HF5078

1. Purpose

2. This bill changes how Minnesota taxes certain sales and uses of goods and services. It repeals some sales tax exemptions that previously applied to preferred athletic seating and related amenities that come with admissions. It also appropriates money for safe harbor shelters and housing grants, and it amends several sections of the Minnesota Tax Statutes to update definitions and rules for what counts as a taxable sale.

3. Main provisions

4. Repealing exemptions for athletic seating and admissions amenities

   • The bill repeals exemptions related to preferred athletic facility seating and other amenities included with the privilege of admissions.
   • It also repeals Minnesota Statutes 2024 sections that previously exempt season tickets or similar collegiate event arrangements (specifically sections 297A.67 subdivisions 35 and 38 and 297A.68 subdivision 46.1.7).

5. Amending the definition of a retail sale (Minnesota Statutes 2024 section 297A.61, subdivision 4)

   • The bill broadens what counts as a retail sale. It covers:
   • The sale, lease, or rental of tangible personal property for non-resale purposes.
   • The sale of services that are taxable.
   • The sale of property by owners if used to generate resale income after leasing (including various lease arrangements).
   • The sale of building materials, supplies, and equipment used in constructing or improving real property, including installations that are part of the sale (e.g., installing carpeting or shrubbery as part of a real property improvement).
   • The sale of master computer software used to produce copies for sale or lease.
   • The sale of items used in real property improvements, including items installed by others (with installation treated as part of the sale).
   • The sale of prizes, promotional items, and tangible property used to provide services.
   • The sale of tangible property used in lawful gambling or the State Lottery, including promotional items.
   • The sale of machines or devices used to furnish goods or services (e.g., coin-operated devices).
   • The treatment of leases and conditional sales contracts as retail sales when applicable (with specific rules for motor vehicles and certain exceptions for long-term leases).
   • The treatment of bundled transactions (bundled sales with multiple products) as retail sales, with an important exception:
     • If a bundled sale includes a telecommunication service, ancillary service, Internet access, or a right to purchase season tickets for collegiate events, and the seller keeps books and records showing the distinct parts of the price attributable to each product, then those products may not be treated as a bundled sale for tax purposes. The seller must maintain normal business records showing the distinct prices.
   • Motor vehicle repair paint and materials
     • When a motor vehicle repair shop buys paint and materials for repairs, the bill requires either listing each item separately on the invoice or using an industry-standard method to estimate the paint and materials used, ensuring the correct gross receipts are taxed.
     • This rule does not apply to wholesale transactions at auto auctions.
   • Digital products and digital codes
     • The sale of specified digital products or other digital products to an end user is a retail sale, with certain rights of use (permanent or conditional).
     • If a digital code is purchased that relates to specified digital products, the subsequent receipt of or access to the related products is not a retail sale.
   • Other notes
     • A payment to a cooperative electric association or a public utility as a contribution in aid of construction is treated as a contract for improvement to real property and is not a retail sale.

6. Other changes to law

   • The bill includes various refinements to how records are kept and how price allocations are handled in bundled transactions, and clarifies when certain transactions are taxable or not, including services and digital products.

7. Significant changes to existing law

8. Taxes on athletic seating and admissions amenities

   • Exemptions for preferred athletic seating and related amenities are repealed, meaning those items and experiences could become subject to sales tax.

9. Season tickets and collegiate event exemptions

   • Exemptions for season tickets to collegiate events (and similar arrangements) are repealed, aligning tax treatment with broader definitions of retail sale.

10. Broadening and clarifying what is taxed

    • The definition of a retail sale now includes more types of transactions (installations as part of real property improvements, certain bundled transactions with specific record-keeping requirements, digital products with nuanced treatment, etc.).

11. Digital products

    • The sale of digital products to end users is taxed, but in some cases, receiving access after purchase may not be treated as a separate sale.

12. Real property improvements and installations

    • Installations tied to real property improvements are included in the sale, affecting how these transactions are taxed.

13. Record-keeping requirements

    • When bundled transactions are involved, sellers must maintain books and records that show how prices are attributable to distinct products in the bundle.

Relevant Terms - sales tax - retail sale - bundled transaction - end user - installation - real property improvements - season tickets - collegiate events - preferred athletic seating - promotional items - prizes - digital products - specified digital products - digital code - telecommunication service - Internet access - promotional items - cooperative electric association - public utility - contribution in aid of construction - construction materials - installation services - master computer software - non-resale - lease and conditional sale - books and records - distinct and separately identifiable products - industry standard practices - gross receipts