, would have been collected
2.7in the first year of the prohibition. "Taxable property and services" means any tangible
2.8property, digital goods, or service, including leaseholds of any term or rents with respect
2.9to the property, consumed or used in this state.
2.10(b) Taxable property and services excludes property or services:
2.11(1) purchased as a component part or ingredient of taxable property or service to be
2.12sold at retail;
2.13(2) purchased for a business purpose in a trade or business, including agriculture; and
2.14(3) purchased for investment purposes. For purposes of this section, "purchased for
2.15a business purpose in a trade or business" means purchased by a person engaged in a trade
2.16or business and used in that trade or business for resale; to produce, provide, render, or sell
2.17taxable property or services; or in furtherance of other bona fide business purposes. For
2.18purposes of this section, "purchased for an investment purpose" means property purchased
2.19exclusively for purposes of appreciation or the production of income, and tuition and fees
2.20paid to an accredited institution of higher education for educational services. All sales
2.21tax exemptions in place as of the effective date of this section exempting purchases other
2.22than the purchases enumerated in this section are repealed.
2.23(c) The Department of Revenue shall determine a method for providing a sales tax
2.24rebate for each duly registered qualified household of the state beginning January 1, 2014.
2.25The monthly amount of the rebate equals the product of (1) the combined sales tax rate
2.26established under this section and under article XI, section 15, and (2) 1/12 of the annual
2.27poverty guidelines updated periodically by the United States Department of Health and
2.28Human Services or its successor agency. For purposes of this section, "qualified family"
2.29means one or more relatives sharing a common residence. All relatives sharing a common
2.30residence are considered part of one qualified family.
2.31article XI, section 15, will read:
2.32Sec. 15. Beginning July 1, 2009, until June 30, 2034, the sales and use tax rate shall be
2.33increased by three-eighths of one percent on sales and uses taxable under the general state
2.34sales and use tax law. Receipts from the increase, plus penalties and interest and reduced
2.35by the share of the rebate under article X, section 9 due to the sales tax rate in this section,
2.36and by any refunds, are dedicated, for the benefit of Minnesotans, to the following funds:
3.133 percent of the receipts shall be deposited in the outdoor heritage fund and may be spent
3.2only to restore, protect, and enhance wetlands, prairies, forests, and habitat for fish, game,
3.3and wildlife; 33 percent of the receipts shall be deposited in the clean water fund and may
3.4be spent only to protect, enhance, and restore water quality in lakes, rivers, and streams
3.5and to protect groundwater from degradation, and at least five percent of the clean water
3.6fund must be spent only to protect drinking water sources; 14.25 percent of the receipts
3.7shall be deposited in the parks and trails fund and may be spent only to support parks and
3.8trails of regional or statewide significance; and 19.75 percent shall be deposited in the arts
3.9and cultural heritage fund and may be spent only for arts, arts education, and arts access
3.10and to preserve Minnesota's history and cultural heritage. An outdoor heritage fund; a
3.11parks and trails fund; a clean water fund and a sustainable drinking water account; and
3.12an arts and cultural heritage fund are created in the state treasury. The money dedicated
3.13under this section shall be appropriated by law. The dedicated money under this section
3.14must supplement traditional sources of funding for these purposes and may not be used
3.15as a substitute. Land acquired by fee with money deposited in the outdoor heritage
3.16fund under this section must be open to the public taking of fish and game during the
3.17open season unless otherwise provided by law. If the base of the sales and use tax is
3.18changed, the sales and use tax rate in this section may be proportionally adjusted by law
3.19to within one-thousandth of one percent in order to provide as close to the same amount
3.20of revenue as practicable for each fund as existed before the change to the sales and use
3.21tax. The sales and use tax rate in this section must be proportionally adjusted on January
3.221, 2014, to within .001 percent in order to provide as close to the same amount of revenue
3.23as practicable for each fund as existed before the change to the sales and use tax under
3.24article X, section 9.
3.25 Sec. 2. SUBMISSION TO VOTERS.
3.26The proposed amendment must be submitted to the people at the 2012 general
3.27election. The question submitted must be:
3.28"Shall the Minnesota Constitution be amended beginning January 1, 2014, to
3.29eliminate individual and corporate income taxes and state gross receipts and sales taxes,
3.30other then a fair tax which is a comprehensive sales and use tax imposed at a rate that
3.31would offset lost revenue from the eliminated taxes and would be included in the gross
3.32price on all new purchases of goods and services, including Internet sales and sales of
3.33digital products, except for property purchased for business or investment; and to provide
4.1each qualified family with a sales tax rebate to ensure that no state sales tax is paid on
4.2purchases up to the federal poverty level?
| 4.3 |
Yes ..... |
||
| 4.4 |
No
.....
" |
4.5 Sec. 3. EFFECTIVE DATE.
4.6Sections 1 and 2 apply to taxes and tax years beginning on or after January 1, 2014.
4.9 Section 1. [297A.611] ADDITIONAL FAIR TAX DEFINITIONS.
4.10 Subdivision 1. Applicability. When used in this chapter, the following words,
4.11terms, and phrases have the meanings given them in this section, unless the context clearly
4.12indicates a different meaning.
4.13 Subd. 2. Fair tax. "Fair tax" means the sales and use tax imposed under this chapter
4.14and incorporated into the gross sales price of all taxable property and services.
4.15 Subd. 3. Basic interest rate. "Basic interest rate" means:
4.16(1) in the case of a debt instrument, investment, financing lease, or account with a
4.17term of not over three years, the applicable interest rate is a short-term rate based on the
4.18average market yield during any one month on outstanding marketable obligations of the
4.19United States with remaining periods of maturity of three years or fewer;
4.20(2) in the case of a debt instrument, investment, financing lease, or account with a
4.21term of over three years but not over nine years, the applicable interest rate is a midterm
4.22rate based on the average market yield during any one month on outstanding marketable
4.23obligations of the United States with remaining periods to maturity of more than three
4.24years but not over nine years; or
4.25(3) in the case of a debt instrument, investment, financing lease, or account with a
4.26term over nine years, the applicable interest rate is a long-term rate based on the average
4.27market yield during any one month on outstanding marketable obligations of the United
4.28States with remaining periods to maturity of over nine years.
4.29 Subd. 4. Business purpose. "Business purpose" means a purchase made by a
4.30person engaged in a trade or business and used in that trade or business for resale; to
4.31produce, provide, render, or sell taxable property or services; or in furtherance of other
4.32bona fide business purposes.
5.1 Subd. 5. Business use conversion. "Business use conversion" means the use
5.2of taxable property or services upon which tax was imposed and actually paid that
5.3commenced to be 95 percent or more used for business purposes.
5.4 Subd. 6. Commissioner. "Commissioner" means the commissioner of revenue.
5.5 Subd. 7. Digital products. (a) "Digital products" means all specified digital
5.6products and all other digital products transferred electronically to the purchaser, including
5.7a digital code or access to a digital code for receiving, accessing, or otherwise obtaining
5.8the digital product.
5.9(b) "Digital code" means a code that provides a purchaser with a right to obtain
5.10one or more specified digital products or other digital products. A digital code may be
5.11transferred electronically, such as through email, or it may be transferred on a tangible
5.12medium such as a plastic card or paper invoice. A digital code is not a code that represents
5.13stored monetary value that is deducted from a total as it is used by the purchaser, or a code
5.14that represents a redeemable card, gift card, or gift card that entitles the holder to select a
5.15digital product of an indicated cash value.
5.16(c) "Specified digital product" means:
5.17(1) digital audiovisual works that are a series of related images that, when shown in
5.18succession, impart an impression of motion and accompanying sounds, if any;
5.19(2) digital audio works that are works that result from the fixation of a series of
5.20musical, spoken, or other sounds, including ringtones; and
5.21(3) digital books that are works that are generally recognized in the ordinary and
5.22usual sense as books.
5.23(d) "Other digital products" means products other than specified digital products
5.24that are transferred electronically to the purchaser and would otherwise be taxable if
5.25delivered in a tangible form, including but not limited to art, greeting cards, and video
5.26and electronic games.
5.27(e) "Transferred electronically" means obtained by the purchaser by means other
5.28than tangible storage media. It is not necessary that a copy of the product be physically
5.29transferred to the purchaser. A product shall be considered delivered electronically to a
5.30purchaser if the purchaser has access to the product.
5.31 Subd. 8. Education and training costs. "Education and training costs" includes
5.32tuition for primary, secondary, or postsecondary education and job-related training
5.33courses. Education and training does not include costs for room, board, sports activities,
5.34recreational activities, hobbies, games, arts or crafts, or cultural activities.
5.35 Subd. 9. Explicitly charged fees. "Explicitly charged fees" means:
5.36(1) brokerage fees;
6.1(2) explicitly stated banking, loan origination, processing, documentation, credit
6.2check fees, or other similar fees;
6.3(3) safe deposit box fees;
6.4(4) trustees' fees; and
6.5(5) other financial services fees, including mutual fund management, sales, and
6.6exit fees.
6.7 Subd. 10. Family member. "Family member" means any resident of this state
6.8with a valid Social Security number who is:
6.9(1) an individual;
6.10(2) the individual's spouse;
6.11(3) a lineal ancestor or descendant of the individual or the individual's spouse;
6.12(4) a legally adopted child of the individual or the individual's spouse;
6.13(5) a child under legal guardianship of the individual or of the individual's spouse; or
6.14(6) a child living away from home. For purposes of this clause, "a child living away
6.15from home" means any person who was a registered student during not fewer than five
6.16months in a calendar year while living away from a common residence of a qualified
6.17family but who receives over 50 percent of that person's support during a calendar year
6.18from members of the qualified family. For purposes of this clause, a child living away
6.19from home whose parents are divorced or legally separated is treated as part of the
6.20qualified family of the custodial parent, and in cases of joint custody, the custodial parent
6.21is the parent who has custody of the child for more than one-half of the time during a given
6.22calendar year. A parent entitled to be treated as the custodial parent under this clause may
6.23release the claim to the other parent if the release is in writing.
6.24 Subd. 11. Financial intermediation services. "Financial intermediation services"
6.25means the sum of (1) explicitly charged fees for financial intermediation services, and (2)
6.26implicitly charged fees for financial intermediation services.
6.27 Subd. 12. Government enterprise. "Government enterprise" means an entity
6.28owned and operated by a federal, state, or local governmental unit or political subdivision
6.29that receives gross payments from private persons, provided that in any quarter in the
6.30calendar year it has revenues from selling taxable property or services that exceed $2,500.
6.31 Subd. 13. Gross imputed amount. "Gross imputed amount" means:
6.32(1) with respect to any underlying interest-bearing investment or account, the
6.33product of:
6.34(i) the excess of the basic interest rate over the rate paid on the investment; and
6.35(ii) the amount of the investment or account; or
6.36(2) with respect to any underlying interest-bearing debt, the product of:
7.1(i) the excess of the rate paid on the debt over the basic interest rate; and
7.2(ii) the amount of the debt.
7.3 Subd. 14. Gross payment. "Gross payment" means the total amount charged for
7.4taxable property and services, including the taxes imposed under this chapter.
7.5 Subd. 15. Implicitly charged fees. "Implicitly charged fees" means the gross
7.6imputed amount in relation to any underlying interest-bearing investment, account, or debt.
7.7 Subd. 16. Intangible property. "Intangible property" includes copyrights,
7.8trademarks, patents, goodwill, financial instruments, securities, commercial paper, debts,
7.9notes and bonds, and other property deemed intangible under state law. Intangible
7.10property does not include tangible personal property or rents or a leasehold of any term
7.11on the tangible personal property, real property or rents or leaseholds of any term on
7.12the real property, or computer software.
7.13 Subd. 17. Investment purpose. "Investment purpose" means the purchase of
7.14property exclusively for the purpose of appreciation or the production of income but not
7.15entailing more than minor personal efforts.
7.16 Subd. 18. Mixed-use property. "Mixed-use property" means a taxable property or
7.17service used for both taxable use or consumption and for a business purpose.
7.18 Subd. 19. Net payment. "Net payment" means the total amount charged for taxable
7.19property or services, excluding the taxes imposed under this chapter.
7.20 Subd. 20. Nonprofit organization. "Nonprofit organization" means any
7.21corporation, society, association, foundation, or institution organized and operated
7.22exclusively for charitable, religious, fraternal, civic, or educational purposes and is exempt
7.23from federal income taxation pursuant to section 501(c) of the Internal Revenue Code.
7.24 Subd. 21. Person. "Person" means any natural person, and unless the context
7.25clearly does not allow it, any corporation, partnership, limited liability company, trust,
7.26estate, government, agency, administration, organization, association, or other legal
7.27domestic or foreign entity.
7.28 Subd. 22. Produce, provide, render, or sell taxable property or services.
7.29"Produce, provide, render, or sell taxable property or services" includes the following:
7.30(1) a taxable property or service is used to produce, provide, render, or sell a taxable
7.31property or service if the property or service is purchased by a person engaged in a trade
7.32or business for the purpose of employing or using the taxable property or service in the
7.33production, provision, rendering, or sale of other taxable property or services in the
7.34ordinary course of that trade or business;
8.1(2) taxable property or services used in a trade or business for the purpose of
8.2research, experimentation, testing, and development is treated as used to produce, provide,
8.3render, or sell taxable property or services;
8.4(3) taxable property or services purchased by an insurer on behalf of an insured is
8.5treated as used to produce, provide, render, or sell taxable property or services if the
8.6premium for the insurance contract giving rise to the insurer's obligation was subject to
8.7tax on financial intermediation services under this section; and
8.8(4) education and training are treated as services used to produce, provide, render, or
8.9sell taxable property or services.
8.10 Subd. 23. Qualified family. "Qualified family" means one or more family members
8.11sharing a common residence. All family members sharing a common residence are
8.12considered part of one qualified family.
8.13 Subd. 24. Taxable employer. (a) "Taxable employer" includes, but is not limited to,
8.14the following:
8.15(1) any household employing domestic servants; and
8.16(2) any government except for government enterprises.
8.17(b) Taxable employer does not include any employer that is:
8.18(1) engaged in a trade or business;
8.19(2) a nonprofit organization; or
8.20(3) a government enterprise.
8.21(c) Taxable employer also does not include the federal government or its agencies,
8.22until such time as federal law allows state taxation of the federal government.
8.23 Subd. 25. Taxable property; taxable service. (a) "Taxable property" means
8.24any tangible personal property and all digital products, including but not limited to the
8.25following:
8.26(1) property purchased for business use but subsequently converted to personal use,
8.27that is subject to the tax imposed by this section at the fair market value of the converted
8.28property as of the date of conversion;
8.29(2) leaseholds of any term;
8.30(3) rents with respect to the property;
8.31(4) property exchanged in barter transactions, that must be taxed as if the transaction
8.32were made in cash; and
8.33(5) mixed use property, to the extent the property is used for a personal and not
8.34a business purpose.
8.35(b) "Taxable service" means any service, including any financial intermediation
8.36service, performed by an employee for which the employee is paid wages by a taxable
9.1employer, or any service performed by an employee for which the employee is paid
9.2wages by:
9.3(1) an employer in the regular course of the employer's trade or business;
9.4(2) an employer that is a nonprofit organization;
9.5(3) an employer that is a government enterprise; or
9.6(4) taxable employers to employees directly providing education and training.
9.7(c) Taxable property or taxable service does not include any intangible property
9.8or used property or property held exclusively for an investment purpose, or any state
9.9government functions that do not constitute the final consumption of property or services.
9.10 Subd. 26. Used property. "Used property" means property for which the tax under
9.11this section has been collected and for which no credit has been allowed, or property that
9.12was held other than for a business purpose on December 31, 2013.
9.13 Subd. 27. Wages. "Wages" means all compensation paid for employment service
9.14including salaries, cash compensation, employee benefits, disability insurance, wage
9.15replacement insurance payments, unemployment compensation insurance, workers'
9.16compensation insurance, and the fair market value of any other consideration paid by an
9.17employer to an employee in consideration for employment services rendered.
9.18EFFECTIVE DATE.This section is effective for sales and purchases made on or
9.19after January 1, 2014, provided the constitutional amendment in article 1 passes.
9.20 Sec. 2. Minnesota Statutes 2010, section 297A.62, subdivision 1, is amended to read:
9.21 Subdivision 1. Generally. Except as otherwise provided in
9.22chapter, a sales tax
9.23
9.24on the production, provision, rendering, or selling of taxable property or services made in
9.25this state or to a destination in this state by a person who is required to have or voluntarily
9.26obtains a permit under section
9.27EFFECTIVE DATE.This section is effective for sales and purchases made on or
9.28after January 1, 2014, provided the constitutional amendment in article 1 passes.
9.29 Sec. 3. Minnesota Statutes 2010, section 297A.62, subdivision 1a, is amended to read:
9.30 Subd. 1a. Constitutionally required sales tax increase. Except as otherwise
9.31provided in
9.32required under the Minnesota Constitution, article XI, section 15, is imposed on the
9.33
10.1the production, provision, rendering, or selling of taxable property or services made in this
10.2state or to a destination in this state by a person who is required to have or voluntarily
10.3obtains a permit under section
10.41, 2034.
10.5EFFECTIVE DATE.This section is effective for sales and purchases made on or
10.6after January 1, 2014, provided the constitutional amendment in article 1 passes.
10.7 Sec. 4. Minnesota Statutes 2010, section 297A.66, subdivision 3, is amended to read:
10.8 Subd. 3. Retailer not maintaining place of business in this state. (a) To the
10.9extent allowed by the United States Constitution and the laws of the United States, a
10.10retailer making retail sales from outside this state to a destination within this state and
10.11not maintaining a place of business in this state shall collect sales and use taxes and remit
10.12them to the commissioner under section
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
10.30
10.31
10.32
10.33
10.34
11.1
11.2
11.3
11.4
11.5
11.6
11.7
11.8
11.9
11.10(b) A retailer that is not subject to paragraph (a) that does not maintain a place of
11.11business in this state but made taxable sales of at least $1,000,000 in the previous year
11.12from outside this state to destinations within this state shall collect sales and use taxes but
11.13shall be compensated for the administrative costs related to the collection and remittance
11.14of the sales tax. The commissioner shall develop a method for calculating and paying the
11.15compensation required under this paragraph. If a retailer subject to this paragraph and the
11.16commissioner are unable to agree on the method for calculating compensation and the
11.17retailer demands arbitration, the matter must be submitted to binding arbitration according
11.18to sections 572B.01 to 572B.31 and the rules of the American Arbitration Association.
11.19Retailers subject to this paragraph may choose to combine into a single group and jointly
11.20request that their objections be combined and dealt with in a single arbitration. Within 30
11.21days after the demand for arbitration, the parties shall each select an arbitrator or agree
11.22on a single arbitrator. If the parties each select an arbitrator, the two arbitrators shall
11.23select a third arbitrator within 45 days after the demand for arbitration. Each party shall
11.24pay the fees and expenses of the selected arbitrator, and the parties shall share equally the
11.25expenses of the third arbitrator or an arbitrator mutually agreed on by the parties.
11.26EFFECTIVE DATE.This section is effective for sales and purchases made on or
11.27after January 1, 2014, provided the constitutional amendment in article 1 passes.
11.28 Sec. 5. [297A.712] EXEMPTIONS.
11.29 Subdivision 1. Scope. The net payments from the sale of and storage, distribution,
11.30use, or consumption of the taxable property and services in this section are specifically
11.31exempted from the taxes imposed under this chapter.
11.32 Subd. 2. Purchased for business purpose. Taxable property or services purchased
11.33by a person engaged in a trade or business are exempt if used in that trade or business:
11.34(1) for resale;
11.35(2) to produce, provide, render, or sell taxable property or services; or
12.1(3) in furtherance of other bona fide business purposes.
12.2 Subd. 3. Purchased for use outside state. Taxable property or services purchased
12.3for export from the state of Minnesota for use or consumption outside of the state are
12.4exempt.
12.5 Subd. 4. Purchased for investment purpose. Taxable property purchased
12.6exclusively for appreciation or the production of income with minor personal effort are
12.7exempt.
12.8 Subd. 5. Purchases by government enterprise. Taxable property and services
12.9purchased by a government enterprise are exempt.
12.10 Subd. 6. Higher education costs. Education and training costs paid to an accredited
12.11institution of higher education are exempt.
12.12EFFECTIVE DATE.This section is effective for sales and purchases made on or
12.13after January 1, 2014, provided the constitutional amendment in article 1 passes.
12.14 Sec. 6. [297A.755] CREDITS AND REFUNDS.
12.15 Subdivision 1. Generally. Each person shall be allowed a credit with respect to the
12.16taxes imposed under this chapter for each month equal to the sum of:
12.17(1) the business use conversion credit under subdivision 2;
12.18(2) the intermediate and export sales credit under subdivision 3;
12.19(3) the insurance proceeds credit under subdivision 4;
12.20(4) the bad debt credit under section 297A.81; or
12.21(5) any amount paid in excess of the amount due.
12.22Only one credit paid may be taken with respect to the sale or purchase of any
12.23particular taxable property or service.
12.24 Subd. 2. Business use conversion credit. A person is eligible for a credit for the
12.25fair tax paid on taxable property and services if the property or service is subsequently
12.26used at least 95 percent for business purposes. The credit is equal to the tax included in the
12.27gross payment on the taxable property or service.
12.28 Subd. 3. Intermediate and export sales credit. A person is eligible for a credit
12.29for the fair tax paid on the purchase of any taxable property or service purchased for a
12.30business purpose in a trade or business or exported from the state for use or consumption
12.31outside of the United States.
12.32 Subd. 4. Insurance proceeds credit. (a) Any person receiving a payment from an
12.33insurer pursuant to an insurance contract, if the insurance premium is subject to the tax
12.34under this chapter, shall be entitled to a credit in an amount equal to the product of the tax
12.35rates imposed under section 297A.62 and the amount of the payment made by the insurer,
13.1adjusted as required in paragraphs (b) and (c). For purposes of this section, "insurance
13.2contract" includes the following insurance contracts:
13.3(1) life;
13.4(2) health;
13.5(3) property and casualty loss;
13.6(4) general liability;
13.7(5) marine;
13.8(6) fire;
13.9(7) accident;
13.10(8) disability;
13.11(9) long-term care; or
13.12(10) any combination of clauses (1) to (9).
13.13(b) The credit under paragraph (a) shall be paid by the insurer to the insured, and the
13.14insurer shall be entitled to the credit in lieu of the insured, except that the insurer may
13.15elect, in a form prescribed by the commissioner, not to pay the credit and require the
13.16insured to apply for the credit. In the event of such election, the insurer must provide the
13.17commissioner and the insured the name and tax identification number of the insurer and of
13.18the insured and indicate the proper amount of the credit.
13.19(c) If taxable property or services purchased by an insurer on behalf of the insured
13.20are purchased free of tax as a purchase for use in a trade or business, then the credit is
13.21not available for that purchase.
13.22EFFECTIVE DATE.This section is effective for sales and purchases made on or
13.23after January 1, 2014, provided the constitutional amendment in article 1 passes.
13.24 Sec. 7. PROHIBITION ON CERTAIN TAXES; IMPOSITION OF FAIR TAX.
13.25(a) For taxable years beginning after December 31, 2013, the following taxes are
13.26repealed:
13.27(1) the individual income and corporate franchise tax under Minnesota Statutes,
13.28chapter 290;
13.29(2) gross revenue and gross receipt taxes under Minnesota Statutes, chapter 295;
13.30(3) petroleum and fuels taxes under Minnesota Statutes, chapter 296A;
13.31(4) motor vehicle sales taxes under Minnesota Statutes, chapter 297B;
13.32(5) gambling taxes under Minnesota Statutes, chapter 297E;
13.33(6) cigarette and tobacco taxes under Minnesota Statutes, chapter 297F;
13.34(7) solid waste management taxes under Minnesota Statutes, chapter 297H;
13.35(8) insurance taxes under Minnesota Statutes, chapter 297I; and
14.1(9) occupation taxes under Minnesota Statutes, section 298.01.
14.2(b) For taxable years beginning after December 31, 2013, all revenues lost as a result
14.3of the repeal of the taxes under paragraph (a) shall be replaced by the levy and imposition
14.4of a sales tax upon all final use or consumption of taxable property or services in this
14.5state. The sales tax under Minnesota Statutes, chapter 297A, shall be renamed the "fair
14.6tax" and modified to expand the base and increase the rate as required by the constitution.
14.7The fair tax shall be incorporated into the gross payment and sales price for all taxable
14.8goods and services.
14.9EFFECTIVE DATE.This section is effective the day after passage of the
14.10constitutional amendment in article 1.
14.11 Sec. 8. FAIR TAX LEGISLATION.
14.12No later than February 1, 2013, the commissioner of revenue shall submit legislation
14.13to the chairs and ranking minority members of the legislative committees having
14.14jurisdiction over taxes in the senate and the house of representatives recommending the
14.15repeal of any provision of law as necessary to comply with this act; the modification,
14.16repeal, or enactment of any provision of law relating to sales and use tax under chapter
14.17297A to comply with this act; and the enactment of any provision of law relating to
14.18implementing the provisions of this act. The sourcing of sales, the duty to collect and remit
14.19the tax, penalties, and other administrative provisions related to the fair tax shall follow
14.20as closely as practical the sourcing, collection, remittance, penalties, and administrative
14.21provisions of the existing sales tax with the exception that the fair tax must be included in
14.22the sales price and not stated separately by the retailer. The legislation shall include, at a
14.23minimum, the following:
14.24(1) the repeal of any provision of law relating to withholding taxes;
14.25(2) the repeal of any provision of law related to the repealed taxes under section 7;
14.26(3) the repeal of the tax exemptions and deductions related to the repealed taxes
14.27under section 6;
14.28(4) the fair tax rate necessary to replace the current sales and use tax revenue and the
14.29revenues lost as a result of the repealed taxes under section 7, paragraph (a);
14.30(5) any modifications necessary to include the fair tax in the reported sale price
14.31of all taxable property, including reporting and remittance requirements for the fair tax
14.32collected by sellers;
14.33(6) the method for collecting the fair tax;
14.34(7) record-keeping requirements for all sellers;
15.1(8) the method for providing each qualified taxpayer with a payment to offset the
15.2burden of taxation of basic necessities as required by section 9;
15.3(9) any provisions necessary for administering the credits allowed in section 6;
15.4(10) provisions for reporting wages to the Social Security Administration;
15.5(11) the statutory, language, and cross-reference changes necessary to effect the
15.6provisions of this act, including the repeal of all sections related to the repeal of the taxes
15.7in section 7, paragraph (a);
15.8(12) recommendations for changes in rate or duration for all local sales taxes to
15.9reflect the expanded tax base under the fair tax;
15.10(13) recommendations for changes to existing local sales tax laws to allow their
15.11administration with the fair tax; and
15.12(14) any other recommendation or provision necessary to effect the provisions
15.13of this act.
15.14EFFECTIVE DATE.This section is effective the day after passage of the
15.15constitutional amendment in article 1.
15.16 Sec. 9. FAIR TAX RATE.
15.17The commissioner shall determine a method for setting the fair tax rate for the tax
15.18required under this act to replace the anticipated state revenue loss due to the repeal of
15.19the taxes in section 7, paragraph (a), and the change from the existing sales tax to the fair
15.20tax in section 8. The commissioner shall determine the rate change necessary to comply
15.21with the Minnesota Constitution, article XI, section 15.
15.22EFFECTIVE DATE.This section is effective the day after passage of the
15.23constitutional amendment in article 1.
15.24 Sec. 10. MONTHLY SALES TAX REBATE.
15.25The commissioner shall determine a method for providing a monthly sales tax
15.26rebate for each qualified family. The sales tax rebate must be distributed to each qualified
15.27family on or before the first business day of the month for which the sales tax rebate is
15.28being provided. The amount of the sales tax rebate must be determined annually and be
15.29equal to the product of the rate of the sales tax established under section 9 and 1/12 of
15.30the annual poverty guidelines updated periodically in the Federal Register by the United
15.31States Department of Health and Human Services under the authority of United States
15.32Code, title 42, section 9902(2), as amended.
16.1EFFECTIVE DATE.This section is effective the day after passage of the
16.2constitutional amendment in article 1.
16.3 Sec. 11. REPEALER.
16.4Minnesota Statutes 2010, sections 297A.61, subdivisions 2, 4, 10, 12, 13, 16a, 16b,
16.516c, 17, 17a, 17b, 18, 30, 31, 32, 33, 34, 36, 37, 38, and 46; 297A.62, subdivision 3;
16.6297A.63, subdivision 2; 297A.64; 297A.65; 297A.67; 297A.68, subdivisions 1, 2, 3, 5, 6,
16.77, 8, 9, 10, 11, 12, 13, 14, 16, 17, 19, 20, 22, 23, 24, 25, 28, 29, 30, 31, 32, 33, 34, 35, 36,
16.837, 38, 39, 40, and 41; 297A.69; 297A.70, subdivisions 4, 5, 7, 8, 9, 11, 12, 13, 14, 15,
16.916, and 17; 297A.71, subdivisions 1, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 17, 18, 20, 22,
16.1032, 34, 35, 38, 40, 41, and 42; 297A.75, subdivisions 4 and 5; 297A.87, subdivision 3;
16.11and 297A.89, subdivision 1, are repealed.
16.12Minnesota Statutes 2011 Supplement, sections 297A.61, subdivision 3; 297A.68,
16.13subdivisions 4, 42, and 43; 297A.70, subdivisions 1, 2, 3, and 6; 297A.71, subdivision 23;
16.14297A.75, subdivisions 1, 2, and 3; and 297A.89, subdivision 2, are repealed.
16.15EFFECTIVE DATE.This section is effective for sales and purchases made on or
16.16after January 1, 2014, provided the constitutional amendment in article 1 passes.
