SALES AND USE TAXES
Section 1 [Sales and use tax accelerated remittance schedule elimination] eliminates the accelerated remittance schedules for vendors with annual sales tax collections of at least $120,000 for all months except for June payments. Effective for all payments due after July 1, 2011.
Section 2 [Ring tone sales tax exemption] exempts the purchase of ring tones from sales and use tax, effective July 1, 2011.
Sections 3 and 4 [Transitional period for services; sales and use tax] states that a sales and use tax rate increase is effective beginning with the first billing period for taxable services starting after the date of the rate change. For a rate decrease, the new rate will apply to bills mailed on or after the date of the rate change. This reflects current administrative practice and is effective the day after final enactment.
Section 5 [Advertising and promotional material] defines advertising and promotional direct mail and continues to apply the current sourcing rules and removes obsolete references to direct pay permits, since these are now one type of exemption certificate rather than a separate permit. This section is effective for sales after June 30, 2011.
Section 6 [Other direct mail sourcing rules] defines “other direct mail” and simplifies the sourcing rules for this item. Under current law, if the purchaser does not provide an exemption certificate or direct pay permit, the seller must source the mail based on each mailing address. The changes will allow the mail to be sourced to the address of the purchaser instead. Also removes obsolete references to direct pay permits, since these are now one type of exemption certificate rather than a separate permit. Effective for sales after June 30, 2011.
Section 7 [Resold admission tickets] allows sellers of resold admission tickets to claim a refund or provide a credit to the purchaser of resold tickets for sales tax paid on the original ticket. The ticket reseller’s credit is the value of the tax paid at the time of the original ticket sale or the tax charged by the reseller, whichever is less. The ticket reseller must charge sales tax on the full value of the ticket resale if tax was not paid on the original ticket sale. This section is effective for sales after June 30, 2011.
Section 8 [Scope] makes a technical change to current law by adding “units of local government” to the list of organizations eligible for a sales tax exemption.
Section 9 [Local sales tax exemption for townships] exempts townships from sales tax and provides that goods and services purchased by a township that are usually provided by a private business are taxable if a private business engages in that same activity. Effective for sales and purchases after June 30, 2011.
Section 10 [Sales of goods and services to local governments] expands the sales tax exemption for certain goods and services to local governments to include water used directly in providing fire protection by a fire department, fire protection district, or fire company providing services to the state or a political subdivision. The exemption is retroactive for sales and purchases made after June 30, 2007; however, no refunds will be made for taxes already paid on water purchased before January 30, 2010.
This section also eliminates a sales tax exemption for towns for gravel, machinery and equipment used for road and bridge maintenance, since these purchases would be exempt under the exemption in section 9. This exemption is effective for purchases made after June 30, 2011.
Sections 11 to 14 [Public safety radio exemption] provides a sales tax exemption for sales and purchases of public safety radio communication systems products and services effective July 1, 2013. Qualifying sales and purchases after December 31, 2009, and before July 1, 2013 that did not receive a sales tax exemption are eligible for a refund, for which purchasers may apply after July 1, 2013.
Section 15 [Aircraft and equipment exemption] provides a sales tax exemption, effective after June 30, 2011, for the sale or purchase of aircraft with a maximum certified takeoff weight of 6,000 lbs. or more, as well as parts necessary to repair and maintain that equipment.
Section 16 [Repealer] repeals the penalties and safe harbor provisions that applied to the accelerate remittance schedules eliminated in section 1.
Sections 1 to 10 establish a dedicated Minnesota Science and Technology Program and Fund. The Minnesota Science and Technology Authority will establish and operate the following programs:
- a commercialized research program, which provides funding under established criteria up to $250,000 per project to assist in transferring science and technology projects from universities and nonprofit research institutions to commercial uses, or to assist projects developed directly by a qualified science and technology company;
- a federal research and development support program to coordinate procurement of federal science and technology research funding, including developing and providing matching funds for Small Business Innovation and Small Business Technology Transfer projects; and
- an industry technology and competitiveness program to advance the capacity and competitiveness of new and current industries, including funding qualified entrepreneurial and targeted industry cluster efforts and retaining science-based occupations in Minnesota.
The authority may make awards in the form of grants or loans, and may charge interest or take an equity position or another form of security interest.
The authority is required to give priority to qualified science and technology businesses that have "demonstrable economic benefits to the state" by creating jobs, attracting federal money, or creating new businesses.
In making grants to colleges, universities, and nonprofit research organizations, the authority is to give priority to proposals that:
- promote collaboration with private businesses;
- attract new research entities, talent, or resources to Minnesota; or
- attract significant researchers and resources from outside of Minnesota.
Awards not used for the intended purpose must be repaid to the fund. The bill also requires repayment to the fund in case the recipient relocates outside Minnesota or ceases operation in the state. If a recipient relocates within three years, 100 percent of the award must be repaid; if relocation occurs after three years, but before four years, 75 percent must be repaid. The program expires on June 30, 2018. Any remaining funds are returned to the general fund.
Section 11 modifies a provision that was part of the 2010 Jobs bill by extending the date under which it would be operative. Current law provides that tax increments from an economic development district may be used to provide loans or other subsidies or assistance to a development consisting of buildings and ancillary facilities if the municipality finds that the project will create or retain jobs in this state, including construction jobs, and that construction of the project would not have commenced before July 1, 2011, unless the authority provided the assistance. The 2011 date is extended to 2012, except for housing projects, which are extended to January 1, 2012, but only if they are not income-restricted.
Section 12 extends for one year, from July 1, 2011, to July 1, 2012, a deadline for action that was included in a provision of the Jobs bill that was enacted by the legislature in 2010. This provision authorizes expenditures of tax increments, not subject to other restrictions in the tax increment financing law, for the purpose of providing improvements, loans, interest rate subsidies, or assistance to private development for construction or substantial rehabilitation of buildings and related facilities if that project would create or retain jobs in the state, including construction jobs. The law also authorized expenditures of increments to make an investment in a business that the authority determines is necessary to make that type of construction feasible. The 2010 law required that the construction must begin before July 1, 2011. The bill would extend that construction period to July 1, 2012, except for housing projects. Market-rate housing projects would have a six-month extension; income-restricted housing gets no extension.
Section 13 modifies the special pooling rules for housing projects. Under present law, an additional ten percent of increment from a district may be used outside of the area of the district from which it was collected for income-restricted housing. This section expands the use of that ten percent of increment to include funding of certain costs related to developing market-rate housing.
This allows use for development of owner-occupied housing with a value of up to 150 percent of the average market value of housing in the city, but not to exceed $200,000 in the seven-county metropolitan area or $125,000 elsewhere in the state.
The money could be used to acquire the houses, demolish or relocate them, rehab them, do site preparation, or pollution cleanup. To qualify, the sites or housing must be a one to four-unit dwelling that has been vacant for at least six months and be in foreclosure after the redemption period has expired.
This authority terminates December 31, 2016, but can be used to continue paying outstanding bonds that were issued before that date or costs incurred under contracts binding by that date.
Section 14 modifies the 2010 law enacted for a tax increment financing district in the city of Ramsey. It corrects the boundary description of the district. It expands the purposes for which increments may be expended, exempts the district from the requirement that 90 percent of redevelopment district increments be spent to correct blight, and the requirement that two parcels for which building permits had been obtained before the district was created would be eliminated from the district.
Section 15 authorizes the authority that operates two specified tax increment financing districts in the city of Cohasset to transfer tax increments from each of those districts to the city in an amount equal to the advances that the city made from its general fund to finance expenditures that are authorized for expenditures of tax increments under the law for the benefit of that district.
Section 16 authorizes the city of Lino Lakes to collect tax increments from a specific tax increment financing district in the city through December 31, 2023, notwithstanding the limit on the duration of districts. The tax increments that would be collected under this extension are required to be used only to pay debt service on bonds issued to finance a specific interchange in the city of Lino Lakes or bonds issued to finance public improvements serving a development known as Legacy at Woods Edge, and bonds issued to refund either of those bonds. The provisions of general tax increment financing law that provide restrictions on the use of revenue from an economic development district and that prohibit the pooling of tax increments outside of the tax increment district, would not apply to these expenditures.
Section 17 allows the city of Taylors Falls to designate all or a part of the city as a border city development zone. The city would receive an allocation of up to $100,000, which could be used for tax reductions for businesses in the border city development zone. This would occur only if the governing body of the city of Taylors Falls determines that the tax reduction or offset is necessary to enable a business to expand within the city or to attract a business to the city. Current law provides border city development zone powers to the cities of Breckenridge, Dilworth, East Grand Forks, Moorhead, and Ortonville. The development zone that may be designated by the city for Taylors Falls would be subject to the same provisions that apply to those cities. Before designating a development zone, the city must adopt a written development plan that addresses specific funding. A business operating within a border city development zone may qualify for a property tax exemption, a corporate franchise tax credit, and a sales tax exemption. Qualified property to which a property tax exemption would apply must be newly constructed after the zone was designated, but would then include the land that contains the improvements. The exemption is available only if the municipality determines that granting it is necesaary to enable a business to expand within a zone or to attract a business to a zone. Businesses may be eligible for an exemption from the sales tax on machinery, equipment, and repair parts, and on construction materials that may be used to construct either a business facility or housing located in a zone. A credit against the corporate franchise tax for wages paid by new industries located in the zone is also available. The $100,000 allocation may be used either as a source of the credit on the state-paid taxes or to reimburse the city or county or both for property tax reductions due to the exemption provided to property within the zone. The duration of the zone designation is limited to 15 years.
Section 18 appropriates $500,000 to the Minnesota Science and Technology fund for fiscal year 2012, with any unspent money to carry over to fiscal year 2013.
LOCAL SALES TAXES
Section 1 [Local sales tax authorization] strikes language that prohibited political subdivisions from adopting new local sales tax provisions until after May 31, 2010. Since that date has passed, the paragraph is no longer needed. Section 1 also adds language prohibiting a local government from spending money to promote a local sales tax referendum, except for funds spent to conduct the vote. This prohibition applies to all referenda on local sales taxes, including those contained in Article 5. This section is effective the day following final enactment.
Section 2 [Local sales tax authorization] requires voter approval of a local option sales tax before the sales tax may be authorized by the legislature, and is effective the day following final enactment.
Section 3 [Limit on deposits to reserve fund; Hennepin county ballpark tax] imposes a limit on the amount of reserves that may be maintained for the baseball park equal to (1) the net present value of all its obligations to fund the ball park authority operating costs, youth sports, extension of library hours, and required capital improvements for a thirty year period starting from when the first bonds were issued, minus (2) the amount of these obligations already paid. Effective the day following final enactment.
Section 4 [Hermantown local sales tax] authorizes the city of Hermantown to impose an additional one-half of one percent local sales tax to pay for the costs of extending a sewer interceptor line; constructing a booster pump station, reservoirs, and related improvements to the water system; and constructing a building to house a police and fire station and an administrative services facility, if approved by referendum at a general election before December 31, 2012. Hermantown is authorized to impose up to a one percent local sales tax to fund these projects, but currently imposes a one-half of one percent sales tax.
Sections 5 and 6 [Rochester expansion of local sales tax revenues; bonding authority] authorizes the city of Rochester to use its existing sales and use tax revenues for the following additional projects: (1) $47 million for transportation infrastructure improvements, except railroad bypasses that would divert rail traffic from the city; (2) $26.5 million for higher education facilities; (3) $20 million for the Destination Medical Community initiative; (4) $8 million for construction of regional public safety facilities; (5) $20 million for a regional recreation/senior center; (6) $10 million for an economic development fund; and (7) $8 million for downtown infrastructure. Five million dollars of the $10 million allocated for the economic development fund must be used for development grants to the following communities: Byron, Chatfield, Dodge Center, Dover, Elgin, Eyota, Kasson, Mantorville, Oronoco, Pine Island, Plainview, St. Charles, Stewartville, Zumbrota, Spring Valley, West Concord, and Hayfield.
Both the sales and use tax applications and associated capital expenditure and bond financing must be approved by city voters in the 2012 general election. If the extension appears on the 2012 ballot, sales and use tax applications currently authorized may be collected until December 31, 2012. The aggregate principal of all bonds issued for the purposes in this section may not exceed $139.5 million plus issuance costs. The extension would be effective until the Rochester City Council determines that $139.5 million has been received to finance the projects and pay the balance on any bonds issued. Remaining funds may be placed in city’s general fund.
Section 8 [Clearwater modification of existing local sales tax revenues] extends voter-approved uses of a one-half of one percent sales and use tax for purposes of acquiring, constructing, and improving regional parks, bicycle trails, park land, open space, and pedestrian walkways.
Section 9 [Marshall local special sales tax deadline extension] extends the date by which the city of Marshall must seek voter approval of local lodging and food and beverage taxes authorized in the 2010 tax bill, allowing the city to hold this vote with the vote on its local sales tax authorized in section 14.
Section 10 [Cloquet local sales and use tax authorization] allows the city to impose a local sales tax of up to 1/2 of one percent, subject to approval at a general election. The imposition and administration of the tax is subject to the provisions in Minnesota Statutes, section 297A.99. The city may also impose a flat $20/vehicle tax on motor vehicles sold by dealers located in the city. Revenues from the taxes must be used to pay the costs of administration and to pay for the following projects: $4.5 million for the improvements to the Veteran's Park, a soccer complex, baseball complex, hockey arena, recreation center, and pedestrian trails throughout the city; $5.8 million for extension of utilities and other improvements related to property development adjacent to Highway 33 and Interstate 35; and $6.2 million for engineering and construction of infrastructure improvements identified in the city's comprehensive land use plan.
The city may issue up to $16.5 million in bonds for the projects listed based on the voter approval of the sales tax imposition. No separate vote is required for issuing the bonds and the bonds are not included in any debt or levy limit on the city. The taxes expire at the earlier of (1) 30 years; or (2) when the revenues collected are sufficient to pay for the projects and retire any associated bonds and bond costs. Because of the timing requirements for termination, any excess revenues will be deposited in the city general fund. The city may choose to end the taxes at an earlier date.
Section 11 [Fergus Falls local sales and use tax authorization] allows the city to impose a local sales tax of one-half of one percent to finance a regional ice arena, as approved by the voters at the 2010 general election. The city may use up to $6.6 million in revenues from the taxes to pay the costs of administration and to pay for the acquisition and betterment of a regional ice center facility, including associated bond costs. Allowed costs include furnishing and equipment costs as well as acquisition, design, and construction costs, and associated bond costs. The tax expires when the revenues collected are sufficient to pay for the project and retire any associated bonds and bond costs. Because of the timing requirements for termination, any excess revenues will be deposited in the city general fund. The city may choose to end the taxes at an earlier date.
Section 12 [Hutchinson local sales and use tax authorization] allows the city to impose a local sales tax of one-half of one percent to pay for its wastewater treatment facility, as approved by the voters at the 2010 general election. Allows the city to impose a complementary flat $20 per vehicle tax on motor vehicles sold by dealers located in the city.
Revenues from the taxes must be used to pay the costs of administration and to pay for the construction and renovation of the city's wastewater treatment facility, including construction, engineering, and associated bond costs. The taxes end at the earlier of (1) 18 years; or (2) when revenues raised are sufficient to pay for the project, including all associated bond costs. Because of the timing requirements for termination, any excess revenues will be deposited in the city general fund. The city may choose to end the taxes at an earlier date.
Section 13 [Lanesboro local sales and use tax authorization] allows the city to impose a one-half of one percent sales tax in the city, as approved by the voters at the 2010 general election, for the following projects: street and utility improvements along a number of specified streets; street lighting on State Highways 250 and 16; wastewater treatment facility improvements; utility improvements to the Lanesboro High Hazard Dam; and improvements to the community center, library, and city hall. The city may issue up to $800,000 in bonds for these projects. Total improvements are limited to $800,000 and associated bond costs. The tax ends when revenues raised are sufficient to pay for the projects, including all associated bond costs. Because of the timing requirements for termination, any excess revenues will be deposited in the city general fund. The city may choose to end the taxes at an earlier date.
Section 14 [Marshall local sales and use tax authorization] allows the city to impose a one-half of one percent sales tax in the city of Marshall, if approved by voters at a general election held in the next two years. The city is required to present separate ballot questions for each of the following two authorized projects: new and existing facilities of the Minnesota Emergency Response and Industry Training Center; and new facilities of the Southwest Minnesota Regional Amateur Sports Center. The city may issue up to $17.29 million in bonds for these projects based on the voter approval of the sales tax imposition, and the bonds are not included in any debt or levy limit on the city. The tax ends at the earlier of (1) 15 years; or (2) when revenues raised are sufficient to pay for the projects, including all associated bond costs. Because of the timing requirements for termination, any excess revenues will be deposited in the city general fund. The city may choose to end the taxes at an earlier date.
Section 15 [Medford local sales and use tax authorization] allows the city to impose a one-half of one percent sales tax to repay Minnesota Public Facility Authority Loans, if approved by the voters at the next general election. The loans were used to finance $4.2 million of improvements to the city's water and wastewater systems. The local sales tax ends at the earlier of (1) 20 years; or (2) when revenues raised are sufficient to repay the loans, including interest. Because of the timing requirements for termination, any excess revenues will be deposited in the city general fund. The city may choose to end the taxes at an earlier date.