Purpose

• The bill aims to modify how sales tax is calculated by allowing or requiring businesses to collect tourism improvement district charges from purchasers and by changing the definition of the “sales price.” This affects what counts as the price subject to sales tax and how discounts and third-party price reductions are treated.

Main Provisions

• Redefinition of Sales Price (Minnesota Statutes 2024 section 297A.61 subdivision 7)
  • Sales price becomes the measure subject to sales tax and includes the total consideration for which property or services are sold, leased, or rented, counted in money, whether received as cash or other forms.
  • Inclusions (what is counted in the sales price):
  • The seller’s cost of the property sold
  • Costs of materials, labor, or services, interest, losses, and all costs of transportation to the seller
  • All taxes imposed on the seller and any other seller expenses
  • Charges by the seller for services necessary to complete the sale (excluding delivery and installation charges)
  • Delivery charges (with specified exceptions for how tax is allocated when dealing with tax-exempt property)
  • Installation charges
• Exclusions (what is not included in the sales price)
  • Discounts (including cash terms or coupons not reimbursed by a third party) that the seller allows and the purchaser uses
  • Interest financing and carrying charges from credit extended on the sale if the amount is separately stated
  • Taxes legally imposed directly on the consumer that are separately stated on the invoice (including certain service charges)
• Third-Party Consideration and Price Reductions (as part of sales price)
  • Sales price includes consideration received by the seller from a third party if:
  • The seller actually receives that third-party consideration
  • The third-party consideration is directly related to a price reduction or discount on the sale
  • The seller is obligated to pass the price reduction or discount through to the purchaser
  • The amount related to the sale is fixed and determinable at the time of sale
  • A third-party price reduction or discount may be recognized if one of the following criteria is met:
  • The purchaser presents a coupon, certificate, or other third-party-authorized documentation claiming a price reduction or discount
  • The purchaser identifies themselves as a member of a group or organization entitled to a price reduction or discount (noting that a publicly available “preferred customer” card does not count as membership)
  • The price reduction or discount is identified as a third-party price reduction or discount on the invoice or documentation presented by the purchaser
• Delivery and Tax Allocation
  • The bill describes how delivery charges are treated for tax purposes, including methods for allocating a portion of delivery charges to tax-exempt property when applicable
• Related Statutory Changes
  • The bill amends the referenced statutes to implement these definitions and treatment rules for sales price and discounts, and to address tourism improvement district charges collection by businesses

Significant Changes Compared to Current Law

• Broadens what counts as the sales price by explicitly including a wider range of costs and consideration (e.g., seller costs, transportation, service charges, and specific delivery/installation charges).
• Introduces or clarifies the treatment of third-party price reductions and coupons, including pass-through requirements, when such reductions are tied to third-party programs.
• Establishes criteria for when third-party considerations must be included in the sales price, potentially affecting how much tax is collected.
• Sets rules for how delivery charges are allocated and taxed, including scenarios involving tax-exempt property.
• Aligns with a broader framework to collect tourism improvement district charges from purchasers, tying these charges into the sales tax base through the revised definition of sales price.

Practical Impact (summary)

• Businesses may collect taxes based on a more encompassing definition of price, including certain third-party discounts and specific costs that were previously excluded.
• Purchasers could see tax calculations reflect third-party price reductions if those reductions meet the bill’s criteria and are passed through to them.
• The handling of delivery, installation, and service-related charges will influence how much tax is charged at the point of sale.
• Tourism improvement district charges may be collected from purchasers as part of the updated tax framework.

Relevant Terms

• sales price
• sales tax
• tourism improvement district charges
• third-party price reduction
• coupon certificate
• purchaser
• price reduction
• delivery charges
• installation charges
• service charge (428B.03)
• pass-through
• discount
• tax-exempt property
• Minnesota Statutes 2024
• Section 297A.61
• Section 428B.02 subdivision 4