Minnesota Rules — Revenue Department

Chapter 8001 TAX DEFINITIONS

Minn. R. 8001.0100 [Repealed, 26 SR 435]

[Repealed, 26 SR 435]

Minn. R. 8001.0200 [Repealed, 26 SR 435]

[Repealed, 26 SR 435]

Minn. R. 8001.0300 Resident and Domicile Defined; Considerations

Subpart 1. Resident.

The term "resident" means:

A. any individual person who is domiciled in Minnesota, subject to the exception set forth in subpart 9; and

B. any individual person (other than an individual deemed a nonresident under the Servicemembers Civil Relief Act, United States Code, title 50 appendix, section 574, or an individual eligible for reciprocity under Minnesota Statutes, section 290.081) who is not domiciled in Minnesota but who maintains a place of abode in Minnesota and spends in the aggregate more than one-half of the taxable year in Minnesota. A person may be a resident of Minnesota for income tax purposes, and taxable as a resident, even though the person is not deemed a resident for other purposes.

Subp. 2. Domicile; definition and presumptions.

The term "domicile" means the bodily presence of an individual person in a place coupled with an intent to make such a place one's home. The domicile of any person is that place in which that person's habitation is fixed, without any present intentions of removal therefrom, and to which, whenever absent, that person intends to return.

A person who leaves home to go into another jurisdiction for temporary purposes only is not considered to have lost that person's domicile. But if a person moves to another jurisdiction with the intention of remaining there permanently or for an indefinite time as a home, that person has lost that person's domicile in this state. The presumption is that a person who leaves this state to accept a job assignment in a foreign nation has not lost that person's domicile in this state.

Except for a person covered by the provisions of the Servicemembers Civil Relief Act, United States Code, title 50 appendix, section 574, the presumption is that the place where a person's family is domiciled is that person's domicile. The domicile of a spouse is the same as the other spouse unless there is affirmative evidence to the contrary or unless the spouses are legally separated or the marriage has been dissolved. When a person has made a home at any place with the intention of remaining there and the person's family neither lives there nor intends to do so, then that person has established a domicile separate from that person's family.

The domicile of a single person is that person's usual home. In a case of a minor child who is not emancipated, the domicile of the child's parents is the domicile of the child. The domicile of the parent who has legal custody of the child is the domicile of the child. A person who is a permanent resident alien in the United States may have a domicile in this state. The domicile of a member of the armed forces will be governed by the facts just prior to becoming a member of the armed forces unless the person takes the necessary steps to establish a new domicile.

The mere intention to acquire a new domicile, without the fact of physical removal, does not change the status of the taxpayer, nor does the fact of physical removal, without the intention to remain, change the person's status. The presumption is that one's domicile is the place where one lives. An individual can have only one domicile at any particular time. A domicile once shown to exist is presumed to continue until the contrary is shown. An absence of intention to abandon a domicile is equivalent to an intention to retain the existing one. No positive rule can be adopted with respect to the evidence necessary to prove an intention to change a domicile but such intention may be proved by acts and declarations, and of the two forms of evidence, acts must be given more weight than declarations. A person who is temporarily employed within this state does not acquire a domicile in this state if during that period the person is domiciled outside of this state.

Subp. 3. Considerations.

The following items listed will be considered in determining whether or not a person is domiciled in this state:

A. location of domicile for prior years;

B. where the person votes or is registered to vote, but casting an illegal vote does not establish domicile for income tax purposes;

C. status as a student;

D. classification of employment as temporary or permanent;

E. location of employment;

F. location of newly acquired living quarters whether owned or rented;

G. present status of the former living quarters, i.e., whether it was sold, offered for sale, rented, or available for rent to another;

H. whether homestead status has been requested and/or obtained for property tax purposes on newly purchased living quarters and whether the homestead status of the former living quarters has not been renewed;

I. ownership of other real property;

J. jurisdiction in which a valid driver's license was issued;

K. jurisdiction from which any professional licenses were issued;

L. location of the person's union membership;

M. jurisdiction from which any motor vehicle license was issued and the actual physical location of the vehicles;

N. whether resident or nonresident fishing or hunting licenses purchased;

O. whether an income tax return has been filed as a resident or nonresident;

P. whether the person has fulfilled the tax obligations required of a resident;

Q. location of other transactions with financial institutions;

R. location of the place of worship at which the person is a member;

S. location of business relationships and the place where business is transacted;

T. location of social, fraternal, or athletic organizations or clubs or in a lodge or country club, in which the person is a member;

U. address where mail is received;

V. percentage of time (not counting hours of employment) that the person is physically present in Minnesota and the percentage of time (not counting hours of employment) that the person is physically present in each jurisdiction other than Minnesota;

W. location of jurisdiction from which unemployment compensation benefits are received;

X. location of schools at which the person or the person's spouse or children attend, and whether resident or nonresident tuition was charged; and

Y. statements made to an insurance company, concerning the person's residence, and on which the insurance is based. Any one of the items listed above will not, by itself, determine domicile.

Subp. 4. Days within and days without Minnesota.

In counting the number of days spent within and without Minnesota, a person shall be treated as present in Minnesota on any day if the person is physically present in Minnesota at any time during that day. However, a person in transit between two points outside Minnesota who is physically present in Minnesota less than 24 hours, will not be treated as present in Minnesota on any day during transit.

Items A and B are examples of the application of this subpart:

A. T is flying from New York to California and must change flights in Minnesota. T is scheduled to arrive in Minnesota at 7:00 P.M. on March 1, and is scheduled to depart at 1:00 P.M. on March 2. Since T is in transit between two points outside Minnesota and is present instate less than 24 hours, neither March 1 nor March 2 is treated as a day within Minnesota.

B. T has been in Minnesota from March 1 to April 15. On April 15, T departed from Minnesota at 6:00 A.M. T is treated as present in Minnesota on April 15.

Subp. 5. Records.

Any person domiciled outside Minnesota who maintains a place of abode within Minnesota and claims to be a nonresident of the state must have available for examination adequate records to substantiate that more than one-half of the tax year was spent outside Minnesota.

Adequate records means any contemporaneously kept records that establish the places of physical presence of the person on particular dates. Adequate records include, but are not limited to, calendars, diaries, canceled checks, credit card receipts, and airline tickets.

Subp. 6. Definition of abode.

An abode is a dwelling place permanently maintained by a person, whether or not owned and whether or not occupied by the person. It does not need to be permanent in the sense that the person does not intend to abandon it at some future time. However, a cabin or cottage not suitable for year round use and used only for vacations is not an abode. Additionally, quarters which contain sleeping arrangements but do not contain facilities for cooking or bathing will not generally be considered an abode.

A person who moves a domicile outside Minnesota is not considered to be maintaining an abode in Minnesota even though the person continues to own or rent a dwelling in Minnesota if the person has moved personal furnishings and belongings from the dwelling and is making a good faith effort to sell, lease, or sublease the dwelling.

Subp. 7. Domiciliary residents.

The physical presence test does not apply to persons who are domiciled in Minnesota throughout the tax year. There is no presumption that a person domiciled in Minnesota has lost that domicile if the person is absent from Minnesota over one-half of the tax year.

Subp. 8. Part year domiciliaries.

Persons domiciled in Minnesota who move their domiciles outside Minnesota during the tax year and persons domiciled outside Minnesota who move their domiciles to Minnesota during the tax year are part year residents of Minnesota. The physical presence test does not apply to such persons unless a Minnesota abode is maintained during the period domiciled outside of Minnesota.

Subp. 9. Certain persons deemed nonresidents.

A person domiciled in Minnesota is deemed a nonresident for the period of time that the person is a qualified individual under the Internal Revenue Code, section 911. For a person who has homesteaded the person's principal residence in Minnesota prior to leaving the country, this subpart applies only if the person notifies the county within three months of moving out of the country that homestead status should be revoked and does not file a Minnesota homestead application for any property in which the person has an interest during the period the person is a qualified individual.

Subp. 10. Examples.

Items A to E contain examples of the application of this part:

A. T was domiciled in Minnesota from January 1, 1987, through September 1, 1987, and did not leave the state during that period. On September 2, 1987, T sold the Minnesota dwelling and changed domicile to Texas. T was a part year resident of Minnesota in 1987. Although T was physically present in Minnesota over 183 days, the physical presence test does not apply because T did not maintain an abode in Minnesota during the part of the year T was not domiciled in Minnesota.

B. Same facts as item A, but T decided not to sell the Minnesota abode. T was a full year resident of Minnesota in 1987. T was physically present in Minnesota over one-half of the year and maintained an abode in Minnesota.

C. Same facts as item A, but T did not sell the Minnesota dwelling although T listed it for sale with a real estate broker at fair market value from September 1 through December 31, 1987. T was a part year resident of Minnesota in 1987, assuming T removed personal belongings and furnishings from the Minnesota abode when T changed domicile. Although T was physically present over one-half of the year and continued to own a dwelling in Minnesota, T will not be considered to have maintained an abode in Minnesota because T moved belongings from the dwelling and made a good faith effort to sell the dwelling.

D. T moved from Minnesota to Florida on February 1, 1987. T maintained an abode in Minnesota and lived in that abode May 1, 1987 to September 1, 1987. T was not a full year resident of Minnesota under the physical presence test. Although T maintained a Minnesota abode, T was not physically present in Minnesota over one-half of the year. However, the department could review the steps T took to change domicile and could consider T a full year resident if it were determined T remained domiciled in Minnesota.

E. T moved domicile to Minnesota on June 1, 1987. T did not have an abode in Minnesota prior to June 1, 1987. T was physically present in Minnesota throughout the period of June 1, 1987 to December 31, 1987. T was a part year resident of Minnesota in 1987. Although T was physically present in Minnesota over one-half of the year, T did not have a Minnesota abode during the part of the year T was domiciled outside the state. Therefore, the physical presence test does not apply.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06; 290.52
• History: 12 SR 2746; 17 SR 1279; 27 SR 1664; L 2005 c 151 art 1 s 114; 46 SR 1363; 47 SR 801; 48 SR 5

Minn. R. 8001.0400 [Repealed, 26 SR 435]

[Repealed, 26 SR 435]

Minn. R. 8001.0500 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8001.0600 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8001.0700 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8001.9000 Incorporation by Reference of Internal Revenue Code

An incorporation by reference of the Internal Revenue Code in Minnesota Statutes, chapter 290 or 290A shall be interpreted in accordance with any regulations or rulings adopted or issued by the Internal Revenue Service which govern the referenced provisions.

History

• Statutory Authority: MS s 270C.06; 290.52
• History: L 2005 c 151 art 1 s 114

Chapter 8002 INDIVIDUAL INCOME DETERMINATION

Minn. R. 8002.0100 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8002.0200 Minnesota Gross Income for Individuals Who Are Part-Year Residents or Nonresidents of Minnesota (federal Adjusted Gross Income)

Subpart 1.

[Repealed, 25 SR 806]

Subp. 2.

[Repealed, 27 SR 1664]

Subp. 3. Distributive shares.

Income received by a nonresident, which is the distributive share of partnership income from personal or professional services which are performed in Minnesota, is assignable to Minnesota in the same proportion as the partnership income is assignable to Minnesota even though the nonresident partner performed no personal or professional services in Minnesota during that year.

Subp. 4.

[Repealed, 46 SR 175]

Subp. 5.

[Repealed, 27 SR 1664]

Subp. 6. Reciprocity exclusion.

Minnesota gross income does not include personal or professional service income earned in Minnesota by a resident of Wisconsin, North Dakota, or Michigan. A resident of North Dakota or Michigan can use this provision only if the resident customarily returns at least once a month to their residence in that state. Wisconsin, North Dakota, and Michigan are the only three states that have reciprocity exclusion agreements with the state of Minnesota. The income subject to reciprocity exclusion is compensation for the performance of personal or professional services which the taxpayer personally renders. It is not enough to employ others to render these services.

A. The reciprocity exclusion does not apply where the personal or professional service income is earned as part of a business operated by the taxpayer which has employees that do more than incidental duties for the business or where there is the sale or delivery of goods which are more than an incidental part of the business. The reciprocity exclusion does apply to all the personal or professional income earned in the business where the sale of goods and the services of the employees are incidental. Where a partner is a member of a partnership where the selling of goods or the services of employees is more than incidental to the partnership business, reciprocity exclusion would apply only to the partner's salary (personal or professional service income) but not to the distributive shares of the partnership business. Salaries would be subject to a reasonableness test and a provision for salaries must be part of the partnership agreement. If there is no written partnership agreement, or if in the written agreement no salary or salary formula is specifically provided, the payment to the partners is a partnership distribution and is not subject to reciprocity exclusion. Partnership draw does not constitute a salary; it is a convenience to the partners in withdrawing a share of their business equity. If all partners are performing personal services and the sale of goods and the services of the employees are incidental, the reciprocity exclusion applies to the partner's salary and to the partner's distributive share. The imputed income of a shareholder of an electing small business corporation (Subchapter S) is not subject to reciprocity exclusion as this income is in the form of a partnership distribution.

B. The word "incidental" means the sale of goods or the services of employees which are only a minor or secondary contribution to the personal service income of the individual or partnership for whom performed. The sale of goods or the services of employees is incidental if for the sale of goods the gross profit (gross receipts less cost of goods sold) or for the services of employees the total compensation paid the employees is less than $20,000 or ten percent of the gross profit of the business, whichever is greater. The total compensation paid the employees and the gross profit from the sale of goods must be totaled when determining if the goods and employees are incidental.

C. If an individual's total income assignable to Minnesota is subject to reciprocity exclusion, that individual need not file a Minnesota income tax return. However, if that individual has Minnesota income, some of which is subject to reciprocity exclusion and some of which is not subject to reciprocity exclusion and if the income which is not subject to reciprocity exclusion exceeds the filing requirements for filing a Minnesota income tax return, that individual must file a Minnesota income tax return. That individual should use the appropriate federal adjusted gross income for the taxable year. A subtraction would be allowed at a subsequent point on the return to remove income which is subject to reciprocity exclusion. In order to claim the reciprocity exclusion, individuals should file form M-115, which is an affidavit claim for exemption of compensation received for services performed under the reciprocity exclusion. Although the exact form may change, the following information will be required:

Subp. 7. Assignable income.

The following items of income received by a nonresident are assignable to Minnesota regardless of the time or place received by the taxpayer if the underlying services giving rise to the payment were performed in Minnesota:

A. a bonus;

B. commissions; and

C. vacation pay. However, certain qualified pension payments are not assignable to Minnesota if they are received by a nonresident, even though the payments are attributable to services previously performed in Minnesota.

Subp. 8.

[Repealed, L 2014 c 308 art 9 s 94]

History

• Statutory Authority: MS s 14.386; 14.388; 14.3895; 270.06; 270C.06; 290.081; 290.52
• History: 8 SR 2412; 17 SR 1279; 25 SR 806; 27 SR 1664; L 2005 c 151 art 1 s 114; L 2014 c 308 art 9 s 94; 46 SR 175

Minn. R. 8002.0300 Subtraction for Interest on U.s. Government Obligations

Subpart 1. Conditions for qualification.

Minnesota Statutes, section 290.0132, subdivision 2, allows an individual taxpayer, an estate, or a trust to subtract the amount of interest earned on certain obligations of the United States government from federal taxable income. To qualify for this subtraction, the obligation must meet the following conditions:

A. For the purposes of these conditions, "interest" includes:

B. The obligation must be an obligation of the United States of America, whether through an agency, authority, commission, or instrumentality of the United States, and must be exempt from state taxation under federal law.

C. The obligation must be in writing, bear interest, contain a binding promise by the United States to pay specified sums on specified dates, and be specifically authorized by Congress. Open accounts and other unsettled claims or demands are not obligations of the United States for the purposes of this part.

D. The obligation must be a direct and primary obligation of the United States. If the primary obligor is not the United States and the United States is merely an insurer or guarantor and has only a secondary or contingent liability, the interest income is not exempt. If the primary obligor is not the United States but the United States pays all or part of the interest on the obligation, the interest income is not exempt. If the obligation was originally a private obligation and if the obligee later gives up all rights against the original obligor as part of an insurance endorsement or otherwise, and agrees to look only to the United States for payment of both principal and interest, then the obligation has become a primary obligation of the United States and the interest income from it is exempt from state taxation.

E. The interest income on the obligation must have been included in federal taxable income for the taxable year that subtraction is claimed. If only a portion of the interest income on an obligation has been included in federal taxable income, only the included portion may be subtracted. Where the interest is in the form of dividends from a regulated investment company and all of the regulated investment company's interest is derived from interest on obligations that are exempt from state taxation by federal law, the full amount of the dividends received by shareholders may be subtracted. Where less than the full amount is derived from interest on exempt obligations, the amount to be subtracted is determined as follows: In the case of a series fund, as defined by the Internal Revenue Code, section 851 (g), the portion of the dividends paid that is exempt from Minnesota income tax must be determined on a fund-by-fund basis.

Subp. 2. Exhibits.

Subpart 3 contains a list of securities that are exempt from Minnesota income tax and for which a subtraction is allowed. Subpart 4 contains a list of securities that are subject to Minnesota income tax and for which no subtraction is allowed. Subparts 5 and 6 contain lists of various federal agencies or related organizations that either generally issue exempt obligations or generally issue taxable obligations. These lists are not intended to be conclusive on the taxable status of any particular obligation issued by or in conjunction with a listed agency or organization. Even though a listed agency generally only issues either exempt obligations or taxable obligations, it does not follow that each and every obligation carrying the name of that particular agency is either exempt or taxable. An agency may issue its own obligations that are exempt and also may handle private obligations that are not exempt. For example, the agency may administer, purchase and sell, insure, or guarantee an otherwise private obligation. Such action by the agency does not convert a private obligation into a direct and primary obligation of the United States of America and, therefore, does not make the private obligation tax exempt. The taxable status of each obligation must be determined separately in accordance with subpart 1, items A to E.

Subp. 3. Exempt obligations listed by name of security.

Subp. 4. Taxable obligations listed by name of security.

Subp. 5. Agencies which generally issue exempt obligations.

Notice: This listing is only a guide and is not conclusive on the issue of the taxable status of an obligation. Each obligation issued by a listed agency must be separately analyzed according to subpart 1, items A to E.

Subp. 6. Agencies or organizations which generally issue taxable obligations.

Notice: This listing is only a guide and is not conclusive on the issue of the taxable status of an obligation. Each obligation issued by a listed agency must be separately analyzed according to subpart 1, items A to E.

History

• Statutory Authority: MS s 270.06; 270C.06; 290.52
• History: 17 SR 1670; 27 SR 1664; L 2005 c 151 art 1 s 114; L 2016 c 158 art 3 s 31

Chapter 8003 INCOME TAX ON CORPORATIONS

Minn. R. 8003.0100 [Repealed, 26 SR 435]

[Repealed, 26 SR 435]

Chapter 8006 TAX CREDITS

Minn. R. 8006.0100 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8006.0200 [Repealed, L 1985 1Sp14 art 1 s 59; L 1987 c 268 art 1 s 128]

[Repealed, L 1985 1Sp14 art 1 s 59; L 1987 c 268 art 1 s 128]

Chapter 8007 ACCOUNTING METHODS; TAXABLE YEAR

Minn. R. 8007.0100 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8007.0200 [Repealed, L 2014 c 308 art 9 s 94]

[Repealed, L 2014 c 308 art 9 s 94]

Minn. R. 8007.0300 Restoration of Amounts Received or Accrued Under Claim of Right

Subpart 1. In general.

If, during the taxable year, the taxpayer is entitled under other provisions of Minnesota Statutes, chapter 290 to a deduction of more than $3,000 because of the restoration to another of an item which was included in the taxpayer's gross income for a prior taxable year (or years) under a claim of right, the tax imposed by Minnesota Statutes, chapter 290 for the taxable year shall be the tax provided in subpart 2.

For the purpose of this part "income included under a claim of right" means an item included in gross income because it appeared from all the facts available in the year of inclusion that the taxpayer had an unrestricted right to such item, and "restoration to another" means a restoration resulting because it was established after the close of such prior taxable year (or years) that the taxpayer did not have an unrestricted right to such item (or portion thereof).

For purposes of determining whether the amount of a deduction described in Minnesota Statutes, section 290.07, subdivision 4 exceeds $3,000 for the taxable year, there shall be taken into account the aggregate of all such deductions with respect to each item of income (described in Minnesota Statutes, section 290.07, subdivision 4 of the same class).

Subp. 2. Determination of tax.

Under the circumstances described in subpart 1, the tax imposed by Minnesota Statutes, chapter 290 for the taxable year shall be the lesser of:

A. the tax for the taxable year computed under Minnesota Statutes, section 290.07, subdivision 4 that is, with the deduction taken into account; or

B. the tax for the taxable year computed without taking such deduction into account, minus the decrease in tax under Minnesota Statutes, chapter 290 for the prior taxable year (or years) which would result solely from the exclusion from gross income of all or that portion of the income included under a claim of right to which the deduction is attributable. For the purpose of this subpart, the amount of the decrease in tax is not limited to the amount of the tax for the taxable year. See item A where the decrease in tax for the prior taxable year (or years) exceeds the tax for the taxable year. If the taxpayer computes the tax for the taxable year under item B, the amount of the restoration shall not be taken into account in computing taxable income or loss for the taxable year, including the computation of any net operating loss carryback or carryover or any capital loss carryover. If the tax determined under item A is the same as the tax determined under item B, the tax imposed for the taxable year under Minnesota Statutes, chapter 290 shall be the tax determined under item A, and this part shall not otherwise apply.

Subp. 3.

[Repealed, L 2003 c 127 art 3 s 24]

Subp. 4. Determination of decrease in tax for prior taxable years.

The prior taxable year (or years) referred to in subpart 2 is the year (or years) in which the item to which the deduction is attributable was included in gross income under a claim of right and, in addition, any other prior taxable year (or years) the tax for which will be affected by the exclusion from gross income in such prior taxable year (or years) of such income.

A. The amount to be excluded from gross income for the prior taxable year (or years) in determining the decrease in tax under subpart 2, item B, shall be the amount restored in the taxable year, but shall not exceed the amount included in gross income in the prior taxable year (or years) under the claim of right to which the deduction for the restoration is attributable, and shall be adjusted as provided in item B.

B. If the amount included in gross income for the prior taxable year (or years) under the claim of right in question was reduced in such year (or years) by a deduction allowed under Minnesota Statutes, section 290.16, subdivision 4 then the amount determined under item A to be excluded from gross income for such year (or years) shall be reduced in the same proportion that the amount included in gross income under a claim of right was reduced.

C. The determination of the amount of the exclusion from gross income of the prior taxable year shall be made without regard to the capital loss limitation contained in Minnesota Statutes, section 290.16, subdivision 5 applicable in computing taxable income for the current taxable year. The amount of the exclusion from gross income in a prior taxable year (or years) shall not exceed the amount which would, but for the application of Minnesota Statutes, section 290.16, subdivision 5, be allowable as a deduction in the taxable year of restoration.

D. The rule provided in item C may be illustrated as follows: For the taxable year 1957, an individual taxpayer had long-term capital gains of $50,000 and long-term capital losses of $10,000, a net long-term gain of $40,000. The taxpayer also had other income of $5,000. In 1961 taxpayer restored the $50,000 of long-term gain. The taxpayer had no capital gains or losses in 1961 but had other income of $5,000. If the tax liability for 1961, the taxable year of restoration, is computed by taking the deduction into account, the taxpayer would be entitled to a deduction under Minnesota Statutes, section 290.16, subdivision 5 of only $1,000 on account of the capital loss. However, if the taxpayer computes the tax under subpart 2, item B, it is necessary to determine the decrease in tax for 1957. In such a determination, $50,000 is to be excluded from gross income for that year, resulting in a net capital loss for that year of $10,000, and a capital loss deduction of $1,000 under Minnesota Statutes, section 290.16, subdivision 5 with carryover privileges. The difference between the tax previously determined and the tax as recomputed after such exclusion for the years affected will be the amount of the decrease.

E. If the deduction otherwise allowable for the taxable year relates to income included in gross income under a claim of right in more than one prior taxable year and the amount attributable to each such prior taxable year cannot be readily identified, then the portion attributable to each such prior taxable year shall be that portion of the deduction otherwise allowable for the taxable year which the amount of the income included under the claim of right in question for the prior taxable year bears to the total of all such income included under the claim of right for all such prior taxable years. The rule provided in this item may be illustrated as follows: Under a claim of right, A included in gross income over a period of three taxable years an aggregate of $9,000 for services to a certain employer, in amounts as follows: $2,000 for taxable year 1952, $4,000 for taxable year 1953, and $3,000 for taxable year 1954. In 1955 it is established that A must restore $6,750 of these amounts to A's employer, and that A is entitled to a deduction of this amount in the taxable year 1955. The amount of the deduction attributable to each of the prior taxable years cannot be identified. Accordingly, the amount of the deduction attributable to each prior taxable year is:

F. In computing the amount of decrease in tax for a prior taxable year (or years) resulting from the exclusion from gross income of the income included under a claim of right, there must first be ascertained the amount of tax previously determined for the taxpayer for such prior taxable year (or years). The tax previously determined shall be the sum of the amounts shown by the taxpayer on the return or returns, plus any amounts which have been previously assessed (or collected without assessment) as deficiencies or which appropriately should be assessed or collected, reduced by the amount of any refunds or credits which have previously been made or which appropriately should be made. After the tax previously determined has been ascertained, a recomputation must then be made to determine the decrease in tax, if any, resulting from the exclusion from gross income of all or that portion of the income included under a claim of right to which the deduction otherwise allowable in the taxable year is attributable. No item other than the exclusion of the income previously included under a claim of right shall be considered in computing the amount of decrease in tax if reconsideration of such other item is prevented by the operation of any provision of the income tax laws or any other rule of law. However, if the amounts of other items in the return are dependent upon the amount of adjusted gross income, taxable income, or net income (such as charitable contributions, foreign tax credit, deductions for depletion, and net operating loss), appropriate adjustment shall be made as part of the computation of the decrease in tax. For the purpose of determining the decrease in tax for the prior taxable year (or years) which would result from the exclusion from gross income of the item included under a claim of right, the exclusion of such item shall be given effect not only in the prior taxable year in which it was included in gross income but in all other prior taxable years affected by the inclusion of the item (for example, prior taxable years affected by a net operating loss carryback or carryover or capital loss carryover). The rules provided in this item may be illustrated as follows: Example 1. For the taxable year 1954, a corporation has taxable income of $35,000, on which it paid a tax of $2,000. Included in gross income for the year was $20,000 received under a claim of right as royalties. In 1957, the corporation is required to return $10,000 of the royalties. It otherwise has taxable income in 1957 of $5,000, so that without the application of Minnesota Statutes, section 290.07, subdivision 4 it has a net operating loss of $5,000 in that year. Facts also come to light in 1957 which entitle the corporation to an additional deduction of $5,000 for 1954. When a computation is made under subpart 2, item A, the corporation has no tax for the taxable year 1957. When a computation is made under subpart 2, item B, the tax for 1957, without taking the restoration into account, is $365, based on a taxable income of $5,000. The decrease in tax for 1954 is computed as follows: The $205 is treated as having been paid on the last day prescribed by law for the payment of the tax for 1957 and is available as a refund. In addition the taxpayer has made an overpayment of $285 ($2,000 less $1,715) for 1954 because of the additional deduction of $5,000. Example 2. Assume the same facts as in example 1 except that, instead of the corporation being entitled to an additional deduction of $5,000 for 1954, it is determined that the corporation failed to include an item of $5,000 in gross income for that year. The decrease in tax for 1954 is computed as follows: The $205 is treated as having been paid on the last day prescribed by law for the payment of the tax for 1957 and is available as a refund. In addition the taxpayer has a deficiency of $285 ($2,285 less $2,000) for 1954 because of the additional income of $5,000.

Subp. 5. Method of accounting.

The provisions of Minnesota Statutes, section 290.07, subdivision 4 and this part shall be applicable in the case of a taxpayer on the cash receipts and disbursements method of accounting only to the taxable year in which the item of income included in a prior year (or years) under a claim of right is actually repaid. However, in the case of a taxpayer on the cash receipts and disbursements method of accounting who constructively received an item of income under a claim of right and included such item of income in gross income in a prior year (or years), the provisions of Minnesota Statutes, section 290.07, subdivision 4 and this part shall be applicable to the taxable year in which the taxpayer is required to relinquish the right to receive such item of income. Such provisions shall be applicable in the case of other taxpayers only to the taxable year which is the proper taxable year (under the method of accounting used by the taxpayer in computing taxable income) for taking into account the deduction resulting from the restoration of the item of income included in a prior year (or years) under a claim of right. For example, if the taxpayer is on an accrual method of accounting, the provisions of this section shall apply to the year in which the obligation properly accrues for the repayment of the item included under a claim of right.

Subp. 6. Inventory items, stock in trade, and property held primarily for sale in the ordinary course of trade or business.

Except for amounts specified in the following paragraph, the provisions of Minnesota Statutes, section 290.07, subdivision 4 and this part do not apply to deductions attributable to items which were included in gross income by reason of the sale or other disposition of stock in trade of the taxpayer (or other property of a kind which would properly have been included in the inventory of the taxpayer if on hand at the close of the prior taxable year) or property held by the taxpayer primarily for sale to customers in the ordinary course of the taxpayer's trade or business. This part is, therefore, not applicable to sales returns and allowances and similar items.

The provisions of Minnesota Statutes, section 290.07, subdivision 4 and this part apply to deductions which arise out of refunds or repayments made by a regulated public utility, as defined in the Internal Revenue Code of 1954, section 1503 (c)(1) or (3) and the Federal Tax Regulations, section 1.1502-2 (g), if such refunds or repayments are required to be made by the government, political subdivision, agency, or instrumentality referred to in such regulation. Thus, deductions attributable to refunds of charges for the sale of natural gas under rates approved temporarily by a proper governmental authority are eligible for the benefits of Minnesota Statutes, section 290.07, subdivision 4 and this part, if such refunds are required by the governmental authority.

Subp. 7. Bad debts.

The provisions of Minnesota Statutes, section 290.07, subdivision 4 and this part do not apply to deductions attributable to bad debts.

Subp. 8. Legal fees and other expenses.

Minnesota Statutes, section 290.07, subdivision 4 and this part do not apply to legal fees or other expenses incurred by a taxpayer in contesting the restoration of an item previously included in income. This rule may be illustrated by the following example:

A sold A's personal residence to B in a prior taxable year and realized a capital gain on the sale. C claimed that under an agreement with A, C was entitled to a five percent share of the purchase price since C brought the parties together and was instrumental in closing the sale. A rejected C's demand and included the entire amount of the capital gain in gross income for the year of sale. C instituted action and in the taxable year judgment is rendered against A who pays C the amount involved. In addition, A pays legal fees in the taxable year which were incurred in the defense of the action. Minnesota Statutes, section 290.07, subdivision 4 applies to the payment of the five percent share of the purchase price to C. However, the payment of the legal fees, whether or not otherwise deductible, does not constitute an item restored for purposes of Minnesota Statutes, section 290.07, subdivision 4.

Subp. 9. Refunds.

If the decrease in tax for the prior taxable year (or years) determined under Minnesota Statutes, section 290.07, subdivision 4, and subpart 2, item B, exceeds the tax imposed by Minnesota Statutes, chapter 290 for the taxable year computed without the deduction, the excess shall be considered to be a payment of tax for the taxable year of the deduction. Such payment is deemed to have been made on the last day prescribed by law for the payment of tax for the taxable year and shall be refunded or credited in the same manner as if it were an overpayment of tax for such taxable year.

History

• Statutory Authority: MS s 270C.06; 290.52
• History: 17 SR 1279; L 2003 c 127 art 3 s 24; L 2005 c 151 art 1 s 114

Minn. R. 8007.0400 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8007.0500 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8007.0600 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8007.0700 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8007.0800 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8007.2000 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8007.3000 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8007.4000 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Chapter 8008 EXEMPTIONS FROM GROSS INCOME

Minn. R. 8008.0100 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8008.0200 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8008.0300 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8008.0400 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8008.0500 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Chapter 8009 DEPENDENT EDUCATION EXPENSE

Minn. R. 8009.0100 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.0200 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.0300 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.0400 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.0500 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.0600 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.0700 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.0800 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.0900 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.1000 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.1100 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.1200 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.1300 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.1400 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.1500 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.1600 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.1700 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.1800 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.1900 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.2000 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.2100 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.2200 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.2300 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.2400 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.2500 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.2600 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.2700 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.3000 [Repealed, L 2009 c 88 art 7 s 11]

[Repealed, L 2009 c 88 art 7 s 11]

Minn. R. 8009.4000 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.4100 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.4200 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.4300 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.4400 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.4500 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.4600 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.4700 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.4800 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.4900 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.5000 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.5100 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.5200 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.5300 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.5400 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.5500 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.5600 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.5700 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.5800 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.5900 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.6500 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.7000 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8009.7100 [Repealed, L 2003 c 127 art 3 s 24]

[Repealed, L 2003 c 127 art 3 s 24]

Minn. R. 8009.7200 [Repealed, L 2003 c 127 art 3 s 24]

[Repealed, L 2003 c 127 art 3 s 24]

Minn. R. 8009.7300 Repealed by subpart

Subpart 1.

[Repealed, 26 SR 435]

Subp. 2.

[Repealed, L 2003 c 127 art 3 s 24]

Minn. R. 8009.7400 [Repealed, L 2003 c 127 art 3 s 24]

[Repealed, L 2003 c 127 art 3 s 24]

Chapter 8010 NONDEDUCTIBLE ITEMS

Minn. R. 8010.0100 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8010.0200 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8010.0300 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8010.0400 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Chapter 8011 INVENTORIES

Minn. R. 8011.0100 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8011.0200 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8011.0300 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8011.0400 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8011.0500 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8011.0600 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8011.0700 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8011.0800 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8011.0900 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8011.1000 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Chapter 8014 DETERMINATION OF BASIS

Minn. R. 8014.0100 [Repealed, 26 SR 435]

[Repealed, 26 SR 435]

Minn. R. 8014.1000 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8014.1100 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8014.1200 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8014.1300 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8014.1400 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8014.1500 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8014.1600 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8014.2000 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Chapter 8017 ALLOCATION AND APPORTIONMENT OF INCOME

Minn. R. 8017.0100 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8017.2000 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8017.3000 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8017.4000 [Repealed, 18 SR 1890]

[Repealed, 18 SR 1890]

Minn. R. 8017.5000 MR 1995 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1995 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8017.6000 Apportionment of Net Income of Air Carriers

Subpart 1. General information.

Minnesota Statutes, section 290.17, subdivision 3, provides that the net income of a trade or business carried on partly in and partly out of this state must be apportioned between this state and other states. Minnesota Statutes, section 290.191, provides general rules for the apportionment of the net income of a trade or business carried on partly in and partly out of this state. Minnesota Statutes, section 290.20, provides that if the methods prescribed by Minnesota Statutes, section 290.191, do not fairly reflect the net income allocable to this state, the commissioner of revenue may require the use of another method. The nature of the air carrier business requires use of a method other than those prescribed by Minnesota Statutes, section 290.191.

Subp. 2. Definitions.

The definitions in this subpart apply to this part.

A. "Air carrier" means a person engaged in the paid carriage of passengers, cargo, or mail on regularly scheduled flights of aircraft.

B. "Aircraft" means a contrivance used or designed for the navigation of flight in the air.

C. "Airport-to-airport mileage" means the mileage, as determined by the United States Department of Transportation, between airports that are the point of origination and termination of a flight in service.

D. "Cargo ton mile" means the paid carriage of one ton of cargo for one mile.

E. "Departures" means departures of an aircraft while operating a flight in revenue service.

F. "Fixed property and payroll" means all property and payroll not defined as flight property or flight payroll.

G. "Fleet type" means each series within an aircraft model.

H. "Flight in revenue service" means the flight of an aircraft for the paid carriage of cargo, mail, or passengers.

I. "Flight payroll" means the payroll of persons engaged as staff, such as pilots and flight attendants, on the air carrier's aircraft.

J. "Flight property" means aircraft ready for flight, spare engines, and spare parts inventory that rotates into aircraft. Inventory that rotates is inventory that consists of aircraft parts that are replacements for defective or worn parts and may be placed into an aircraft for use more than one time.

K. "Mail ton mile" means the paid carriage of one ton of mail for one mile.

L. "Minnesota cargo ton mile" means the paid carriage of one ton of cargo for one Minnesota plane mile.

M. "Minnesota departures" means departures of aircraft from Minnesota facilities for flights in revenue service.

N. "Minnesota mail ton mile" means the paid carriage of one ton of mail for one Minnesota plane mile.

O. "Minnesota passenger ton mile" means the paid carriage of one ton of passengers for one Minnesota plane mile.

P. "Minnesota plane mile ratio" means the resultant ratio of Minnesota plane miles divided by total plane miles. A separate plane mile ratio must be computed for each fleet type.

Q. "Minnesota plane miles" means the number of miles on completed flights in revenue service using airport-to-airport mileage flown from a departure point in Minnesota to the border of the state or flown from the border of Minnesota to a destination within the state. Minnesota plane miles are calculated by multiplying the airport-to-airport mileage by the percentage resulting from the division of the Minnesota distance by total distance for each flight in revenue service. The Minnesota plane miles of a flight in revenue service from a Minnesota departure point to a Minnesota destination is the airport-to-airport mileage.

R. "Passenger ton mile" means the paid carriage of one ton of passengers for one mile. For this purpose, each passenger is considered to weigh 200 pounds.

S. "Plane miles" means the number of miles flown on completed flights in revenue service using airport-to-airport mileage. Plane miles must be accumulated on a fleet type basis.

Subp. 3. Formula.

Except as provided in this part, the method of apportionment prescribed in Minnesota Statutes, section 290.191, governs the apportionment of the net income of air carriers by this state.

Subp. 4. Property factor.

Items A to D govern inclusion of property for purposes of the property factor in Minnesota Statutes, section 290.191.

A. The denominator of the property factor must include the property permitted to be included under Minnesota Statutes, section 290.191, subdivisions 9 and 10.

B. Fixed property owned or rented and actually used by the air carrier in this state in carrying on business in this state must be included in the numerator of the property factor.

C. All flight property owned or rented by the taxpayer must be included in the numerator of the property factor by multiplying the original cost of the flight property by the Minnesota plane mile ratio. This calculation must be made on a fleet type basis.

D. Fixed and flight property that is rented by an air carrier is valued at eight times the net annual rental, as set forth in Minnesota Statutes, section 290.191, subdivision 10, paragraph (e).

Subp. 5. Payroll factor.

The payroll factor must be determined under Minnesota Statutes, section 290.191, subdivision 12, except that flight payroll must be included in the numerator by multiplying the total flight payroll times the Minnesota plane mile ratio. This calculation must be made on a fleet type basis.

Subp. 6. Receipts factor.

Items A and B govern inclusion of receipts for purposes of the receipts factor in Minnesota Statutes, section 290.191.

A. The denominator of the receipts factor includes all receipts from the paid carriage of passengers, cargo, and mail.

B. The numerator must be 85 percent of the sum of the amounts calculated in subitem (1) plus 15 percent of the sum of the amounts calculated in subitem (2). The Minnesota passenger, cargo, and mail revenue must be determined on a fleet type basis by:

History

• Statutory Authority: MS s 270.06; 270C.06
• History: 17 SR 95; L 2005 c 151 art 1 s 114

Chapter 8019 UNITARY BUSINESS TAXATION

Minn. R. 8019.0100 Definition of Unitary Business

Subpart 1. Definitions of corporation and United States.

The term "corporation" does not include an S corporation. The term "United States" includes any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any possession of the United States, or any political subdivision of any of the foregoing.

Subp. 2. Unitary business.

"Unitary business" means business activities or operations which result in a flow of value between them. The term is applied to a flow either between multiple entities that are related through common ownership or within a single legal entity, and without regard to whether each entity is a sole proprietorship, a corporation, a partnership, or a trust. Flow of value is determined by reviewing the totality of facts and circumstances of business activities and operations.

Some activities that evidence a flow of value between related corporations include the following: assisting in the acquisition of equipment, assisting with filling personnel needs, lending funds or guaranteeing loans, interplay in the area of corporate expansion, providing technical assistance, supervising, providing general operational guidance, providing overall operational strategic advice, or common use of trade names and patents. Flow of value must be more than the flow of funds arising out of passive investment and consists of more than occasional financial oversight.

Transactions separately accounted for may evidence a flow of value. The fact that a business uses or can use a separate accounting system, including, but not limited to, separate accounting between divisions of a single legal entity, between multiple entities under common ownership, on an arm's length basis, on a geographical basis, or by business function, does not determine whether a corporation is operating as a unitary business.

Subp. 2a. Presumption of unity.

A. Business activities or operations carried on by more than one corporation related through common ownership are presumed to be unitary in nature when:

B. The unitary nature of the business activities or operations is presumed when contributions to income result from functional integration, centralized management, and economies of scale.

C. All of the examples in item A, subitems (2) and (3), are not needed to show the unity of operation or unity of use. The presumptions of unity stated in item A, subitem (1), are independent from the presumption of unity stated in item A, subitems (2) and (3). The mere ownership of as much as 100 percent of the stock of another corporation does not, in the absence of other indicia of a unitary business, mean that the business of the group is unitary in nature. The presence of any one of the factors contained in subparts 2a and 5 is evidence that the activities of the corporations constitute a unitary trade or business. The presence of any one of the factors contained in subparts 3 and 4 creates a presumption that the activities of the corporations constitute a unitary trade or business.

Subp. 3. Horizontal type of business.

Business activities or operations carried on by more than one corporation, related through common ownership, are generally unitary when the activities of the corporations are in the same general line of business and exhibit functional integration and economies of scale.

For example, separately incorporated grocery stores, related through common ownership, will usually be engaged in a unitary trade or business if they are functionally integrated, and have centralized management and economies of scale.

Subp. 4. Steps in a vertical process.

Business activities or operations carried on by more than one corporation, related through common ownership, are unitary in nature when the various members are engaged in a vertically structured enterprise.

For example, assuming that the common ownership requirement is met, a trade or business that is functionally integrated and which benefits from centralized management and controlled interaction which involves the exploration and mining of copper ore by one of the related corporations; the smelting and refining of the copper ore by another of the related corporations; and the fabrication of the refined copper into consumer products by another of the related corporations, is unitary in nature.

Subp. 5. Centralized management.

Centralized management in determining the policies of each corporation in a group of corporations that are related through common ownership indicates that the corporations, which might otherwise be considered to be carrying on separate trades or businesses, are engaged in a unitary trade or business.

The fact that the executive officers of one of the corporations in a group of corporations are normally involved in determining the policies respecting the business activities of the other corporations in the group indicates that the group of corporations is carrying on a unitary trade or business.

A finding of centralized management is not supported merely by showing that the requisite ownership percentage exists. When a more than incidental economic benefit accrues to a group because such ownership improves its financial position, it indicates that the group is carrying on a unitary trade or business. Both centralized management authority and the exercise of that authority must exist in order to justify a conclusion that unity of use is present.

Subp. 6. Common ownership.

Common ownership does not exist unless the corporation is one which is a member of a group of two or more corporations and more than 50 percent of the voting stock of each member is directly or indirectly owned by a common owner or by common owners, either corporate or noncorporate, or by one or more of the member corporations of the group. The term "common owner" includes the constructive ownership of stock by related taxpayers as provided by the Internal Revenue Code of 1986, section 267, as amended through December 31, 1999. Examples of common ownership are:

A. Corporation P owns 51 percent of the voting stock of corporation R1 and corporation R1 owns 51 percent of the voting stock of each of corporations R2 and R3. Common ownership exists among P, R1, R2, and R3.

B. Corporation P owns 51 percent of the voting stock of corporation R1, corporation R1 owns 49 percent of the voting stock of corporation R2 and corporation R2 owns 51 percent of the voting stock of R3. Common ownership exists among P and R1 and will be identified as group A. Common ownership exists among R2 and R3 and will be identified as group B. There is no common ownership between group A and group B.

Subp. 7. Examples.

The provisions of subparts 1 to 6 may be illustrated by the examples in items A to C.

A. Sales corporation owns 51 percent of the outstanding voting stock in each of four subsidiaries: refining corporation, drilling corporation, transport corporation, and research corporation. Sales corporation markets and sells petroleum products in the United States and abroad. Some of the petroleum products are obtained from refining corporation which acquires some of the crude oil from drilling corporation. Transport corporation operates pipeline facilities to transport crude oil from drilling corporation's storage facilities to refining corporation's refineries. Research corporation conducts research and development for both sales and refining corporations. Since the corporations are operating a vertically integrated business and since there is common ownership, the five corporations are conducting a unitary business.

B. Corporation A owns 60 percent of the outstanding voting stock in each of three corporations: B, C, and D. Corporation B, in turn, owns 100 percent of the outstanding voting stock in corporation E. Corporation A is primarily engaged in operating multiline department stores in Minnesota and other midwestern states. Corporation B operates a chain of department stores in the northwestern portion of the United States. B's stores sell only high quality, top grade consumer items. Corporation C operates a chain of discount stores throughout the southwestern portion of the United States. Corporation D is a finance company, handling all of the consumer credit and financing arrangements of purchases at the stores owned by corporations A, B, and C. Corporation E is the purchasing agent for corporations A, B, and C and maintains warehouses for the stores' inventories. Corporation A provides management services for all of the other corporations and maintains overall control in determining the policies respecting the primary business activities of the other corporations, including their budgetary and financial affairs. All of these corporations are engaged in the conduct of a unitary business since they are operating a horizontally integrated business and since they have common ownership.

C. Corporation K was incorporated in 1945 and thereafter was engaged primarily in activities connected with the manufacture and sale of canned goods. In 1960, K embarked upon a diversification campaign designed to insulate its profits from fluctuations in the demand for canned goods. One hundred percent of the voting stock of corporation L was acquired. Corporation L operated a chain of department stores throughout the United States. In 1961, K purchased 80 percent of the voting stock of corporation M which was engaged primarily in the manufacture and sale of household goods. In 1962, K acquired 75 percent of the voting stock of corporation N which developed and marketed computer software and programs. There was no significant flow of goods between any of the corporations. While these subsidiaries were relatively autonomous in their day-to-day operations, each subsidiary did not operate as a distinct business enterprise at the level of full-time management. Corporation K involved itself in policy determinations respecting the primary business activities of all the corporations. The subsidiaries were required to submit annual budgets to K for approval. Capital expenditures in excess of $500,000 needed approval from K. All of the financing arrangements for the subsidiaries were made by or with the approval of K's management team which authorized and directed intercompany loans when feasible. Tax matters were supervised by K's tax department which prepared the subsidiaries' federal income tax returns. Corporation K also performed centralized warehousing and accounting functions for itself and its subsidiaries. A uniform system of inventory control for corporation K and the subsidiaries was developed and managed by corporation N. Due to the control that corporation K exerted over policy determinations respecting the primary business activities of the subsidiaries and the integration and interdependence occasioned by the centralization of various business functions, all of the corporations are engaged in a unitary business.

History

• Statutory Authority: MS s 270.06; 270C.06; 290.52
• History: 26 SR 435; L 2005 c 151 art 1 s 114

Minn. R. 8019.0200 [Repealed, 26 SR 435]

[Repealed, 26 SR 435]

Minn. R. 8019.0300 Unitary Business, Reporting

Subpart 1.

[Repealed, 26 SR 435]

Subp. 2.

[Repealed, 26 SR 435]

Subp. 3.

[Repealed, 26 SR 435]

Subp. 4.

[Repealed, 26 SR 435]

Subp. 5. Credits.

Any refundable or nonrefundable credits allowed on the Minnesota return are allowed only to a corporation that has a nexus with Minnesota and must be based on that corporation's expenditures. These credits must be taken into consideration after computing the income or loss of a unitary business on the combined report.

Subp. 6.

[Repealed, 26 SR 435]

Subp. 7.

[Repealed, 26 SR 435]

Subp. 8.

[Repealed, 26 SR 435]

Subp. 9.

[Repealed, 26 SR 435]

Subp. 10.

[Repealed, 26 SR 435]

Subp. 11.

[Repealed, 26 SR 435]

History

• Statutory Authority: MS s 270.06; 270C.06; 290.52
• History: 26 SR 435; L 2005 c 151 art 1 s 114

Minn. R. 8019.0400 [Repealed, 15 SR 584]

[Repealed, 15 SR 584]

Minn. R. 8019.0405 Combined Group Franchise Tax Return

Subpart 1. Filing of a single return.

Members of a unitary business, as defined in part 8019.0100, subpart 2, required to be included on a combined report must file a single corporate franchise tax return for the combined group. While a foreign corporation may be part of a unitary business, only domestic corporations, as defined in Minnesota Statutes, section 290.01, subdivision 5, can file a combined report.

Subp. 2. Definitions.

The following definitions apply to this part.

A. "Combined group" means two or more corporations that are part of a unitary business, as defined in Minnesota Statutes, section 290.17, subdivision 4, and are required or permitted to file a combined report under subpart 1 and Minnesota Statutes, section 290.17 or 290.34, subdivision 2.

B. "Designated member" means the member of a combined group designated by the combined group.

C. "Member" means a corporation that is part of a combined group.

D. "Single return" means one combined report or return filed by the designated member on behalf of all members of a combined group.

Subp. 3. Taxable year.

A single return must be filed on the basis of the designated member's taxable year. Each member shall conform the calculation of its corporate franchise tax, including its Minnesota net income, alternative minimum tax, apportionment factors, deductions, and credits, to the designated member's annual accounting period for the first and subsequent single return years in which the member is included in the combined group.

Subp. 4. Members with different accounting periods.

A member of a combined group that has a different accounting period than the designated member shall calculate its corporate franchise tax using the same accounting period as the designated member. A member shall conform its calculation of its corporate franchise tax to the designated member's annual accounting period by:

A. creating a pro forma federal income tax return based upon the member's actual accounting records for the time period covered by the designated member's accounting period; or

B. allocating the income and other return information, on a pro rata basis, based upon the number of months falling within the designated member's accounting period. For example, if a designated member's accounting period ends on December 31 and a member's accounting period ends on September 30, the member would assign 9/12 of its income and apportionment factors of one year and 3/12 of its income and apportionment factors of the succeeding accounting period to arrive at a full 12 months' income to be included in the single return.

Subp. 5. Filing requirements.

The designated member is responsible for filing the single return.

The single return must identify each member that is included in the combined return.

Subp. 6. Liability for tax.

Every corporation that is a member of a combined group during any part of a tax year is severally liable for the taxes, penalties, interest, or additions to tax of the combined group for that taxable year provided, however, that the designated member is primarily responsible for payment of the taxes, penalties, interest, or additions to tax for the taxable year.

The tax liability prescribed in this part cannot be reduced by an agreement entered into by one or more members with another member or with another person.

Subp. 7. Exception.

A former member may be less than severally liable, as provided in subpart 6, for an assessment of a tax deficiency in an amount not exceeding the portion of the deficiency which the commissioner determines to be allocable to the former member, based upon the proportion of the former member's taxable net income over the combined group's taxable net income, if:

A. the corporation has ceased to be a member as the result of a bona fide sale or exchange of its stock for fair value;

B. the sale or exchange occurred prior to the date of the assessment of the deficiency; and

C. the commissioner believes that the assessment or collection of the balance of the deficiency is not jeopardized.

Subp. 8. Refunds.

Claims for refund are filed by the designated member on behalf of the members. Refunds are paid to the designated member.

Subp. 9.

[Repealed, 43 SR 886]

Subp. 10. Estimated payments.

The designated member shall make quarterly payments of estimated taxes for the combined group, as provided in Minnesota Statutes, section 289A.26.

In applying the provisions of Minnesota Statutes, section 289A.26, a combined group filing a single return is treated as if it were a single corporation.

Subp. 11. Forms and schedules.

The single return must include the forms and schedules prescribed by the commissioner.

Subp. 12.

[Repealed, 26 SR 435]

Subp. 13. Interest.

Interest due on an underpayment or assessment of tax is calculated as if the combined group were a single corporation.

Subp. 14.

[Repealed, 26 SR 435]

History

• Statutory Authority: MS s 14.386; 14.388; 270.06; 270C.06; 290.37; 290.52
• History: 15 SR 584; 26 SR 435; L 2005 c 151 art 1 s 114; 32 SR 2175; 43 SR 886

Minn. R. 8019.0500 Unitary Business: Aggregation of Capital Gains and Losses

Subpart 1. General information.

Minnesota Statutes, section 290.17, subdivision 4, provides that if a trade or business conducted wholly within this state, or partly within and partly without this state, is part of a unitary business, the entire income of the unitary business is subject to apportionment under Minnesota Statutes, section 290.191. Minnesota Statutes, section 290.17, subdivision 4, further provides that none of the income of a unitary business is considered to be derived from any particular source, and none may be allocated to a particular place, except as provided by the applicable apportionment formula. In accordance with the unitary business principle, the aggregation of capital gains and capital losses is permitted or required in combined reporting as follows: for open taxable years beginning after December 31, 1986, and ending on or before October 19, 1998, corporations may file claims for refund in accordance with this part under Minnesota Statutes, section 289A.40, in effect for the year of the claims; and for taxable years beginning after October 19, 1998, capital losses must be aggregated with capital gains.

Subp. 2. Definitions.

For purposes of this part, the following terms have the meanings given them:

A. "Capital gain" means the amount of gain from the sale or exchange of capital assets in a taxable year that exceeds the losses from the sale of capital assets in the same taxable year. Capital assets is defined in section 1221 of the Internal Revenue Code.

B. "Capital loss" means the amount of losses from the sale or exchange of capital assets in a taxable year that exceeds the gains from the sale of capital assets in the same taxable year. Capital assets is defined in section 1221 of the Internal Revenue Code.

C. "Change in ownership" means the sale or transfer of voting stock, that is either directly or indirectly owned by a common owner or by common owners, either corporate or noncorporate, of a member of a combined group, which results in 50 percent or less of the voting stock of the member being owned by the previous common owner, or common owners who had owned more than 50 percent of such stock prior to the sale or transfer.

D. "Combined group" means two or more corporations that are part of a unitary business as defined in Minnesota Statutes, section 290.17, subdivision 4, and that file returns on a combined report basis under part 8019.0405 or Minnesota Statutes, section 290.17 or 290.34.

E. "Member" means a corporation or person whose income is included in a combined report.

F. "Net capital loss" means the sum of the capital gains and losses of all of the members of the combined group for a taxable year which results in an overall loss.

G. "Open year" means any taxable year for which the Minnesota commissioner of revenue may issue orders of assessment or the taxpayer may file an amended return to claim a credit or refund.

H. "Taxpayer" means a corporation as defined in Minnesota Statutes, section 290.01, subdivision 4, subject to tax imposed by Minnesota Statutes, chapter 290.

Subp. 3. Application of capital losses.

In each taxable year, a member must first apply any capital loss to that member's capital gains. Any capital loss not applied and available must then be aggregated with the capital gains and capital losses of the other members of the combined group. Any capital loss not applied after aggregation must then be carried forward to the next taxable year by each member, subject to subpart 4. Any capital losses not applied through aggregation must be retained by the member that sustained the loss, and that member must carry the loss forward to the next tax year, regardless of the combined group to which the member belongs.

Subp. 4. Proration of capital losses.

Proration of capital losses is required when more than one member of a combined group has a capital loss, and the combined group sustains a net capital loss. Proration is necessary in order to determine the amount of capital loss used by each member in aggregation, and the amount that is subsequently available for carryover. For any tax year that a combined group has two or more members with capital losses, and the combined group has a net capital loss, each member's capital loss must be aggregated based on its pro rata share of the combined group's total capital loss. The pro rata share of each member's capital loss to be applied to the capital gains is the sum of the capital gains for all the members having capital gains, multiplied by a fraction, the numerator of which is the amount of the member's capital loss, and the denominator of which is the total capital losses for all members of the combined group that had capital losses. The pro rata share of the member's capital loss not used in aggregation must then be available for carryover.

Example: A combined group has the following capital gains and capital losses:

These losses would be prorated as follows:

Subp. 5. Carryover from tax years beginning before January 1, 1987.

Capital losses incurred by a corporation for tax years beginning before January 1, 1987, must first be carried back three years under Minnesota Statutes 1986, section 290.16. Any losses not applied may be allowed as a capital loss carryover, and will offset the capital gains of the combined group of which it is a member in the carryover year.

Subp. 6. Separate return loss carryover.

A corporation may not aggregate its capital gains or capital losses in any tax year in which the corporation does not file as a member of a combined group. Capital losses incurred in such tax year must be carried forward and, in years which the taxpayer files as a member of a combined group, must be aggregated under subpart 3.

Subp. 7. Treatment of losses incurred when corporation not subject to tax in Minnesota.

Capital losses incurred by a corporation in a year in which it did not file a Minnesota tax return, or was a member of a combined group of which no member filed a Minnesota tax return, are not available for carryover to offset any gains either on a separate or combined return. This subpart applies to all loss years, including those beginning after December 31, 1986.

Subp. 8. Carryover when changes in ownership occur.

When a member of a combined group has a change in ownership, the member shall aggregate its capital gains or capital losses that were recognized during the time period of the tax year immediately preceding the change in ownership with those capital gains and losses that were recognized during the same time period by all members of the combined group regardless of whether a short period return has been filed. Such capital gains and losses must be aggregated under subpart 3. Any capital losses not applied through aggregation must be carried forward in accordance with subpart 3 and may only be aggregated with those capital gains and losses that were recognized by the corporation's new combined group for the portion of the corporation's tax year immediately following the change in ownership.

History

• Statutory Authority: MS s 14.386; 14.388; 270.06; 270C.06
• History: 23 SR 807; L 2005 c 151 art 1 s 114; 32 SR 2175

Chapter 8020 INCOME APPORTIONMENT

Minn. R. 8020.0100 Petition for Application of Other Than Prescribed Apportionment Formula

Subpart 1. In general.

Minnesota Statutes, section 290.20, subdivision 1, permits a departure from the apportionment provisions of Minnesota Statutes, section 290.191. If the methods of apportionment required by that section do not fairly reflect all or any part of the taxable net income allocable to this state, the taxpayer may petition for the determination of net income by use of another method. The taxpayer must petition for use of another method of determining taxable net income allocable to this state. The petition must be filed at the time of or at a time prior to the time the return or amended return is filed. Acceptance of a return using a method of apportionment other than the method prescribed by Minnesota Statutes, section 290.191, is not approval of the petition and other method by the commissioner.

Subp. 2. Time of petition.

Minnesota Statutes, section 290.20, requires that any taxpayer applying for a deviation from the apportionment methods prescribed by Minnesota Statutes, section 290.191, must file a petition in the form required by the commissioner. The petition must be filed before or at the same time as the return or amended return is filed using a method other than the methods prescribed by Minnesota Statutes, section 290.191.

Subp. 3. Form of petition.

The petition filed under this part shall be in the form required by the commissioner and shall include:

A. the name, address, and tax identification number of the taxpayer;

B. in the case of a corporation, the state of incorporation and the location of the principal office or place of business;

C. the tax year of the petition. If more than one year is covered by the petition, the summary statement required by item E must demonstrate the ongoing necessity of departure from the apportionment provisions prescribed by Minnesota Statutes, section 290.191;

D. a statement of the kind or kinds of business activity in which the taxpayer is engaged and from which the income was derived for the taxable year stated in the petition;

E. a summary statement of the facts upon which the taxpayer relies to demonstrate that the application of the methods prescribed by Minnesota Statutes, sections 290.17 and 290.191, will be unfair as applied to the taxpayer, and that the method proposed will fairly reflect the taxable net income properly allocable to this state; and

F. a hypothetical computation of Minnesota taxable net income in accordance with the proposed method of apportioning income.

Subp. 4. Additional information.

The commissioner may, after receipt and review of the petition, require additional information from the taxpayer which is necessary to determine whether the apportionment provisions prescribed by Minnesota Statutes, section 290.191, will be unfair when applied to the taxpayer. The 45-day period for approval or rejection of the petition, contained in subpart 5, is suspended from the date of the letter requiring additional information to the date of receipt by the commissioner of the required information.

Subp. 5. Approval or rejection of petition.

The commissioner shall approve or reject a petition filed under this part within 45 days after the date of receipt of the petition. However, failure of the commissioner to act within 45 days does not constitute approval of a petition. If the petition is approved more than 15 days prior to the due date of the first estimated tax return, the taxpayer must file that return and each return thereafter in the year or years covered by the petition using the approved method and attaching thereto a copy of the approved petition with its first payment. If the petition is rejected or if the taxpayer has not received an order approving or rejecting the petition prior to the due date of the first estimated tax payment, the taxpayer must file estimated tax payments using the apportionment methods prescribed by Minnesota Statutes, section 290.191. If the taxpayer's petition is approved after an estimated tax payment is made or a return is filed, the taxpayer may amend its return, estimated tax filings, and payments using the approved method and attaching thereto a copy of the approved petition.

Subp. 6. Appeals.

An order by the commissioner rejecting any petition filed under this part constitutes an order from which an appeal may be made to the Tax Court pursuant to Minnesota Statutes, section 271.06.

History

• Statutory Authority: MS s 270.06; 270C.06
• History: 18 SR 1890; L 2005 c 151 art 1 s 114

Minn. R. 8020.0150 Apportionment Formulas Required by Commissioner

Minnesota Statutes, section 290.20, subdivision 1, grants the commissioner the authority to require a taxpayer to use a method of apportionment other than that prescribed in Minnesota Statutes, section 290.191, if:

A. the statutory method does not fairly reflect all or any part of the taxable net income apportionable to Minnesota; and

B. the commissioner's method fairly reflects net income. For purposes of this part, the statutory method shall be presumed to not fairly reflect a taxpayer's taxable net income if the statutory method does not fairly represent the extent of the taxpayer's net income in this state. When the commissioner has determined that the statutory apportionment formulas do not fairly reflect net income as applied to a specific industry, the commissioner may adopt apportionment rules for uniform application to that industry. If rules have been adopted with respect to a specific industry, a taxpayer's petition under part 8020.0100 must demonstrate the unfairness of the application of the industry-specific rule as applied to it.

History

• Statutory Authority: MS s 270.06; 270C.06
• History: 18 SR 1890; L 2005 c 151 art 1 s 114

Chapter 8021 CHARITABLE AND DIVIDEND DEDUCTIONS

Minn. R. 8021.0100 [Repealed, 26 SR 435]

[Repealed, 26 SR 435]

Minn. R. 8021.0200 [Repealed, 26 SR 435]

[Repealed, 26 SR 435]

Chapter 8023 ESTATES AND TRUSTS

Minn. R. 8023.0100 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8023.0200 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8023.0300 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8023.0400 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8023.0500 [Repealed, 26 SR 435]

[Repealed, 26 SR 435]

Chapter 8030 FIDUCIARIES

Minn. R. 8030.0100 [Repealed, 26 SR 435]

[Repealed, 26 SR 435]

Chapter 8031 PARTNERSHIPS

Minn. R. 8031.0100 Repealed by subpart

Subpart 1.

[Repealed, 26 SR 435]

Subp. 2.

[Repealed, 26 SR 435]

Subp. 3.

[Repealed, L 2008 c 366 art 12 s 8]

Minn. R. 8031.0200 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8031.0300 [Repealed, 26 SR 435]

[Repealed, 26 SR 435]

Minn. R. 8031.0400 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Chapter 8034 CORPORATIONS

Minn. R. 8034.0100 Evasion of Tax by Corporations

In any case where a corporation, which is subject to Minnesota corporate franchise tax, conducts business transactions with its members or stockholders, or with any person or corporation interested in the business of the corporation, in a manner as to reduce the taxable net income attributable to this state, or affect the amount of credit against the tax, or both, the commissioner may determine the income of the corporation to reflect what would have been its reasonable taxable net income or tax credit but for such business transaction. Among others, the following devices commonly employed to distort income attributable to this state will not be recognized in determining the tax:

A. the purchase or sale, by or between corporations or others, at a price greater or less than the price paid in the usual course of business by independent purchasers;

B. the fixing of income at an arbitrary figure by contract or agreement;

C. the payment of arbitrary amounts for so-called advisory, management, or counseling services;

D. arbitrary charges for, or allocation of, improper overhead expenses, such as officers' salaries, rents, auditing, etc.;

E. arbitrary agreements for the purchase, or sale of, goods or services at fixed prices, or on a basis of cost, actual or estimated, or on a basis of cost plus a fixed percentage or amount.

History

• Statutory Authority: MS s 270.06; 270C.06; 290.52
• History: 26 SR 435; L 2005 c 151 art 1 s 114

Chapter 8035 INCOME ALLOCATION BY INSURANCE COMPANIES

Minn. R. 8035.0100 [Repealed, 26 SR 435]

[Repealed, 26 SR 435]

Chapter 8038 RETURNS

Minn. R. 8038.0100 Income Tax Returns for Spouses

Subpart 1.

[Repealed, 27 SR 1664]

Subp. 2.

[Repealed, 27 SR 1664]

Subp. 3.

[Repealed, 27 SR 1664]

Subp. 4. Community property.

If both spouses are residents of a community property state or nation, it is permissible for them to split their income and losses based on the law of their residence. Otherwise, it is not permissible for spouses to split their income and losses or to assign it to the other spouse unless it is required under the provisions of the Internal Revenue Code.

Subp. 5.

[Repealed 27 SR 1664]

Subp. 6. Amended returns, refunds when no longer married.

Where spouses filed a joint return and subsequently are no longer married, an amended return or claim for refund filed by one of the former spouses shall be allowed if the item is attributable to that spouse to the extent of that spouse's tax liability. Where a joint return was filed, the spouse's tax liability shall be determined according to the following formula:

The spouse's share of the joint liability is then subtracted from the spouse's contributions through withholding or estimated tax or other credits which were used to pay that joint liability. The amount of the refund to be made to the spouse cannot exceed the amount of the joint overpayment shown on the amended return or claim for refund.

Joint estimated tax payments shall be divided according to the provisions of part 8093.0200. Where credits are not paid out of joint funds, the credit shall belong to the spouse who made the payment on which the credit is based. Where credits are attributable to, earned by, or paid to both spouses jointly, or paid from joint funds of both spouses, they shall be divided equally between the spouses.

When an amended joint return or a claim for refund is filed under this part, no refund will be given to a spouse unless an amended return or claim for refund is filed by that spouse. No additional tax liability may be created and assessed against a spouse unless an amended return is filed by that spouse or an order of assessment is issued by the department.

Subp. 7.

[Repealed, 27 SR 1664]

Subp. 8. Signing of returns.

A. A joint return must be signed by both spouses unless the return is made by an agent of both spouses, or one spouse signs as the agent of the other. Any spouse who makes a joint return through an agent assumes the responsibility for making the return and incurs liability for the penalty provided for erroneous, false, or fraudulent returns. One spouse cannot sign as the agent of the other unless the return is accompanied by a power of attorney authorizing such action by the spouse not signing the return. Other agents must also submit their power of attorney with the return.

B. Notwithstanding item A, if one spouse is unable to sign the return because of disease or injury, the other spouse may sign the incapacitated spouse's name to the return with the oral consent of the incapacitated spouse. Any return signed under this exception must contain a statement indicating the reason for the inability of the spouse who is incapacitated to sign the return and that the incapacitated person consented to the signing.

Subp. 9.

[Repealed, 27 SR 1664]

Subp. 10.

[Repealed, 27 SR 1664]

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06; 290.52
• History: 27 SR 1664; L 2005 c 151 art 1 s 114; 46 SR 1363

Minn. R. 8038.2000 [Repealed, 27 SR 1664]

[Repealed, 27 SR 1664]

Minn. R. 8038.3000 [Repealed, 26 SR 435]

[Repealed, 26 SR 435]

Chapter 8043 NONGAME WILDLIFE CHECKOFF

Minn. R. 8043.0100 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8043.0200 Administration

Subpart 1. Reversal of designation.

A taxpayer may reverse all or part of the designation that was made to the nongame wildlife management fund where the designation was originally made in error and the taxpayer had no intention to make a gift when the designation was made. A taxpayer must not reverse the designation to the nongame wildlife management fund merely because the taxpayer, at a later date, changes the intention to make a gift to the fund. It will be presumed that the taxpayer intended to make a designation when more than 90 days have elapsed since the taxpayer received the refund check or a notice informing the taxpayer that a designation was made to the nongame wildlife management fund with the following two exceptions:

A. The taxpayer has a valid explanation showing why no action was taken within the 90-day period. Examples of a valid reason are sickness or being outside of the country.

B. The taxpayer considered the designation to the nongame wildlife management fund as a payment of estimated income tax and properly reported for this amount as an estimated tax payment on the taxpayer's income tax return for the following year.

Subp. 2. Who may make the designation.

An individual may designate all or part of an income tax or property tax refund to the nongame wildlife management fund. A corporation may designate all or part of its corporate franchise tax refund to the nongame wildlife management fund. A partnership, fiduciary, trust, or estate must not make this designation.

Subp. 3.

[Repealed, 26 SR 435]

Subp. 4. Amount of designation.

The amount of the refund from which a taxpayer may make a designation to the nongame wildlife management fund is determined after the following deductions have been made:

A. unpaid Minnesota tax liabilities owed to the commissioner of revenue;

B. a debt which qualifies for the provisions of the Revenue Recapture Act contained in Minnesota Statutes, chapter 270A; and

C. amounts credited to the estimated income tax liability for taxable year.

Subp. 5. Machine audit.

The term "machine audit" means the adjustments made to a taxpayer's return in the original processing of the return from the date the return is filed until the date the refund is granted or the order assessing additional tax is issued. If, upon machine audit, a taxpayer's overpayment is reduced, the reduction shall be made in the following order:

A. The amount of the overpayment that the taxpayer had requested as a refund is reduced.

B. The amount of the overpayment that the taxpayer had designated to the nongame wildlife management fund is reduced. If, upon machine audit, the taxpayer no longer has an overpayment but is assessed a tax balance due, the designation to the nongame wildlife management fund is canceled.

Subp. 6. Designation for taxpayers owing tax.

A taxpayer who owes a tax balance due (including penalty and interest) on an income tax return may designate that an amount be paid to the nongame wildlife management fund by paying the entire balance that is due for both the tax liability and the designation to nongame wildlife at the same time that the return is filed. If the amount that is paid with the return does not equal the tax balance due and the amount designated to nongame wildlife, the amount of the tax balance due shall be paid first. If the amount that is paid with the return does not fully pay the tax balance due, the designation to the nongame wildlife management fund shall be canceled.

History

• Statutory Authority: MS s 270.06; 270C.06; 290.52
• History: 17 SR 1279; 26 SR 435; L 2005 c 151 art 1 s 114

Chapter 8050 OVERPAYMENTS

Minn. R. 8050.0100 Overpayments; Credits and Refunds

Subpart 1. Authority to make credits or refunds.

The commissioner, within the applicable period of limitations, may credit any overpayment of tax, including interest thereon, against any outstanding liability for any tax (or for any interest, additional amount, addition to the tax, or assessable penalty) owed by the taxpayer making the overpayment, and the balance, if any, shall be refunded to such taxpayer by the commissioner.

Subp. 2. Credit against estimated tax properly executed.

An income, corporate franchise, or estate tax return shall, at the election of the taxpayer, constitute a claim for refund or credit of an overpayment as defined in Minnesota Statutes, section 289A.50, for the amount of the overpayment disclosed by the return. For the purposes of Minnesota Statutes, section 289A.50, a claim is considered as filed on the date on which the return is considered as filed.

An election to treat the return as a claim for refund or credit is evidenced by a statement on the return setting forth the amount determined as an overpayment and advising the commissioner either to refund the amount to the taxpayer or to apply it as a credit against the taxpayer's estimated income tax for the taxable year immediately succeeding the taxable year for which the return is filed. If the taxpayer elects to have all or part of the overpayment shown by the return applied to the taxpayer's estimated tax for the succeeding taxable year, no interest is payable on the portion of the overpayment credited and such amount must be applied as a payment on the account of the estimated income tax for such year or the installments thereof.

A taxpayer electing to have an overpayment refunded must not thereafter revoke that election and have the overpayment applied as a payment on account of estimated tax.

Subp. 3. Overpayment of estimated tax.

If any installment of estimated tax is overpaid, the overpayment shall first be applied against any outstanding installments of estimated tax. If the overpayment exceeds the correct amount of tax due, the overpayment must be credited or refunded when the taxpayer files a claim for refund or credit on the income tax return filed for the year the deposits are made. A taxpayer may not receive a refund prior to filing a tax return for the year for which the estimated tax has been paid unless one of the conditions in items A to D is met:

A. The taxpayer made duplicate payments of the same installment of estimated tax.

B. The department credited to the taxpayer's account an amount that was meant to be paid to the Internal Revenue Service or some other entity.

C. The taxpayer erred in having an overpayment applied to estimated tax. When making this determination, the commissioner shall examine the tax liability of the taxpayer for the year of the overpayment and prior years, the taxpayer's history of applying overpayments to estimated tax, the taxpayer's history of making estimated tax payments, and the amount of time between when the taxpayer realized the error and when the taxpayer requested the refund.

D. The facts and circumstances clearly demonstrate that the taxpayer did not intend to make an estimated payment. A change in circumstances, such as moving from Minnesota or change in economic conditions, does not constitute grounds for allowing refunds prior to filing of a return.

History

• Statutory Authority: MS s 270.06; 270C.06; 290.52
• History: 17 SR 1279; 26 SR 435; 27 SR 1664; L 2005 c 151 art 1 s 114

Chapter 8052 PRACTICE BEFORE THE DEPARTMENT OF REVENUE

Minn. R. 8052.0100 [Repealed, L 1990 c 480 art 1 s 45]

[Repealed, L 1990 c 480 art 1 s 45]

Minn. R. 8052.0200 [Repealed, L 1990 c 480 art 1 s 45]

[Repealed, L 1990 c 480 art 1 s 45]

Minn. R. 8052.0300 Practice of Attorneys, Accountants, Agents, and Preparers Before Department of Revenue

Subpart 1. Practice defined.

The term "practice" comprehends all matters connected with the presentation by an attorney, accountant, agent, or preparer to the Department of Revenue or any of its employees, of a client's rights, privileges, or liabilities under a law administered by the commissioner as defined in Minnesota Statutes, section 270C.01, subdivision 5, and the rules thereunder. "Practice" includes the preparation and filing of necessary documents, correspondence with and communication to the Department of Revenue, and the representation of a client at conferences, hearings, and meetings. However, the preparation and signing of a tax return, the appearance of an individual as a witness for a taxpayer, and the furnishing of information at the request of the Department of Revenue or any of its employees do not, of and by themselves, constitute practice before the department, unless these acts are coupled with the presentation of a client's case at conferences, hearings, or meetings. For purposes of this rule, the term "practice" is synonymous with "representation," and the term "state tax" is synonymous with a tax or fee imposed by a "law administered by the commissioner."

Subp. 2. Scope of representation pursuant to power of attorney.

When authorized by the taxpayer through a written power of attorney, an attorney, accountant, agent, or preparer may appear as the taxpayer's representative, without the taxpayer, before an employee of the Department of Revenue with respect to the tax liability of the taxpayer for the type of tax and taxable year or period authorized in the power of attorney. A written power of attorney is not required if the taxpayer is present. For purposes of this part, "written power of attorney" means the signed original or a copy of the signed original of any of the following:

A. the power of attorney form designed and printed by the Department of Revenue;

B. an Internal Revenue Service power of attorney if it is modified to include state taxes;

C. a power of attorney under Minnesota Statutes, chapter 523, if it is filled out to include tax matters or generally to include all matters; or

D. any other document which has all the necessary legal elements for creating a power of attorney and is broad enough to include tax matters or generally to include all matters. For purposes of this part, a power of attorney grants authority to deal with any return as defined in Minnesota Statutes, section 270C.01, subdivision 8. For taxes which are classified as private data on individuals or nonpublic data not on individuals, a taxpayer representative may inspect only those state records, files, or documents which are: (a) specifically listed in; (b) directly or indirectly connected with matters specifically listed in; or (c) covered by the terms of, a power of attorney. The signed power of attorney form may be transmitted to the Department of Revenue by facsimile or by electronic transmission as an imaged attachment in a format that cannot be altered. If the taxpayer is not present, a person presenting a power of attorney shall present identification satisfactory to the department employee.

Subp. 3. Persons ineligible to practice.

A person shall be ineligible to appear as a taxpayer representative under this part, if the person is:

A. barred or suspended from practice before the Department of Revenue;

B. an employee of the Department of Revenue;

C. barred or suspended from practice as an attorney or certified public accountant in the state of Minnesota;

D. barred or suspended from practice before the Internal Revenue Service; or

E. a former employee of the Department of Revenue, to the extent provided in Minnesota Statutes, section 270C.10. However, with regard to items C and D, a granting of reinstatement to practice as an attorney or certified public accountant, or a granting of reinstatement to practice before the Internal Revenue Service shall automatically reinstate a person's eligibility to practice before the Department of Revenue if the person is not otherwise ineligible under item A, B, or E.

Subp. 4. Standards of ethics and conduct.

No attorney, accountant, agent, or preparer acting as a taxpayer representative shall neglect or refuse to submit records or information in any matter before the Department of Revenue, upon proper and lawful request by a duly authorized employee of the Department of Revenue, unless the taxpayer representative has a good faith belief that the information or testimony is privileged. No taxpayer representative shall interfere, or attempt to interfere, with any proper and lawful efforts by the Department of Revenue or its employees to obtain information relative to any matter before the Department of Revenue. Insisting upon a subpoena shall not be a violation of this subpart.

Each taxpayer representative shall exercise due diligence in regard to all of the following:

A. preparing, assisting in the preparation of, approving, and filing returns, documents, affidavits, and any other papers relating to Department of Revenue matters to the extent of participation;

B. determining the correctness of representations made to the Department of Revenue; and

C. determining the correctness of representations made to clients with reference to any matter administered by the Department of Revenue. Each taxpayer representative shall exercise good faith in determining the correctness of representations made by clients to the representative with reference to any matter administered by the Department of Revenue when the preparer or agent has reasonable grounds to believe the client's representations are false or inaccurate. No taxpayer representative shall unreasonably delay the prompt disposition of any matter before the Department of Revenue. Where there is a conflict between this part and a code of conduct which is promulgated by another agency or branch of government, that code of conduct shall control. The taxpayer representative must disclose to the department that there is a conflict.

Subp. 5. Incompetent conduct.

Incompetent conduct, for which any attorney, accountant, agent, or preparer may be barred or suspended from practice before the Department of Revenue, means the failure by an attorney, accountant, agent, or preparer, after due warning has been given by the commissioner of revenue pursuant to part 8052.0400, subpart 3, to:

A. demonstrate the familiarity with the state tax statutes, rules, and forms necessary to enable the practitioner to properly apply, discuss, or complete them, and thus to render adequate services in connection with a taxpayer's case before the Department of Revenue; or

B. exercise due diligence as required in subpart 4, second paragraph. The standard used for determining failure to exercise due diligence shall be the common law standard of reasonableness used in determining negligence.

Subp. 6. Disreputable conduct.

Disreputable conduct, for which any attorney, accountant, agent, or preparer may be barred or suspended from practice before the Department of Revenue, includes any conduct that violates subpart 4. In addition, the following acts or events constitute disreputable conduct:

A. Conviction of any criminal offense under a state or federal tax statute, or conviction of any crime involving dishonesty or breach of trust.

B. Preparing or filing for oneself or another a false or fraudulent state tax return or other statement on which state taxes or a refund thereof may be based, knowing it is false or fraudulent.

C. Willful failure to prepare or file a state tax return for oneself or another in violation of the applicable tax statutes or rules.

D. Willful failure to prepare and file an amended state tax return for oneself, knowing that a material error or omission was made on the original return.

E. Willful failure to recommend to a client that an amended state tax return be prepared and filed, knowing that a material error or omission was made on the original return.

F. Advising a client or a prospective client to adopt a state tax evasion plan which is not legal, knowing that the plan is not legal.

G. Giving false testimony or information in any proceeding before the Department of Revenue, or before any tribunal authorized to pass upon state tax matters, knowing it is false.

H. Filing any false or fraudulently altered document, affidavit, or power of attorney in any case or other proceeding before the Department of Revenue, or procuring the filing thereof, knowing it is false or fraudulently altered.

I. Using, with intent to deceive, false representations to procure employment in any case or proceeding before the Department of Revenue, including, but not limited to:

J. Approving for filing, or advising or aiding in the preparation of, a false or fraudulent state tax return prepared by some other person, knowing the return is false or fraudulent.

K. Misappropriation of, or failure to properly and promptly remit, funds received from a client for the purpose of paying taxes or other obligations due the state of Minnesota.

L. Endorsement or negotiation of a client's check in payment of a refund of any tax, credit, penalty, or interest administered by the commissioner of revenue, without the client's prior endorsement. The preceding sentence shall not apply when the full amount of the check is deposited in the taxpayer's bank account for the benefit of the taxpayer.

M. Charging a client a fee based upon a percentage of the refund that the client is eligible to receive from the state of Minnesota, unless representation of the client reaches the contested stage, either in a formal administrative hearing or a court proceeding.

N. Attempting to influence, or offering or agreeing to attempt to influence, the official action of any employee of the Department of Revenue by the use of threats, false accusations, duress, or coercion, by the offer of any special inducement or promise of advantage, or by the bestowing of any gift, favor, or thing of value.

O. In connection with practice before the Department of Revenue, making false accusations or statements knowing them to be false, or circulating or publishing slanderous or libelous matter concerning the Department of Revenue or any of its employees.

P. Knowingly aiding and abetting another person to practice before the Department of Revenue during a period that the other person is barred or suspended from practice.

Q. For purposes of items A to P, the phrases "state tax" and "state tax return" include all matters referred to in subpart 2, second paragraph.

History

• Statutory Authority: MS s 270.06; 270C.06; 270C.44; 290.52
• History: 17 SR 1279; L 1995 c 202 art 1 s 25; 26 SR 435; L 2005 c 151 art 1 s 114; 35 SR 1017

Minn. R. 8052.0400 Procedures to Bar or Suspend

Subpart 1. Commissioner's power to suspend or bar.

Pursuant to Minnesota Statutes, section 270C.44, the commissioner of revenue, after due notice and opportunity for hearing, may suspend or bar from further practice before the Department of Revenue any attorney, accountant, agent, or preparer who is incompetent or disreputable, refuses to comply with the provisions of this rule, or in any manner willfully and knowingly defrauds, deceives, or misleads any taxpayer with respect to a claim or prospective claim involving the Department of Revenue.

Subp. 2. Reasons to suspend or bar from practice.

Any attorney, accountant, agent, or preparer may be barred or suspended from practice before the Department of Revenue for violation of any of the provisions contained in part 8052.0300.

Subp. 3. Warning.

Whenever the commissioner of revenue has sufficient grounds to believe that any attorney, accountant, agent, or preparer has violated a provision of part 8052.0300, subpart 5 or 6, the commissioner shall notify the practitioner in writing of the specific violation which has been committed. The notification must contain a warning to the practitioner that if the violation continues, or if any other violations are committed, the commissioner shall commence a proceeding to bar or suspend the practitioner.

Subp. 4. Proceeding.

Whenever the commissioner of revenue has sufficient grounds to believe that any attorney, accountant, agent, or preparer has failed to comply with a warning by continuing to violate any provision of part 8052.0300, the commissioner shall commence a proceeding to bar or suspend the attorney, accountant, agent, or preparer. The commissioner's notice of and order for hearing must set forth the specific violations which the practitioner has committed, both prior and subsequent to the commissioner's warning, and must make a recommendation as to the specific disciplinary action to be taken against the practitioner. The entire proceeding is governed by the procedure for contested case proceedings as provided in parts 1400.5010 to 1400.8400 and Minnesota Statutes, sections 14.02 and 14.57 to 14.69.

Subp. 5. Consent to suspension.

An attorney, accountant, agent, or preparer, in order to avoid the commencement or conclusion of a disciplinary proceeding, may, by agreement with the commissioner of revenue, consent to suspension from practice before the Department of Revenue. The commissioner of revenue shall then suspend the practitioner in accordance with the disciplinary guideline set forth in subpart 6.

Subp. 6. Disciplinary actions.

Upon completion of the hearing in a contested case proceeding for disciplinary action brought by the commissioner of revenue against an attorney, accountant, agent, or preparer, if the administrative law judge finds that the practitioner has committed the violations specified in the commissioner's notice of and order for hearing, and that disciplinary action is appropriate, the commissioner shall:

A. suspend the practitioner from practicing before the Department of Revenue for a period of up to one year, if the proceeding brought against the practitioner is the first proceeding in which disciplinable misconduct has been found;

B. suspend the practitioner for a period of up to five years if the proceeding brought against the practitioner is the second proceeding in which the disciplinable misconduct has been found; or

C. bar the practitioner from practicing before the Department of Revenue if the proceeding brought against the practitioner is at least the third proceeding in which disciplinable misconduct has been found. For purposes of items A to C, a voluntary suspension pursuant to subpart 5 is a proceeding in which disciplinable misconduct has been found. The commissioner shall base a decision as to disciplinary action on all the facts, along with any extenuating circumstances the commissioner deems relevant.

Subp. 7. Effects of being barred or suspended.

If the commissioner's order against an attorney, accountant, agent, or preparer bars the practitioner, the practitioner shall not thereafter be permitted to practice before the Department of Revenue, except to represent himself or herself. Similarly, if the commissioner's order against an attorney, accountant, agent, or preparer suspends the practitioner, the practitioner shall not thereafter be permitted to practice before the Department of Revenue during the period of suspension, except to represent himself or herself. Barring or suspending an individual, who is employed by a firm or organization at the time a violation of this part occurred, does not affect the right of other members of the firm or organization to practice before the department.

Subp. 8. Petition for reinstatement.

A suspended or barred attorney, accountant, agent, or preparer may petition, in writing, the commissioner of revenue for reinstatement to practice before the Department of Revenue if there has been a material change in circumstances after the practitioner has been suspended or barred. The petition must be supported with documentation or testimony from a responsible third party as to the fitness, character, and ability of the practitioner to resume practice. The commissioner shall review the petition and make a determination within 30 days as to whether the practitioner shall be reinstated. If the petition is granted by the commissioner, the practitioner may resume practice. If the petition is denied by the commissioner, no further petitions may be brought by the practitioner during the remainder of the suspension period, or for a period of five years if the practitioner has been barred.

History

• Statutory Authority: MS s 270.06; 270C.06; 290.52
• History: L 1984 c 640 s 32; L 1987 c 384 art 2 s 1; 17 SR 1279; 26 SR 435; 26 SR 391; L 2005 c 151 art 1 s 114,116

Chapter 8092 WITHHOLDING

Minn. R. 8092.0100 Payroll Period

Subpart 1. Definition.

The term "payroll period" means the period of service for which a payment of wages is ordinarily made to an employee by the employer. It is immaterial that the wages are not always paid at regular intervals. For example, if an employer ordinarily pays a particular employee for each calendar week at the end of the week, but if for some reason the employee in a given week receives a payment in the middle of the week for the portion of the week already elapsed and receives the remainder at the end of the week, the payroll period is still the calendar week; or if, instead, that employee is sent on a three-week trip by the employer and receives at the end of the trip a single wage payment for three weeks' services, the payroll period is still the calendar week, and the wage payment shall be treated as though it were three separate weekly wage payments.

Subp. 2. Limitation on number of payroll periods.

For the purpose of Minnesota Statutes, section 290.92, an employee can have but one payroll period with respect to wages paid by any one employer. Thus, if an employee is paid a regular wage for a weekly payroll period and in addition thereto is paid supplemental wages (for example, bonuses) determined with respect to a different period, the payroll period is the weekly payroll period.

Subp. 3. Miscellaneous payroll period.

The term "miscellaneous payroll period" means a payroll period other than a daily, weekly, biweekly, semimonthly, monthly, quarterly, semiannual, or annual payroll period.

History

• Statutory Authority: MS s 270C.06; 290.52
• History: 17 SR 1279; L 2005 c 151 art 1 s 114

Minn. R. 8092.0200 [Repealed, 29 SR 330]

[Repealed, 29 SR 330]

Minn. R. 8092.0300 [Repealed, 29 SR 330]

[Repealed, 29 SR 330]

Minn. R. 8092.0400 Requirement of Withholding

Subpart 1. Alternative methods.

Minnesota Statutes, section 290.92, subdivision 2a, provides alternative methods, at the election of the employer, for use in computing the income tax to be collected at source on wages. Under the wage bracket method (see Minnesota Statutes, section 290.92, subdivision 2a, clause (3)) the employer is required to deduct and withhold a tax in accordance with the tables prepared by the commissioner. The commissioner may authorize under the provisions of Minnesota Statutes, section 290.92, subdivision 2a, clause (7), the employer to withhold the tax on the basis of the employee's average estimated wages with necessary adjustments for any quarter. Before using this method the employer must receive authorization from the commissioner. Applications to use such method must be accompanied by evidence establishing the need for such method.

Subp. 2. Method of collection.

The employer is required to collect the tax by deducting and withholding the amount thereof from the employee's wages as and when paid, either actually or constructively. Wages are constructively paid when they are credited to the account of or set apart for an employee so that they may be drawn upon by the employee at any time although not then actually reduced to possession. To constitute payment in such a case, the wages must be credited to or set apart for the employee without any substantial limitation or restriction as to the time or manner of payment or condition upon which payment is to be made, and must be made available to the employee so that they may be drawn upon at any time, and their payment brought within the employee's own control and disposition.

Subp. 3. Wages other than money.

An employer is required to deduct and withhold the tax notwithstanding the wages are paid in something other than money (for example, wages paid in stocks or bonds) and to pay over the tax in money. If the wages are paid in property other than money, the employer should make necessary arrangements to ensure that the amount of the tax required to be withheld is available for payment in money.

Subp. 4. Withholding by other than employer.

As a matter of business administration, certain of the mechanical details of the withholding process may be handled by representatives of the employer. Thus, in the case of an employer having branch offices, the branch manager or other representative may actually, as a matter of internal administration, withhold the tax or prepare the statements required. Nevertheless, the legal responsibility for withholding, paying, and returning the tax and furnishing such statements rests with the employer.

Subp. 5. Withholding; trust fund.

The amount of any tax withheld and collected by the employer is a special fund in trust for the state of Minnesota.

History

• Statutory Authority: MS s 14.388; 270C.06; 290.52
• History: 17 SR 1279; 29 SR 330; L 2005 c 151 art 1 s 114

Minn. R. 8092.0500 Wage Bracket Withholding

Subpart 1. General.

The employer may elect to use the wage bracket method provided in Minnesota Statutes, section 290.92, subdivision 2a, clause (3), with respect to any employee. The tax computed under the wage bracket method shall be the tax required to be deducted and withheld under Minnesota Statutes, section 290.92. Wage bracket withholding tables for weekly, semimonthly, monthly, and daily or miscellaneous payroll periods have been prepared by the commissioner and are available for distribution in a separate publication.

Subp. 2. Established payroll periods other than daily or miscellaneous.

The wage bracket withholding tables referred to above for established payroll periods other than daily or miscellaneous should be used in determining the tax to be withheld for any such period without reference to the time the employee is actually engaged in the performance of services during such payroll period.

Subp. 3. Periods to which the table for daily or miscellaneous payroll period is applicable.

The table applicable to a daily or miscellaneous payroll period shows the tax on the amount of wages for one day. Where the withholding is computed under the rules applicable to a miscellaneous payroll period, the wages and the amounts shown in the table must be placed on a comparable basis. This may be accomplished by reducing the wages paid for the period to a daily basis by dividing the total wages by the number of days (including Sundays and holidays) in the period. The amount of the tax shown in the table as the tax required to be withheld from the wages, as so reduced to a daily basis, should then be multiplied by the number of days (including Sundays and holidays) in the period.

If wages are paid for a period which is not a payroll period, the amount to be deducted and withheld under the wage bracket method shall be the amount applicable in the case of a miscellaneous payroll period containing a number of days (including Sundays and holidays) equal to the number of days (including Sundays and holidays) in the period with respect to which such wages are paid.

If wages are paid to an employee without regard to any particular period, as, for example, commissions paid to a salesperson upon consummation of a sale, the amount of tax to be deducted and withheld shall be determined in the same manner as in the case of a miscellaneous payroll period containing a number of days (including Sundays and holidays) equal to the number of days (including Sundays and holidays) which have elapsed, beginning with the latest of the following days:

A. the first day after the last payment of wages to such employee by such employer in the calendar year;

B. the date on which such individual's employment with such employer began in the calendar year; or

C. January 1 of such calendar year, and ending with (and including) the date on which such wages are paid.

Subp. 4. Period or elapsed time less than one week.

It is the general rule that if wages are paid for a payroll period or other period of less than one week, the tax to be deducted and withheld under the wage bracket method shall be the amount computed for a daily payroll period, or for a miscellaneous payroll period containing the same number of days (including Sundays and holidays) as the payroll period, or other period, for which such wages are paid. In the case of wages paid without regard to any period, if the elapsed time computed as provided in subpart 3 is less than one week, the same rule is applicable.

Subp. 5. Rounding off of wage payment.

In determining the amount to be deducted and withheld under the wage bracket method the wages may, at the election of the employer, be computed to the nearest dollar, provided such wages are in excess of the highest wage bracket of the applicable table. For the purpose of the computation to the nearest dollar, the payment of a fractional part of a dollar shall be disregarded unless it amounts to one-half dollar or more, in which case it shall be increased to $1.

History

• Statutory Authority: MS s 14.388; 270C.06; 290.52
• History: 17 SR 1279; 29 SR 330; L 2005 c 151 art 1 s 114

Minn. R. 8092.0600 Additional Withholding

In addition to the tax required to be deducted and withheld in accordance with the provisions of Minnesota Statutes, section 290.92, the employer and employee may agree that an additional amount shall be withheld from the employee's wages.

The amount deducted and withheld pursuant to an agreement between the employer and employee shall be considered as tax required to be deducted and withheld under Minnesota Statutes, section 290.92. All provisions of law and rules applicable with respect to the tax required to be deducted and withheld under Minnesota Statutes, section 290.92 shall be applicable with respect to any amount deducted and withheld pursuant to the agreement.

History

• Statutory Authority: MS s 270C.06; 290.52
• History: L 2005 c 151 art 1 s 114

Minn. R. 8092.0700 Supplemental Wage Payments

Subpart 1. In general.

An employee's remuneration may consist of wages paid for a payroll period and supplemental wages, such as bonuses, commissions, and overtime pay, paid for the same or a different period, or without regard to a particular period. When such supplemental wages are paid (whether or not at the same time as the regular wages) the amount of the tax required to be withheld shall be determined in accordance with this subpart or subpart 2.

The supplemental wages, if paid concurrently with wages for a payroll period, shall be aggregated with the wages paid for such payroll period. If not paid concurrently, the supplemental wages shall be aggregated with the wages paid or to be paid within the same calendar year for the last preceding payroll period or for the current payroll period. The amount of tax to be withheld shall be determined as if the aggregate of the supplemental wages and the regular wages constituted a single wage payment for the regular payroll period.

In cases where supplemental wages are not paid concurrently with wages for a payroll period the employer may determine the amount of tax required to be withheld in accordance with this paragraph rather than in accordance with the provisions of the previous paragraph. In such a case the withholding of tax on such supplemental payments shall be at the rate provided in Minnesota Statutes, section 290.92, subdivision 3, paragraph (d), as if no exemption had been claimed.

Subp. 2. Special rule where aggregate withholding exemption exceeds wages paid.

If supplemental wages are paid to an employee during a calendar year for a period which involves two or more consecutive payroll periods, for which other wages also are paid during such calendar year, and the aggregate of such other wages is less than the aggregate of the amounts determined under the table furnished by the commissioner as the withholding exemptions applicable for such payroll periods, the amount of the tax required to be withheld on the supplemental wages shall be computed as follows:

A. Step 1. Determine an average wage for each of such payroll periods by dividing the sum of the supplemental wages and the wages paid for such payroll periods by the number of such payroll periods.

B. Step 2. Determine a tax for each payroll period as if the amount of the average wage constituted the wages paid for such payroll period.

C. Step 3. From the sum of the amounts of tax determined in step 2 subtract the total amount of tax withheld, or to be withheld, from the wages, other than the supplemental wages, for such payroll periods. The remainder, if any, shall constitute the amount of the tax to be withheld upon the supplemental wages. The rules prescribed in this subpart shall, at the election of the employer, be applied in lieu of the rules prescribed in subpart 1 except that this subpart shall not be applicable in any case in which the payroll period of the employee is less than one week.

Subp. 3. Vacation allowances.

Amounts of so-called "vacation allowances" shall be subject to withholding as though they were regular wage payments made for the period covered by the vacation. If the vacation allowance is paid in addition to the regular wage payment for such period, the rules applicable with respect to supplemental wage payments shall apply to such vacation allowance.

History

• Statutory Authority: MS s 14.388; 270C.06; 290.52
• History: 29 SR 330; L 2005 c 151 art 1 s 114

Minn. R. 8092.0800 Wages Paid for Payroll Period of More Than One Year

If wages are paid to an employee for a payroll period of more than one year, for the purpose of determining the amount of tax required to be deducted and withheld in respect of such wages, the amount of the tax shall be determined as if such payroll period constituted a miscellaneous payroll period of 365 days.

History

• Statutory Authority: MS s 270C.06; 290.52
• History: L 2005 c 151 art 1 s 114

Minn. R. 8092.0900 Wages Paid Through an Agent, Fiduciary, or Other Person on Behalf of Two or More Employers

If a payment of wages is made to an employee by an employer through an agent, fiduciary, or other person who also has control, receipt, custody, or disposal of, or pays the wages payable by another employer to such employee, the amount of tax required to be withheld on each wage payment made through such agent, fiduciary or person shall, whether the wages are paid separately on behalf of each employer or paid in a lump sum on behalf of all such employers, be determined upon the aggregate amount of such wage payment or payments in the same manner as if such aggregate amount had been paid by one employer.

In any such case, each employer shall be liable for the return and payment of a pro rata portion of the tax so determined, such portion to be determined in the ratio which the amount contributed by the particular employer bears to the aggregate of such wages.

For example, three companies maintain a central management agency which carries on the administrative work of the several companies. The central agency organization consists of a staff of clerks, bookkeepers, stenographers, etc., who are the common employees of the three companies. The expenses of the central agency, including wages paid to the foregoing employees, are borne by the several companies in certain agreed proportions. company X pays 45 percent, company Y pays 35 percent, and company Z pays 20 percent of such expenses. The amount of the tax required to be withheld on the wages paid to persons employed in the central agency should be determined in accordance with the provisions of this section. In such event, company X is liable as an employer for the return and payment of 45 percent of the tax required to be withheld. Company Y is liable for the return and payment of 35 percent of the tax and company Z is liable for the return and payment of 20 percent of the tax.

History

• Statutory Authority: MS s 270C.06; 290.52
• History: L 2005 c 151 art 1 s 114

Minn. R. 8092.1000 [Repealed, L 2003 c 127 art 3 s 24]

[Repealed, L 2003 c 127 art 3 s 24]

Minn. R. 8092.1100 Liability for Tax

Every employer required to deduct and withhold the tax under Minnesota Statutes, section 290.92, from the wages of an employee is liable for the payment of such tax whether or not it is collected from the employee by the employer. If, for example, the employer deducts less than the correct amount of tax, or fails to deduct any part of the tax, the employer is nevertheless liable for the correct amount of the tax. The employer is relieved of liability to any other person for the amount of any such tax withheld and paid to or deposited with the commissioner.

History

• Statutory Authority: MS s 14.388; 270C.06; 290.52
• History: 17 SR 1279; 29 SR 330; L 2005 c 151 art 1 s 114

Minn. R. 8092.1200 Remuneration Other Than in Cash for Service Performed by Retail Commission Salesperson

Subpart 1. In general.

An employer, in computing the amount to be deducted and withheld as tax in accordance with Minnesota Statutes, section 290.92, may elect to disregard any wages paid, after October 1, 1961, in a medium other than cash for services performed by an employee if the noncash remuneration is paid for services performed by the employee as a retail commission salesperson, and the employer ordinarily pays the employee remuneration solely by way of cash commissions for services performed as a retail commission salesperson.

Minnesota Statutes, section 290.92, subdivision 10, and this part are not applicable with respect to noncash wages paid to a retail commission salesperson for services performed in a capacity other than as such a salesperson. Such parts are not applicable with respect to noncash wages paid by an employer to an employee for services performed as a retail commission salesperson if the employer ordinarily pays the employee remuneration other than by way of cash commissions for such services. Thus, noncash remuneration may not be disregarded in computing the amount to be deducted and withheld in a case where the employee, for services performed as a retail commission salesperson, is paid both a salary and cash commissions on sales, or is ordinarily paid in something other than cash (stocks, bonds, or other forms of property) notwithstanding that the amount of remuneration paid to the employee is measured by sales.

Subp. 2. Retail commission salesperson.

For purposes of Minnesota Statutes, section 290.92, subdivision 10, and this part, the term "retail commission salesperson" includes an employee who is engaged in the solicitation of orders at retail, that is, from the ultimate consumer, for merchandise or other products offered for sale by the employee's employer. The term does not include an employee salesperson engaged in the solicitation on behalf of an employer of orders from wholesalers, retailers, or others for merchandise for resale. However, if the salesperson solicits orders for more than one principal, the salesperson is not excluded from the term solely because he or she solicits orders from wholesalers or retailers on behalf of one or more principals. In such case the salesperson may be a retail commission salesperson with respect to services performed for one or more principals and not with respect to services performed for the other principals.

Subp. 3. Noncash remuneration.

The term "noncash remuneration" includes remuneration paid in any medium other than cash, such as goods or commodities, stocks, bonds, or other forms of property. The term does not include checks or other monetary media of exchange.

History

• Statutory Authority: MS s 270C.06; 290.52
• History: 17 SR 1279; L 2005 c 151 art 1 s 114

Minn. R. 8092.1300 [Repealed, 29 SR 330]

[Repealed, 29 SR 330]

Minn. R. 8092.1400 [Repealed, L 2017 1Sp1 art 13 s 17]

[Repealed, L 2017 1Sp1 art 13 s 17]

Minn. R. 8092.2000 [Repealed, L 2017 1Sp1 art 13 s 17]

[Repealed, L 2017 1Sp1 art 13 s 17]

Chapter 8093 ESTIMATED TAX

Minn. R. 8093.0100 [Repealed, 27 SR 1664]

[Repealed, 27 SR 1664]

Minn. R. 8093.0200 Estimated Tax Payments of Spouses

Subpart 1. In general.

Either spouse may make separate estimated tax payments. Making separate payments does not preclude the spouses from making a joint tax return for the year.

Subp. 1a. When spouses not living together.

Spouses may make joint estimated tax payments. Joint estimated tax payments may be made even though they are not living together. However, joint estimated tax payments may not be made if they are separated under a decree of divorce or separate maintenance or if they have different tax years.

Subp. 1b. Joint estimated tax payment defined.

The phrase "joint estimated tax payment" includes estimated payments resulting from an election to have an overpayment from a joint income tax return applied to estimated tax for the preceding year.

Subp. 2. Application to separate returns.

The fact that joint estimated tax payments are made does not preclude either spouse from filing separate returns. If joint estimated payments are made but the spouses file separate returns for that tax year, the joint estimated payments may be treated as payments of either spouse for the taxable year or may be divided between them in such manner as they may agree. In the event the spouses fail to agree to a division, the payments must be allocated in accordance with the following rule: the joint estimated payments are allocated to a spouse in the same ratio that the amount of tax shown on the separate return of the spouse bears to the sum of the taxes shown on the separate returns of the spouses.

Subp. 3. Death of spouse.

Joint estimated tax payments may be made after the death of either spouse for liability arising from the year of the death. If joint estimated tax payments are made but the surviving spouse and the deceased spouse file separate returns for that tax year, the joint estimated tax payments may be divided between the decedent and the surviving spouse in such manner as the surviving spouse and the personal representative of the decedent may agree. If the surviving spouse and the personal representative of the decedent fail to agree to a division, the payments must be allocated as follows: the joint estimated tax payments are allocated to the surviving spouse in the same ratio as the amount of tax shown on the separate return of the surviving spouse bears to the sum of the taxes shown on the separate returns of the surviving spouse and the deceased, and the remaining joint estimated tax payments are allocated to the deceased spouse.

Subp. 4.

[Repealed, L 1987 c 268 art 1 s 128]

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06; 290.52
• History: 17 SR 1279; 27 SR 1664; L 2005 c 151 art 1 s 114; 46 SR 1363

Minn. R. 8093.0300 [Repealed, 27 SR 1664]

[Repealed, 27 SR 1664]

Minn. R. 8093.0400 Short Taxable Year

Subpart 1.

[Repealed, 27 SR 1664]

Subp. 2.

[Repealed, 27 SR 1664]

Subp. 3. Short taxable years of individuals; requirement of declaration.

No estimated payments are required if the short taxable year is:

A. a period of less than four months;

B. a period of at least four months but less than six months and the taxpayer's estimated income for the year first exceeds the income tax filing requirements for the year after the first day of the fourth month;

C. a period of at least six months but less than nine months and the taxpayer's estimated income for the year first exceeds the income tax filing requirements for the year after the first day of the sixth month; or

D. a period of nine months or more and the taxpayer's estimated income for the year first exceeds the income tax filing requirements for the year after the first day of the ninth month.

Subp. 4. Short taxable year; income placed on annual basis.

For the purpose of determining whether the anticipated income for a short taxable year necessitates the payment of estimated tax, such income must be placed on an annual basis in the manner prescribed in Minnesota Statutes, section 290.32.

Subp. 5.

[Repealed, 27 SR 1664]

Subp. 6.

[Repealed, 27 SR 1664]

Subp. 7. Payment of estimated tax.

Payment dates for a taxpayer with a short tax year are the same as those found in Minnesota Statutes, section 289A.25, subdivision 3. The applicable percentages of annual estimated tax that must be paid on each date are:

History

• Statutory Authority: MS s 270.06; 270C.06; 290.52
• History: 17 SR 1279; 27 SR 1664; L 2005 c 151 art 1 s 114

Minn. R. 8093.0500 Exceptions to Imposing Addition to Tax for Individuals

Subpart 1.

[Repealed, 27 SR 1664]

Subp. 2.

[Repealed, 27 SR 1664]

Subp. 3.

[Repealed, 27 SR 1664]

Subp. 4.

[Repealed, 26 SR 435]

Subp. 5.

[Repealed, 26 SR 435]

Subp. 6. Special rule; joint return to separate return.

This subpart applies to taxpayers who file a separate return after filing a joint return for the previous year. The previous year tax for determining the applicability of any addition to tax for making an underpayment of estimated tax, is determined by the following rule: the tax of each spouse is that portion of the joint tax that bears the same ratio to the whole of the joint tax as the amount of tax for which the taxpayer would have been liable bears to the sum of the taxes for which the taxpayer and the taxpayer's spouse would have been liable had each spouse filed a separate return for the preceding taxable year.

Subp. 7. Special rule; separate return to joint return.

This subpart applies to taxpayers who file a joint return after filing separate returns for the previous year. The previous year tax for determining the applicability of any addition to tax for making an underpayment of estimated tax, is the sum of both the tax shown on the return of the taxpayer and tax shown on the return of the taxpayer's spouse for such preceding year.

History

• Statutory Authority: MS s 270.06; 270C.06; 290.52
• History: 17 SR 1279; 26 SR 435; 27 SR 1664; L 2005 c 151 art 1 s 114

Minn. R. 8093.0600 Short Taxable Years of Individuals

Subpart 1. In general.

The provisions of Minnesota Statutes, section 289A.25, subdivision 5, as modified in subpart 2, are applicable in the case of a short taxable year. (See part 8093.0400 for requirement of estimated tax payments for short taxable year.)

Subp. 2. Determining tax.

In any case in which the taxable year for which an underpayment of estimated tax exists is a short taxable year due to a change in annual accounting periods, in determining the tax shown on the return for the preceding taxable year, the tax for the preceding year will be reduced by multiplying it by the number of months in the short taxable year and dividing the resulting amount by 12.

In any case in which an underpayment of estimated tax exists and the preceding taxable year was a short taxable year, the tax for the short year is increased by multiplying it by 12 and then dividing the result by the number of months in the short taxable year.

History

• Statutory Authority: MS s 270.06; 270C.06; 290.52
• History: 27 SR 1664; L 2005 c 151 art 1 s 114

Minn. R. 8093.2000 [Repealed, L 2005 c 151 art 6 s 21]

[Repealed, L 2005 c 151 art 6 s 21]

Minn. R. 8093.2100 [Repealed, L 2008 c 366 art 12 s 8]

[Repealed, L 2008 c 366 art 12 s 8]

Minn. R. 8093.3000 [Repealed, L 2005 c 151 art 6 s 21]

[Repealed, L 2005 c 151 art 6 s 21]

Minn. R. 8093.4000 [Repealed, 27 SR 1664]

[Repealed, 27 SR 1664]

Chapter 8097 SUBCHAPTER S CORPORATIONS

Minn. R. 8097.0200 MR 1995 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1995 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8097.0300 [Repealed, 26 SR 435]

[Repealed, 26 SR 435]

Chapter 8098 INDIVIDUAL HOUSING ACCOUNTS

Minn. R. 8098.0100 [Repealed, 8 SR 1079]

[Repealed, 8 SR 1079]

Minn. R. 8098.0200 [Repealed, 8 SR 1079]

[Repealed, 8 SR 1079]

Minn. R. 8098.0300 [Repealed, 8 SR 1079]

[Repealed, 8 SR 1079]

Minn. R. 8098.0400 [Repealed, 8 SR 1079]

[Repealed, 8 SR 1079]

Minn. R. 8098.0500 [Repealed, 8 SR 1079]

[Repealed, 8 SR 1079]

Minn. R. 8098.0600 [Repealed, 8 SR 1079]

[Repealed, 8 SR 1079]

Minn. R. 8098.0700 [Repealed, 8 SR 1079]

[Repealed, 8 SR 1079]

Minn. R. 8098.0800 [Repealed, 8 SR 1079]

[Repealed, 8 SR 1079]

Minn. R. 8098.0900 [Repealed, 8 SR 1079]

[Repealed, 8 SR 1079]

Minn. R. 8098.1000 [Repealed, 8 SR 1079]

[Repealed, 8 SR 1079]

Chapter 8099 TARGETING

Minn. R. 8099.0100 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8099.0200 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8099.0300 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Minn. R. 8099.0400 [Repealed, L 1987 c 268 art 1 s 128]

[Repealed, L 1987 c 268 art 1 s 128]

Chapter 8100 AD VALOREM TAXES; UTILITIES

Minn. R. 8100.0100 Definitions

Subpart 1. Scope.

As used in this chapter, the following words, terms, and phrases shall have the meanings given to them by this part, except where the context clearly indicates a different meaning.

Subp. 2. Allocation.

"Allocation" means the process of dividing the unit value of a utility company among the states in which the utility operates.

Subp. 3. Apportionment.

"Apportionment" means the process of distributing that portion of the utility company's unit value which has been allocated to Minnesota to the various taxing districts in which the utility company operates.

Subp. 3a. Beta.

"Beta" is the measure of a stock's volatility compared with a measurement of the overall market. A beta of less than one indicates lower-than-market risk; a beta of more than one indicates a higher-than-market risk. Beta is part of the capital asset pricing model.

Subp. 4. Book depreciation.

"Book depreciation" means the depreciation shown by a utility company on its corporate books, and allowed the company by various regulatory agencies.

Subp. 5. Capitalization rate.

"Capitalization rate" means the relationship of income to capital investment or value, expressed as a percentage.

Subp. 5a.

[Repealed, 24 SR 1106]

Subp. 5b. Contributions in aid of construction.

"Contributions in aid of construction" is money paid to another utility, to be used directly or indirectly for the construction or acquisition of plant; or the contribution of property that is used as plant.

Subp. 5c. Cooperative association.

"Cooperative association" includes municipal power agencies and pipelines that are not common carriers.

Subp. 6. Electric company.

"Electric company" means any company engaged in the generation, transmission, or distribution of electric power, excluding municipal corporations.

Subp. 7. Gas distribution company.

"Gas distribution company" means any company engaged in the distribution of natural or synthetic gas, excluding municipal corporations.

Subp. 8.

MR 1989 [Repealed, 14 SR 1806]

Subp. 8. Integrated company.

"Integrated company" means any company engaged in two or more utility operations within Minnesota, such as electric distribution and gas distribution, within the framework of one corporate structure.

Subp. 9.

MR 1989 [Renumbered 8100.0100, subpart 8]

Subp. 9. Net operating earnings.

"Net operating earnings" means earnings from the system plant of the utility after the deduction of operating expenses, depreciation, and taxes, but before any deduction for interest.

Subp. 10.

MR 1989 [Repealed, 14 SR 1806]

Subp. 10. Non-formula-assessed property.

"Non-formula-assessed property" means property of a utility which is valued by the local or county assessor rather than by the commissioner of revenue.

Subp. 11.

MR 1989 [Renumbered 8100.0100, subpart 9]

Subp. 11. Operating property.

"Operating property" means any tangible property that is owned or leased, except land, which is directly associated with the generation, transmission, or distribution of electricity, natural gas, gasoline, petroleum products, or crude oil. Examples of operating property include, but are not limited to, substations, transmission and distribution lines, generating plants, and pipelines. Property that is located on the same or contiguous parcels of land as operating property is presumed to also be operating property. Land is always nonoperating property.

Subp. 11a. Original cost less depreciation.

"Original cost less depreciation" means the original cost of the property to the present owner, minus any depreciation attributable to the property.

Subp. 12.

MR 1989 [Renumbered 8100.0100, subpart 10]

Subp. 12. Pipeline company.

"Pipeline company" means any company engaged in the transmission of natural gas, gasoline, petroleum products, or crude oil via a fixed line of pipes.

Subp. 13.

MR 1989 [Renumbered 8100.0100, subpart 11]

Subp. 13. Qualifying construction work in progress.

"Qualifying construction work in progress" means the cost of materials and associated charges which are not yet placed in a permanent site.

Subp. 13a. Relative risk.

"Relative risk" means the risk of a stock as measured by its beta.

Subp. 13b. Risk-free rate.

"Risk-free rate" means the theoretical rate of return on an absolutely riskless investment, measured by long-term United States government securities.

Subp. 13c. Risk premium.

"Risk premium" means the return over and above the risk-free rate.

Subp. 14.

MR 1989 [Renumbered 8100.0100, subpart 12]

Subp. 14. System plant.

"System plant" means the total tangible property, real and personal, of a company which is used in its utility operations in all states in which it operates.

Subp. 14a.

MR 1989 [Renumbered 8100.0100, subpart 13]

Subp. 15.

MR 1989 [Renumbered 8100.0100, subpart 14]

Subp. 15. Throughput.

"Throughput" means the amount of product measured in barrels, gallons, or cubic feet which passes through a pipeline.

Subp. 16.

MR 1989 [Renumbered 8100.0100, subpart 15]

Subp. 16. Unit value.

"Unit value" means the value of the entire system plant of a utility company taken as a whole without any regard to the value of its component parts.

Subp. 17.

MR 1989 [Renumbered 8100.0100, subpart 16]

Subp. 17.

[Repealed, 21 SR 749]

Subp. 18.

MR 1989 [Renumbered 8100.0100, subpart 17]

History

• Statutory Authority: MS s 270.06; 270.11; 270C.06
• History: 14 SR 1806; 21 SR 749; 24 SR 1106; L 2005 c 151 art 1 s 114; 31 SR 1317

Minn. R. 8100.0200 Introduction

The commissioner of revenue establishes an estimate of the unit value for each utility company operating within the state. The entire system is valued utilizing data relating to the cost of the property, the earnings of the company owning or operating the property, and additional indicators of value where applicable. The resulting valuation is allocated to each state in which the utility company operates. The value of property located in Minnesota that is exempt from property tax or that is locally assessed is subtracted from the value allocated to Minnesota. Next, by the process of apportionment, the portion allocated to Minnesota is distributed to the various taxing districts within the state. The data used in the valuation, allocation, and apportionment process is drawn from reports submitted to the Department of Revenue by the utility companies. These reports include Minnesota Department of Revenue Annual Utility Reports (UTL forms), Reports to the Minnesota Public Utilities Commission, Annual Reports to Shareholders, Annual Reports to the Federal Energy Regulatory Commission, United States Department of Agriculture, Rural Utility Service or equivalent, and other publicly available sources of information regarding rates. Periodic examinations of the supporting data for these reports are made by the Department of Revenue. Finally, the value is equalized based on sales/assessment ratios determined by the Department of Revenue.

The commissioner of revenue reserves the right to exercise discretion whenever the circumstances of a valuation estimate dictate the need for it. Discretion may be used to ensure a balance between a prescriptive rule and sound appraisal judgment; to ensure that all relevant data pertaining to value is considered; to ensure that a reasonable estimate of market value is derived; to address concerns of predictability and stability in estimations of market value; and to ensure that utility valuation is easily understood and administered.

History

• Statutory Authority: MS s 270.06; 270.11; 270C.06
• History: 11 SR 635; 12 SR 58; 13 SR 394; 14 SR 1806; 15 SR 2190; 21 SR 749; 24 SR 1106; L 2005 c 151 art 1 s 114; 31 SR 1317

Minn. R. 8100.0300 Valuation

Subpart 1. General.

Because of the unique character of public utility companies, the traditional approaches to valuation estimates of property (cost, capitalized income, and market) must be modified when utility property is valued. Consequently, the value of utility company property is estimated in the manner provided in this chapter.

All indicators of value must be considered to determine their validity relating to the specific property being valued. If an indicator is not demonstrated to be reliable or of value for the specific property being appraised it must not be used.

Subp. 2.

[Repealed, 31 SR 1317]

Subp. 3. Cost approach.

A. The cost factor to be considered in the utility valuation formula is the original cost less depreciation of the system plant, plus the cost of improvements to the system plant, plus the original cost of all types of construction work in progress that are installed by the assessment date, plus the cost of property held for future use, plus the cost of contributions in aid of construction. Original cost less depreciation is presumed to be equal to historical cost less depreciation. For rate-regulated companies, the commissioner must use the same type of cost that is used in the rate base calculation.

B. The original cost of any leased operating property used by the utility must be reported to the commissioner in conjunction with the annual utility report. If the original cost of the leased operating property is not available, the commissioner shall make an estimate of the cost by capitalizing the lease payments.

C. If a conflict of opinion exists regarding the character of specific property, whether it is operating or nonoperating property, assessors or utility companies may request a determination by the commissioner.

D. Depreciation is not allowed on construction work in progress. Depreciation is allowed as a deduction from cost in the amount allowed on the accounting records of the utility company, as such records are required to be maintained by the appropriate regulatory agency, except that depreciation may be reduced if available information indicates the amount deducted does not equal actual accrued depreciation when the current estimated remaining life is considered.

E. The following example illustrates how the cost indicator of value is computed for an electric company:

Subp. 4. Income approach.

The income indicator of value is estimated by weighting the capitalized net operating earnings of the utility company for the most recent three years as follows: most recent year, 40 percent; previous year, 35 percent; and final year, 25 percent. Utilities may request the removal of nonrecurring items of income or expense. The commissioner must determine if removal of the item is appropriate. The net income is capitalized by applying a capitalization rate that is computed by using the band of investment method. This method considers:

A. the capital structure of utilities;

B. the cost of debt or interest rate;

C. the yield on preferred stock of utilities;

D. the yield on common stock of utilities; and

E. the risk-free rate, relative risk, and risk premiums for public utility companies. Capitalization rates are computed for electric companies, gas distribution companies, natural gas transmission systems, and fluid pipeline companies. The rates are recalculated each year using the method described in this subpart. The following example illustrates how the income indicator of value would be computed for a gas distribution company:

Subp. 4a. Additional indicators of value.

Additional indicators of value, other than the cost and income indicators, may exist in some situations. When additional indicators of value exist, the commissioner has the discretion to use these additional indicators in computing the unit value of a utility. Additional indicators of value include, but are not limited to, the market indicator.

A. If the commissioner determines that the market indicator can be quantified, is reliable, and is indicative of value for a company, the commissioner has the discretion to adjust the weightings of the cost and income indicators to give weight to the market indicator in the unit value computation. If the market indicator is used, the weighting for the market indicator must not exceed five percent.

B. If the commissioner finds that economic or other forms of obsolescence exists, the commissioner has the discretion to adjust the weightings in the correlation process described in subpart 5 or make other adjustments in its methodology consistent with these rules and applicable statutes.

C. If the commissioner uses additional indicators of value, the commissioner must state in writing the findings that necessitate deviation from the default weightings of 50 percent for cost indicator and 50 percent for income indicator, as described in subpart 5.

Subp. 5. Unit value computation.

The unit value of the utility company is equal to the total of the weighted indicators of value. The total weighting must equal 100 percent. The default weightings of the indicators are: market indicator, 0 percent; cost indicator, 50 percent; income indicator, 50 percent.

The following is an example of the computation of the unit value for a utility company when the market indicator has been determined to be a valid additional indicator of value:

Subp. 5a. Valuation election for cooperative associations.

After assessment year 2007, cooperative associations have the option to irrevocably elect the method under which they are valued.

A. For assessment year 2007, each cooperative must be valued in the same manner as it was valued in assessment year 2006, using either the unit value method or cost less depreciation method.

B. Beginning in assessment year 2008, cooperative associations that were valued under the cost less depreciation method in assessment year 2007 may irrevocably elect to be valued using the unit value method described in subparts 1 to 5. Elections made by a cooperative association prior to November 1 of any year are effective the next assessment year. Such elections must be in a format prescribed by the commissioner.

C. Prior to November 1 of assessment year 2008, cooperative associations that were valued under the unit value method in assessment year 2007 may irrevocably elect to be valued under the cost less depreciation method. Such elections will be in a format prescribed by the commissioner. Cooperative associations that do not elect to revert back to valuation using cost less depreciation method prior to November 1 of assessment year 2008, are deemed to have irrevocably elected to be valued using the unit value method.

Subp. 6. Cost less depreciation method of valuation for utility property of cooperatives, municipal power agencies, and pipelines that are not common carriers.

Cooperative associations may irrevocably elect to have their property valued using the unit value method described in subparts 1 to 5. Cooperative associations not electing unit valuation and other types of utilities which do not operate in the traditional profit-making mode, are not common carriers, or are nonregulated, must have their utility property valued on the basis of cost less depreciation. Elections made by a cooperative association prior to November 1 of any year are effective the next assessment year. Such elections must be in a format prescribed by the commissioner.

A. Depreciation is allowed as a deduction from the original cost in increments of 2-1/2 percent per year, but the maximum depreciation allowed must not exceed 75 percent of the cost of the utility operating property. Additions to existing utility property are depreciated 2-1/2 percent per year until they reach the 75 percent maximum. Retirements of utility property are deducted from the cost basis at the average depreciation level of all of the company's taxable property.

B. Cost less depreciation is calculated by using the following inputs: the total cost at the end of the year preceding the assessment year; total depreciation at the beginning of the year preceding the assessment year; total cost at the beginning of the year preceding the assessment year; and the original cost of property retired during the year preceding the assessment year. Depreciation for the year is calculated by multiplying the total cost at the end of the year preceding the assessment year by 2-1/2 percent. Depreciation on retirements is calculated by dividing the total depreciation for the year preceding the assessment year by total cost at the beginning of the year preceding the assessment year. This number is then multiplied by the original cost of retirements for the year; the result is equal to the depreciation on retirements for the year. Net depreciation for the year is calculated by adding the total depreciation at the beginning of the year preceding the assessment year and the depreciation for the year, and then subtracting the depreciation on retirements for the year. Net depreciated value for the year is equal to the total cost at the end of the year preceding the assessment year less net depreciation for the year. Net depreciated value for the assessment year is the total market value for all property owned by the company. A company factor is calculated by dividing the net depreciated value for the assessment year by the total cost at the end of the year preceding the assessment year. The factor is multiplied by the cost of each individual parcel at the end of the year preceding the assessment year to derive the market value of each individual parcel.

C. The following example illustrates this process for an electric cooperative association electing cost less depreciation valuation under this subpart for assessment year 2006.

Subp. 7.

[Repealed, 21 SR 749]

Subp. 8. Retirements.

Utility operating property may be retired from the utility system while still in place if certain criteria are met:

A. The property must be physically disconnected from the utility system. In the case of electrical plants, the disconnection or dismantling of wires, cables, connectors, or transformers constitutes physical disconnection. In the case of pipelines, the disconnection of pipes, valves, or fittings is evidence of physical disconnection.

B. An affidavit of retirement must be filed by the utility with the commissioner at least 30 days prior to the assessment date. This affidavit must indicate the facility being retired and the date it was taken out of service.

C. The utility must make every effort to inform the commissioner of pending major retirements. The commissioner in turn shall notify the county assessor of impending major retirements as soon as this information becomes available to the department.

D. Utility real property which is retired in place must continue to be taxed for ad valorem purposes. However, its market value is not determined on the basis of its value as utility operating property.

E. If a utility chooses to temporarily retire a facility pending the development of an alternate fuel, greater demand, increased source of supply, or another valid reason, the cost of this facility must be transferred to the appropriate regulatory agency's account entitled "Held for Future Use." Standby facilities are not considered to be temporarily retired unless their costs are carried in this account. Temporarily retired utility facilities are valued taking into account a number of factors including age of the facility, type of facility, amount of maintenance and additional costs needed to restore the facility to operational status, length of retirement, and earning potential of the facility. A temporarily retired facility must not be valued lower than if the facility were considered nonoperating utility property.

History

• Statutory Authority: MS s 270.06; 270.11; 270C.06; 273.33; 273.37; 273.38
• History: 7 SR 1797; 8 SR 2723; 10 SR 18; 11 SR 635; 12 SR 58; 13 SR 394; 14 SR 1806; 15 SR 2190; 21 SR 749; 24 SR 1106; L 2005 c 151 art 1 s 114; 31 SR 1317

Minn. R. 8100.0400 Allocation

Subpart 1. General.

After the unit value of the utility property has been estimated, the portion of value which is attributable to Minnesota must be determined. Each of the factors in the allocation formula is assigned a weighted percentage to denote the relative importance assigned to that factor. The resulting sum of the weighted factors multiplied by the unit value yields the valuation of the utility property which is, after the adjustments described in part 8100.0500, subject to ad valorem tax in the state of Minnesota.

Subp. 2. Electric companies.

The original cost of the utility property located in Minnesota divided by the total original cost of the property in all states of operation is weighted at 90 percent. Gross revenue derived from operations in Minnesota divided by gross operations revenue from all states is weighted at ten percent.

The following example illustrates this formula, assuming a unit value of $20,000,000.

Subp. 3. Gas distribution companies.

The allocation of value of gas distribution companies must be made considering the same factors as are used to determine the allocation of value of electric companies. The weight given to the original cost factor is 75 percent, and gross revenue is weighted 25 percent.

Subp. 4. Pipeline companies.

The allocation of pipeline companies is equal to the original cost of the utility property located in Minnesota divided by the total original cost of the property in all states of operation weighted at 75 percent. Additionally, throughput of product from operations in Minnesota divided by throughput of product from operations in all states is weighted at 25 percent.

The following example illustrates the allocation of value of property of a pipeline company and the weights given to each factor:

History

• Statutory Authority: MS s 270.06; 270C.06
• History: 14 SR 1806; 21 SR 749; L 2005 c 151 art 1 s 114; 31 SR 1317

Minn. R. 8100.0500 Adjustments for Non-Formula-Assessed or Exempt Property

Subpart 1. Deduction for exempt or non-formula-assessed property.

After the Minnesota portion of the unit value of the utility company, except for electric cooperatives, is determined, any property which is non-formula-assessed or which is exempt from ad valorem tax, is deducted from the Minnesota portion of the unit value. Only that qualifying property located within the state of Minnesota may be excluded.

Subp. 2. Valuation formula not applicable to certain utility property.

The following properties are valued by the local or county assessor and, therefore, the formula provided herein for the valuation of utility property is not applicable to such property:

A. land;

B. nonoperating property; and

C. rights-of-way.

Subp. 3. Deduction for cost of land and rights-of-way; application to nonoperating property.

The Minnesota portion of the unit value is reduced by the value included in the unit value of the company for land, rights-of-way, nonoperating property, and exempt property. This amount is calculated by determining the ratio of the unit value computed in part 8100.0300, subpart 5, to the cost less depreciation allowed in part 8100.0300, subpart 3. This ratio is multiplied by the cost less depreciation of the property to be deducted.

Subp. 4.

[Repealed, 31 SR 1317]

Subp. 4a.

[Repealed, 31 SR 1317]

Subp. 5. Burden of proof and responsibility of utility company.

The utility company has the burden of proof to establish that the value of any property should be excluded from the Minnesota portion of the unit value. Accordingly, the utility company has the responsibility to submit, in the form required by the commissioner of revenue, such schedules of exempt or non-formula-assessed property as the commissioner may require.

History

• Statutory Authority: MS s 270.06; 270.11; 270C.06
• History: 14 SR 1806; 17 SR 1279; 24 SR 1106; L 2005 c 151 art 1 s 114; 31 SR 1317

Minn. R. 8100.0600 Apportionment

Subpart 1. Apportionment to taxing district.

After the unit valuation of the utility company has been allocated to the state of Minnesota and has been adjusted under part 8100.0500, the determined amount shall be apportioned or distributed to the taxing districts in Minnesota in which the company operates. This apportionment will be made by the commissioner of revenue on the basis of information submitted by the utility companies in annual reports filed with the commissioner.

Subp. 2. Required information.

The following information must be submitted for each taxing district:

A. the original cost of the company's operating property by classification, including the cost of leased taxable property;

B. the original cost of any new additions since the last assessment, including work in progress on the assessment date; and

C. the original cost of any retirements made after the last assessment.

Subp. 3. Required information when new taxing district established.

Whenever a new taxing district is established, the information submitted by the utility companies for the taxing district must be submitted in the same form as enumerated in subpart 2, items A to C. If the utility, because of administrative difficulty, is forced to make estimates of values and costs for property within new taxing districts, these estimates must be approved by the commissioner.

Subp. 4. Market value of the operating utility property.

The total market value of each company's operating utility property in Minnesota shall be:

The current original cost in each taxing district as of the last assessment date plus original cost of new construction reduced by the original cost of property retired since the last assessment date. The Minnesota portion of the unit value as adjusted under this rule shall be divided by the total current original cost to determine a percentage. The resulting percentage shall be multiplied by the current original cost in each taxing district to determine the market value in each district.

Subp. 5.

[Repealed, 14 SR 1806]

History

• Statutory Authority: MS s 270.06; 270C.06
• History: 14 SR 1806; L 2005 c 151 art 1 s 114

Minn. R. 8100.0700 [Repealed, L 2017 1Sp1 art 15 s 37]

[Repealed, L 2017 1Sp1 art 15 s 37]

Minn. R. 8100.0800 [Repealed, L 2014 c 308 art 9 s 94]

[Repealed, L 2014 c 308 art 9 s 94]

Chapter 8105 AD VALOREM TAXES; RAILROADS

Minn. R. 8105.0100 [Repealed, 11 SR 335]

[Repealed, 11 SR 335]

Minn. R. 8105.0200 [Repealed, 11 SR 335]

[Repealed, 11 SR 335]

Minn. R. 8105.0300 [Repealed, 11 SR 335]

[Repealed, 11 SR 335]

Minn. R. 8105.0400 [Repealed, 11 SR 335]

[Repealed, 11 SR 335]

Minn. R. 8105.0500 [Repealed, 11 SR 335]

[Repealed, 11 SR 335]

Minn. R. 8105.0600 [Repealed, 11 SR 335]

[Repealed, 11 SR 335]

Minn. R. 8105.0700 [Repealed, 11 SR 335]

[Repealed, 11 SR 335]

Minn. R. 8105.9900 [Repealed, 11 SR 335]

[Repealed, 11 SR 335]

Chapter 8106 RAILROAD VALUATION

Minn. R. 8106.0100 Definitions

Subpart 1. Scope.

As used in this chapter, the following words, terms, and phrases have the meanings given to them by this part. Some of the words, terms, and phrases are defined by statute but are included here for completeness.

Subp. 2. Allocation.

"Allocation" means the process by which a fair and reasonable portion of each railroad's total unit value is assigned to Minnesota for purposes of taxation.

Subp. 3. Apportionment.

"Apportionment" means the process of distributing that portion of the railroad's unit value which has been allocated to Minnesota after deducting exempt and nonoperating property to the various counties and taxing districts in which the railroad company operates.

Subp. 4. Assessment/sales ratio.

"Assessment/sales ratio" means the ratio derived by dividing the estimated market value of a property by its adjusted selling price and used as a measure of the level of estimated market value to real or true market value.

Subp. 5. Book depreciation.

"Book depreciation" means the depreciation shown by a railroad company on its corporate books and allowed the company by the Surface Transportation Board.

Subp. 6. Capitalization rate.

"Capitalization rate" means an anticipated rate of return from an investment, a rate at which income is processed (capitalized) to indicate the probable capital value. This rate is usually expressed as a percentage.

Subp. 7. Equalization.

"Equalization" means the adjustment of the estimated market value of railroad operating property to the apparent assessment/sales ratio of commercial and industrial property.

Subp. 8. Exempt property.

"Exempt property" means property which is nontaxable for ad valorem tax purposes by statutes. An example of such property is personal property exempt from taxation under Minnesota Statutes, chapter 272.

Subp. 9.

[Repealed, 28 SR 1297]

Subp. 10. Mainline track.

"Mainline track" means all track reported to the STB by the respondent railroad as main line.

Subp. 11.

[Repealed, L 2003 c 127 art 5 s 50]

Subp. 12. Obsolescence allowance.

"Obsolescence allowance" means the adjustment to be made to the gross cost indicator of value to reflect the loss of economic usefulness or value because of causes other than physical deterioration.

Subp. 13. Operating property.

"Operating property" means all property owned or used on a regular and continual basis by a railroad company in the performance of railroad transportation services, including without limitation, franchises, rights-of-way, bridges, trestles, shops, docks, wharves, buildings, and structures.

Subp. 14. Original cost.

"Original cost" means the amount paid for an asset as recorded on the railroad's books in accordance with STB accounting rules and regulations.

Subp. 15.

[Repealed, L 2003 c 127 art 5 s 50]

Subp. 16.

[Repealed, L 2003 c 127 art 5 s 50]

Subp. 17. Restated cost.

"Restated cost" means the cost of an asset recorded on a railroad's books after adjusting the amount from a retirement-replacement-betterment accounting basis to a depreciation accounting basis, in accordance with Code of Federal Regulations, title 49, part 1201 (effective January 1, 1983).

Subp. 17a. STB.

"STB" means the Surface Transportation Board, a federal regulatory agency.

Subp. 18. Structure.

"Structure" means all coal and ore wharves or docks, station houses, depots, shops, office buildings, and all other buildings with a restated cost of over $10,000.

Subp. 19. System.

"System" means the total tangible property, real and personal, of a company which is used in its railroad operations in all states in which it operates.

Subp. 20. Unit value.

"Unit value" means the value of the system of a railroad company taken as a whole without any regard to the value of its component parts.

Subp. 21. Weighting.

"Weighting" means the confidence or reliability given to a factor or indicator. It is usually expressed as a portion of 100 percent.

History

• Statutory Authority: MS s 14.388; 270.84; 270C.06
• History: 11 SR 335; L 2003 c 127 art 5 s 50; 28 SR 1297; L 2005 c 151 art 1 s 114

Minn. R. 8106.0200 [Repealed, L 2003 c 127 art 5 s 50]

[Repealed, L 2003 c 127 art 5 s 50]

Minn. R. 8106.0300 Reports Required

Subpart 1. Reports to be filed.

The data used in the valuation, allocation, and apportionment processes will be drawn from reports submitted to the Department of Revenue by the railroad companies. These reports shall include:

A. the Minnesota Department of Revenue annual railroad report;

B. the annual report to the STB;

C. the annual stockholders report; and

D. other commonly accepted sources of railroad income, expense, capitalization, and debt and stock values such as IBBOTSON Associates Inc., and Statistics of Class I Freight Railroads compiled by the STB.

Subp. 2.

[Repealed, 28 SR 1297]

Subp. 3. Failure to file.

In the event any railroad company fails to file the required reports, the commissioner shall make a valuation according to the commissioner's best judgment based on available information.

Other sources of pertinent information may be consulted only when necessary to make the valuation, allocation, and apportionment required by parts 8106.0100 to 8106.0700. Said sources will, when applicable, be used uniformly and will be commonly accepted sources of data for which they are consulted. Questions unique to the valuation of a particular railroad may be resolved by consulting the books and records of the particular railroad involved.

History

• Statutory Authority: MS s 14.388; 270.84; 270C.06
• History: 11 SR 335; 28 SR 1297; L 2005 c 151 art 1 s 114

Minn. R. 8106.0400 Valuation

Subpart 1. In general.

The approaches to value that will be used in determining the estimated unit value of railroad operating property are cost, capitalized income, and stock and debt except as provided in subparts 4 and 6.

Subp. 2. Cost approach to valuation.

The cost factor that will be considered in the railroad valuation method is the restated cost of the railroad system, plus the restated cost of construction work in progress on the assessment date. The railroad system shall be considered to be made up of the following STB accounts: all road and equipment accounts, including leased equipment accounts; all general expenditures; and other elements of investment and railroad property owned and leased to others as well as railroad property leased from others. Book depreciation and obsolescence shall be allowed as a deduction from the restated cost of the railroad's assets enumerated above. The original cost if known, and the annual lease payments of any leased operating property used by the railroad must be reported to the commissioner in conjunction with the annual railroad report. The commissioner shall incorporate the value of the leased property into the railroad's unit value utilizing this information.

Obsolescence will be calculated through the use of the "Blue Chip Method." This method compares the railroad being appraised with the best railroads in the country, the so-called blue chip railroads. Three indicators of obsolescence will be used. First, a five-year average rate of return will be calculated for the railroad under appraisal. This rate of return is computed by dividing the subject's annual net railroad operating income for each of the most recent five years preceding the assessment, by the railroad's total owned transportation property less recorded depreciation and amortization (net investment in railroad property) for each corresponding year. The resulting five rates of return are then averaged using a simple arithmetic average to arrive at a five-year average rate of return. An example of this computation is as follows:

XYZ Railroad

A study will then be made of the Class I railroads operating within the United States for the same five-year period using such informational sources as information compiled annually by the Wisconsin Department of Revenue known as the "Blue Chip" Obsolescence Study for STB Class I Railroads. Each year the railroad with the highest rate of return will be selected as the blue chip railroad. The resulting five rates of return will then be averaged to find the five-year average blue chip rate of return. An example of this process is as follows:

The five-year average rate of return for the railroad under appraisal will be compared to the five-year average blue chip rate of return. The deviation of the subject railroad's rate of return from the blue chip railroads' rate of return is the amount of indicated obsolescence. The following example illustrates the computation.

Second, a five-year average freight traffic density indicator will be calculated. This indicator is calculated by dividing the subject railroad's ton miles of revenue freight for the most recent five years preceding the assessment by the average miles of road operated for each corresponding year. The resulting five indicators of freight traffic density are then averaged using a simple arithmetic average to arrive at a five-year average of freight traffic density. An example of this computation is as follows:

XYZ Railroad

A five-year study is then made of the Class I railroads operating within the United States in the same manner and using the same sources as the rate of return study with the exception that this study concentrates on the freight traffic density achieved by the various Class I railroads. Each year the railroad with the highest freight traffic density will be selected as the blue chip railroad. The resulting five freight traffic density amounts will then be averaged to find the five-year average blue chip freight traffic density amount. An example of this process is as follows:

The five-year average freight traffic density indicator of the railroad under appraisal will be compared to the five-year average blue chip freight traffic density indicator. The deviation of the subject railroad's freight traffic density from the blue chip railroad's freight traffic density is the amount of indicated obsolescence. The following example illustrates this computation:

Third, a five-year average gross profit margin indicator will be calculated. This indicator measures a railroad's ability to convert gross revenue to net profit. This indicator is calculated by dividing net railway operating income, before federal and deferred taxes, by gross revenues. This calculation is performed using the subject railroad income figures for the most recent five years preceding the assessment. The resulting five indicators of gross profit margin are then averaged using a simple arithmetic average to arrive at a five-year average of gross profit margin. An example of this computation is as follows:

XYZ Railroad

A study will then be made of the Class I railroads operating within the United States for the same five-year period in the same manner and using the same sources in the two previous five-year studies mentioned above. This study will look at the gross profit margin achieved by the various Class I railroads. Each year the railroad with the highest gross profit margin will be selected as the blue chip railroad. The resulting five gross profit margin percents will then be averaged to find a five-year average blue chip gross profit margin percentage. An example of this process is as follows:

The five-year average gross profit margin percent for the railroad under appraisal will be compared to the five-year average blue chip gross profit margin percent. The deviation of the subject railroad's gross profit margin from the blue chip railroad's gross profit margin is the amount of indicated obsolescence. The following example illustrates this computation:

The obsolescence percentage indicated by this comparison of gross profit margins will be added to the obsolescence indicated by a comparison of rates of return and freight traffic density. The total of these three amounts will be averaged and this result will be the overall obsolescence percentage for the subject railroad. The following is an example of this computation:

XYZ Railroad

The obsolescence percentage will then be applied to the road accounts of the subject railroad, excluding land and personal property, after the allowance for depreciation has been deducted. In no instance shall the allowance for obsolescence exceed 50 percent. The following example illustrates how the cost indicator of value is computed and how the allowance for obsolescence is applied.

XYZ Railroad

This cost indicator of value computed in accordance with this part will bear a weighting of 15 percent of the total unit value estimate of the railroad's property, except in the case of bankrupt railroads, or railroads with no income to be capitalized, as provided for in subpart 6, or railroads not meeting the criteria for use of the stock and debt approach to value as specified in subpart 4. These railroads will be valued using a 40 percent weighting for the cost indicator of value.

Subp. 3. Income approach to valuation.

The income indicator of value will be calculated by averaging the net railway operating income, as defined by the STB, of the railroad for the most recent five years preceding the assessment. This average income shall be capitalized by applying to it a capitalization rate which will be computed by using the band of investment method. This method will consider:

A. the capital structure of railroads, including capital surplus and retained earnings;

B. the cost of debt or interest rate paying particular attention to imbedded debt of railroads;

C. the yield on preferred stock of railroads; and

D. the yield on common stock of railroads. This rate will be calculated each year using the method described in this subpart. An example of a computation of the capitalized income approach to value is as follows: XYZ Railroad Five-year average Net Railway Operating Income Capitalized at 14.0 percent (2,978,500 ÷ 14.0 percent) equals $21,275,000. The income indicator of value computed in accordance with this part shall be weighted 60 percent of the total estimated unit value of the railroad's property except in the case of bankrupt railroads or railroads having no net operating income as provided for in subpart 6.

Subp. 4. Stock and debt approach to valuation.

The stock and debt approach to value is the third method which will be used to estimate the unit value of the railroad operating property. This approach to value is based on the accounting principle: assets = liabilities + equity. Therefore, when the value of a company's liabilities (debt) is found and this added to the worth of its stock, a value can be established for its assets (property).

The use of this approach to value will be limited to only those railroads meeting qualifications in items A to C:

A. The stock of the railroad must be traded on either the New York or American Stock Exchange.

B. The bonds of the railroad must be traded or have a rating by either Standard and Poor's or Moody's rating services.

C. If the railroad is part of a diversified company, the value of the railroad portion of the total stock price must be able to be separated on an earnings basis using the following method: XYZ Railroad If a railroad has no net earnings, and is part of a conglomerate, then the stock and debt indicator of value will not be used. The value of the stock used in the stock and debt method shall be an average of the month-ending stock prices for the 12 months immediately preceding the assessment date of January 2. The value of the bonds, equipment obligations, and conditional sales contracts, and other long-term debts shall also be an average of the cost of money quotes for the 12 months immediately preceding the assessment date of January 2. The source for these stock and bond prices shall be Standard and Poor's Stock Guide or other applicable financial service. An illustration of a computation of the stock and debt approach to value is as follows: XYZ Railroad Company After the gross stock and debt indicator of value has been computed, an allowance will be made for the effect, if any, of revenue from other than railway operations included in this indicator of value. This allowance shall be based on the ratio of a five-year average of net revenue from railway operations, as determined by the STB, to a similar five-year average of income available for fixed charges as determined by the STB. The five-year average will be the most recent five years preceding the assessment date. An example of this computation is as follows: XYZ Railroad Company The stock and debt indicator of value computed in accordance with this part will bear a weighting of 25 percent of the total unit value of the railroad's property, except in the case of bankrupt railroads, railroads in bankruptcy proceedings, or railroads with no income to be capitalized, as provided for in subpart 6. If no stock and debt indicator of value is computed, the weighting of 25 percent which would have been applied to this indicator of value will be placed on the cost indicator of value.

Subp. 5. Unit value computation.

The estimated unit value of the railroad property will be the total of the three weighted indicators of value. The following is an example of the computation of the unit value.

XYZ Railroad

The weighting shown above may vary from railroad to railroad as provided for in subparts 2 to 4.

Subp. 6. Railroads operating at a loss, bankrupt railroads involved in federal bankruptcy proceedings, and railroads adjudged bankrupt by a federal court.

Railroads which are involved in federal bankruptcy proceedings, adjudged bankrupt, or railroads having no net railway operating income will be valued using the cost and stock and debt approaches to value. If the stocks or bonds of such railroads are not traded, or do not meet the other requirements for use of the stock and debt indicator of value, then these railroads will be valued using the cost approach to value only.

History

• Statutory Authority: MS s 14.388; 270.84; 270C.06
• History: 11 SR 335; L 1998 c 254 art 1 s 107; 28 SR 1297; L 2005 c 151 art 1 s 114

Minn. R. 8106.0500 Allocation

Subpart 1. In general.

After the estimated unit value of the railroad property has been determined, the portion of value which is attributable to Minnesota must be established. This is accomplished through the use of certain allocation factors. Each of the factors in the allocation method shows a relationship between the railroad system operations in all states and its Minnesota operations. These relationships are expressed in percentage figures. These percentages are then added and an average is computed. The resulting average of the factors, multiplied by the unit value, yields the Minnesota portion of the railroad property which will, after the adjustments described in parts 8106.0600 and 8106.0800, be subject to ad valorem tax in Minnesota.

Subp. 2. Allocation factors.

The factors to be considered in making allocations of unit values to Minnesota for railroad companies are:

A. miles of railroad track operated in Minnesota divided by miles of railroad track operated in all states;

B. ton miles of revenue freight transported in Minnesota divided by ton miles of revenue freight transported in all states;

C. gross revenues from transportation operations within Minnesota divided by gross revenues from transportation operations in all states; and

D. cost of road property in Minnesota divided by the cost of road property in all states. The following example illustrates the allocation method to be applied to the unit value of railroad property.

History

• Statutory Authority: MS s 270.84; 270C.06
• History: 11 SR 335; L 2005 c 151 art 1 s 114

Minn. R. 8106.0600 Adjustments for Nonformula Assessed Property or Exempt Property

After the Minnesota portion of the unit value of the railroad company is determined, property which is either exempt from taxation, such as personal property, or classified as nonoperating will be deducted from the Minnesota portion of the unit value to the extent that it has been included in the computation of this value.

Property which has been included in the computation of the unit value but has been defined as nonoperating property will be valued by the local assessor. The Minnesota portion of the unit value will be reduced by the restated cost of this property. Only nonoperating property located within Minnesota will be eligible for this exclusion.

The railroad company shall have the responsibility to submit to the commissioner of revenue, in the form required by the commissioner, such schedules of nonoperating property as the commissioner may require.

In addition to nonoperating property which will be valued and assessed locally, a deduction from the Minnesota portion of the unit value will be made for personal property.

A percentage of the Minnesota portion of the unit value before deducting nonoperating property will be excluded as personal property. This percentage will be computed in the following way:

A. The following STB accounts for property within Minnesota will be totaled:

B. The total of these accounts will then be divided by the total of the Minnesota road, equipment, leased property, general expenditures, construction work in progress, and other elements of investment accounts. The resulting percentage will be used to determine the personal property amount of the Minnesota portion of the unit value. This amount will not be taxable for ad valorem purposes.

C. The following is an illustration of the computation for the personal property exclusion. XYZ Railway

History

• Statutory Authority: MS s 14.388; 270.84; 270C.06
• History: 11 SR 335; 28 SR 1297; L 2005 c 151 art 1 s 114

Minn. R. 8106.0700 Apportionment

Subpart 1. In general.

After the taxable Minnesota portion of the railroad's unit value has been determined, this value must be distributed to the various counties and taxing districts in which the railroad operates. This distribution will be accomplished by the commissioner of revenue through the use of certain apportionment components. Each of the components in the apportionment method is a reflection of the property owned or used by the railroad within a particular taxing district. The figures making up these components will be developed on information submitted by the railroad companies in annual reports filed with the commissioner, and information supplied to the commissioner by the various county auditors and assessors.

Subp. 2. Apportionment components.

There are three components which will be used in the distribution of the value of railroad property to the various taxing districts. They are railroad operating land, miles of track, and railroad operating structures with a restated cost of $10,000 or more.

Subp. 3. Railroad operating land.

The information for the computation of this apportionment component will be based on information submitted by both the railroads and the various county auditors and assessors. The railroad companies shall file with the commissioner of revenue each year, in conjunction with their annual reports required by part 8106.0300, subpart 1, the number of acres of railroad operating land owned or used by them in each taxing district in which they operate. The county auditor shall also be required to submit to the commissioner of revenue a report showing the number of acres of railroad operating land, detailed by owning railroad, in each taxing district within the county. If either the railroads or the auditors find that it is administratively impracticable to submit this information, the commissioner shall make an estimate of the number of acres of railroad operating land within each taxing district based on the best information available. Such information would usually consist of the miles of railroad track within the taxing district and the normal width of the right-of-way used by the railroad. In addition, information relative to the current estimated market value of all land within the respective taxing districts will be obtained from the county or city assessors by a review of the information reported to the commissioner of revenue in compliance with Minnesota Statutes, section 270C.85, subdivision 2, clause (4).

The computation for the railroad operating land apportionment component will be accomplished annually in the following manner:

A. The average estimated market value per taxable acre within a specific taxing district will be calculated by dividing the estimated market value of all taxable land within the taxing district as indicated by the most recent assessment information reported to the commissioner under Minnesota Statutes, section 270C.85, subdivision 2, clause (4). The number of acres within a taxing district will be obtained from the most recent statistics available from the Minnesota Geospatial Information Office, Department of Administration. The total number of acres will be adjusted to allow for nontaxable or exempt acres by subtracting these nontaxable or exempt acres from the total acres. The number of nontaxable or exempt acres will be obtained from the most recent exempt real property information reported to the commissioner under Minnesota Statutes, section 270C.85, subdivision 2, clause (4). The following example illustrates this calculation.

B. This average estimated market value per taxable acre is then applied to the number of acres of railroad operating land within the taxing district to compute a gross railroad operating land component within the taxing district. The following example illustrates this computation:

C. This railroad operating land component will then be adjusted. This adjustment is achieved by striking a ratio between the system unit value for all Minnesota railroads, as described in part 8106.0400, subpart 5, to the total of net investment in railway property used in transportation service as defined by the STB for all railroads operating in Minnesota. This relationship will be computed annually and will then be applied to the gross railroad operating land component to arrive at the adjusted railroad operating land component. This adjusted land value will then be used as one element of the apportionment computation. The following is an example of how the adjusted railroad operating land component is to be computed: Total System Unit Value ($99,468,500) ÷ Total Net Investment in Railway Property Used in Transportation Services ($165,780,830) = 60%

Subp. 4. Miles of track.

The information for the computation of this apportionment component will be based on information submitted by the railroads to the commissioner of revenue in conjunction with the annual report required by part 8106.0300, subpart 1. Each railroad will be required to list the miles of track they own in each taxing district within Minnesota. The track must be separated into two classes, main line track and all other track.

In order to make the miles of track in each taxing district compatible with the other apportionment components, the miles must be converted to dollars. This conversion will be computed annually. The conversion will be accomplished by adding together the following STB accounts for each railroad's net investment in Minnesota: account 3, grading; account 8, ties; account 9, rails; account 11, ballast. The total of these accounts will then be divided by the number of miles of track operated by the respective railroads within Minnesota to obtain a cost per mile figure. This will be used as the average cost per mile for track within Minnesota.

The following is an example of how the average cost per mile of track in Minnesota will be computed:

Total cost of track ($15,250,000) ÷ Total miles operated (610) = Average Cost per Mile of Track $25,000.

Main line track shall be weighted at 1.5 times the cost of all other track; thus, if the average cost per mile of track is $25,000, main line track would be worth more than $25,000 per mile, while all other track would be worth less. The calculation for the average cost of both main line and all other track shall be made annually on an industry basis.

The calculation to determine the average cost per mile of main line track and the average cost per mile of all other track will be computed in the following manner:

A. Total mileage operated will be multiplied by the average cost per mile to arrive at a total track cost.

B. Total mileage operated will be separated into the two types of track, main line and all other track.

C. Main line track will be multiplied by 1.5 to arrive at adjusted main line miles.

D. Adjusted main line miles will be added to all other track miles to arrive at adjusted total track miles.

E. Total track cost will be divided by adjusted total track miles to arrive at the cost per mile of all other track.

F. The cost per mile of main line track will be computed by multiplying the cost per mile of all other track by 1.5. An illustration of this computation is as follows: After the per mile cost figures for main line and all other track are obtained, these per mile cost figures would be multiplied by the length of each type of track in a particular taxing district to obtain the value of the trackage in that district. The same cost figures will be used for all railroads operating in Minnesota.

Subp. 5. Structures.

The information for the computation of this apportionment component will be based on statements submitted by the railroads. These schedules shall be submitted annually to the commissioner of revenue in conjunction with the annual report required by part 8106.0300, subpart 1. The schedules shall show the location, by taxing district, of all operating structures owned by the reporting railroad within Minnesota with a restated cost of $10,000 or more. The schedules shall list a description of the structure and the railroad's current restated cost investment in the structure as it appears in the appropriate STB account.

An example of this listing is as follows:

XYZ Railroad

Subp. 6. Apportionment computation.

The apportionment of a railroad's taxable Minnesota value is accomplished by totaling the amount of the land, track, and structure components as developed in subparts 3 to 5 for each taxing district, then finding the sum of these totals for all the taxing districts in which the subject railroad operates. The taxable Minnesota portion of the railroad's unit value is divided by the total of the three apportionment components for all taxing districts in which the railroad operates in order to arrive at a percentage. This resulting percentage is then applied to the total amount of the three apportionment components for each specific taxing district. The figure produced by this multiplication process is the taxing district's share of the railroad's taxable Minnesota portion of the unit value. No more value can be distributed to the various taxing districts than that produced by the valuation process described in parts 8106.0100 to 8106.0600.

The example in part 8106.9900 illustrates the apportionment process.

History

• Statutory Authority: MS s 14.388; 270.84; 270C.06
• History: 11 SR 335; 28 SR 1297; L 2005 c 151 art 1 s 114; L 2009 c 101 art 2 s 107; 44 SR 957

Minn. R. 8106.0800 Equalization

Subpart 1. In general.

After the apportionment of value referred to in part 8106.0700 has been made, the railroad property values must be equalized to coincide with the assessment levels of commercial and industrial property within each respective county receiving a share of the apportioned railroad value. This equalization will be accomplished through the use of an assessment/sales ratio.

Subp. 2. Assessment/sales ratio computation.

A comprehensive assessment/sales ratio study compiled annually by the sales ratio section of the Property Tax Division of the Department of Revenue commonly known as the State Board of Equalization Sales/Ratio Study will be used in this computation. The portions of this study which will be used for purposes of this section are known as the "County Commercial and Industrial Sales Ratio."

This commercial and industrial (C & I) sales ratio is computed through an analysis of the certificates of real estate value filed by the buyers or sellers of commercial or industrial property within each county. The information contained on these certificates of real estate value is compiled pursuant to requests, standards, and methods set forth by the Minnesota Department of Revenue acting upon recommendations of the Minnesota legislature. The most recent C & I study available will be used for purposes of this section.

The median C & I sales ratio from the County Commercial and Industrial Sales Ratio study will be used as a basis to estimate the current year C & I median ratio for each county.

The process used to estimate this current year median ratio will be as follows.

The current estimated market value of commercial and industrial property within each county will be taken from the information reported to the commissioner under Minnesota Statutes, section 270C.85, subdivision 2, clause (4). The amount of the value of new commercial and industrial construction, ("new" meaning since the last assessment period) as well as the value of commercial and industrial property which has changed classification (i.e. commercial to tax exempt property) will also be taken from the information reported to the commissioner under Minnesota Statutes, section 270C.85, subdivision 2, clause (4). The value of new construction will then be deducted from the estimated market value, resulting in a net estimated current year market value for commercial and industrial property within the county. The value of commercial and industrial property which has changed classification will be deducted from the previous years estimated market value to arrive at a net estimated previous year market value for commercial and industrial property within the county. The net current year value will be compared to the net previous year's estimated market value for commercial and industrial property within the county and the difference between the two values noted. This difference will be divided by the previous year's net estimated market value for commercial and industrial property to find the percentage of increase, or decrease, in assessment level for each year. This percent of change will be applied to the most recent C & I median ratio to estimate the current year's C & I median ratio. An example of this calculation for a typical county is shown below.

This same calculation is performed for each Minnesota county which contains operating railroad property. If there are five or fewer valid sales of commercial and industrial property within a county during the study period, these few sales are insufficient to form the basis for a meaningful C & I ratio. Therefore, the median assessment/sales ratio to be used for purposes of the above computation will not be the median C & I ratio but will be the weighted median ratio of all property classes within the county for which a sales ratio is available. This weighted median ratio is computed in the same manner using the same procedures and standards as the C & I ratio. In addition, the computation described above will not be performed using the commercial and industrial estimated market value but will use the estimated market value for all property within the county. All other aspects of the calculations are identical except for this substitution.

The weighted median ratio is developed by multiplying the median ratio for each class of property (agricultural, residential, recreational, commercial) by the percentage of value that class of property comprises of the total county value. An example of this calculation is as follows:

Subp. 3. Application of the estimated current year median assessment/sales ratio.

After the estimated current year median ratio has been calculated pursuant to subpart 2, it is used to adjust the apportioned estimated market value of operating railroad property to the apparent assessment level of commercial and industrial property in each county. This is done by multiplying the estimated market value of the railroad property by the estimated sales ratio to arrive at the equalized market value of operating railroad property. In no instance will any adjustment be made if, after comparing the estimated current year sales ratio to the assessment level of operating railroad property, the difference between the two is five percent or less. An example of this adjustment is as follows:

• For purposes of this example, assume that railroad property is assessed at 100 percent of market value.

** No adjustment made because estimated current year median sales ratio is within five percent of assessment level on operating railroad property.

All railroads operating within a particular county will be equalized at the same percentage.

These equalized estimated market values of operating railroad property will be certified to the county assessor denoting specific railroads and taxing districts pursuant to Minnesota Statutes, section 270.87.

History

• Statutory Authority: MS s 14.388; 270.84; 270C.06
• History: 11 SR 335; 28 SR 1297; L 2005 c 151 art 1 s 114; 44 SR 957

Minn. R. 8106.9900 Example of Apportionment Process

History

• Statutory Authority: MS s 270.84; 270C.06
• History: 11 SR 335; L 2005 c 151 art 1 s 114

Chapter 8110 CERTIFICATE OF REAL ESTATE VALUE

Minn. R. 8110.0100 General Information Required

In order to be accepted for filing, a certificate of real estate value must contain the following data:

A. Buyer's name and address.

B. Seller's name and address.

C. Legal description of all parcels involved in the transaction. The property identification number assigned by the county for administration of the property tax system is not sufficient.

D. Location of property described such as street address.

E. A statement signed by the buyer that the information provided on the certificate is correct and complete under penalty of the law. "Buyer" for the purpose of this rule means the individual or one of the individuals who will get title to the property. If a partnership will get title to the property, the buyer is a partner. If a corporation will get title, the buyer is an officer. For any entity, "buyer" may also include a natural person who is an agent of the buyer and who has knowledge of the transaction.

F. A telephone number at which the buyer can be reached during the day. If the buyer has no current telephone number, but has an agent or attorney, the telephone number of the agent or attorney may be used.

History

• Statutory Authority: MS s 270.06; 270C.06; 272.115
• History: 9 SR 914; 17 SR 1279; 27 SR 1603; L 2005 c 151 art 1 s 114

Minn. R. 8110.0200 Financing Information Required

Subpart 1. Type of transfer.

The certificate of value must include data regarding the type of purchase or transfer and must require the buyer to indicate if:

A. the buyer and seller are natural persons related to each other (the relation may be by blood, marriage, or adoption) or are related business operations;

B. the transfer or purchase was of a partial interest in the property;

C. the property was transferred as part of a trade of properties;

D. the property was transferred or conveyed to a government or a charitable organization as defined in section 501(c)(3) of the Internal Revenue Code;

E. the transfer or conveyance was intended only to add or remove a coowner's name from the title of the property;

F. the property was transferred or conveyed as part of a forced sale such as foreclosure or condemnation;

G. the transfer was a result of a gift or inheritance; or

H. the property was transferred or conveyed in fulfillment of a contract for deed or other purchase agreement dated more than two years before the transfer.

Subp. 2. Type of property; financing.

If none of the descriptions in subpart 1 apply, the buyer must provide the data required by items A to I.

A. Type of property transferred or conveyed, including, but not limited to: land only; land with buildings; buildings only; and information relating to any new construction, demolition, or additions to buildings which occurred between January 1 of the year of sale and date of the original agreement.

B. Whether the principal intended use of the property is:

C. Date of original agreement establishing the sales price of the property being transferred. Usually this will be the date of the earnest money agreement or other similar agreement requiring performance at an agreed price.

D. Total purchase price of all real, personal, or intangible property being transferred or conveyed as established by the original agreement.

E. Total down payment paid by buyer to include amounts paid prior to and at the time of closing.

F. Information regarding any preexisting financing for which the buyer will assume responsibility from the seller for repayment of the debt, which must include:

G. Information regarding any new loans obtained by the buyer, including:

H. Value of all personal property included in total sales price, including, but not limited to:

I. Value of all intangible property included in total sales price, including, but not limited to, goodwill, licenses, franchises, patents, or business name as part of the transfer of a business operation.

History

• Statutory Authority: MS s 270.06; 270C.06; 272.115
• History: 9 SR 914; 27 SR 1603; L 2005 c 151 art 1 s 114

Minn. R. 8110.0250 Information Required for Apartment, Commercial/Industrial, or Farm Sales

In the case of sales of apartment, commercial/industrial, or farm properties, if none of the descriptions in part 8110.0200, subpart 1, items A to H, apply, in addition to the information provided in part 8110.0200, subpart 2, the buyer must provide the following information:

A. Whether the buyer or seller paid someone to make an appraisal of the property's value prior to its sale and, if known, the appraised value.

B. Whether the buyer was an owner of adjacent property and, if so, whether the buyer believes that the buyer paid a higher price than other potential buyers.

C. Whether the buyer believes for any other reason that the price the buyer paid was considerably different from what the buyer believes other similar properties would sell for.

D. Whether the total purchase price represents allocation of a sales price that includes another property or properties sold to the buyer at the same time.

E. Whether the buyer leased the property from the seller before the purchase.

F. Whether the seller leased the property from the buyer after the purchase.

G. Whether the sale was announced or promoted through realtor listings, newspaper or other publications, advertisements, or through brochure or other promotional or informational mailings or some other method.

H. In the case of rental property, whether the buyer was guaranteed a minimum level of rental income.

I. Whether a foreclosure, court judgment, order, or other legal proceeding was pending in connection with the property when it was sold.

J. In the case of commercial/industrial properties, how the property was used before it was sold.

K. In the case of apartment properties, the total number of apartment buildings included in the sales price and the total number of rental units in all buildings.

L. In the case of farm properties:

History

• Statutory Authority: MS s 270.06; 270C.06; 272.115
• History: 27 SR 1603; L 2005 c 151 art 1 s 114

Minn. R. 8110.0300 Supplemental Documents

When completing the certificate, the buyer may attach supplemental documents if the buyer needs to expand on any of the requested data. For example, in the case of a lengthy legal description of the property being transferred or conveyed, a copy of the deed may be attached. Any supplemental documents accompanying the certificate must be attached to the Department of Revenue's copy of the certificate.

History

• Statutory Authority: MS s 270.06; 270C.06; 272.115
• History: 9 SR 914; 27 SR 1603; L 2005 c 151 art 1 s 114

Minn. R. 8110.0400 Form to Be Complete and Signed

The county auditor shall not accept a certificate for filing unless the form is complete and contains the buyer's signature.

The county auditor shall accept for filing any certificate which contains only the data required by part 8110.0100 if the certificate shows that one of the types of transfers listed in part 8110.0200, subpart 1 is involved. If the type of transfer involved is not listed in part 8110.0200, subpart 1, the county auditor shall not accept the certificate unless the data required by part 8110.0200, subpart 2 is included on the form. If the form is complete, the county auditor shall accept the certificate and has no responsibility for the accuracy for the data provided.

History

• Statutory Authority: MS s 270C.06; 272.115
• History: 9 SR 914; L 2005 c 151 art 1 s 114

Minn. R. 8110.0500 Commissioner May Require Additional Information

The commissioner of revenue may require additional information to be included on the Certificate of Real Estate Value as is necessary for the preparation of the annual assessment/sales ratio study. The additional information must be consistent with the most recent Standard on Assessment Ratio Studies published by the assessment standards committee of the International Association of Assessing Officers and specific procedures published in the State Register by the Commissioner of Revenue pursuant to Minnesota Statutes, section 273.1325, subdivision 2.

History

• Statutory Authority: MS s 270.06; 270C.06; 272.115
• History: 27 SR 1603; L 2005 c 151 art 1 s 114; L 2013 c 143 art 14 s 110

Chapter 8115 LOCAL GOVERNMENT LEVY LIMITATIONS

Minn. R. 8115.0200 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.0300 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.0400 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.0500 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.0600 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.1000 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.1100 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.1200 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.1300 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.1400 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.1500 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.1600 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.1700 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.1800 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.1900 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.2000 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.2100 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.2200 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.2300 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.2400 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.2500 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.2600 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.2700 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.2800 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.2900 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.3000 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.4000 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.4100 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.4200 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.4300 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.4400 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.4500 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.4600 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.4700 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.4800 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.4900 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.5000 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.5100 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.5200 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.5300 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.5400 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.5500 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.5600 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.5700 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.5800 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.5900 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.6000 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.6100 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.6200 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.6300 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.6400 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Minn. R. 8115.9900 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b); Repealed, L 2009 c 88 art 10 s 20]

Chapter 8120 TAXES; CIGARETTE AND TOBACCO PRODUCTS

Minn. R. 8120.0200 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.0300 Shipping of Unstamped Cigarettes Into Minnesota by Licensed Outstate Distributors Prohibited

No licensed distributor engaged in the business without this state shall ship or transport cigarettes to retailers in this state, to be sold by those retailers, without first having affixed to each package of such cigarettes the proper Minnesota tax stamp.

History

• Statutory Authority: MS s 270C.06; 297.10
• History: L 2005 c 151 art 1 s 114

Minn. R. 8120.0400 Commingling of Stamped and Unstamped Cigarettes Prohibited

No unstamped cigarettes shall be stored or kept behind the same counter or showcase over which cigarettes are sold to ultimate consumers, or within 25 feet of the cabinet, rack, or place where cigarettes for sale to ultimate consumers are kept or stored.

History

• Statutory Authority: MS s 270C.06; 297.10
• History: L 2005 c 151 art 1 s 114

Minn. R. 8120.0500 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.0600 Cigarette Tax Stamps; Purchase, and Payment for

Tax stamps shall be purchased by the distributor only from the commissioner of revenue. Stamps cannot be purchased from other distributors and transfer of stamps between distributors is prohibited. The commissioner has the authority to demand payment in certified funds and determine when a distributor is eligible to purchase stamps on credit.

History

• Statutory Authority: MS s 270.06; 270C.06; 297.10; 297F.02
• History: 27 SR 585; L 2005 c 151 art 1 s 114

Minn. R. 8120.0700 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.0800 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8120.0900 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.1000 Credit for Tax Stamps Damaged or Unfit for Use

Subpart 1. In general.

Credit for unused tax stamps which for any reason become damaged or unfit for use will be issued by the commissioner of revenue upon compliance by the distributor with the conditions in this part.

Subp. 2. Application for credit.

The distributor shall file an affidavit with the commissioner of revenue for credit, setting forth in detail the number of stamps, the denomination of each, and the reason why the stamps have become damaged or unfit for use.

Subp. 3. Stamps held.

Stamps that have been damaged or made unfit for use shall be held by the distributor until the affidavit under subpart 2 is filed with the commissioner of revenue or an authorized agent or employee of the commissioner has inspected them.

Subp. 4. Stamps affixed to packages.

Credit will be issued by the commissioner of revenue for tax stamps that are affixed to packages being returned to the manufacturer, or affixed to packages which, or the contents of which, have become damaged and unfit for sale.

Subp. 5.

[Repealed, 27 SR 585]

History

• Statutory Authority: MS s 270.06; 270C.06; 297.10; 297F.02
• History: 17 SR 1279; 27 SR 585; L 2005 c 151 art 1 s 114

Minn. R. 8120.1100 [Repealed, 27 SR 585]

[Repealed, 27 SR 585]

Minn. R. 8120.1200 Credit and Refunds for Returned Tax Stamps

Subpart 1. In general.

Credit will be issued by the commissioner of revenue for unaffixed tax stamps that are returned to the commissioner and are fit for sale.

Subp. 2. Business discontinued.

Refunds for unused tax stamps can only be made when the distributor discontinues business. No refund shall be made until the commissioner has had an opportunity to audit the records of the distributor and is satisfied that no further tax is due.

History

• Statutory Authority: MS s 270.06; 270C.06; 297.10; 297F.02
• History: 17 SR 1279; 27 SR 585; L 2005 c 151 art 1 s 114

Minn. R. 8120.1300 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.1400 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8120.1500 Applications for Distributors' and Subjobbers' Cigarette Licenses

Applications for cigarette distributors' and subjobbers' licenses shall be made on a form prescribed by the commissioner. Application forms shall be furnished by the commissioner of revenue.

All questions on the application forms must be answered completely and all applications must be signed by the applicant or an officer thereof.

History

• Statutory Authority: MS s 270.06; 270C.06; 297.10; 297F.02
• History: 27 SR 585; L 2005 c 151 art 1 s 114

Minn. R. 8120.1600 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.1700 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8120.1800 Licensed Warehouse Records

Licensed warehouses handling deliveries or shipments of cigarettes or tobacco products to persons in Minnesota shall keep a true and accurate book record of all such deliveries or shipments. Such book record shall show the name and address of the consignee, the date of delivery or shipment, the brands and number of cigarettes delivered, the type of tobacco product, brand name, and quantity delivered, and shall be available for inspection by the commissioner of revenue and the commissioner's authorized agents and employees.

History

• Statutory Authority: MS s 270.06; 270C.06; 297.10; 297F.02
• History: 17 SR 1279; 27 SR 585; L 2005 c 151 art 1 s 114

Minn. R. 8120.1900 Invoices and Inventory Records

Every distributor shall preserve invoices of all cigarette purchases and sales except sales to the ultimate consumers. Sales invoices shall clearly specify quantities and brands of cigarettes. Licensed distributors shall make invoices or records of all cigarettes transferred to retail outlets owned or controlled by them.

Every distributor shall, at the close of each period for which a return is required, take an inventory of stamped and unstamped cigarettes on hand as well as an inventory of unaffixed stamps. Cigarettes stamped with indicia of other states shall be considered unstamped cigarettes for Minnesota cigarette tax purposes.

The commissioner may require that a distributor take an additional inventory of stamped and unstamped cigarettes as well as an inventory of unaffixed stamps, if, in the commissioner's opinion such inventory is necessary to determine the correctness of the returns filed by the distributor.

History

• Statutory Authority: MS s 270.06; 270C.06; 297.10; 297F.02
• History: 17 SR 1279; 27 SR 585; L 2005 c 151 art 1 s 114

Minn. R. 8120.2000 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.2100 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.2200 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.2300 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.2400 [Repealed, 27 SR 585]

[Repealed, 27 SR 585]

Minn. R. 8120.2500 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.2600 [Repealed, 27 SR 585]

[Repealed, 27 SR 585]

Minn. R. 8120.2700 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.2800 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.3000 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.3100 Consumer Use Tax Exemption

The consumer use tax exemptions in Minnesota Statutes, section 297F.06, can be claimed one time per month by a consumer.

History

• Statutory Authority: MS s 270.06; 270C.06; 297.10; 297F.02
• History: 27 SR 585; L 2005 c 151 art 1 s 114

Minn. R. 8120.3200 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.4000 Tax on Free Samples

Where tobacco products samples are distributed in this state by a manufacturer through its agents, the tobacco products tax is payable by such manufacturer. In such instances, the manufacturer shall file a return and report thereon the quantities of such tobacco products so distributed. The tax shall be computed on the usual wholesale sale price of such products.

History

• Statutory Authority: MS s 270C.06; 297.38
• History: L 2005 c 151 art 1 s 114

Minn. R. 8120.4100 Transfer of Cigars or Other Tobacco Products Within the State

A tax at the rate specified in Minnesota Statutes, section 297F.05, subdivision 3, shall be imposed upon all tobacco products in this state to be paid by any person engaged in business as a distributor. The tax shall be imposed at the time the distributor: brings, or causes to be brought, into this state from without the state tobacco products for sale; makes, manufactures, or fabricates tobacco products in this state for sale in this state; or ships or transports tobacco products to retailers in this state, to be sold by those retailers.

The liability for the tax accrues at the time of receipt of tobacco products in this state by a distributor. A subsequent transfer from the original distributor to another distributor within this state does not relieve the original distributor from the tax liability. Therefore, no tax credit can be taken on tobacco tax returns for any transfers made within the state.

History

• Statutory Authority: MS s 270.06; 270C.06; 297.38; 297F.02
• History: 27 SR 585; L 2005 c 151 art 1 s 114

Minn. R. 8120.4200 [Repealed, 27 SR 585]

[Repealed, 27 SR 585]

Minn. R. 8120.4300 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.4400 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.4500 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.4600 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.4700 [Repealed, 27 SR 585]

[Repealed, 27 SR 585]

Minn. R. 8120.4800 [Repealed, 27 SR 585]

[Repealed, 27 SR 585]

Minn. R. 8120.4900 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.5000 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.5100 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Minn. R. 8120.5200 Credit for Tax Paid on Tobacco Products

Subpart 1. In general.

Credits will be allowed for tax paid on tobacco products under the following conditions.

Subp. 2. Sales.

For sales without the state:

A. All sales of tobacco products to retailers located outside the state, to be sold by those retailers, shall be listed on a form prescribed by the commissioner, showing date and number of invoice, name and address of retailer, and manufacturer's wholesale sales price unless permission is granted by the commissioner of revenue to furnish the information in some other manner.

B. All sales to consumers located without the state, to be consumed without the state, shall be listed showing the date of sale, invoice number, name and address of the consumer, and the manufacturer's wholesale sales price of the tobacco products sold unless permission is granted by the commissioner of revenue to furnish the information in some other manner. A credit will not be allowed under any circumstances for a sale consummated or made in this state to consumers for consumption without this state nor shall such sales be listed.

Subp. 3.

[Repealed, 27 SR 585]

Subp. 4. Destruction of tobacco products.

As to tobacco products which have become damaged and unfit for sale, the agent or employee of the commissioner may authorize destruction of same. Such destruction shall take place in the agent's or employee's presence and he or she shall issue a certificate signed by the distributor and the agent or employee of the commissioner setting forth the type of tobacco products, brand name and quantities destroyed, facts of destruction, and the manufacturer's wholesale sales price. A copy of the certificate shall be furnished to the distributor and the original shall be filed with the commissioner.

Subp. 5. Waiver.

If the commissioner is satisfied that the distributor utilizes procedures and maintains adequate records to ensure full compliance with the provisions of Minnesota Statutes, chapter 297F, the commissioner may waive any of the requirements of this part.

History

• Statutory Authority: MS s 270.06; 270C.06; 297.38; 297F.02
• History: 17 SR 1279; 27 SR 585; L 2005 c 151 art 1 s 114

Minn. R. 8120.5300 [Repealed, L 2001 1Sp5 art 7 s 66]

[Repealed, L 2001 1Sp5 art 7 s 66]

Chapter 8121 METROPOLITAN SOLID WASTE LANDFILL FEE

Minn. R. 8121.0100 Scope; Purpose

Parts 8121.0100 to 8121.0500 govern the administration of the fee imposed upon operators accepting and disposing of solid waste at mixed municipal solid waste disposal facilities in the metropolitan area under Minnesota Statutes, sections 473.842 and 473.843.

History

• Statutory Authority: MS s 270C.06; 473.843
• History: 9 SR 2298; L 2005 c 151 art 1 s 114

Minn. R. 8121.0200 Definitions

The terms in parts 8121.0100 to 8121.0500 have the meanings given in the rules of the Pollution Control Agency and in Minnesota Statutes, chapters 115A, 116, 290, and 473. Terms of special significance to these parts are:

A. "Solid waste" is as defined in Minnesota Statutes, section 116.06, subdivision 22.

B. "Previous month" means a calendar month, however, an operator may elect to designate an alternate period of time not to exceed 31 days.

C. "Commissioner" means the commissioner of revenue.

D. "Rolloffs" means the common solid waste industrywide standard applied to a movable container capable of being temporarily attached to a truck chassis, used primarily for transporting solid waste to a landfill or disposal site.

History

• Statutory Authority: MS s 270C.06; 473.843
• History: 9 SR 2298; L 2005 c 151 art 1 s 114

Minn. R. 8121.0300 Determination of Fee

Subpart 1. Amount.

The fee due from an operator of a mixed municipal solid waste disposal facility in the metropolitan area on solid waste accepted for disposal is determined under Minnesota Statutes, section 473.843, subdivision 1.

Subp. 2. Basis for calculation.

An operator of a facility that weighs waste may allow haulers to elect the method to be used for calculation of the fee on the haulers' vehicles.

A hauler making the election is to do so annually, prior to January 1, by notifying the landfill operator of the method for calculation of the fee to be used.

Haulers may elect a method to apply to the entire fleet or the election may be done on a vehicle by vehicle basis.

All invoices must indicate the method selected for the vehicles identified on the invoice.

The commissioner will approve identifiers to be attached to all vehicles which will allow the operator to easily determine the basis for calculation of the fee.

If an election is not made by January 1, an operator will calculate the fee based on the same basis as the tipping fee is calculated.

On or before February 1 of each year, operators shall submit to the commissioner the list of elections made by all haulers.

Subp. 3. Exception.

Upon request of a hauler, the landfill operator may calculate the fee for rolloffs on a load by load basis. Each invoice is to reflect the basis for the calculation of the fee. The tipping fee and state fee are to be calculated on the same basis.

History

• Statutory Authority: MS s 270C.06; 473.843
• History: 9 SR 2298; L 2005 c 151 art 1 s 114; 44 SR 760

Minn. R. 8121.0400 Reporting Requirements

Subpart 1. Returns; payment of fee.

A return, on a form designed by the commissioner, must be submitted by all operators to the commissioner no later than the 20th day of the following month. Payment of the fee due must accompany the return. A mixed municipal solid waste facility may use an accounting period other than a calendar month but only after receiving approval from the commissioner.

The operator shall maintain original or electronic records sufficient to document and verify the information required on the returns. All records must be maintained for four years.

Records required to be maintained include bills, receipts, invoices, cash register tapes, other documents or original entry supporting the entries in the books of account, and all schedules and working papers used in preparation of the tax report.

Subp. 2. Invoices.

In addition to the requirements in subpart 1, every operator of a facility shall prepare an invoice, in duplicate, for each individual shipment of solid waste received and accepted at the facility. Each invoice must include the following: the customer's name and address, weight of the waste in pounds if the fee is calculated on weight or volume of the waste in cubic yards, and a means of vehicle identification that will establish the amount of waste delivered to the landfill by each vehicle when a customer operates more than one vehicle for the purpose of hauling and disposing of waste. The duplicate copy of the invoice must be retained at the disposal facility, or otherwise be available from the operator, for not less than 18 months.

The amount of the fee charged, if any, must be shown separately on each invoice, except that when a customer receives a periodic billing statement, the statement must separately show the total amount of solid waste fee due, as well as the number of cubic yards or the pound equivalent received at the facility by each vehicle of the customer during the billing period.

For customers with multiple vehicles hauling, the operator may modify the above requirement by issuing a statement when the customer is billed.

For nonrepetitive single vehicle customers or for loads containing less than three cubic yards, the invoice does not need to show the customer's name and address.

If an operator has a flat disposal fee policy for certain vehicles or loads, the state fee assessed is 50 cents for automobiles and $1.50 for pickup trucks, trailers, and other vehicles containing three cubic yards or less.

History

• Statutory Authority: MS s 270C.06; 473.843
• History: 9 SR 2298; L 2005 c 151 art 1 s 114; 44 SR 760

Minn. R. 8121.0500 Exemptions

Subpart 1. Energy and resource recovery and recycling facilities.

Facilities seeking exemption under Minnesota Statutes, section 473.843, subdivision 1, paragraph (c), must apply to the commissioner before solid waste is taken to a mixed municipal solid waste disposal facility.

In order for an energy and resource recovery facility or recycling facility to qualify for this exemption, the facility shall make application to the commissioner, providing the commissioner with records showing volume of waste received, amount of recycled product, and the amount of disposal solid waste residue.

When the commissioner has approved the exemption of a facility in consultation with the Pollution Control Agency, the facility must present to the operator of a mixed municipal solid waste disposal facility a statement of exemption. The statement must be on a form designed by the commissioner.

The statement of exemption must be signed and dated by the operator and attached to the report upon which the exemption is taken. The exemption must be claimed on the report for the month that it is allowed to the facility.

Subp. 2.

[Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

Subp. 3. Operating waste.

When solid waste that is accepted at a mixed municipal solid waste facility is not disposed of in the body of the facility, but is to be used in the operation of the facility, the solid waste may be exempt from the amount of fee charged. The generator of waste qualifying for this exemption must first obtain approval of the Minnesota Pollution Control Agency as to the suitability of the material for the intended use.

Upon receipt of authorization for the exemption from the Pollution Control Agency, the commissioner will provide the generator with an appropriate statement of exemption. The commissioner may revoke an exemption upon a finding that the use of the material is not consistent with the use for which the exemption was granted.

History

• Statutory Authority: MS s 270C.06; 473.843
• History: 9 SR 2298; L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8; L 2005 c 151 art 1 s 114; 44 SR 760

Chapter 8122 LAWFUL GAMBLING; ANNUAL AUDITS

Minn. R. 8122.0100 Scope; Purpose

Minnesota Statutes, section 297E.06, subdivision 4, mandates that the commissioner of revenue prescribe standards for the annual audit of certain organizations licensed to conduct lawful gambling in Minnesota. The purpose of this chapter is to set minimum standards for these annual audits.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06
• History: 20 SR 1482; L 2005 c 151 art 1 s 114; 45 SR 827

Minn. R. 8122.0150 Definitions

Subpart 1. Scope.

The terms used in this chapter are defined in Minnesota Statutes, chapter 297E, unless separately defined under this part.

Subp. 2. Accrual basis.

"Accrual basis" means the method of accounting in which revenue is recognized in the period earned and expense is recognized in the period incurred.

Subp. 3. Audit.

"Audit" means the examination of accounting records with the expression of an opinion on whether the financial statements of the organization present fairly, in all material respects, the financial position, results of operations, and its cash flows, in conformity with the regulatory basis of accounting.

Subp. 4. Certified public accountant; CPA.

"Certified public accountant" or "CPA" means a person who is licensed as a certified public accountant in accordance with Minnesota Statutes, chapter 326A.

Subp. 5. Cash basis.

"Cash basis" means the method of accounting in which revenues are recognized when actually received and expenses are recognized when actually disbursed.

Subp. 6. Ending inventory.

"Ending inventory" means the cost of unopened pull-tab and tipboard deals, paddletickets, unused bingo paper or sheets, and the cost of pull-tab, tipboard, and paddleticket games in play on the last day of the month. Sales tax is excluded from ending inventory.

Subp. 7.

[Repealed, L 2010 c 191 s 14]

Subp. 8. Material weakness.

"Material weakness" means a reportable condition in which the design or operation of the specific internal control structure elements do not reduce to a relatively low level the risk that material errors or irregularities could occur and not be detected within a timely period by employees in the normal course of performing their assigned functions.

Subp. 9. Regulatory basis.

"Regulatory basis" means a method of accounting other than generally accepted accounting principles. All receipts, allowable expenses, and lawful purpose expenditures are determined using the cash basis method of accounting with the exception of the cost of the games and taxes imposed under Minnesota Statutes, section 297E.02, subdivisions 1 and 6 (8.5 percent gross receipts tax and combined net receipts tax), which are recognized on the accrual basis method of accounting.

Subp. 10. Reportable condition.

"Reportable condition" means significant deficiencies in the design or operation of the internal control structure which could adversely affect the organization's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements.

Subp. 11.

[Repealed, 45 SR 827]

Subp. 12. Year.

"Year," when used in defining an audit period, means the organization's fiscal year used for filing federal form 990 or 990-T (Unrelated Business Income Tax).

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06
• History: 20 SR 1482; L 2005 c 151 art 1 s 114; L 2010 c 191 s 13,14; 45 SR 827

Minn. R. 8122.0200 Accountants Qualifications

Subpart 1. License required.

An accountant must be an independent certified public accountant and licensed to practice in Minnesota.

Subp. 2. Standards of independence.

The CPA shall maintain objectivity and be free of the appearance of conflicts of interest when discharging professional responsibilities needed to perform the audit. CPAs shall adhere to the standards of objectivity and independence as established in the American Institute of Certified Public Accountants professional standards.

In addition, for purposes of this subpart, an individual CPA who is a member of an organization, or the accounting firm the individual belongs to, must not perform the organization's annual audit if one or more of the following occurred during the fiscal year:

A. the CPA was an employee of the organization;

B. the CPA was an officer of the organization, such as treasurer, executive director, chief executive officer, gambling manager, or president;

C. the CPA served on the board of directors for the organization;

D. the CPA served on a gambling committee or other committee with oversight or decision-making authority over gambling business transactions, other than in a member's capacity to approve gambling business transactions presented at monthly membership meetings as required under Minnesota Statutes, chapter 349; or

E. in connection with the organization general fund, gambling fund, or any other organization fund, the CPA prepared or reconstructed accounting record source documents, consummated transactions, had custody over assets, exercised authority, or unduly exercised authority on behalf of the organization by assuming the role of employee or management.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06
• History: 20 SR 1482; L 2005 c 151 art 1 s 114; L 2010 c 191 s 13; 45 SR 827

Minn. R. 8122.0250 Due Date; Extensions

The annual audits required are due on or before the last day of the sixth month following the organization's fiscal year end or on an extended due date.

A written request to file the annual audit after the required due date must be submitted to the Department of Revenue by the required annual audit due date. The request must be signed by the organization's chief executive officer, gambling manager, or the independent accountant performing the audit. The request must include the:

A. organization's name;

B. organization's license number;

C. organization's fiscal year end;

D. reason for the request; and

E. expected completion date. An automatic 30-day extension will be granted in each fiscal year. Second requests for an extension or requests for extensions exceeding 30 days will be granted only upon a showing of reasonable cause. "Reasonable cause" shall mean cases where the reasons for the filing delay are beyond the control of the organization. Acceptable reasons for granting an additional extension include, but are not limited to:

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06
• History: 20 SR 1482; L 2005 c 151 art 1 s 114; 45 SR 827

Minn. R. 8122.0300 Communication of Illegal Acts, Material Errors, and Irregularities

An organization is responsible to communicate illegal acts, material errors, and irregularities to the Department of Revenue in writing within ten days of notification from auditors that such acts, errors, or irregularities exist. The organization must include a copy of all correspondence or notes taken during meetings between the independent auditors and the licensed organization specifically detailing the illegal acts, material errors, and irregularities.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06
• History: 20 SR 1482; L 2005 c 151 art 1 s 114; 45 SR 827

Minn. R. 8122.0350 Accounting Records

All licensed organizations are required to maintain records that account for the assets, liabilities, and fund balance of their lawful gambling operation. These records must also account for their gambling revenue, prize payouts, allowable expenses, and lawful purpose expenditures.

If, in the opinion of the independent CPA engaged to conduct the annual financial audit, the licensed organization has not maintained proper accounting records in a form that can be audited, the accountant must either:

A. notify the organization in writing of the deficiencies that exist and the corrective action required, with an estimate of the cost to generate auditable records or the reason the cost cannot be estimated; or

B. terminate the audit engagement.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06
• History: 20 SR 1482; L 2005 c 151 art 1 s 114; L 2010 c 191 s 13; 45 SR 827

Minn. R. 8122.0400 Accountant's Workpapers and Communications; Access and Retention

Subpart 1. Workpapers.

Workpapers are the records kept by the independent CPA of the procedures followed, tests performed, information obtained, and conclusions reached pertinent to the examination and review of the financial statements of a licensed gambling organization. Workpapers must include, but are not limited to, work programs, analyses, memoranda, letters of confirmation and representation, management letters, abstracts of organization documents, and schedules or commentaries prepared or obtained by the accountant in the course of the audit and that support the accountant's opinion or assurance.

Subp. 2. Communications.

Communications are written documentation or notes of oral contacts between the independent CPA and an organization. The communication with the organization must include, but is not limited to, matters relating to the auditor's responsibility, significant accounting policies, the process used in obtaining management judgments, significant audit adjustments, auditor responsibilities for other information, auditor disagreements with organization's management, auditor views on auditing and accounting matters for which other auditors were contacted, major issues discussed with management prior to retention, and any difficulties encountered while performing the audit.

Subp. 3. Access and retention.

Every licensed gambling organization required to file an audit shall require the accountant, through the licensed gambling organization, to make available for review by the Department of Revenue the workpapers and communications with the organization prepared in the conduct of the audit. The licensed gambling organization shall require that the accountant retain the workpapers for a period of not less than 3-1/2 years after the opinion date of the audit report.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06
• History: 20 SR 1482; L 2005 c 151 art 1 s 114; L 2010 c 191 s 13; 45 SR 827

Minn. R. 8122.0450 Termination of Audit Engagement

If for any reason the audit engagement is terminated by either the licensed organization or the independent accountant prior to its completion and filing of the annual financial audit report, the accountant is, within ten days of termination, required to make a written report to the Department of Revenue detailing the reason or reasons for the termination.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06
• History: 20 SR 1482; L 2005 c 151 art 1 s 114; 45 SR 827

Minn. R. 8122.0500 Less Than a 12-Month Audit

An organization whose license is active, discontinued, terminated, or expired at the organization's fiscal year end, is required to complete and file an audit, if the organization's gross receipts exceed the thresholds as specified in Minnesota Statutes, section 297E.06.

In the year an organization commences gambling activity, the audit required may cover the operations of the organization for a period of less than 12 months.

In the year an organization's license expires, is discontinued, or terminated, the audit will be through the organization's fiscal year end, unless the organization's license termination plan has been approved by the Gambling Control Board prior to the fiscal year end. In this circumstance, the organization has the option of performing the required audit through the license termination plan approval date, or another date specified by the organization that is between the approval date and the last day of the fiscal year.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06
• History: 20 SR 1482; 26 SR 772; L 2005 c 151 art 1 s 114; 45 SR 827

Minn. R. 8122.0510 More Than a 12-Month Audit

An organization that is terminating gambling activity or changing its year end date in accordance with Internal Revenue Code, section 442, may, upon specific prior approval from the Department of Revenue, have an audit prepared for periods longer than 12 months but no longer than 18 months. The audit will then be due at the end of the sixth month following the new fiscal year end or the month the organization terminated gambling activity, whichever applies. The request for an extended audit period must be submitted to the Department of Revenue in writing on or before the due date of the audit that would be prepared under the organization's actual fiscal year end.

Example: An organization with a fiscal year end of December 31, 2018, is terminating gambling activity April 30, 2019. The audit may cover the period January 1, 2018, through April 30, 2019. The request for the extended audit period must be submitted by June 30, 2019, the due date of a December 31 audit. The extended audit is due October 31, 2019.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06; 297E.06
• History: 24 SR 893; L 2005 c 151 art 1 s 114; 45 SR 827

Minn. R. 8122.0550 Audit

Subpart 1. Minimum requirements.

The annual financial audits must be prepared on the regulatory basis of accounting and contain, at a minimum, an opinion, financial statements, supplemental schedules, a report on internal controls, a response to internal controls report, and other information as noted.

Subp. 2. Opinion.

An audit opinion expressed in accordance with generally accepted auditing standards regarding the fairness of the presentation of the financial statements must be properly signed and dated by the CPA firm who performed the audit. The address, telephone number, and fax number of the accounting firm must be listed. For firms with more than one office, the address of the office that prepared the financial statements should be specified.

Subp. 3. Financial statements.

The financial statements must be comparative financial statements showing the current year and previous year's financial information, unless it is a first year engagement for the accounting firm in which case the preparation of comparative statements is optional. The statements must be presented in a format prescribed by and acceptable to the commissioner of revenue. The financial statements required are as follows:

A. The statement of assets, liabilities, and fund balance must include all assets, liabilities, and the fund balance of the gambling operations as follows, if applicable:

B. The statement of revenue and expense must include revenues and expenses from the gambling operations and include, at a minimum:

C. The statement of changes in fund balance must include, at a minimum:

D. The annual audit must include notes to the financial statements. The notes to the financial statements must include, at a minimum:

Subp. 4. Supplemental schedule; reconciliations; physical inventory.

A. The annual audit must include an allowable expense comparison schedule. The schedule must include, at a minimum, allowable expenses expended, detailed by type of expenditure as listed on Form LG100A, which is the total amount of actual allowable expenses from the revenue and expense statement.

B. The annual audit must include a reconciliation of the gambling operations bank accounts to the reported profit carryover. The reconciliation must include, at a minimum:

C. The annual audit must include a reconciliation between the number of paper pull-tab, paddleticket, and tipboard games played to the number of paper pull-tab, paddleticket, and tipboard games reported on Schedule B2, Lawful Gambling Report of Barcoded Games, for the fiscal year audited. The schedule must include, at a minimum:

D. A physical inventory observation and cash count of all sites and locations must be taken as part of the annual audit process, regardless of when the audit engagement was scheduled. A physical inventory must be taken within 30 days of the balance sheet date or engagement date, whichever is later, unless prior written approval of an alternate date is obtained from the Department of Revenue. A list of the games in inventory by manufacturer ID, part number, and serial number must be submitted to the Department of Revenue within 30 days of the date the physical inventory was taken. The physical inventory and cash count must be performed by:

Subp. 5. Sampling and testing; closed games.

Closed games and occasions must be tested independently by the CPA based upon criteria set by the CPA within professional standards. The sampling and testing of tipboard, paper pull-tab, paddleticket, nonlinked bingo, and raffle closed games must meet the following requirements:

A. When a minimum sample size is required, the random or systematic method of sampling will be used. When a minimum sample is expanded, the expanded portion of the sample may use random, systematic, or haphazard methods. When a minimum sample is not required, the sample method may be random, systematic, or haphazard. The following chart of gross receipts will be used to determine the minimum size of a sample for closed pull-tab and tipboard games. There is no minimum sample size requirement for testing paddletickets, nonlinked bingo, and raffles. Closed games and occasions will be sampled independently by the CPA using judgment based on professional standards.

B. Closed tipboard and paper pull-tab games selected in the sample will be tested for the following minimum criteria, and any differences or deficiencies must be noted in the results of the games tested:

C. The results of closed game sampling and testing must be provided to the organization upon a request from the organization.

Subp. 6. Report on internal control structure and other matters.

A. A report about internal control structure reportable conditions observed, or evidenced by testing, during the course of an audit, that could affect the organization's ability to record, process, summarize, and report financial data must be submitted. The report shall elevate a condition to that of a material weakness when the magnitude of the condition is considered material in relation to the financial statements being audited. This report must include all the elements required by, and the department adopts and incorporates by reference, AU-C section 265, Communicating Internal Control Related Matters Identified in an Audit (AICPA, Professional Standards, section 265, 2020). If no reportable conditions or material weaknesses are detected, a report must be submitted stating that no material weaknesses were detected. This report is required under subpart 1. A list of the types of gambling audit reportable condition or material weakness to include in this report follows in subitems (1) to (12). This list is illustrative, and not all-inclusive:

B. A regulatory checklist questionnaire must be included with the report from item A, on a form prescribed by the commissioner. Responses to questions on this checklist must be based on findings and information collected during the course of the audit.

Subp. 7. Organization's response to report on internal control structure.

The licensed organization shall file with the Department of Revenue a response to the reportable conditions item by item, including any remedial action taken or proposed by the organization. This response may be submitted with the annual audit or be filed separately within 60 days after the due date of the annual audit. The response must include the following items:

A. Any profit carryover variance as shown on the reconciliation of profit carryover supplemental schedule must be identified. All identified variances which require amendments to tax returns must be amended and submitted to the Department of Revenue along with supporting documentation. The auditor must, upon agreement with the organization, assist in preparing an amended return or returns for the organization. The response must indicate if such amendments have been submitted to the Department of Revenue. Variances which require adjustments instead of amendments should be adjusted by sending a letter to the Department of Revenue requesting an adjustment along with supporting documentation. Requests for an approved adjustment cannot be substituted for filing amended tax returns that correct the condition that resulted in the variance. If the variance is identified, an amended tax return or returns must be filed. Unidentified variances must be investigated by the organization and identified. If after investigation an organization is unable to resolve the variance, the organization shall contact the Department of Revenue. The Department of Revenue will then assist the organization in resolving the variance. Final resolution will be based upon an organization's individual situation and can include: amended tax returns, an approved adjustment, required reimbursement from nongambling sources, or a combination of all three.

B. If the comparison of games played to games reported on Schedule B2, Lawful Gambling Report of Barcoded Games, shows a difference, the organization must respond to the reportable conditions item by identifying and stating if the game difference was due to the games being:

C. Specific items as noted on the internal control structure report must be responded to. If no response is received from the organization, the organization must submit to the Department of Revenue a copy of the audit management letter upon request.

Subp. 8. Other.

The front page of the annual audit report must contain the following items:

A. the organization's legal name and licensed name, if different;

B. the organization's license number;

C. the Minnesota ID number; and

D. the federal ID number.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06; 297E.06
• History: 20 SR 1482; 24 SR 893; L 2005 c 151 art 1 s 114; L 2010 c 191 s 13; 45 SR 827

Minn. R. 8122.0600 [Repealed, L 2010 c 191 s 14]

[Repealed, L 2010 c 191 s 14]

Minn. R. 8122.0650 Failure to File or Failure to Meet Requirements

Subpart 1. Failure to file.

If an organization fails to file the required annual audit, the Department of Revenue will request the delinquent items. If the organization fails to respond to the request and correct the delinquency, the Gambling Control Board will be informed and a suspension of the organization's gambling activity will be requested. An organization may also be ineligible for relicensing until the delinquent reports are submitted. The Gambling Control Board may also issue fines for noncompliance with the annual audit requirements. See Minnesota Statutes, sections 349.151, subdivision 4, paragraph (a), clause (9), and 349.155, subdivision 4.

Subp. 2. Failure to meet requirements.

If the audit fails to comply with all or part of the audit requirements, the audit will be deemed deficient and not satisfying the annual audit requirements. If an organization fails to file the required annual audit or fails to comply with any part of the requirements for the annual audit, the Department of Revenue will request the delinquent items. If the organization fails to respond to the request and correct the delinquency, the Gambling Control Board will be informed and a suspension of the organization's gambling activity will be requested. An organization may also be ineligible for relicensing until the delinquent reports are submitted. The Gambling Control Board may also issue fines for noncompliance with the annual audit requirements. See Minnesota Statutes, sections 349.151, subdivision 4, paragraph (a), clause (9), and 349.155, subdivision 4.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06
• History: 20 SR 1482; L 2005 c 151 art 1 s 114; 45 SR 827

Chapter 8125 TAXATION; INSPECTION; PETROLEUM PRODUCTS

Minn. R. 8125.0200 Terminal Records and Reports

Subpart 1. Terminal defined.

As used herein, the word "terminal" shall mean a facility for storage of petroleum products which have not theretofore been received in this state by a licensed distributor.

Subp. 2. Records and terminal reports.

All operators of terminals in this state shall keep a true and accurate record of all petroleum products delivered into and withdrawn from their terminal. A terminal report on a form approved by the commissioner shall be filed for each month showing receipts, disbursements, and inventories.

Subp. 3. Manifests to be furnished.

A manifest or a bill of lading shall be issued for each withdrawal from a terminal in this state at the time of such withdrawal. Manifests or bills of lading shall show the following information: state tax number, date shipped, name of carrier, origin (point of loading), name of supplier, name and address of distributor who will report and pay the tax (consignee), destination, kind of product, and number of gallons. The state tax number may be the manifest or bill of lading number if designated as the state tax number. The required information contained in the manifest or bill of lading shall be filed with the commissioner either as a legible duplicate copy of each manifest or bill of lading, or in any other format approved by the commissioner. The commissioner will approve alternative formats provided they contain the required information and are presented in an organized and readable manner.

No petroleum product shall be loaded into a tank car, the cargo tank of a tank truck, or a truck transport at any terminal located outside the state for shipment to a Minnesota destination unless the distributor who will report and pay the tax (consignee) shall require that a manifest or bill of lading be issued showing the following information: state tax number, date shipped, name of carrier, origin (point of loading), name of supplier, name and address of consignee, destination, kind of product, and number of gallons. The state tax number may be the manifest or bill of lading number if designated as the state tax number. The required information contained in the manifest or bill of lading shall be filed with the commissioner either as a legible duplicate copy of each manifest or bill of lading, or in any other format approved by the commissioner. The commissioner will approve alternative formats provided they contain the required information and are presented in an organized and readable manner.

History

• Statutory Authority: MS s 270.06; 270C.06; 296.27; 296A.02
• History: 17 SR 351; L 2005 c 151 art 1 s 114

Minn. R. 8125.0300 Transport Requirements

Subpart 1. Truck transports.

Any unit operated on the public highways of this state which is used to transport petroleum products shall be deemed to be a truck transport if the cargo tank has a capacity of 2,100 gallons or more.

Subp. 2.

[Repealed, 17 SR 351]

Subp. 3.

[Repealed, 17 SR 351]

Subp. 4.

[Repealed, 17 SR 351]

Subp. 5. Diversions to be reported.

Any supplier or transporter of petroleum products who diverts a shipment to any other destination than that which is listed on the manifest shall notify the commissioner within a reasonable time, setting forth the manifest number (state tax number), date, kind of product, number of gallons, the consignee to whom the shipment has been diverted, and the final destination.

Subp. 6.

[Repealed, 17 SR 351]

Subp. 7. Manifest to be carried.

Operators of tank trucks or truck transports transporting petroleum products in this state on which the gasoline tax has not been assumed shall carry proof of ownership of such material (bill of lading, manifest, invoice, or other identification).

History

• Statutory Authority: MS s 270.06; 270C.06; 296.27; 296A.02
• History: 17 SR 351; L 2005 c 151 art 1 s 114

Minn. R. 8125.0400 Distributor Records

Subpart 1. Records to be kept.

Licensed distributors shall keep a true and accurate record of all purchases, transfers, sales, and use of petroleum products. A record shall be kept showing the following information for each receipt of petroleum products: manifest number (state tax number), point of origin, from whom received, kind of product, gallons received, and date unloaded. A daily record shall be kept of the totals of all sales of each petroleum product.

Subp. 2. Sales invoices.

A sales invoice shall be made for each bulk sale of petroleum products at the time of the sale, regardless of gallonage. All sales invoices issued for bulk sales shall be machine-numbered serially with numbers of at least three digits, and shall show the following: name and address of distributor printed or rubber-stamped upon the invoice, date of sale, name and address of the purchaser, kind of product, price per gallon, number of gallons, and rate and amount of tax if any. The words "bulk sale," as used in this part, shall mean any sale of a petroleum product dispensed into a fixed or portable storage tank. When issued for the purpose of securing refunds or credits of the Minnesota gasoline tax, the invoices shall, in addition to the aforementioned requirements, be prepared at least in duplicate, and one copy shall be given to the purchaser.

When issued for other than bulk sales and for the purpose of securing refunds or credits of the Minnesota gasoline tax, the invoices or receipts shall show the names and locations of the seller and purchaser, date of purchase, number of gallons, total price, and type of equipment in which the fuel is to be consumed.

When issued for deliveries made into another state, invoices shall be issued in the same manner with a separate set of numbers.

Subp. 3. Inventories.

A physical inventory shall be taken at the end of each month of all petroleum products and a record kept of the quantity in each tank, tank capacity, tank number if any, and kind of product.

Subp. 4. Records to be retained.

Copies of all manifests, bills of lading, invoices, delivery tickets, and tax returns required to be filed pursuant to Minnesota Statutes, chapter 296, as well as all other records relating to the purchase, transfer, sales, and use of petroleum products and special fuel, shall be retained for a period of four years.

History

• Statutory Authority: MS s 270.06; 270C.06; 296.27; 296A.02
• History: 17 SR 351; L 2005 c 151 art 1 s 114

Minn. R. 8125.0410 Distributor's Licenses

Subpart 1.

[Repealed, L 2019 1Sp6 art 11 s 20]

Subp. 2. Seizure.

The seizure authorized by Minnesota Statutes, section 296A.24, will be performed by the commissioner of revenue or authorized designee in cases where there is an intent to evade the tax imposed by Minnesota Statutes, chapter 296A. Intent to evade the tax will be presumed if the manifest either does not list a shipper or lists a shipper not a licensed distributor under Minnesota Statutes, chapter 296A, and the consignee is not listed or is not a licensed distributor under Minnesota Statutes, chapter 296A.

History

• Statutory Authority: MS s 270.06; 270C.06
• History: 17 SR 351; L 2005 c 151 art 1 s 114

Minn. R. 8125.0500 Distributor and Dealer Credits and Refunds

Subpart 1. Distributor credits, how allowed.

The credits under Minnesota Statutes, section 296A.16, subdivision 1, shall be allowed as follows:

A. under clause (1), credit shall be taken prior to computing the allowance for evaporation and loss;

B. under clause (2), credit on sales made directly from terminals shall be taken prior to computing the allowance for evaporation and loss; credit on all other sales shall be taken after computing the allowance for evaporation and loss;

C. under clause (3), credit shall be taken prior to computing the allowance for evaporation and loss;

D. under clauses (4) and (5), credit shall be taken only when supported by a credit memorandum issued by the commissioner. Such credit memorandum will reflect the adjustment for the allowance for evaporation and loss;

E. under clause (6), credit shall be taken after computing the allowance for evaporation and loss.

Subp. 2. Unusual losses.

A written notice of any unusual loss of gasoline or special fuel by a distributor or dealer while in possession, including gasoline or special fuel destroyed by accident, shall be given to the commissioner within 30 days after the discovery of the loss in order to qualify for credit or refund of tax paid, and, in addition, all claims of a distributor or dealer for refund or credit of gasoline or special fuel tax paid as a result of such unusual loss shall be filed with the commissioner within 90 days after the discovery of such loss.

History

• Statutory Authority: MS s 270.06; 270C.06; 296.27; 296A.02
• History: 17 SR 351; 17 SR 1279; L 2005 c 151 art 1 s 114

Minn. R. 8125.0600 Dealer Records

Subpart 1. Records to be kept.

Dealers shall keep a true and accurate record of all purchases and sales of petroleum products. Purchase records shall show the kind of product, from whom purchased, number of gallons, and date unloaded. A daily record shall be kept of the total of all sales of each petroleum product.

Subp. 2. Sales invoices.

When issued for the purpose of securing refunds or credits of the Minnesota gasoline tax, sales invoices representing bulk sales shall be machine-numbered serially with numbers of at least three digits, and shall show the following: name and address of the dealer printed or rubber-stamped upon the invoice, date of sale, name and address of the purchaser, kind of product, price per gallon, number of gallons, and rate and amount of tax. They shall be prepared at least in duplicate and one copy shall be given to the purchaser. The words "bulk sale," as used in this part, shall mean any sale of a petroleum product dispensed into a fixed or portable storage tank.

When issued for other than bulk sales and for the purpose of securing refunds or credits of the Minnesota gasoline tax, the invoices or receipts shall show the names and locations of the seller and purchaser, date of purchase, number of gallons, total price, and type of equipment in which the fuel is to be consumed.

When issued for the purpose of securing a refund or credit of the Minnesota gasoline tax, a separate invoice shall be issued for each sale, at time of sale, regardless of gallonage.

Invoices issued to operators of portable feed mills, corn shellers, and other portable units for gasoline serviced to the unit tank, shall show separately the number of gallons, if any, serviced to the vehicle supply tank.

Subp. 3.

[Repealed, 17 SR 351]

History

• Statutory Authority: MS s 270.06; 270C.06; 296.27; 296A.02
• History: 17 SR 351; L 2005 c 151 art 1 s 114

Minn. R. 8125.0700 Special Fuel Requirements

Subpart 1.

[Repealed, 17 SR 351]

Subp. 2. Sales invoices.

Sales invoices issued for sales of special fuel made by a distributor or a special fuel dealer shall bear the name and address of the purchaser, date of sale, type of product, number of gallons, price per gallon, and total amount of sale. Sales invoices shall have the name and address of the distributor or special fuel dealer making the sale printed or rubber-stamped thereon and shall be machine-numbered serially with numbers of at least three digits and issued in sequence. A separate sales invoice book shall be maintained for special fuel sales, and one copy of each such sales invoice shall be retained in the special fuel sales invoice book, unless otherwise authorized by the commissioner. Sales invoices issued for fuel other than for use as special fuel shall show the kind of fuel, type of equipment in which the fuel is to be consumed, and the name and address of the purchaser.

Subp. 3. Meter readings and inventories.

Distributors, special fuel dealers, and bulk purchasers shall at the end of each month take and record:

A. through a mechanical accumulating meter in working order, meter readings on each pump through which special fuel is dispensed; and

B. physical inventories of special fuel showing quantity in each tank, tank capacity, and kind of product.

Subp. 4. Users' records and reports.

All users of special fuel shall keep a true and accurate record of all purchases, sales, transfers, and use of special fuel and shall retain all such records for a period of four years.

Subp. 5.

[Repealed, 17 SR 351]

Subp. 6.

[Repealed, 17 SR 351]

Subp. 7. Records to be retained.

Copies of all manifests, bills of lading, invoices, sales and delivery tickets, tax returns required to be filed pursuant to Minnesota Statutes, chapter 296A, as well as all other records relating to the purchase, transfer, sales, and use of special fuel, shall be retained for a period of four years.

Subp. 8. Changes in storage capacity or location.

Distributors, special fuel dealers, and bulk purchasers shall report to the commissioner in writing within seven days any change in storage capacity or location of special fuel facilities.

Subp. 9.

[Repealed, 17 SR 351]

History

• Statutory Authority: MS s 270.06; 270C.06; 296.27; 296A.02
• History: 17 SR 351; L 2005 c 151 art 1 s 114

Minn. R. 8125.0800 [Repealed, 17 SR 351]

[Repealed, 17 SR 351]

Minn. R. 8125.0900 Mixtures of Products

All mixtures of petroleum products which occur at bulk stations, service stations, or in tank trucks and truck transports resulting in a product that does not meet state of Minnesota specifications shall be reported to the commissioner promptly, setting forth the date and the number of gallons of each petroleum product mixed. Such mixtures of petroleum products shall not be moved or disposed of until authorization is given by the commissioner.

History

• Statutory Authority: MS s 270C.06; 296.27; 296A.02
• History: L 2005 c 151 art 1 s 114

Minn. R. 8125.1000 [Repealed, L 2003 c 127 art 7 s 15]

[Repealed, L 2003 c 127 art 7 s 15]

Minn. R. 8125.1100 Ownership Changes

Licensed distributors, special fuel dealers, and bulk purchasers shall immediately report in writing to the commissioner all changes of ownership or storage facilities.

History

• Statutory Authority: MS s 270C.06; 296.27; 296A.02
• History: L 2005 c 151 art 1 s 114

Minn. R. 8125.1200 Records Kept Accessible

The books and records of all persons buying and selling petroleum products or special fuel, or using special fuel, and of all carriers of petroleum products shall be made accessible to the commissioner at Saint Paul or at any other location satisfactory to the commissioner.

History

• Statutory Authority: MS s 270C.06; 296.27; 296A.02
• History: L 2005 c 151 art 1 s 114

Minn. R. 8125.1300 Refunds and Credits

Subpart 1.

[Repealed, L 2003 c 127 art 7 s 15]

Subp. 2. Public transit systems.

The exemption from the gasoline excise tax for gasoline purchased by a transit system in Minnesota Statutes, section 296A.07, subdivision 4, applies only to gasoline purchased by a transit system which is actually used by the transit system for purposes necessary in carrying out its responsibility to provide public transportation as defined in Minnesota Statutes, sections 174.24 and 473.384. Gasoline that is used for purposes that are not necessary in carrying out the transit system's responsibility to provide public transportation is not exempt from taxation.

Subp. 3.

[Repealed, L 2017 1Sp1 art 11 s 23; art 21 s 10]

History

• Statutory Authority: MS s 270.06; 270C.06; 296.27; 296A.02
• History: 17 SR 351; L 2003 c 127 art 7 s 15; L 2005 c 151 art 1 s 114; L 2017 1Sp1 art 11 s 23; art 21 s 10

Minn. R. 8125.1301 Refunds for Power Take-Off Units or Auxiliary Engines

Subpart 1. General rule.

A person who purchases and uses any gasoline or special fuel, on which the Minnesota gasoline or special fuel tax has been paid, for the operation of a power take-off unit (PTO) or auxiliary engine fueled from the same supply tank as the highway vehicle, may obtain a refund of the tax paid on the fuel consumed by the PTO, as calculated under subpart 4 or 5. The taxpayer must file a claim for refund as outlined in subpart 2. Refunds may not be obtained for fuel consumed during idling time.

Subp. 2. Claim for refund.

All claims for refund must:

A. be submitted on a form PDR-1 or other form as prescribed by the commissioner;

B. cover only one month;

C. be filed within one year from the fuel purchase date, with the postmark date being the filing date; and

D. be supported by records maintained under subpart 3. Only one refund claim per each one-month period is allowed. If corrections to any refund claim are necessary, an amended refund claim must be filed.

Subp. 3. Records to be maintained.

The claimant must maintain the following records:

A. Each sales ticket or invoice must be machine numbered serially with numbers of at least three digits and have on it the:

B. If bulk fuel is purchased, the customer must keep dispersal records that indicate the date of disbursement, the number of gallons withdrawn, and a description of the vehicle in which the fuel was delivered.

C. Fuel logs must be maintained and must be made available to the Department of Revenue upon demand.

D. In lieu of original sales tickets or invoices, the department will accept alternative records, including computer-generated listings or other electronically generated listings, as long as they clearly provide the necessary information.

Subp. 4. Calculation of refund.

The percentages in this subpart are allowed for the refund of tax paid on gasoline or special fuel used in operating a PTO or auxiliary engine, when records as outlined in subpart 3 are maintained. The amounts are specified as a percentage of the total taxable fuel used by the vehicle; in other words, the fuel actually placed into the supply tank of the motor vehicle on which the PTO is attached. The refund will be equal to the tax actually paid on that percentage of the fuel.

The percentages are:

Subp. 5. Optional means of calculating refund; information needed for refund claim.

A claimant may choose to forego taking the straight percentage under subpart 4 if accurate records and sufficient documentation are provided to the commissioner to substantiate the refund claim.

A. A claim for refund may include alternative information provided from a hubometer (hub meter) or similar device that accurately measures the road use mileage of a vehicle. This information is needed in order to separate the road miles from the PTO miles. The information provided must be sufficient to determine the actual number of miles for which the PTO is engaged while the vehicle is stationary. The refund will then be based on the actual amount of fuel used to run the PTO. This provision is only applicable if the claimant chooses not to take the straight percentage available under subpart 4, and if the claimant provides the commissioner with the documentation needed to substantiate the claim.

B. A claimant with a vehicle with technology that enables the claimant to generate accurate statements containing detailed information regarding the amount of fuel used to propel the PTO may submit those statements to the commissioner with a refund claim. In such a case, the applicable general percentage under subpart 4 will not be used and the technology-generated information shall be used by the commissioner to independently calculate the refund.

C. A claimant may use an alternative method, other than those listed in item A or B, to calculate the refund, provided that the claimant furnishes the commissioner with the proposed formula to be used, or other manner of substantiation, and receives written prior approval from the commissioner to use the alternate method.

Subp. 6. Insufficient information or documentation.

If the commissioner determines that the optional information provided under subpart 5 is not sufficient, the applicable general percentage under subpart 4 shall be used to calculate the refund.

History

• Statutory Authority: MS s 270.06; 270C.06; 296.18; 296.27; 296A.02; 296A.16
• History: 22 SR 2156; L 2005 c 151 art 1 s 114; 49 SR 532

Minn. R. 8125.1400 Repealed by subpart

Subpart 1.

[Repealed, 17 SR 351; L 2003 c 127 art 7 s 15]

Subp. 2.

[Repealed, L 2003 c 127 art 7 s 15]

Subp. 3.

[Repealed, 17 SR 351; L 2003 c 127 art 7 s 15]

Subp. 4.

[Repealed, L 2003 c 127 art 7 s 15]

Subp. 5.

[Repealed, L 2003 c 127 art 7 s 15]

Subp. 6.

[Repealed, L 2003 c 127 art 7 s 15]

Subp. 7.

[Repealed, L 2003 c 127 art 7 s 15]

Subp. 8.

[Repealed, 17 SR 351; L 2003 c 127 art 7 s 15]

Subp. 9.

[Repealed, L 2003 c 127 art 7 s 15]

Subp. 10.

[Repealed, L 2003 c 127 art 7 s 15]

Chapter 8130 SALES AND USE TAXES

Minn. R. 8130.0110 Scope and Interpretation

Subpart 1. Application of chapter.

Terms not specifically defined in the Sales and Use Tax Law or this chapter will be given the meanings ascribed to them in accordance with legal, accounting, business, or common usage. Unless otherwise specifically noted, this chapter is limited to interpreting the sales and use tax laws in Minnesota Statutes, chapter 297A, and laws related to the administration of the sales and use tax laws.

Subp. 2. Sales.

Certain transactions defined in this chapter constitute sales. All sales of tangible personal property are deemed to be retail sales unless made to purchasers who intend to resell the property to others in the normal course of business as defined in Minnesota Statutes, section 297A.61, subdivision 21. The tax required to be collected by sellers on behalf of the commissioner is based upon the gross receipts from sales not specifically exempt. "Gross receipts" are defined in part 8130.1800.

Subp. 3. Use tax situations.

The use tax complements the sales tax and basically applies to the following situations:

A. property to be used in Minnesota purchased outside this state in a transaction that otherwise would have been a taxable sale if it had occurred in Minnesota;

B. property purchased for resale or other nontaxable use and used by the purchaser for a taxable purpose; and

C. property purchased from a Minnesota vendor on which no sales tax was paid.

Subp. 4.

[Repealed, L 2005 c 151 art 7 s 23]

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: L 2005 c 151 art 1 s 114; art 7 s 23; 31 SR 449

Minn. R. 8130.0120 [Repealed, 31 SR 449]

[Repealed, 31 SR 449]

Minn. R. 8130.0200 Sale by Transfer of Title

Subpart 1. Delivery requirements.

Minnesota Statutes, section 297A.61, subdivision 3, paragraph (b), clause (1), provides that a transfer of title constitutes a sale. Title to goods passes from the seller to the buyer in any manner and on any condition explicitly agreed upon by the parties. However, no title to goods can pass under a contract for sale prior to identifying such goods as the exact goods to be delivered under the contract. Unless otherwise explicitly agreed, title passes to the buyer at the time and place at which the seller completes performance with reference to the physical delivery of the goods. Although the seller retains the legal title to the goods, title passes if the purchaser has the right to the use, possession, and enjoyment of such goods. The following rules apply.

A. When the contract requires or authorizes the seller to send the goods to the buyer, but does not require the seller to deliver them at destination, title passes to the buyer at time and place of shipment.

B. When the contract requires delivery at destination, title passes upon tender there.

C. Unless otherwise agreed, when the term is "f.o.b." (free on board) the place of shipment, title passes when the seller places the goods in the possession of the designated carrier, or if there is no designated carrier, the seller places the goods in the possession of a common carrier after making a contract for their transportation that is reasonable in view of the circumstances and the nature of the goods.

D. Unless otherwise explicitly agreed, when delivery is to be made without moving the goods, and the seller is to deliver a document of title, title passes at the time when and where such document was delivered.

E. Unless otherwise explicitly agreed, when delivery is to be made without moving the goods, and the goods, at the time of contracting, are already identified, and no documents are to be delivered, title passes at the time and place of contracting.

Subp. 2.

[Repealed, 18 SR 1891]

Subp. 3. Revesting after rejection or revocation.

A rejection or other refusal by the buyer to receive or retain the goods, whether or not justified, or a justified revocation of acceptance, revests title to the goods in the seller. Such revesting occurs by operation of law and is not a sale. For example, where a customer holds a television set for a few days and thereafter returns it to the retailer, the retailer is not required to report the transaction, as there was no sale.

Subp. 4. Mixed transaction.

A transaction involving performance of a nontaxable repair service, and incident thereto, a transfer of tangible personal property to the purchaser is not considered a sale for sales and use tax purposes if:

A. the value of the property transferred is insignificant as compared to the total consideration; and

B. no separate charge is made for such property. In such cases, the service provider is regarded as rendering a nontaxable service. However, if a separate charge is made for the property transferred, a sale within the meaning of the Sales and Use Tax Law is deemed to have occurred. Example. A jeweler uses a spring costing 25 cents to repair a watch. The jeweler bills the customer $6 for repair services. Since the cost of the spring is insignificant in relation to the charge for repair services, no sale of the spring is considered to have been made. The jeweler is required to pay a use tax on the spring if the jeweler did not pay a sales tax at the time of purchase. However, if the jeweler bills separately for the spring, the jeweler must collect a sales tax from the customer.

Subp. 5.

[Repealed, L 2005 c 151 art 7 s 23]

Subp. 6.

[Repealed, L 2005 c 151 art 7 s 23]

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06; 297A.29
• History: 17 SR 1279; 18 SR 1891; L 2005 c 151 art 1 s 114; art 7 s 23; 31 SR 449

Minn. R. 8130.0300 [Repealed, 31 SR 449]

[Repealed, 31 SR 449]

Minn. R. 8130.0400 Leases

Subpart 1. General rule; examples.

Any item which is taxable if sold is also taxable if leased. If an item is contracted for lease in Minnesota and physical possession of the item by the lessee occurs in Minnesota, a taxable transaction has occurred even if the lessee removes the property from the state for personal use. However, leased property shipped or transported outside Minnesota by the lessee, which will be used in a trade or business outside Minnesota by the lessee without any intermediate use in Minnesota, and which will not be returned to Minnesota except in the course of interstate commerce, is exempt from tax if the lease is not subject to tax in the jurisdiction to which the leased property is transported for use or is used in the other jurisdiction as part of a maintenance contract.

All payments made pursuant to leases of tangible personal property, including mobile equipment such as motor vehicles, trailers, and contractor's equipment, constitute sales made in Minnesota if such property is either garaged or principally used, including use thereof in interstate commerce for delivery or other temporary purpose outstate, by the lessee at or from a Minnesota situs of the lessee.

Example 1. Motor Freight Line, a Minnesota company, leases ten tractor-trailers from a leasing company. The contract is signed at the Minnesota office of Motor Freight Line, and all payments under the lease are made from this office. Motor Freight Line uses seven of the tractor-trailers to haul freight in interstate commerce to and from its Minnesota freight depot. The remaining three tractor-trailers are used to haul freight in interstate commerce to and from Motor Freight Line's depot in Illinois. From time to time, the three tractor-trailers enter Minnesota in the course of the normal interstate commerce activities of Motor Freight Line. The lease price attributable to the seven tractor-trailers used to haul freight to and from the Minnesota freight depot constitutes a Minnesota sale. The lease price of the remaining three tractor-trailers does not constitute a Minnesota sale.

Example 2. Amalgamated Contractors, a Minnesota company, leases a heavy-duty crane for a construction job in Iowa on a monthly basis. The payments are made by Amalgamated to the lessor in Iowa. Subsequently, Amalgamated secures a construction contract in Minnesota and transfers the crane to the Minnesota site. Lease payments due while the crane is located in Minnesota are subject to Minnesota use tax although such payments continue to be made in Iowa.

Example 3. Peter Smith, a resident of Fargo, North Dakota, leases a chain saw from XYZ Rental-All, an equipment leasing firm, with an office only in Moorhead, Minnesota. Mr. Smith intends to use the saw at the residence in Fargo, and takes possession of the saw from the rental firm in Minnesota. A Minnesota sales tax is due and payable on this transaction.

Subp. 2. Leases of drive-it-yourself automobiles, trailers, or other vehicles.

All lease payments made pursuant to leases executed in Minnesota for drive-it-yourself automobiles, trailers, or other vehicles on a mileage, hourly, or other time basis are taxable, irrespective of whether such vehicles are to be used exclusively in Minnesota or are to be used in other states. Thus, where the lessee delivers the vehicle to the lessor in a state other than Minnesota, either by express agreement with the lessor or without securing prior consent, a lease payment made to the lessor in such other state constitutes consideration for a Minnesota sale.

All lease payments made in Minnesota pursuant to leases executed in states other than Minnesota for drive-it-yourself automobiles, trailers, or other vehicles on a mileage, hourly, or other time basis do not constitute consideration paid for a Minnesota sale. Consequently, such payments are not subject to the Minnesota sales and use tax.

Example 1. A rental agency, located in Minnesota, leases an automobile to X. Thereafter, X drives the automobile to California and returns the vehicle to the rental agency's office in Los Angeles, and there pays the total lease charge of $280. The lease charge constitutes a sale in Minnesota, and the rental agency is required to include the entire $280 in its gross receipts subject to tax.

Example 2. A rental agency, located in New York, leases an automobile to Y. Thereafter, Y drives the automobile to Minnesota and returns the automobile to the rental agency's office in this state, and there pays the total lease charge of $150. No part of the $150 payment is subject to the Minnesota sales or use tax.

Subp. 3.

[Repealed, L 2006 c 259 art 6 s 32; 31 SR 449]

Subp. 4. Services of operator furnished with rentals of equipment.

For services of an operator furnished with the rental of equipment:

A. Certain types of equipment are only available with the services of an operator. For example, the hiring of a taxicab involves the concurrent hiring of a taxicab driver. The same is true with respect to bus companies and commercial airlines. The primary or chief activity of the taxicab company, or the bus line, or the airline, is furnishing transportation services. For all practical purposes, one cannot hire a taxicab or a bus or a commercial airline without accepting the services of a licensed operator. Consequently, the gross receipts from such transactions are not considered sales under Minnesota Statutes, section 297A.61, subdivision 3, paragraph (b), clause (2).

B. There are enterprises which lease equipment either with or without operators. For example, a lessor of transport trucks will furnish a driver if the lessee so requests, or a lessor of heavy equipment will furnish an operator for a crane or caterpillar. When a driver or operator is furnished along with the equipment, the lessor, by the lessor's employee or agent, retains control of the equipment. Accordingly, the lessor is considered to be furnishing a nontaxable service rather than leasing the equipment, and the transaction is not considered to be a sale under Minnesota Statutes, section 297A.61, subdivision 3, paragraph (b), clause (2). When a lessor utilizes equipment in furnishing such nontaxable services, no exemption for the purpose of resale is allowed on purchases of such equipment.

C. On occasion, an employee may use his or her own pickup truck to transport tools on behalf of the employer from one site to another. If the employee is not engaged in the business of leasing the truck, the transportation of the tools is, in effect, a service performed by the employee at the request of the employer. Any reimbursement to the employee is deemed to be nontaxable.

Subp. 5. Additional items or services furnished in connection with leases of drive-it-yourself equipment.

If a lessor, in addition to granting a license to use or right of possession of leased property, contracts to furnish other items or services such as gasoline, oil, lubrication, maintenance (including replacement parts and labor for installation thereof or for the repair of the property in question), license fees, highway use taxes, and insurance, the deductibility of such items will be determined under the following rules.

Items deductible from the lease price are gasoline, maintenance labor, public liability insurance, license fees, and highway use taxes. If these items are separately stated by description in the lease agreement and by specific amounts in either the lease agreement, billing, or invoice, they may be deducted in determining the amount of the lease payment subject to tax. If such items are separately stated by description only and without specification of amounts, a percentage of up to one-third of the lease payment may be deducted in determining the amount of the payment subject to tax, provided that the lessor has records that substantiate the accuracy of the percentage used.

Where the lease agreement does not specify such items, the entire payment is subject to tax.

Items not deductible under any circumstances are oil or lubrication, replacement parts, and collision and comprehensive insurance.

Subp. 6. Maintenance contract.

When under the terms of a contract a lessor of tangible personal property other than motor vehicles agrees to provide full maintenance of such property and the periodic payment is a single sum covering both rental of the property and the maintenance service, the entire payment is subject to tax.

Subp. 7. Leases to electing motor carrier.

Motor carriers may elect under provisions of Minnesota Statutes, section 297A.90, to pay directly to the commissioner of revenue the tax due on the leasing of certain mobile transportation equipment and accessories used in interstate commerce. Lessors of such property need not collect the tax from the electing carriers who have been issued a motor carrier direct pay certificate. See part 8130.3500 for rules relating to the motor carrier direct pay authorization and describing the property for which the payment of tax by the lessee may be deferred.

Subp. 8. Leases to a joint venture.

Charges for equipment furnished to a joint venture by the individual participants are not subject to the tax. Such charges are made for the purpose of allocating credit to the different members for providing the equipment.

Subp. 9.

[Repealed, L 2005 c 151 art 7 s 23]

Subp. 10. Time of incidence of tax.

For the time of incidence of the tax:

A. A lease of tangible personal property is defined in Minnesota Statutes, section 297A.61, subdivision 14a. For leases entered into after June 30, 1997, gross receipts generated from the lease are taxable at the rate in effect at the time the obligation to make a lease payment becomes due. The initial obligation to pay becomes fixed upon the transfer of possession of the tangible personal property unless the agreement specifically sets forth another time. Subsequent obligations to pay become fixed either by the terms of the agreement, trade practices of the lessor, or practice in a course of dealing.

B. A lease of tangible personal property normally imposes upon the lessee multiple obligations. Each of these obligations may be treated separately by the agreement. The incidence of taxation upon each payment under the agreement will be determined by the obligation for which payment is made and the time at which such obligation to pay in fact arose.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: 17 SR 1279; L 2005 c 151 art 1 s 114; art 7 s 23; L 2006 c 259 art 6 s 32; 31 SR 449

Minn. R. 8130.0500 License to Use

Subpart 1. General rule.

When a privilege to possess, use, and enjoy tangible personal property is granted by the owner for a determinate time and on a fixed rental fee basis, or on some other basis that includes a fixed rental fee, and the owner surrenders possession and control under the terms of the agreement to the other party, such arrangement represents a lease. However, where the arrangement contemplates that the owner, for a consideration, will permit the other party to use the property, without the owner divesting physical possession thereof, the arrangement is a "license to use" and is a sale under Minnesota Statutes, section 297A.61, subdivision 3, paragraph (b), clause (2).

Example. A lumber dealer sells lumber of only standard dimensions because the majority of customers are building contractors and generally only require lumber in standard sizes. Whenever large lumber orders of nonstandard dimensions are received, the dealer will either cut the lumber and make an additional charge, or allow the contractor to use the sawing equipment on the dealer's premises for $15 per hour. The charges made by the dealer, for the use of sawing equipment by the contractor, represent the granting of "a license to use" and are taxable.

Subp. 2. Computer time exception.

The making available of a computer on a time-sharing basis for use by customers securing access by remote facilities shall not be considered granting of a "license to use." It shall be considered to be the providing of a nontaxable service.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: 17 SR 1279; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.0600 Consideration

Subpart 1. Consideration in money.

As used in Minnesota Statutes, section 297A.61, subdivision 3, paragraph (b), "consideration in money" refers to the amount of money whether in the form of currency, coins, negotiable instruments, or scrip which the parties agree shall be paid by the purchaser.

Example 1. "M," manufacturer, purchases a machine for use in production. "M" pays $5,000 in cash and gives a $20,000, 90-day promissory note drawn to the order of "V," vendor. The note bears interest at six percent. The consideration in money is $25,000. The $20,000 note is still deemed to be "consideration in money" even though "V," holds it until maturity, as "V" may convert the note, plus accrued interest, into cash by negotiation. The accrued interest that may be paid to "V," either at the time of negotiation or at the time of maturity, does not constitute "consideration in money" for sales tax purposes in respect of the sale of the machine.

Example 2. Same facts as in example 1, except that "V" discounts the $20,000 promissory note at a bank for $19,500. The consideration paid by "M" is $25,000.

Transactions described in Minnesota Statutes, section 297A.61, subdivision 3, paragraph (b), are sales or purchases where effected by exchange or barter. The terms "exchange" and "barter" are used synonymously. (See part 8130.1500 for exemption for property taken in trade.)

Subp. 2. Trading stamps.

Trading stamps which may be redeemed for premiums constitute consideration in the form of scrip. Redemptions by customers of trading stamps for premiums are subject to sales tax unless the premium is exempt by statute, e.g. clothing. The basis of the tax is the fixed value of the trading stamps plus any cash required for the redemption of a particular premium.

Trading stamp companies are the users or consumers of trading stamps and similar materials, e.g. booklets, catalogs, etc., and must therefore pay tax on all purchases thereof. Purchases by trading stamp companies of premiums, i.e. merchandise to be exchanged for redeemed trading stamps, are exempt as purchases for resale.

The amount charged by a trading stamp company to a dealer for the privilege of distributing trading stamps which are redeemable by the trading stamp company either in cash or premiums is exempt.

Subp. 3. Coupons.

Whether coupons constitute consideration in the form of scrip is dependent upon the nature of the coupon. Coupons will generally be one of two types:

A. coupons which are of such a nature that the retailer does not have recourse to a supplier, distributor, or product manufacturer for reimbursement. These coupons, upon tender to the seller, result in a reduction of the sales price by the seller and are not a part of the consideration paid. The net amount is subject to the tax;

B. coupons that are redeemed by the retailer who in turn is reimbursed by a supplier, distributor, or product manufacturer are scrip and a part of the consideration. The value of such coupons is included in the amount subject to the tax. The value of the coupon is equal to the difference between the normal selling price and the reduced selling price of the merchandise.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: 17 SR 1279; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.0700 Producing, Fabricating, Printing, or Processing of Property Furnished by Consumer

Subpart 1. General.

A sales tax is assessed on the retail sale of tangible personal property. See Minnesota Statutes, section 297A.61, subdivision 3, paragraph (b).

In addition, a sales tax is assessed on the production, fabrication, printing, or processing of tangible personal property for retail consumers who furnish directly or indirectly the materials used in the production, fabrication, printing, or processing. See Minnesota Statutes, section 297A.61, subdivision 3, paragraph (c).

Producing, fabricating, printing, and processing include any operation which results in the creation or production of tangible personal property, or which is a step in a process or in a series of operations resulting in the creation or production of tangible personal property, except sales for resale.

Subp. 2. Repairs.

Application of labor to tangible personal property, other than clothing, so that such property may continue to be used in the same form and for the purpose for which acquired represents repairs and does not constitute producing, fabricating, printing, or processing of property. The repair and alteration of clothing, however, is taxable under Minnesota Statutes, section 297A.61, subdivision 3, paragraph (g), clause (6)(i). If the expenditure is made for the purpose of modifying, altering, or assembling it in some other manner, the application of labor to tangible personal property represents a sale under the provisions of Minnesota Statutes, section 297A.61, subdivision 3, paragraph (c).

Subp. 3. Tax applications.

A. Example 1. A customer enters into an agreement with an upholsterer whereby the latter will remove old fabric from the customer's living room sofa and replace it with fabric chosen by the customer. The cost agreed upon is $300. Service charges are $150, with the remaining $150 representing the cost of the materials. As the reupholstering repair permits the customer to continue to use the sofa for the purpose for which it was acquired, only the $150 for material represents a sale, provided the charges for materials are billed separately, and that such charges represent a reasonable sales price for such material were it purchased without the service charge for reupholstering. If the customer had furnished the material, no sale would have resulted.

B. Example 2. A customer furnishes material which is thereafter produced into a slipcover for sofa. The charge for producing the slipcover is a sale in accordance with Minnesota Statutes, section 297A.61, subdivision 3, paragraph (c), since it results in the fabrication of tangible personal property. If the customer had purchased material from the upholsterer, the entire cost to the customer would be a sale.

C. Example 3. Custom sawing of logs by a saw mill where logs are furnished by the customer constitutes a sale.

D. Example 4. Developing prints of home movies or stills for customers who furnish the exposed film constitutes a sale.

E. Example 5. Printing on paper stock furnished by customers constitutes a sale.

F. Example 6. Reproducing copies of typewritten or printed matter on a stock furnished by customers constitutes a sale.

G. Example 7. Recapping of a tire carcass supplied by the customer is a repair. If the materials and labor are separately stated, only the material portion is taxable. If no separation is shown on the invoice, the entire amount is taxable. These rules apply even though the new cap is of a different tread design, i.e. a snow tread cap applied over a summer tread, or vice versa. If a carcass is traded in for a recapped tire, the entire charge, less allowance for the trade-in is taxable. (See part 8130.1500.)

H. Example 8. Cutting and milling charges by a lumberyard or woodworking shop, and pipe cutting or threading charges by a hardware store or plumbing shop are taxable whether the materials are supplied by the buyer or the seller.

I. Example 9. Engraving of an item furnished by the customer is considered a service not subject to tax. This service engraving is to be differentiated from product engraving which is taxable. Product engraving is billed along with or included in the sales price by the seller at the time the item is sold.

J. Example 10. The entire amount charged for the initial electroplating, heat treating, or painting of tangible personal property furnished by the customer is taxable as fabrication labor.

K. Example 11. Collating and assembling done by stapling or using a similar process affixing items together is taxable. The punching, assembly, stamping, burning, electroplating, etc. of goods supplied by a customer is taxable.

L. Example 12. A locksmith changes a combination on a safe or changes the tumblers in a lock so that a different key must be used. The transaction is considered to be a nontaxable service and the locksmith is required to pay the sales or use tax on purchases of the parts and materials used to perform such service. However, retail sales of keys and parts which are billed separately are taxable.

M. Example 13. Additional types of fabrication charges which are taxable regardless of whether the customer or fabricator furnishes the materials include charges for the following:

Subp. 4. Custom made goods.

The total gross receipts from the sale of custom made products are taxable, without deduction for labor costs, provided that the manufactured item remains personal property after installation. Labor charges to install manufactured items which become part of real property are not taxable.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06; 297A.29
• History: 17 SR 1279; 18 SR 2483; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.0800 Repealed by subpart

Subpart 1.

[Repealed, 29 SR 1273]

Subp. 2.

[Repealed, 29 SR 1273]

Subp. 3.

[Repealed, 29 SR 1273]

Subp. 4.

[Repealed, 29 SR 1273]

Subp. 5.

[Repealed, L 2003 c 127 art 6 s 18; 29 SR 1273]

Subp. 6.

[Repealed, 29 SR 1273]

Subp. 7.

[Repealed, 29 SR 1273]

Subp. 8.

[Repealed, 29 SR 1273]

Subp. 9.

[Repealed, 29 SR 1273]

Subp. 10.

[Repealed, 29 SR 1273]

Subp. 11.

[Repealed, 29 SR 1273]

Subp. 12.

[Repealed, L 2003 c 127 art 6 s 18; 29 SR 1273]

Subp. 13.

[Repealed, 29 SR 1273]

Minn. R. 8130.0900 Entertainment

Subpart 1. Admissions and use of amusement devices in general.

Under Minnesota Statutes, section 297A.61, subdivision 3, paragraph (g), clause (1), the privilege of admission to places of amusement, recreational areas, or athletic events, and the making available of amusement devices, tanning facilities, reducing salons, steam baths, turkish baths, health clubs, and spas or athletic facilities constitute sales, if the places, events, or devices are located within Minnesota.

Subp. 2. Examples; admissions.

Example 1. "A" purchases four tickets for a professional football game to be played in Wisconsin. The sale of the tickets to A does not constitute a sale because the event is not occurring in Minnesota.

Example 2. "A" purchases four tickets from the University of Iowa athletic ticket office for a football game to be played at Minneapolis, Minnesota, between the University of Minnesota and the University of Iowa. As the granting of the privilege of admission is at a place in Minnesota, the sale of the tickets to A constitutes a sale.

Admission charges to any places of amusement or athletic events within Minnesota, therefore, constitute a sale unless the charges are exempt under Minnesota Statutes, section 297A.70, subdivision 10, 11, 13, or 14. The following partial list is illustrative:

A. admissions to musical concerts;

B. admissions to dances;

C. admissions to motion picture theaters or theaters presenting stage shows and plays;

D. admissions to golf courses and tennis courts;

E. admissions to skating rinks and swimming pools;

F. admissions to state, county, or other fairs;

G. admissions to carnival rides and hay and sleigh rides; and

H. admissions to a museum.

Subp. 3. Use of athletic or amusement devices.

Consideration paid for the use of athletic or amusement devices or games constitutes a sale. "Amusement devices" means property used in whole or in part to obtain amusement, entertainment, or diversion. The following partial list is illustrative:

A. use of billiard or pool tables;

B. use of pinball machines, shuffleboards, etc.;

C. use of bowling alleys;

D. use of lift device on a ski slope;

E. use of trapshooting facilities;

F. use of golf driving range facilities, etc.;

G. privilege of selecting and listening to a recording on a mechanical device commonly referred to as a juke box.

Subp. 4. Entry fees.

Entry fees are payments required as a condition to participation in a competitive event. That portion of an entry fee assignable to admissions or the use of athletic or amusement devices is a sale and taxable. If the entry fee to a competitive event requiring admissions or the use of athletic or amusement devices does not separately state that portion of the fee assignable to them, the entire fee is taxable.

Subp. 5. Club dues.

The granting of memberships in a club, association, or other organization that makes available sports and athletic facilities for use of its members is taxable if it meets the requirements of Minnesota Statutes, section 297A.61, subdivision 3, paragraph (g), clause (4). Membership dues to other kinds of clubs are not taxable. This includes various forms of membership dues whether social and/or activity membership dues. However, payments to associations or organizations which only entitle the payee to attend concerts or events sponsored or held by the association each year are taxable as the granting of admissions to a place of amusement.

Subp. 6. Tours.

The charges made for aircraft, bus, boat, sightseeing rides, or tours are considered nontaxable as being transportation services. They are not classified as the granting of the privilege of admission to places of amusement or the privilege of use of amusement devices.

Subp. 7. Carnival rides.

The gross receipts are fully taxable. If a carnival or amusement company charges a lump sum fee to a sponsor, and the sponsor allows its patrons, members, etc. to avail themselves of the carnival or amusement rides free of charge, such lump sum charges are subject to sales tax. In such a case, the sponsor is considered to have been granted the privilege of admission.

Subp. 8.

[Repealed, 31 SR 449]

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.1000 Lodging

Subpart 1. General rule.

Under Minnesota Statutes, section 297A.61, subdivision 3, paragraph (g), clause (2), furnishing for a consideration of lodging and related services by a hotel, rooming house, resort, campground, motel, or trailer camp and the granting of any similar license to use real property other than the renting or leasing of it for a period of 30 days or more constitute a sale.

Subp. 2. Criteria.

The following criteria apply in determining whether a license to use real property for lodging purposes constitutes a sale under Minnesota Statutes, section 297A.61, subdivision 3, paragraph (g), clause (2):

A. A lease of or license to use specific real property enforceable for a period of 30 days or more and which requires serving a notice of intention to so terminate either by the lessor or lessee of a period of at least 30 days prior thereto (or such shorter period as agreed to by the parties for violation of the lease conditions) does not constitute a sale even though the rent may be paid on a weekly or semimonthly basis.

B. A lease of or a license to use real property if the consideration for the lease or license is paid or payable at periods of less than 30 days' duration, or if the parties are not bound by an enforceable written contract to give prior notice of 30 days or more of intention to terminate, constitutes a sale.

C. A person engaged in the furnishing of taxable lodging facilities, in determining the amount of consideration received subject to the tax, shall include separately stated charges for telecommunication service and amounts received for the use of a television set or other items of tangible personal property. Example 1. "G," guest, registers at hotel without entering into an enforceable written agreement whereby G will occupy a room for a period in excess of 30 days. G stays at the hotel for five full weeks. Thereafter, G settles the account and vacates the room. Although occupancy was in excess of the statutory period of 30 days, the transaction constitutes a sale in accordance with item B. Example 2. Hotel, in addition to furnishing sleeping accommodations and related service to transients, leases rooms or suites to ten persons on a monthly basis. "G," guest, occupies a small suite, and pays in advance on the first day of each month. The leasing of a suite to G does not constitute a sale, as a hotel also may be a lodging house, and G, who is a tenant at will, is required to give notice of termination of at least 30 days. Example 3. "T," tenant, rents an apartment from Landlord without a lease. T pays rent weekly. Each of the parties is required to give notice of one week of intention to terminate. Consequently, this arrangement constitutes a sale, as the leasing of the premises to T is for a period of less than 30 days. Example 4. Motel charges guest $50 per day for a room. "G," guest, makes three local telephone calls. Motel bills G for $50 plus a separately stated charge of $1.50 for telephone calls, and $5 for use of video games. The taxable consideration paid by G is $56.50 represented by the $50 charge for the room, $5 charge for the video games, and $1.50 for telephone calls. Example 5. If "X" company leases a room in a hotel or motel on a yearly basis for occasional use by employees or guests, the charge is exempt even if a particular room is not reserved for the exclusive use of X company.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: 17 SR 1279; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.1100 Utilities and Residential Heating Fuels

Subpart 1. General law.

Under Minnesota Statutes, section 297A.61, subdivision 3, paragraph (e), the furnishing for a consideration of electricity, gas, water, or steam for use or consumption within Minnesota are taxable sales.

Subp. 2. Definitions.

The definitions in items A to F apply to this part.

A. "Billing month," for natural gas or electricity, means the month the bill is dated regardless of when the service was rendered. Billing month means the meter reading date if there is no date on the bill. If a utility uses a system of cycle billing and 12 revenue months per year, the billing month may be the utility's revenue month.

B. "Heating season" means the billing months of November, December, January, February, March, and April.

C. "Interruptible service credit" means a credit given by a utility company to a customer each month in exchange for the customer's agreement to shut down certain equipment during periods of high power usage.

D. "Primary source of residential heat" means the source which heats the largest square footage of floor space. When a user heats the same area with two sources of heat, each using different fuels, such as a home heated by wood which also has an electric heating system, then the primary source of residential heat is the source which supplies more heat than any other source for the largest period of time during the heating season. The examples in subitems (1) to (3) illustrate this situation.

E. "Residential use" means use for general household purposes including cooking and water heating. Residential use does not include use in travel trailers, motor homes, or other recreational vehicles.

F. "Residential users" or "residential customers" includes persons billed for sales of residential heating fuel for single-family homes, duplexes, townhouse units, condominium units or buildings, apartment units or buildings, nursing homes, intermediate care facilities, mobile homes, fraternity or sorority houses, rooming houses, seasonal cabins, group homes, city and county jails, and state-operated correctional facilities and regional treatment centers.

Subp. 3. Exemptions.

The following are exempt from sales and use tax:

A. Fuels, electricity, gas, steam, or water that is used or consumed in agricultural or industrial production of personal property intended to be sold ultimately at retail. See part 8130.5500 and Minnesota Statutes, sections 297A.68, subdivision 2, and 297A.69, subdivision 2.

B. Fuel, electricity, gas, and steam stored, used, or consumed in the production of a taxable service intended to be sold ultimately at retail. See Minnesota Statutes, section 297A.68, subdivision 3.

C. For the billing months of the heating season, natural gas or electricity sold for residential use to customers who are metered and billed as residential users and who use natural gas or electricity for their primary source of residential heat. When gas or electricity is exempt as a heating fuel, all other gas or electricity used through the same meter is also exempt for the six-month heating season. Each qualifying customer must receive six months of service exempt from taxation. See Minnesota Statutes, section 297A.67, subdivision 15. See subpart 7 for tax treatment of residential customers on utility budget plans.

D. On a year-round basis, all fuel oil, coal, wood, steam, hot water, propane gas, and LP gas sold to residential customers for residential use. See Minnesota Statutes, section 297A.67, subdivision 15. See subpart 7.

E. Water services for residential use are exempt regardless of how the services are billed. See Minnesota Statutes, section 297A.67, subdivision 16.

Subp. 4. Charges included in sales price.

All charges associated with furnishing utilities or making utility service available, except fees for the safe drinking water testing program mandated by federal law and taxes legally imposed directly on the consumer that are separately stated on the bill given to the purchaser, are considered part of the sales price and are subject to tax. If the utility service being provided is exempt from tax, the additional charges are also exempt. If the utility service being provided is partially exempt from tax, the additional charges will be exempt to the same extent the utility service is exempt. The following are examples of taxable charges that are included in the base on which the sales tax is charged. These charges are taxable even if minimal or no services are consumed:

A. demand charge;

B. fixed or basic monthly charge;

C. franchise fee;

D. fuel clause adjustment;

E. minimum charge;

F. reconnection fee;

G. service charge;

H. service connection charge;

I. standby fee; and

J. surcharge.

Subp. 5. Credits determined before and after the sale.

Credits or dividends, such as capital contribution credits, interruptible service credits, and patronage dividends, are not included in the amount subject to sales tax if the credit and the amount of the credit are determined prior to the sale. These credits are included in the amount subject to sales tax if the credit or the amount of the credit is determined by events that happen after the sale has occurred. The examples in items A to C illustrate these situations.

A. An electric company and a manufacturer enter into an interruptible service agreement. Under this agreement, the manufacturer agrees to shut down certain machinery during peak electricity demand periods. In exchange, the electric company gives the customer a credit on each bill. This credit is a constant dollar amount and is based on the amount of kilowatts the manufacturer would conserve by shutting down the agreed upon machinery. The credit is given regardless of whether the manufacturer was required to shut down machinery during the period. Here, the credit is contracted for before the sale and must be subtracted from the sales price before sales tax is calculated.

B. A utility company and a manufacturer enter into an interruptible service agreement. Under this agreement, the manufacturer agrees to allow the utility company to control its water heaters during peak kilowatt demand periods and must use 500 kilowatts during the period. In exchange, the utility company gives the manufacturer an $8 rebate each month. If 500 kilowatts are not used during the period, no rebate is given. The rebate can only be used as a credit against the next bill, and if service is not continued the credit is forfeited. In this case, whether a credit will be allowed is not determined until after the sale occurs. Therefore, the amount of the credit must be included in the sales price when calculating the amount of sales tax due.

C. The rate a utility cooperative charges its patrons includes a capital contribution in addition to the cost of providing services. The bylaws of the cooperative require that the excess of its revenue over its operating costs and other expenses are capital contributions paid by its patrons. At the end of each year, the amount of each patron's contribution is determined and credited to the patron's capital account. In this case, it is not determined until after the sale has occurred if a credit will be allowed, and if so, how much the credit will be. Therefore, the amount of the credit must be included in the sales price when calculating the amount of sales tax due.

Subp. 6. Commercial and residential use.

A. If a building houses both residential quarters and commercial operations and contains one meter for the entire building for either water, electricity, or natural gas, the water, electricity, or natural gas supplied will be considered to be for residential use if less than 50 percent of the square footage of the building is used for commercial operations. If 50 percent or more of the building is used for commercial operations, the utility service will be considered to be for commercial use.

B. If a building which houses both residential quarters and commercial operations contains one central heating plant for the entire building, heating fuels supplied to or for the heating plant will be considered to be used for residential use if less than 50 percent of the square footage of the building is used for commercial operations. If 50 percent or more of the building is used for commercial operations, the heating fuels will be considered to be for commercial use.

C. Examples of a residence that is also used as a commercial property:

D. When a building houses both residential quarters and commercial operations, a utility's acceptance of a fully completed exemption certificate claiming the residential heating fuel exemption will relieve the utility from liability for the tax if it is later determined that the exemption was improperly claimed. The utility must exercise reasonable care and judgment before allowing the customer to use the exemption for the utility to be relieved of liability under this item.

Subp. 7. Residential heating fuels.

A. All fuel oil, coal, wood, steam, hot water, propane gas, and LP gas delivered to a residence is assumed to be used for residential heating and is exempt. All fuel oil, coal, wood, steam, hot water, propane gas, and LP gas that is not delivered to a residence is taxable. Heating fuels picked up by a customer are taxable unless the customer provides the retailer with a written statement indicating that the heating fuel is for residential heating purposes.

B. Sales of firewood are exempt as residential heating fuel whether delivered or picked up by the customer. Sales of firewood for recreational use, including camping and picnics, are taxable.

C. Sales of artificial fireplace logs are not exempt home heating fuel and are taxable.

D. Fuel used to heat fish houses is taxable since fish houses are not regarded as residences.

E. The monthly payments of residential customers on budget plans with a local utility will not change during the heating season. Sales tax is paid by the utility on actual consumption, not the monthly payments. Therefore, while residential customers will not pay sales tax on their heating fuel during the heating season, their monthly payments will remain the same.

Subp. 8. Sales of utility services by local governments to themselves.

Effective June 1, 1992, items A and B apply when a local government sells utility services to other departments or divisions within the same unit of local government.

A. A utility that is operated by a local government as a separate corporation is considered a separate legal entity or person. Therefore, the sale of utility services by this entity to other departments within the local government are taxable sales.

B. A utility that is operated by a local government, but that is not separately incorporated, should not charge sales tax on sales of utility services to other departments or within the same unit of local government. The transfer is merely a book transfer within one entity and no taxable sale has occurred.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06; 297A.29
• History: 17 SR 1279; 18 SR 83; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.1200 Sales of Building Material, Supplies, or Equipment

Subpart 1. General rule.

Under Minnesota Statutes, section 297A.61, subdivision 4, paragraph (d), sales of building materials, supplies, and equipment to owners, contractors, subcontractors, or builders constitute retail sales and are thus taxable.

A. The term "building materials, supplies, and equipment," as used in these rules, refers to property intended to become part of a new building, structure, road or an addition, repair, improvement, or alteration to roads or real estate. A partial list of such materials includes gravel, blacktop, bricks, cement, steel beams and rods, electrical supplies, glass, woodwork, paint and paint supplies, pipes and valves, aluminum sheathing, wood and composition sheathing, lumber, plastics, roofing, and wallboards. Other property usually incorporated into a building or other types of real property includes lighting fixtures, plumbing and bathroom fixtures, furnaces, boilers and heating units for space heating, prefabricated cabinets, and central air conditioning units (for space cooling).

B. The term "real property" includes structures that are permanently affixed to real estate, such as buildings, fixtures, machinery, fences, railroad tracks, grain elevators, bridges, storage bins, silos, outdoor advertising signs, and billboards.

C. Other types of equipment may be incorporated into a new structure or added to an existing structure undergoing repairs, alterations, or improvements in order to enhance the attractiveness of the structure or to increase its rental or sales value. Examples of such equipment are built-in dishwashers, stoves and ranges, garbage disposal units, and air-conditioners installed in openings in outer walls.

Subp. 2. Contractors and construction activities.

Contractors are generally classified into two broad groups: general contractors and subcontractors.

A. A "general contractor" is a person who contracts to furnish the necessary materials and labor for the performance of a construction contract, and generally is one who contracts to build the entire project or a major portion thereof, or who contracts to install special building equipment, or who repairs or remodels a limited area in a structure at a price that includes machinery, equipment, and installation charges. The person for whom the general contractor performs the work is generally the owner.

B. A "subcontractor" is a person who contracts to furnish the necessary materials and labor for the completion of a portion of the general construction contract at the job site. The subcontractor ordinarily contracts with the general contractor to perform a certain part of the work which the general contractor has undertaken to perform under the general construction contract.

C. The terms "contractor" and "subcontractor" are not applicable to persons who merely sell tangible personal property in the form of building materials, supplies, or equipment to construction contractors, for delivery at the job site without any requirement that they install such tangible personal property.

D. The term "construction contract" as used herein refers to a contract under the terms of which a contractor agrees to perform construction activities resulting in an alteration, repair, or improvement of real property. Where machinery or equipment is attached to real property in such a manner and with the intent that it becomes a nontemporary accession to the real property, the contract pursuant to which it is attached shall be regarded as a "construction contract." Any attachment of property by or for a lessor thereof to realty not owned by the lessor where the lessor retains title and ownership of the property shall be considered a temporary accession to the real property and such property therefore retains its character as tangible personal property. The term "construction contract" shall not include any contract for a sale of machinery or equipment which the seller, pursuant to the contract, will attach to or install upon real property if:

E. Such construction activities do not include the sale and installation of an appliance, machinery, equipment, or other item of tangible personal property in such a manner as not to become a permanent part of the real estate. Computers shall be considered to retain their classification and identification as personal property when installed because of such factors as industry standards, custom and practice, usage, and uniqueness. Where a fixed price or lump sum construction contract provides for the incidental transfer of certain tangible personal property and the contractor sells such items only as a part of the construction project, the contractor is not regarded as a retailer provided that such personal property comprises an insubstantial portion of the total contract price. Example 1. A dealer agrees to replace the old refrigerators with new models in a four-unit dwelling. The sale and installation of the refrigerators does not constitute a construction contract. The transaction represents a sale at retail to the owner of the four-unit dwelling. Example 2. A computer manufacturer sells and leases computers and also installs them on the customer's property. The sale or lease of a computer, regardless of size, is a sale or lease of tangible personal property and the installation does not constitute a construction contract. Example 3. A leasing company purchases a piece of equipment from company A and leases it to company B. Company A installs the equipment on the property of company B. The sale and installation of the equipment does not constitute a construction contract, since the owner of the equipment is not the same as the owner of the property to which the equipment was installed. The equipment is considered to be tangible personal property and the leasing company purchases the property exempt for resale and collects the sales tax on the lease payments from company B.

Subp. 3. Construction contracts with exempt entities.

For construction contracts with exempt entities:

A. The exemption from the tax on the sale of tangible personal property to the United States, as well as to corporations and other institutions exempt under Minnesota Statutes, sections 297A.67 to 297A.71, does not extend to building materials, supplies, and equipment purchased by a contractor under an agreement to erect a building or to alter, repair, or improve real estate for such exempt entity unless the sale is specifically exempted under section 297A.71. However, purchases of such building materials, supplies, and equipment by exempt entities are exempt from the sales and use tax. Example. A school district enters into a contract with a contractor for school construction. The contractor purchases materials for this job from various suppliers. The construction is clearly an alteration or improvement to real property with material purchased by the contractor for use in constructing the school. These transactions constitute retail sales and are subject to the sales tax. Had the school district purchased the materials directly, the purchase of the materials by the school district would have been exempt.

B. If an exempt entity has entered into a fixed price construction contract which covers the complete structure including the materials, and the exempt entity furnishes some or all of the materials to the contractor for a credit against the contract price, a taxable sale occurs when the exempt entity transfers the materials to the contractor. Example. A school district enters into a contract with a contractor for the construction of a school building. The contractor not only specified the price at which the contractor agreed to deliver the completed school, but made known to the school district the portion of the total cost of construction allocated to building materials and supplies. In addition, the contractor furnished the school district with the names of the several suppliers and the descriptions and price of each item or items furnished by each of such suppliers. Thereafter, the school district purchased the specified items at the price furnished by the contractor and made payments from its own funds to the suppliers. The material and supplies so purchased were thereafter delivered to the contractor and, in return, the school district received credit against the contract price for the payments made by it. Although the initial purchase of the material and supplies by the school district is exempt, the transfer to the contractor is a transfer of title or possession and taxable as such for the following reason: the contractor has agreed to deliver a completed structure which necessarily includes the materials; during construction of the building the materials will be in the possession of the contractor, who bears the risk of any loss of such materials during construction; and a portion of the contract price is correspondingly reduced by the cost of the materials paid to the supplier by the school district.

C. The transfer of building materials by an exempt entity to its contractor for use in connection with a contract for the erection, alteration, repair, or improvement of realty is not deemed a retail sale (and is thus exempt from the sales or use tax) provided:

D. An exempt entity, in addition to contracting with a contractor for the erection of a building or the alteration or repair of real estate, may appoint and designate the contractor as purchasing agent for such exempt entity in connection with the construction contract. In such situations the department will recognize the agency relationship asserted only if the written contract clearly sets forth:

Subp. 4. Contractor-retailer.

A "contractor-retailer" is a person using building materials, supplies, and equipment in the performance of construction contracts, and in addition, is engaged in making retail sales of building materials, supplies, and equipment.

A. A sale by a contractor-retailer of building supplies, materials, and equipment which sales does not provide for installation of the merchandise sold is a sales at retail.

B. A sale by a contractor-retailer of building supplies, materials, and equipment which sale provides for installation of the merchandise is a construction contract and tax shall be paid by the contractor-retailer based upon the cost of materials. Two separate contracts executed contemporaneously by a contractor-retailer providing individually for the sale and installation of building materials, supplies, and equipment shall be considered to be a single unified construction contract if that was the intent of the parties as evidenced by their actions. A contractor-retailer who enters into a construction contract with an exempt entity shall pay tax based upon the cost of materials.

C. A contractor-retailer sells property under both of the following two circumstances.

D. Persons primarily engaged in the making of retail sales of building materials, supplies, and equipment used in construction, alteration, repair, or improvement of real property, and who are also engaged as contractors in building, altering, repairing, or improving real property, shall report and pay their sales or use tax liability in accordance with the following.

E. The accounting records of a contractor-retailer must clearly reflect the use made of items purchased for both the preceding and current calendar year. These records must be in such form that the commissioner may determine readily that the proper sales and use tax liability is being reported and paid. Example 1. In March, a contractor-retailer purchased ten bathtubs at $150 each and 20 bathroom sinks at $40 each. As primarily a contractor, the contractor-retailer paid the sales tax due. During this same month, the contractor-retailer sold at retail two bathtubs at $200 each and five bathroom sinks at $55 each. The contractor-retailer reports gross receipts from retail sales of $675. The sales tax due and owing from the contractor-retailer is $43.88 (6.5 percent of $675). Since the contractor-retailer is entitled to offset the tax paid on the property sold at retail, the following calculation is made for the sales and use tax reported for the month of March: Deductions are calculated as follows: Example 2. A contractor-retailer purchased ten bathtubs at $150 each and 20 bathroom sinks at $40 each. Being primarily a retailer, the contractor-retailer paid no tax at time of purchase, but gave the supplier an exemption certificate. Thereafter, in March, the contractor-retailer sold at retail two bathtubs at $200 each and five bathroom sinks at $55 each. In addition, the contractor-retailer utilized three bathtubs and six bathroom sinks in contracting activities. The contractor-retailer makes the following calculation for the sales and use tax reported for the month of March (for purposes of this example, it is assumed that in March no other sales were made at retail and no other material, etc., were used in contracting activities): *The amount subject to use tax is calculated as follows:

Subp. 5.

[Repealed, L 2005 c 151 art 7 s 23]

Subp. 6.

[Repealed, L 2005 c 151 art 7 s 23]

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: 17 SR 1279; L 2005 c 151 art 1 s 114; art 7 s 23; 31 SR 449

Minn. R. 8130.1300 [Repealed, L 2003 c 127 art 6 s 18]

[Repealed, L 2003 c 127 art 6 s 18]

Minn. R. 8130.1400 [Repealed, L 2002 c 377 art 10 s 32]

[Repealed, L 2002 c 377 art 10 s 32]

Minn. R. 8130.1500 Exemption for Property Taken in Trade

Any amount allowed as a credit against the sales price for tangible personal property taken in trade for resale is exempt under Minnesota Statutes, section 297A.67, subdivision 26. The payoff of the old contract does not affect the amount allowed on the trade-in; even if this indebtedness is included in the new contract. The property so accepted qualifies for the exemption if the property is taxable under the Sales and Use Tax Law or the Sales Tax on Motor Vehicles Law.

Example 1. A dealer sells a new boat with a list price of $3,000 to a customer. The dealer accepts the customer's used boat in trade and gives the customer a credit of $1,000. The credit qualifies for the exemption. Consequently, the sales price is $2,000.

Example 2. A mobile home dealer sells a customer a new mobile home with a list price of $12,000. The customer trades in an old mobile home which has an existing loan of $2,000 on it. The dealer agrees to include the payoff amount of the old contract in the new contract. The dealer allows $5,000 for the trade-in of the customer's mobile home. The following represents the amount of financing the customer arranges for and the sales price is $7,000:

The tax is computed on the sales price of $7,000.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: 17 SR 1279; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.1600 Repealed by subpart

Subpart 1.

[Repealed, 31 SR 349]

Subp. 2.

[Repealed, 31 SR 349]

Subp. 3.

[Repealed, 31 SR 349]

Subp. 4.

[Repealed, 31 SR 349]

Subp. 5.

[Repealed, L 2003 c 127 art 6 s 18]

Minn. R. 8130.1700 Deductions Allowable in Computing Sales Price

Subpart 1.

[Repealed, 31 SR 349]

Subp. 2.

[Repealed, 31 SR 349]

Subp. 3.

[Repealed, L 2003 c 127 art 6 s 18]

Subp. 4.

[Repealed, L 2003 c 127 art 6 s 18]

Subp. 5.

[Repealed, 31 SR 349]

Subp. 6. Refunds for property adjustments.

Where taxable property is returned, the retailer's reported gross receipts may be reduced in the month the property is returned by the amount of the sales price refunded, provided that the applicable sales tax has also been refunded. If the credit given or the cash refunded for the returned merchandise is reduced by a handling charge, the entire amount of sales tax collected should be refunded and a reduction of gross sales for the full sales price should be taken on the sales and use tax return. Where a purchaser of taxable property makes a gift of such property, and subsequently the recipient of the gift returns the property to the vendor and requests a refund of the amount paid for the property, the recipient is entitled to a refund of the sales tax applicable to the amount of the sales price that is refunded. Repossession of tangible personal property does not constitute a return of property. Merchandise that was sold on approval and later returned may be deducted from gross receipts.

Adjustments to the sales price because of unknown damage at the time of sale, i.e. scratches, dents, etc., but not detected until a later time, may be deducted from gross receipts.

Example 1. A hardware dealer sells a customer a lawnmower for $100. The customer pays $100 plus sales tax. As the lawnmower was defective, it was returned to the hardware dealer, and the total price including sales tax paid was refunded to the customer. Gross receipts will be reduced by $100.

Example 2. Retail Tires sells four new tires to a customer at $40 each under guarantee in June. In August, the customer returns one tire and is given a cash refund of $30 plus tax. Retail Tires may reduce gross sales by the $30 refunded on the August sales and use tax return.

Example 3. A purchases taxable personal property from a retailer at a price of $100 plus sales tax. A then makes a gift of the property to B. B returns the property to the retailer and requests a refund of the amount paid for the property. B (the donee of the gift) is entitled to a refund of the $100 sales price plus sales tax. The retailer may reduce gross sales by $100 on the sales tax return for merchandise returned and thereby receive credit for the amount of refundment.

Example 4. A lumber company sells 20 redwood posts to a customer for $100 plus sales tax. The customer decides not to use the posts and returns them to the lumber company. The lumber company has a policy of refunding all but $10 on all returned merchandise. This $10 represents a handling fee for placing the merchandise back into stock. The lumber company is required to refund the customer the entire sales tax and claim a reduction of $100 in gross sales on its sales and use tax return.

Subp. 7.

[Repealed, 31 SR 349]

History

• Statutory Authority: MS s 270C.06; 297A.29
• History: 17 SR 1279; L 2003 c 127 art 6 s 18; L 2005 c 151 art 1 s 114; 31 SR 349

Minn. R. 8130.1800 Gross Receipts Defined; Method of Reporting

Subpart 1. Gross receipts.

The sales tax is imposed upon the gross receipts from retail sales. "Gross receipts" are defined in Minnesota Statutes, section 297A.61, subdivision 8, as the total amount received, in money or by barter or exchange, for all retail sales (see Minnesota Statutes, section 297A.61, subdivision 4) as measured by the sales price. (See Minnesota Statutes, section 297A.61, subdivision 7.)

The person filing the return may report gross receipts either:

A. on the cash basis as the consideration is received; or

B. on the accrual basis as sales are made. An election is deemed to have been made to report gross receipts under the method of accounting on the basis of which the person filing the return regularly computes income for tax purposes, unless he or she can demonstrate to the commissioner that a method of accounting for gross receipts subject to the sales tax (which differs from the method of accounting employed for other purposes) will not prevent or make difficult an orderly and systematic audit of the records by the commissioner. An application shall be made to the commissioner for permission to change the method of reporting.

Subp. 2. Cash basis.

If sales are made at retail on a strictly cash basis, the retailer shall report gross receipts on the basis of cash or other consideration received, minus the exclusions and deductions from the total consideration allowed under Minnesota Statutes, sections 297A.61, subdivision 7, and 297A.67 to 297A.71.

Subp. 3. Accrual basis.

A person who reports income on the accrual basis is required to report gross receipts as the sales are made, minus the exclusions and deductions from the total consideration allowed under Minnesota Statutes, sections 297A.61, subdivision 7, and 297A.67 to 297A.71, regardless of when cash from such sales is received.

Example 1. A supermarket's gross sales for May, are $200,000, of which $175,000 are represented by exempt products. In addition, cash refunds of $1,000 for exempt products returned were made. The computation for the supermarket, which is on a cash basis, is as follows:

Example 2. A department store has cash sales of $500,000 and charge sales of $750,000 for the month of October. The department store reports on the accrual basis. Consequently, the department store reports as gross sales $1,250,000 on the sales and use tax return it files for this month.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: 17 SR 1279; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.1900 Retailer and Seller

Subpart 1. Defined.

A "retailer" and a "seller" means any person engaged in making sales, leases, or rentals of personal property or services. See Minnesota Statutes, section 297A.61, subdivision 9. Under Minnesota Statutes, section 297A.61, subdivision 3, a sale includes any one of a number of transactions not ordinarily considered to be retail activities. Consequently, the person making such a sale is deemed to be a retailer and a "seller" in accordance with Minnesota Statutes, section 297A.61, subdivision 9, and this part.

Subp. 2. Examples.

For illustrative purposes, a partial listing of retailers and sellers follows:

A. a person who leases automobiles, trucks, trailers, or tractors;

B. a person who leases office equipment or computers;

C. a person who leases machinery, heavy earth-moving equipment, or any other type of tangible personal property;

D. a person who sells or installs a truck body on a new chassis for a consumer;

E. a person who binds printed sheets furnished by a consumer;

F. a person who prints on paper stock furnished by a consumer;

G. a person who prepares food for a customer for a consideration (see Minnesota Statutes, section 297A.61, subdivision 3, paragraph (d), clause (1), and subdivision 31. See Minnesota Statutes, section 297A.67, subdivisions 4, 5, and 6, for exemptions);

H. a person who grants the privilege of admission to a motion picture theater or any other place of amusement or recreation for a consideration, including plays, concerts, bowling alleys, golf courses, state or county fairs, professional or amateur athletic contests, skating rinks, etc.;

I. a person who furnishes music through mechanical devices such as juke boxes for a consideration;

J. a person who operates a hotel, rooming house, resort, campground, motel or trailer camp, or who leases real property for lodging purposes for a period of less than 30 days (see Minnesota Statutes, section 297A.61, subdivision 3, paragraph (g), clause (2));

K. a person who furnishes, for a consideration, electricity, gas, water, steam, or telecommunications services (see Minnesota Statutes, section 297A.61, subdivision 3, paragraphs (e) and (i));

L. a person who sells or furnishes any type of tangible personal property or service constituting a sale other than a sale for resale as defined in Minnesota Statutes, section 297A.61, subdivision 4; and

M. a person who machines castings, threads pipes, or processes lumber for customers who have furnished the material.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.2000 [Repealed, 17 SR 2369]

[Repealed, 17 SR 2369]

Minn. R. 8130.2100 [Repealed, L 2002 c 377 art 10 s 32]

[Repealed, L 2002 c 377 art 10 s 32]

Minn. R. 8130.2300 Imposition of Sales Tax

The actual-tax-collected method may not be used by the seller to reduce liability to an amount less than that computed on the basis of gross receipts. See Minnesota Statutes, section 297A.62.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: 17 SR 1279; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.2350 [Repealed, L 2002 c 377 art 10 s 32]

[Repealed, L 2002 c 377 art 10 s 32]

Minn. R. 8130.2400 [Repealed, 15 SR 693]

[Repealed, 15 SR 693]

Minn. R. 8130.2500 Application for Permit to Make Retail Sales

Subpart 1. Duty to obtain a permit.

The following persons making taxable sales within Minnesota, or sales outside the state for use, storage, distribution, or consumption in Minnesota must obtain a sales tax permit and collect the sales or use tax from the purchaser at the time of sale:

A. a retailer located in Minnesota;

B. a retailer maintaining a place of business in Minnesota;

C. a retailer making retail sales from outside this state to a destination within this state if the retailer engages in the regular or systematic soliciting of sales from potential customers in this state and meets the requirements of Minnesota Statutes, section 297A.66.

Subp. 1a. Tax identification number constitutes permit.

Under Minnesota Statutes, section 297A.84, a person that has a valid Minnesota tax identification number for taxes imposed under Minnesota Statutes, chapter 297A, is considered to have a permit.

Subp. 2. Nontaxable retail activities.

If a person engages in retail activities which are exclusively exempt, it is not necessary to apply for or secure a permit.

If a nonprofit organization makes or plans to make fundraising sales which are not exclusively exempt under Minnesota Statutes, section 297A.70, subdivision 13, 14, or 15, or any other part of Minnesota Statutes, chapter 297A, that organization must obtain a sales tax permit and collect the sales tax.

Subp. 3. Multiple locations.

If a person who is required to secure a permit has more than one place of business and the activities conducted at each place are subject to tax, and the person elects to file a separate return for each place of business, a separate application must be filed for each business location. A permit may be used only at the places designated. Members of a group of corporations related by stock ownership, if the members are engaged in making retail sales, must make individual applications.

Subp. 4. Consolidated return.

If a person elects to file a consolidated return, a list containing the business name and address of each separate place of business must be submitted to the commissioner when applying for a permit. An application containing such a list constitutes an application for each listed business name and address. The same sales and use tax account number applies to each location, along with a location number. If, thereafter, the person elects to file a separate return for any of the listed places of business, a new account number must be secured for the business location for which the separate return is filed.

Subp. 5. Vending machines.

If a person required to secure a sales and use tax permit operates vending machines in more than one location, the person is not required to secure a separate permit for each location. Vending machines include, but are not limited to, coin-operated or bill-operated machines that dispense food, candy, drinks, items of tangible personal property, or provide amusement and diversion.

Vending machines do not include the coin-operated services described in Minnesota Statutes, section 297A.61, subdivision 3, paragraph (g), clauses (3) and (6)(i).

Subp. 6. Information required.

Application for a permit must contain the following information:

A. the legal form and name of organization; for example, individual, partnership, Minnesota corporation, foreign corporation, or association, and if a corporation, the state and date of incorporation;

B. date when taxable sales were first made or date when taxable sales are expected to begin;

C. name and mailing address;

D. Minnesota Department of Revenue identification number, unless no such number was previously assigned, and the federal identification number, unless none has been assigned;

E. business name and location or appropriate name and location;

F. if there are two or more locations and the consolidated method is elected, each business name and address;

G. the date on which the fiscal year ends;

H. list of owners, partners, or principal officers, and home addresses and social security numbers of such individuals;

I. type of business; for example, retail trade, wholesale trade, manufacturing, motion picture theater, hotel, or bowling alley;

J. whether business is operated seasonally and, if so, usual opening and closing dates; and

K. names and addresses of all the applicant's agents operating in Minnesota and location of each of the applicant's distribution and sales houses or offices or other places of business within this state. The application must be submitted by the owner, if a natural person, by a partner if the applicant is a partnership, or by an owner, partner, or officer if the applicant is a corporation or an association.

Subp. 7. Change in ownership or name.

Where there is a change in ownership or name, the following rules are applicable:

A. Sale of a business enterprise operated as a sole proprietorship requires a new application, although the business may be continued under the same name.

B. Admission of a new partner to a partnership requires a new application, even if the business is continued under the same name. Resignation, expulsion, or death of a partner requires a new application if the partnership is required to obtain a new federal identification number because of the resignation, expulsion, or death.

C. A change in the ownership of shares of stock of a corporation does not invalidate a permit issued to the corporation, as there has been no shifting of the liability for payment of sales and use tax.

D. A change in name of a business enterprise or a change in location, where there has been no change in ownership, means the permit holder must notify the department of the changed name or address.

E. In the event of the death of a permit holder who was operating a business as a sole proprietor, the duly appointed and qualified estate representative of the decedent's estate can assume and use the decedent's Minnesota sales and use tax account number during the period of probate administration. However, if the decedent's business is sold or ownership is assumed by a member of the decedent's family, a change of ownership occurs and a new Minnesota sales and use tax permit is required.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.25; 297A.27; 297A.29
• History: 15 SR 693; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.2600 [Repealed, L 2002 c 377 art 10 s 32]

[Repealed, L 2002 c 377 art 10 s 32]

Minn. R. 8130.2700 Reinstatement of Revoked Permits

Subpart 1.

[Repealed, 22 SR 1027]

Subp. 2.

[Repealed, 22 SR 1027]

Subp. 3.

[Repealed, 22 SR 1027]

Subp. 4.

[Repealed, 15 SR 693]

Subp. 5. New application, or application for reinstatement of revoked permit.

The commissioner may reinstate a revoked sales and use tax permit, or issue a new permit to a taxpayer whose permit had been revoked if the taxpayer:

A. files all unfiled sales and use tax returns;

B. pays with a certified check, cashier's check, or money order the entire balance of tax, penalty, and interest due;

C. deposits with the commissioner, security or a surety bond in an amount equal to three times the average liability for the period for which returns are required to be filed, or six times the average liability in the case of a taxpayer who has had another permit revoked within the preceding 24 months;

D. signs an agreement to file timely returns and remit tax when due in the future. The agreement will specify an individual to whom or location where the returns and payments must be sent. All payments must be made by certified check, cashier's check, or money order, or by electronic funds transfer in the case of a taxpayer who has had another permit revoked within the preceding 24 months; and

E. has sales and use tax returns prepared by an attorney, accountant, agent, or preparer or attends a business education class for sales tax given by the department, if the taxpayer has had another permit revoked within the preceding 24 months. The commissioner will hold the security deposit described in item C for two years. Each failure to file a return or pay a tax due during the two-year period extends such period for the duration of the taxable period for which the return has not been filed or the tax has not been paid. The commissioner will pay interest on any money deposited as security. The interest will be calculated from the date of deposit to the date of refund, or date of application to any outstanding tax liability, at a rate specified in Minnesota Statutes, section 270C.405. The security deposit will be refunded to the taxpayer at the end of the two-year period, plus any extensions for violations, unless the taxpayer has any unpaid tax liabilities. The commissioner may apply the security deposit to any unpaid tax liabilities. The commissioner may refund the security deposit to the taxpayer before the end of the two-year holding period (or extended holding period) if the taxpayer's business ceases to operate and the taxpayer is no longer required to file sales and use tax returns and pay sales and use tax.

Subp. 6.

[Repealed, 22 SR 1027]

Subp. 7.

[Repealed, 22 SR 1027]

History

• Statutory Authority: MS s 270.06; 270C.06; 297A.25; 297A.27; 297A.29
• History: L 1984 c 640 s 32; 15 SR 693; 22 SR 1027; L 2005 c 151 art 1 s 114,116; 32 SR 1283

Minn. R. 8130.2800 [Repealed, 15 SR 693]

[Repealed, 15 SR 693]

Minn. R. 8130.2900 [Repealed, L 2005 c 151 art 7 s 23]

[Repealed, L 2005 c 151 art 7 s 23]

Minn. R. 8130.3000 Repealed by subpart

Subpart 1.

[Repealed, L 2002 c 377 art 10 s 32]

Subp. 2.

[Repealed, L 2002 c 377 art 10 s 32]

Subp. 3.

[Repealed, L 2002 c 377 art 10 s 32]

Subp. 4.

[Repealed, L 2002 c 377 art 10 s 32]

Subp. 5.

[Repealed, L 2002 c 377 art 10 s 32]

Subp. 6.

[Repealed, L 2002 c 377 art 10 s 32]

Subp. 7.

[Repealed, L 2002 c 377 art 10 s 32]

Subp. 8.

[Repealed, L 2002 c 377 art 10 s 32]

Subp. 9.

[Repealed, 15 SR 693]

Subp. 10.

[Repealed, 15 SR 693]

Minn. R. 8130.3100 Content and Form of Exemption Certificate

Subpart 1.

[Repealed, L 2005 c 151 art 7 s 23]

Subp. 2. Application to use exemption certificates.

A. A taxpayer must submit an application to the commissioner in order to obtain an exemption authorization to be used on the certificate of exemption for the following exemptions or situations:

B. A taxpayer does not need to submit an application to the commissioner in order to obtain an exemption authorization when the certificate of exemption is used for other exemptions.

C. Exemption certificates may be used for single purchases or for continuing future purchases. When used for continuing future purchases, the certificate is referred to as a blanket exemption certificate. Whether a certificate is a single purchase or blanket certificate is determined by marking the appropriate blank provided on the form.

Subp. 3.

[Repealed, 15 SR 693]

Subp. 4.

[Repealed, 15 SR 693]

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.25; 297A.27; 297A.29
• History: 15 SR 693; L 1997 c 199 s 14; L 2005 c 151 art 1 s 114; art 7 s 23; 31 SR 449

Minn. R. 8130.3200 Nonexempt Use of Purchase Obtained with Exemption Certificate

Subpart 1. Nonexempt use, use tax imposed.

Under Minnesota Statutes, sections 297A.665 and 297A.72, the seller may accept an exemption certificate from the purchaser on items otherwise taxable. Under Minnesota Statutes, section 297A.73, if the purchaser makes a nonexempt use of the property for which the purchaser had given an exemption certificate, that use is considered a retail sale by the purchaser when the item is first used by the purchaser. The sales price (see Minnesota Statutes, section 297A.61, subdivision 7, regarding the calculation of sales price) must be reported as a purchase subject to tax.

If the purchaser is not registered for sales and use tax and is not required to file a sales and use tax return, the purchaser must file a consumer's use tax return.

Use of the property for demonstration or display while holding it for sale or lease in the regular course of business is not a taxable use by the purchaser.

Subp. 2. Temporary use.

If the purchaser temporarily uses the property other than for demonstration or display, while holding it for sale or lease, the use tax is calculated on the reasonable rental value of the property.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.25; 297A.27; 297A.29
• History: 15 SR 693; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.3300 Fungible Goods for Which Exemption Certificate Given

Subpart 1. Defined.

For purposes of Minnesota Statutes, section 297A.74, fungible goods are movable goods which may be estimated and replaced according to weight, measure, and number. Such goods comprise those belonging to the same class that do not have to be dealt with in specie (retaining existence as a distinct individual of a particular class). Common examples of fungible goods are grain in silos or elevators, oil in tanks, coal in hoppers, and lumber in piles.

Subp. 2.

[Repealed, 15 SR 693]

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.25; 297A.27; 297A.29
• History: 15 SR 693; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.3400 Direct Pay Authorization Procedure

Subpart 1. Issuance.

The commissioner of revenue may issue a direct pay permit to certain persons who:

A. purchase substantial amounts of tangible personal property for business use under circumstances that normally make it difficult or impractical at the time of purchase to determine whether such property will be subject to the sales tax or whether the use thereof will be exempt; and

B. hold a sales and use tax permit.

Subp. 2. Payment.

The holder of a direct pay permit must report and pay the applicable use tax directly to the commissioner instead of paying the sales tax to its vendors with respect to all materials purchased pursuant to a direct pay permit.

Subp. 3. Application.

An application for a direct pay permit must be submitted to the commissioner of revenue. The application should be in the form of a letter containing the applicant's name, address, sales and use tax account number, description of the business, description of accounting system to reflect the proper amount of tax due, volume of purchases, and justification for adopting the direct pay method.

Subp. 4. Qualification requirements.

To qualify for a direct pay permit, a business must demonstrate to the satisfaction of the commissioner that:

A. the nature of the business is such that the direct pay method will materially reduce the administrative work of collecting the tax;

B. the firm's accounting system will clearly reflect the proper amount of tax due;

C. the firm makes taxable purchases in sufficient volume to justify the expense of regular audits by the Department of Revenue; and

D. it is in the best interests of the state to issue the permit. Each person whose application is approved will receive a direct pay permit which will be numbered, dated, and signed by the commissioner or the commissioner's delegated representative.

Subp. 5. Holder's duties to vendors.

The holder of a direct pay permit must furnish a copy of the direct pay permit or a statement that the holder holds a direct pay permit, the number of the permit and the date issued, to each vendor from whom the holder purchases tangible personal property on which an exemption is claimed. The use of the permit will relieve the vendor from the responsibility of collecting the sales tax on sales made to a direct pay permit holder. Each person issued a direct pay permit must keep a current list of all vendors from whom purchases are made under the direct pay method, and, upon request by the commissioner, must submit such list for examination.

The holder of a direct pay permit must either issue the permit to all vendors required to collect Minnesota sales and use taxes (except those excluded in subpart 6), and accrue all liability as a use tax, or maintain accounting records in sufficient detail to show in summary, and in respect to each transaction, the amount of sales taxes paid to vendors in each reporting period.

If the holder of the permit chooses the latter alternative, then all purchases from any one supplier must be made either exempt or taxable. It is not permissible to request the vendor to assess the sales tax on only selected transactions.

Subp. 6. Certain transactions not permitted.

A holder of a direct pay authorization may never use it in connection with the following transactions:

A. purchases of taxable food or beverages;

B. purchases of taxable lodging or services related thereto;

C. purchases of admissions to places of amusement or athletic events, or the privilege of use of amusement devices;

D. purchases of motor vehicles taxed under Minnesota Statutes, chapter 297B; and

E. purchases of any of the taxable services listed in Minnesota Statutes, section 297A.61, subdivision 3, paragraph (g), clauses (3), (4), and (6), and paragraph (i).

Subp. 7. Authorization revocable and not transferable or assignable.

A direct pay authorization is not transferable nor may the use of a direct pay authorization be assigned to a third party. The commissioner may revoke a direct pay authorization at any time the holder fails to comply with the conditions under which the authorization was granted or for any other reason constituting misuse of the authorization. The direct pay authorization may also be revoked when the commissioner determines that its continued use is contrary to the best interests of the state of Minnesota.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.25; 297A.27; 297A.29
• History: 15 SR 693; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.3500 Motor Carriers in Interstate Commerce

Subpart 1. Direct payment and notice.

Under Minnesota Statutes, section 297A.90, persons described in subpart 2 engaged in interstate for-hire transportation of property or passengers by motor vehicle may elect to pay sales and use taxes directly to the commissioner of revenue on mobile transportation equipment and parts and accessories attached or to be attached to the equipment. Electing carriers shall give notice of the election to the commissioner of revenue and shall pay taxes due in accordance with this part. The notice must be in the form of a letter setting forth the electing carrier's name, address, sales and use tax account number, and accompanied by the carrier's certificate or permit issued by, or registration with, the United States Department of Transportation, the transportation regulation board, or other evidence such as the file number issued by the Minnesota Department of Transportation to verify that it is a carrier engaged in transporting tangible personal property or passengers in interstate commerce.

Subp. 2. Persons included.

Persons referred to in subpart 1 include:

A. persons possessing a certificate or permit or having completed a registration process that authorizes for-hire transportation of property or passengers from the United States Department of Transportation, the transportation regulation board, or the Minnesota Department of Transportation;

B. persons transporting commodities defined as exempt in for-hire transportation in interstate commerce;

C. persons who, pursuant to contracts with persons described in items A or B, transport tangible personal property or passengers in interstate commerce; and

D. persons who in the course of their business are transporting solely their own goods in interstate commerce.

Subp. 3. Motor carrier direct pay authorization.

A motor carrier direct pay authorization issued to qualified electing carriers by the commissioner of revenue is effective as of the date shown on the authorization.

Subp. 4. Governing provisions.

Carriers that elect to pay the tax under the provisions of Minnesota Statutes, section 297A.90, are governed by the following:

A. The carrier must hold or must have applied for a Minnesota sales and use tax permit. Application for such a permit must be made at the same time as the carrier's notice of election if none has previously been applied for.

B. Sales and use taxes due on the purchases and leases of tangible personal property other than mobile transportation equipment and parts and accessories attached or to be attached shall be paid directly to retailers authorized to collect the Minnesota tax at the same time and in the same manner as though no election had been made. Such property may not be purchased or leased exempt under a motor carrier direct pay authorization.

C. Mobile transportation equipment intended for use both within and without Minnesota and parts and accessories attached or to be attached may be purchased or leased tax free by presenting a copy of motor carrier direct pay authorization to the seller.

D. Use taxes due in respect of mobile transportation equipment and parts and accessories attached or to be attached thereto shall be paid directly to the commissioner of revenue by way of a return filed on or before the 20th day of the month following the purchase or rental of such property. The return must show the sum of:

E. If sales or use tax has been paid to another state on an item which is includable in the Minnesota return, a credit is allowable for such tax (limited to the Minnesota sales and use tax rate) in the same ratio as the cost of the item is included in the Minnesota tax base.

F. Withdrawal of an election to come under the provisions of Minnesota Statutes, section 297A.90, becomes effective only upon notice of such intent to the commissioner of revenue. If such election is withdrawn, subsequent reelection is effective only upon approval of the commissioner of revenue.

G. If an interstate motor carrier does not elect to pay Minnesota sales and use tax under the provisions of Minnesota Statutes, section 297A.90, then mobile transportation equipment subject to the sales tax on motor vehicles under Minnesota Statutes, chapter 297B, is not subject to the Minnesota sales and use tax under Minnesota Statutes, chapter 297A, and a sales tax on motor vehicles, equal to the sales and use tax rate, is collected at the time such equipment is registered in Minnesota. On purchases of parts, accessories, equipment, and supplies not exempt, the carrier shall pay the sales and use tax directly to registered retailers. If the retailer is not registered, the carrier shall pay the use tax directly to the commissioner of revenue.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: L 1995 c 233 art 4 s 4; L 1995 c 248 art 4 s 4; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.3600 [Repealed, 31 SR 449]

[Repealed, 31 SR 449]

Minn. R. 8130.3800 Imposition of Use Tax

The "use tax" is a compensating or complementary tax, reaching the use, storage, distribution, or consumption of certain items purchased for use in Minnesota.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.25; 297A.27; 297A.29
• History: 15 SR 693; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.3850 [Repealed, L 2002 c 377 art 10 s 32]

[Repealed, L 2002 c 377 art 10 s 32]

Minn. R. 8130.3900 Liability for Payment of Use Tax

Subpart 1. General rule.

Minnesota Statutes, section 297A.63, imposes upon the purchaser of tangible personal property used, stored, distributed, or consumed in Minnesota, liability for the use tax until the tax has been paid to Minnesota.

Subp. 2. Collection authorization.

If a seller who is not required to collect Minnesota sales tax applies for a sales and use tax permit to collect a tax on tangible personal property sold to persons located in Minnesota, authorization to do so may be granted to the seller provided the seller agrees:

A. to collect the tax due from customers on storage, use, distribution, or consumption in Minnesota of taxable personal property in accordance with Minnesota Statutes, sections 297A.77 and 297A.89, subdivision 2;

B. to file a Minnesota sales and use tax return, and to remit the tax collected to Minnesota. (See Minnesota Statutes, sections 289A.18 and 289A.31); and

C. to maintain adequate records of all sales of taxable personal property made to persons within Minnesota.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.25; 297A.27; 297A.29
• History: 15 SR 693; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.4000 Collection of Tax at Time of Sale

Subpart 1.

[Repealed, L 2005 c 151 art 7 s 23]

Subp. 2.

[Repealed, L 2005 c 151 art 7 s 23]

Subp. 3. Outstate business.

An outstate business making deliveries to Minnesota customers in its own trucks must collect and remit the sales tax imposed on Minnesota buyers.

Subp. 4. Manufacturer's representative.

When a manufacturer's representative takes the order and bills the purchaser and collects for the merchandise, the representative is then considered a retailer and is required to have a permit and collect the sales tax from the customer.

Subp. 5.

[Repealed, 31 SR 449]

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.25; 297A.27; 297A.29
• History: 15 SR 693; 17 SR 1279; L 2005 c 151 art 1 s 114; art 7 s 23; 31 SR 449

Minn. R. 8130.4100 [Repealed, 15 SR 693]

[Repealed, 15 SR 693]

Minn. R. 8130.4200 Repealed by subpart

Subpart 1.

[Repealed, L 2005 c 151 art 7 s 23; 31 SR 449]

Subp. 2.

[Repealed, 15 SR 693; 31 SR 449]

Subp. 3.

[Repealed, 31 SR 449]

Minn. R. 8130.4300 Property Brought Into Minnesota

Subpart 1. General rule.

Minnesota Statutes, section 297A.665, paragraph (f), places the burden of proof on the purchaser of tangible personal property or any items listed in Minnesota Statutes, section 297A.63, to prove that the items which were shipped or brought into Minnesota by such purchaser were not purchased from a retailer for storage, use, or consumption in Minnesota, and thus are not subject to Minnesota sales or use tax. Whether the property has been purchased for use in Minnesota usually will be determinable at or near the time of its purchase. Thus, a nonresident purchaser who can show that property had been purchased and previously used in another state for a reasonable period of time before being brought into Minnesota for use therein, usually will be deemed to have satisfied the requirements of Minnesota Statutes, section 297A.665, paragraph (f).

Subp. 2.

[Repealed, 31 SR 449]

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.25; 297A.27; 297A.29
• History: 15 SR 693; L 2005 c 151 art 1 s 114; 31 SR 449; 48 SR 840

Minn. R. 8130.4400 Credit Against Use Tax

Subpart 1. General rule.

Under Minnesota Statutes, section 297A.80, a credit is allowed against the use tax due under Minnesota Statutes, section 297A.63, from any person on any item purchased by the person if the item has previously been subjected to a sales or use tax in another state or a subdivision of the other state. The credit is allowed to the extent of the rate legally imposed on the item in the other state. If the tax paid in the other state is subject to refund by the other state, it is not legally imposed for purposes of this credit. If the rate imposed by the other state or any subdivision of the other state is equal to or higher than the rate imposed under Minnesota Statutes, section 297A.63, then no tax is due. The credit is not allowed for taxes paid to a foreign country.

Calculation of use tax due is governed by Minnesota Statutes, section 297A.80. That section states that use tax provisions apply only at the rate measured by the difference between the rate fixed by Minnesota Statutes, section 297A.63, and the rate by which the previous tax was calculated in the other state. The maximum amount of tax which will be assessed by Minnesota according to Minnesota Statutes, section 297A.80, is the amount of tax calculated from the Minnesota rate. Use tax due to Minnesota is the tax prescribed by the rate in Minnesota Statutes, section 297A.63, less the rate paid in the state of purchase. If the sales tax imposed in the state of purchase is equal to or greater than the amount of Minnesota use tax, no Minnesota use tax is due.

Subp. 2. Erroneous tax payment.

A Minnesota taxpayer who erroneously pays a sales tax to another state may not take a credit against the tax due Minnesota on the Minnesota return. Credit is allowed against the tax due Minnesota if the Minnesota taxpayer has legally paid a sales tax to another state and may only be taken by the person who paid the tax to the other state.

Subp. 3.

[Repealed, L 2005 c 151 art 7 s 23]

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.25; 297A.27; 297A.29
• History: 15 SR 693; L 2005 c 151 art 1 s 114; art 7 s 23; 31 SR 449

Minn. R. 8130.4700 Prepared Food, Candy, and Soft Drinks

Subpart 1.

[Repealed, 29 SR 1273]

Subp. 1a. Applicable law.

Minnesota Statutes, section 297A.61, subdivision 3, paragraph (d), defines "sale and purchase" to include the preparation of food for a consideration. Taxable food includes prepared food as defined in Minnesota Statutes, section 297A.61, subdivision 31; soft drinks, as defined in Minnesota Statutes, section 297A.61, subdivision 32; candy, as defined in Minnesota Statutes, section 297A.61, subdivision 33; and all food sold through vending machines as defined in Minnesota Statutes, section 297A.61, subdivision 34. Dietary supplements as defined in Minnesota Statutes, section 297A.67, subdivision 2, are also taxable.

Under Minnesota Statutes, section 297A.67, subdivision 2, food and food ingredients, except for taxable food described in Minnesota Statutes, section 297A.61, subdivision 3, paragraph (d), are exempt from tax. Alcoholic beverages and tobacco are not food and food ingredients and are therefore subject to tax unless another exemption applies.

Subp. 2. Food and food ingredients.

"Food and food ingredients" as defined in Minnesota Statutes, section 297A.67, subdivision 2, are exempt.

A. Examples of items that qualify as exempt food or food ingredients include, but are not limited to, the following: cereal and cereal products, butter, cheese, milk and milk products, oleomargarine, meat and meat products, fish and fish products, eggs and egg products, vegetables and vegetable products, fruit and fruit products, spices and salt, sugar and sugar products, coffee and coffee substitutes, tea, cocoa and cocoa products. Exempt "food and food ingredients" also include the following items: baking powder and soda; beverage powders; chips (potato, corn, etc.); chip dip; cooking oils; cooking wine; flavoring; freezer pop ingredients; food coloring; gelatin; ice cream; malted milk powder; nuts; dry, frozen, or concentrated nonalcoholic cocktail mixes (that is, cocktail mixes intended for consumption in combination with an alcoholic or other beverage); raisins; artificial sweeteners; salad dressing; seasonings; condiments; herbs; relishes; sauces; gravies; sherbet; shortening; vanilla; tonic water; ice cubes; or unsweetened bottled or canned water.

B. Notwithstanding their inclusion in item A, food and food ingredients are subject to tax if they qualify as prepared food, a soft drink, candy, or food sold through vending machines.

C. Examples of items that do not qualify as food or food ingredients include nonedible cake decorations, Easter egg dye, garden seeds, pet food, and softener salt.

Subp. 3.

[Repealed, 29 SR 1273]

Subp. 4.

[Repealed, 29 SR 1273]

Subp. 5. Soft drinks.

A. "Soft drinks" means nonalcoholic beverages that contain natural or artificial sweeteners.

B. "Soft drinks" does not include beverages that contain milk or milk products; or soy, rice, or similar milk substitutes.

C. "Soft drinks" does not include beverages that contain more than 50 percent vegetable or fruit juice. Beverages that are labeled fruit juice, fruit drink, fruit ade, or fruit nectar are subject to tax when the percentage of fruit juice content is not specified.

D. Soft drinks are taxable regardless of serving size or the type of seller. For example, they are taxable whether they are sold by a grocery store, restaurant, or vending machine.

E. Examples of sweeteners are corn syrup, dextrose, invert sugar, sucrose, fructose, fruit juice concentrates, molasses, evaporated cane juice, rice syrup, barley malt, honey, and artificial sweeteners. Sweeteners are taxable only when combined with another ingredient. They are not taxable when sold separately.

F. Examples of soft drinks are soda pop, bottled or canned water that contains sweeteners, coffee and tea drinks that contain sweeteners, root beer, nonalcoholic beer, and fruit drinks containing 50 percent or less fruit juice.

G. Examples of nontaxable items are apple cider; beverage powders or concentrates such as ground coffee, tea bags, and juice concentrate; carbonated and noncarbonated bottled or canned water that does not contain sweeteners regardless of container size; vegetable juices containing more than 50 percent vegetable juice, even if these beverages contain sugar; and coffee drinks that contain milk. These items are taxable if they are prepared by the seller, qualify as an alcoholic beverage, or are sold through a vending machine.

Subp. 6. Candy.

A. "Candy" means a preparation of sugar, honey, or other sweeteners in combination with chocolate, fruits, nuts, or other ingredients or flavorings in the form of bars, drops, or pieces. All bars, drops, or pieces, not depending on size, are taxable.

B. "Candy" does not include food items that require refrigeration or that contain flour such as white, whole wheat, rice, corn, or brown flour, as long as the label lists "flour" as one of the ingredients.

C. Examples of sweeteners are corn syrup, dextrose, invert sugar, sucrose, fructose, fruit juice concentrates, molasses, evaporated cane juice, rice syrup, barley malt, honey, and artificial sweeteners.

D. Examples of candy are caramel-coated popcorn, honey roasted and honey coated nuts, gum, breath mints, fruit roll-ups, marshmallows, sweet or semisweet cooking bars or chips, artificially sweetened candy, almond bark, glazed apricots, and chocolate-coated potato chips.

E. Examples of food items that are not candy include:

Subp. 7. Prepared food, candy, or soft drinks served at hospitals, sanitariums, nursing homes, senior citizens' homes, and correctional, detention, and detoxification facilities.

A. Under Minnesota Statutes, section 297A.67, subdivision 4, prepared food, candy, or soft drinks served to patients, inmates, or persons residing at hospitals, sanitariums, nursing homes, senior citizens' homes, and correctional, detention, and detoxification facilities are exempt. This exemption applies when the prepared food, candy, or soft drinks are purchased as well as sold by these facilities. For purposes of this subpart, the definitions in subitems (1) to (5) apply:

B. All prepared food, candy, or soft drinks served to patients and residents by hospitals, sanitariums, nursing homes, senior citizens' homes, and correctional, detention, and detoxification facilities are exempt, including prepared food, candy, or soft drinks that are prepared by separate entities.

C. Food items, including prepared food, candy, or soft drinks sold through vending machines, coffee shops, and cafeterias that operate in these facilities are subject to tax and are not considered to have been served to the patients, inmates, or persons residing at the facilities enumerated in item A.

Subp. 8. Prepared food, candy, or soft drinks served at schools.

A. Under Minnesota Statutes, section 297A.67, subdivision 5, prepared food, candy, or soft drinks served at public and private elementary, middle, or secondary schools, as defined in Minnesota Statutes, section 120A.05, are exempt. This exemption applies to prepared food, candy, or soft drinks when purchased as well as sold by the schools.

B. All prepared food, candy, or soft drinks served at public and private elementary, middle, or secondary schools are exempt, including prepared food, candy, or soft drinks that are prepared or served by separate entities and prepared food, candy, or soft drinks that are purchased by employees or the general public.

C. Prepared food, candy, or soft drinks served to students at institutions of higher education are subject to sales tax unless provided to students under a board contract. For purposes of this subpart, "institutions of higher education" means colleges, universities, and private career schools. The exemption for board contracts applies only when a contract that includes the sale of prepared food, candy, or soft drinks exists between a student and an institution of higher education, or between a student and a residential student organization that is recognized by the institution, for an educational activity that takes place on the premises of that institution. The student is not required to be enrolled at the institution at which the activity is conducted. If the food is not provided as part of a board contract, the institution may only purchase the prepared food, candy, or soft drinks exempt for resale from a third party if the food is intended to be resold at retail. The rules in subitems (1) to (4) apply for purposes of the exemption for board contracts.

D. Food items, including prepared food, candy, or soft drinks sold through vending machines at all schools, including K-12 institutions and institutions of higher education, are taxable.

E. Administrative offices located off the school premises are not considered part of the school and prepared food, candy, or soft drinks served at those offices are taxable.

Subp. 9. Incidental prepared food, candy, or soft drinks at educational programs.

A. Prepared food, candy, or soft drinks that are provided as part of an educational service, such as a children's camp or a professional seminar, are generally not taxable. When providing prepared food, candy, or soft drinks is incidental to the total program fee, and charges for the prepared food, candy, or soft drinks are included in the fee to attend the program, the prepared food, candy, or soft drinks are not taxable to the program participants.

B. If the educational program purchases prepared food, candy, or soft drinks to serve to participants in the program, the program must pay sales or use tax on the prepared food, candy, or soft drinks purchased if participants are not billed separately for the prepared food, candy, or soft drinks. If the charges to participants for the prepared food, candy, or soft drinks are separately stated, they may be purchased by the educational program exempt for resale, and tax must be charged on the separately stated fees for the prepared food, candy, or soft drinks charged to participants.

Subp. 10. Prepared food, candy, or soft drinks provided to employees.

A. When an employer purchases prepared food, candy, or soft drinks, to provide to employees for no consideration, the prepared food, candy, or soft drinks provided to employees is exempt. The purchase of these items by the employer is taxable. When an employer in the business of selling prepared food, candy, or soft drinks provides these items free to employees, the employer owes use tax on its cost of the prepared food, candy, or soft drinks and all other taxable items, including disposable plates, soft drinks, napkins, cups, and flatware.

B. Notwithstanding this subpart, prepared food, candy, or soft drinks served to employees at K-12 schools, as provided in Minnesota Statutes, section 297A.67, subdivision 5, are exempt even if the employees are required to pay for the items.

Subp. 11. Purchases of equipment and products by retailers of prepared food, candy, or soft drinks.

Retailers of prepared food, candy, or soft drinks, including but not limited to restaurants and fast food establishments, must pay the tax on all purchases of equipment and products used or consumed in the business, including fixtures and reusable items such as linens, flatware, glassware, and towels. Restaurants are specifically excluded from the class of manufacturers considered to be engaged in industrial production, as defined in Minnesota Statutes, section 297A.68, subdivision 2, paragraph (c). In addition, machinery and equipment used by restaurants in the furnishing, preparing, or serving of prepared food, candy, or soft drinks is not included in the exemption for capital equipment as defined in Minnesota Statutes, section 297A.68, subdivision 5, paragraph (c), clause (7). Consequently, sales of equipment, electricity, gas, and steam and all other items to retailers of prepared food, candy, or soft drinks are taxable, except for the sale of exempt food and food ingredients and nonreusable items to such retailers. Nonreusable items such as souffle cups; straws; ice; swizzle sticks; paper products such as placemats, tablecloths, napkins, and doilies; paper, plastic, or wooden plates; cups; forks; toothpicks; or other items which are used or consumed by the customer as an integral part of the prepared food, candy, soft drinks, or alcoholic drinks are considered sold with the prepared food, candy, or soft drinks. Sales of these nonreusable items to persons engaged in the business of selling prepared food, candy, or soft drinks are, accordingly, sales for resale.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06; 297A.29
• History: 29 SR 1273; L 2005 c 151 art 1 s 114; 34 SR 723

Minn. R. 8130.4705 Food Sold with Eating Utensils

Subpart 1. Eating utensils provided by seller.

The sale of food sold with eating utensils provided by the seller is one of the conditions that meets the definition of prepared food in Minnesota Statutes, section 297A.61, subdivision 31. Examples of "eating utensils" include plates, bowls, knives, forks, chopsticks, spoons, glasses, cups, napkins, or straws. A "plate" does not include a container or packaging used to transport food. Some foods, such as foods containing certain raw animal foods requiring cooking by the consumer, and bakery items, which otherwise are excepted from the definition of prepared food, are prepared food if they meet the condition of Minnesota Statutes, section 297A.61, subdivision 31, clause (1), "food sold with eating utensils provided by the seller." This part explains when eating utensils are considered to be provided by the seller.

Subp. 2. Seller's practice to physically give or hand utensil to the customer.

Food is sold with eating utensils provided by the seller if the seller's practice for the item, as represented by the seller, is to physically give or hand a utensil to the customer with the food as part of the sales transaction. For purposes of this part, the seller's practice to "physically give or hand" a utensil to the customer means:

A. it is the seller's practice to hand the utensil to the customer along with the food;

B. it is the seller's practice to place the utensil in a package containing the customer's food, including prepackaged food when the seller places the utensil in the package;

C. it is the seller's practice to sell food with a utensil that has been prepackaged by a person other than the seller, except when the person who originally placed the utensils in the package has a North American Industry Classification System (NAICS) classification code of a manufacturer, sector 311, the utensil is not provided by the seller; or

D. it is the seller's practice to place the utensil on a table, counter, or similar surface for the customer to use. A utensil previously placed by the seller, for example, as part of a place setting, is considered physically given to the customer. For purposes of this item, "table, counter, or similar surface" means furniture or surfaces where a customer sits or stands to eat.

Subp. 3. Seller makes utensils available to the customer.

Food is sold with eating utensils provided by the seller when the seller makes the utensils available to the customer under the following circumstances:

A. if a plate, glass, cup, or bowl is necessary to receive the food from the seller; for example, milk dispensed from a milk dispenser is sold with an eating utensil provided by the seller because the customer must use a glass in order to receive the milk; or

B. if the seller's prepared food sales percentage, as determined in subpart 5, is greater than 75 percent; except that

C. in the case of a food item that contains four or more servings packaged as one item sold for a single price, as provided for in subpart 4, even if the sales percentage of prepared food is greater than 75 percent, a utensil is not provided by the seller merely because the seller makes the utensil available.

Subp. 4. Four or more servings packaged as one item.

When a food item that contains four or more servings packaged as one item is sold for a single price, eating utensils are considered provided by the seller if it is the seller's practice to physically give or hand the utensils to the customer as described in subpart 2, and the following items apply.

A. The number of servings in an item is as shown on the label on the item sold. In the absence of a label, a seller shall make a reasonable determination of the number of servings in the item.

B. For purposes of this subpart, "packaged" means that the food item is placed in a package by the seller or the customer either prior to or following the selection of the food.

C. For purposes of this subpart, "single price" means one price for the entire contents of the packaged food. If the food item consists of more than one serving and the seller charges for each individual serving in the package, then the sale is not "one item sold for a single price."

Subp. 5. Determination of prepared food sales percentage.

The seller shall determine the prepared food sales percentage as provided in this subpart.

A. Annually, the seller shall determine a single prepared food sales percentage for all of the seller's establishments in this state combined.

B. The seller shall calculate the prepared food sales percentage as follows:

C. The seller shall calculate the percentage either each tax year or each business fiscal year, based on the seller's data from the prior tax year or business fiscal year.

D. The seller shall calculate and apply the percentage as soon as possible after accounting records are available to the seller, but not later than 90 days after the beginning of the tax or business fiscal year, whichever is used for the annual calculation.

E. Notwithstanding item C, if the seller has a new establishment in this state, the following subitems apply.

F. "Seller's establishments" means business operations in Minnesota owned by the same person, as defined in Minnesota Statutes, section 297A.61, subdivision 2, paragraphs (a) and (b).

Subp. 6. Examples.

A. The following subitems are examples of utensils originally placed in a package by a person other than the seller.

B. The following subitems are examples explaining whether a food item that contains four or more servings packaged as one item is sold for a "single price."

C. The following subitems are examples of combined sales from a seller's establishments for purposes of the prepared food sales percentage under subpart 5.

Subp. 7. Other prepared food.

Notwithstanding the application of subparts 1 through 6, if a food is considered "prepared food" under Minnesota Statutes, section 297A.61, subdivision 31, clause (2), because it is sold in a heated state or heated by the seller, or because the seller mixed or combined two or more food ingredients as a single item, excepting the foods listed in Minnesota Statutes, section 297A.61, subdivision 31, clause (2), items (i) through (iv), the food is still taxed as prepared food.

Example: a pizzeria prepares, heats, and sells pizzas by the slice solely for pick-up, and does not have any utensils available or given to the customer. The business has a prepared food sales percentage greater than 75 percent, so that it only need have utensils available for any food sold at the establishment for the utensils to be considered "provided by the seller." However, the fact that no utensils are provided by the seller does not mean that the pizza is not prepared food. Rather, it is prepared food because it is heated by the seller and also because the seller combines food ingredients and sells it as a single item.

History

• Statutory Authority: 270C.06
• History: 32 SR 461

Minn. R. 8130.4800 Repealed by subpart

Subpart 1.

[Repealed, L 2006 c 259 art 6 s 32]

Subp. 2.

[Repealed, L 2003 c 127 art 6 s 18]

Subp. 3.

[Repealed, L 2006 c 259 art 6 s 32]

Subp. 4.

[Repealed, L 2006 c 259 art 6 s 32]

Subp. 5.

[Repealed, L 2006 c 259 art 6 s 32]

Subp. 6.

[Repealed, L 2006 c 259 art 6 s 32]

Subp. 7.

[Repealed, L 2006 c 259 art 6 s 32]

Subp. 8.

[Repealed, L 2006 c 259 art 6 s 32]

Minn. R. 8130.4900 [Repealed, 21 SR 330]

[Repealed, 21 SR 330]

Minn. R. 8130.5000 [Repealed, L 2002 c 377 art 10 s 32]

[Repealed, L 2002 c 377 art 10 s 32]

Minn. R. 8130.5100 [Repealed, L 2006 c 259 art 6 s 32]

[Repealed, L 2006 c 259 art 6 s 32]

Minn. R. 8130.5200 [Repealed, L 2005 c 151 art 7 s 23]

[Repealed, L 2005 c 151 art 7 s 23]

Minn. R. 8130.5300 Petroleum Products

Subpart 1. Fuels subject to Minnesota Statutes, chapter 296A.

An exemption from sales and use tax is provided for petroleum products upon which a tax has been imposed under Minnesota Statutes, chapter 296A. The tax imposed by Minnesota Statutes, chapter 296A, applies to all gasoline (including aviation and marine gasoline), and special fuels for highway or aircraft use.

Subp. 2. Fuels not subject to Minnesota Statutes, chapter 296A.

All fuels not subject to the tax imposed by Minnesota Statutes, chapter 296A, or for which a refund of the petroleum tax has been allowed because the buyer used the fuel for nonhighway use, are subject to sales and use tax unless exempted under other provisions of the Sales and Use Tax Law. Unless another exemption applies, use tax must be reported on a sales or use tax return in relation to the month in which a petroleum tax refund is issued.

Example. Trucking company is a bulk purchaser (as defined in Minnesota Statutes, section 296A.01, subdivision 9) and orders 100,000 gallons of petroleum products in October. It instructs the distributor to deliver 70,000 gallons to a storage tank used to supply such petroleum products to licensed motor vehicles owned and operated by it. The remaining 30,000 gallons are delivered to a storage tank used to supply fuel oil for heating trucking company's premises. For the month of October, trucking company reports and pays the special fuel (as defined in Minnesota Statutes, section 296A.01, subdivision 46) excise tax on 70,000 gallons. Trucking company files a sales and use tax return and reports and pays a tax on the purchase price of the 30,000 gallons of petroleum products used for space heating. See Minnesota Statutes, section 297A.63 for application of use tax.

History

• Statutory Authority: MS s 270.06; 270C.06; 297A.29
• History: L 1992 c 575 s 53; 29 SR 1450; L 2005 c 151 art 1 s 114

Minn. R. 8130.5400 [Repealed, L 2006 c 259 art 6 s 32]

[Repealed, L 2006 c 259 art 6 s 32]

Minn. R. 8130.5500 Agricultural and Industrial Production

Subpart 1. Agricultural and industrial production.

There is a sales and use tax exemption for materials used or consumed in agricultural or industrial production of personal property intended to be sold ultimately at retail. This exemption is found in Minnesota Statutes, section 297A.25, subdivision 9. The provisions of this part apply to those persons engaged in agricultural or industrial production. Agricultural and industrial production includes any step or steps in the production process. It also includes the production, fabrication, printing, or processing of tangible personal property for consumers for consideration, defined as a sale under Minnesota Statutes, section 297A.01, subdivision 3, paragraph (b).

Materials that are used or consumed in providing a service other than production, fabrication, printing, or processing of tangible personal property for retail sale are taxable.

Generally, the production process begins with the removal of raw materials from stock for the purpose of commencing activities effecting changes thereon in the course of producing the intended product. The production process ends when the completed state is achieved. The completed state includes the packaging of the individual product, but not palletizing or otherwise preparing the packaged product for shipment. If the product is not packaged, the process ends when it is placed into finished goods inventory. If the package is not placed into finished goods inventory prior to shipment, the process ends when the last process prior to loading for shipment has been completed.

Quality control, testing, design, and research and development activities are part of the production process. The production process does not include the storage and preservation of raw materials prior to commencement of the production process; the handling, movement, storage, and preservation of completed goods; or the painting, cleaning, repairing, and maintenance of equipment and facilities. Agricultural and industrial production does not include the preparation, cooking, mixing, or furnishing of meals. "Meals" means food which will ordinarily be consumed without delay and without further preparation or storage.

In the case of mining or quarrying, the production process begins with the removal of overburden from the site of the ore, mineral, peat deposit, or surface materials and ends when the last process before stockpiling is performed. If the product is not stockpiled before shipment, the production process ends when the last process before loading for shipment has been completed.

Subp. 2. Exempt materials.

Minnesota Statutes, section 297A.25, subdivision 9, provides exemption for all materials used or consumed in agricultural or industrial production of personal property intended to be sold ultimately at retail, whether or not the item so used becomes an ingredient or constituent part of the property produced. All materials that are ingredients or component parts of the product, and materials that act on or come in contact with the product but that are not machinery, equipment, implements, tools, accessories, appliances, contrivances, furniture, or fixtures, are within this exemption. Examples of such exempt materials are grinding compounds, polishing compounds, and lithographic printing plates. The phrase "used or consumed in agricultural or industrial production" also includes materials that are only used once in production and even though they have not been physically consumed will not be used again. Examples of such exempt materials that could qualify for this exemption are keylines, typeset used for printing, and paper pan and cake liners used for baking goods.

Subp. 3.

[Repealed, 17 SR 2369]

Subp. 3a. Chemicals and fertilizers.

The purchase or use of chemicals or fertilizers for use or consumption in agricultural or industrial production is not taxable.

The purchase of chemicals and fertilizers for application to agricultural crops to achieve soil fertilization, weed control, or elimination of crop disease, or to prevent or destroy pest infestation of growing crops is not taxable. The agricultural crops must be grown for sale or as feed for use or consumption in agricultural production.

The purchase of chemicals for the control or eradication of pests is exempt if used for the health and protection of those animals whose feed is exempt under subpart 11. For purposes of this subpart, "pest" means an insect, rodent, nematode, fungus, weed, terrestrial or aquatic plant, animal life, virus, bacteria, or other organism. Pest control chemicals include insecticides (fly sprays, fly tapes, louse killers), pesticides, and rodenticides (mouse, rat, and gopher poison).

Chemicals and fertilizers that are purchased for nonproduction use such as lawn fertilizers, weed control chemicals used in a lawn or garden, or insect spray for home use, are all taxable.

Herbicides and fertilizers that are purchased by farmers for use on land that is part of the Conservation Reserve Program or other specifically enumerated government program are exempted under Minnesota Statutes, section 297A.25, subdivision 9.

Detergents or other cleaning chemicals used in cleaning factory or farm buildings, including buildings used to house animals, are taxable. However, disinfectants that are not merely detergent additives and that are applied to agricultural animals, or used to disinfect their surroundings to control or eradicate animal disease or pests, are not taxable.

Chemicals used for cleaning food processing machinery and equipment are also exempt. However, the chemicals used to clean the area surrounding the food processing machinery and equipment are taxable.

Chemicals that are used to clean tooling or equipment that is used in production are taxable because the chemicals are not used or consumed in the production process.

However, if applying the chemical to the tooling or equipment, other than for ordinary cleaning and maintenance, is required to manufacture the particular product, the purchase of that chemical is exempt.

Subp. 4.

[Repealed, 17 SR 2369]

Subp. 4a. Fuels, electricity, gas, steam, and water.

The purchase of fuel, electricity, gas, steam, and water that is used or consumed directly in agricultural or industrial production is not taxable. If these items are used for space heating or lighting, however, they are taxable.

The purchase of fuel, electricity, gas, steam, or water to power a machine or fixture that controls the lighting or climate of a building is taxable, unless the lighting or climate control is a special requirement necessary to produce that particular agricultural or industrial product. If the lighting or climate control is a special requirement, then the amount of fuel, electricity, gas, steam, or water used for that lighting or climate control is not taxable. The amount used must be determined by deducting the amount of fuel, electricity, gas, steam, or water used to maintain average lighting or climate control from the total amount used for lighting or climate control. "Average climate control" means a summer temperature range of 73 to 79 degrees Fahrenheit and a winter temperature range of 68 to 74.5 degrees Fahrenheit. "Average lighting" means the amount of wattage per square foot necessary to adequately light the area if lighting is not a special requirement necessary to produce a particular agricultural or industrial product.

There is a separate statutory exemption for electricity used to make snow for certain ski areas. See Minnesota Statutes, section 297A.25, subdivision 9.

Subp. 5.

[Repealed, 17 SR 2369]

Subp. 5a. Petroleum products and lubricants.

The purchase of petroleum products such as gasoline, diesel fuel, propane, grease, oil, or radiator antifreeze used or consumed in the operation of equipment used in the production of agricultural or industrial products, is exempt from the sales and use tax. Also exempt are lubricants such as penetrating oil, pulsator oil, and surge oil, and fuels such as propane, as long as they are used or consumed in the production process.

There is a separate statutory exemption for petroleum products used in the improvement of agricultural land by constructing, maintaining, and repairing drainage ditches, tile drainage systems, grass waterways, water impoundment, and other erosion control structures. See Minnesota Statutes, section 297A.25, subdivision 7.

Subp. 6. Packaging materials.

Sales of materials to persons engaged in agricultural or industrial production for use in packaging, shipping, or delivering tangible personal property produced or manufactured by them are exempt. Packaging material includes nonreturnable containers, but does not include returnable containers except as otherwise specified in this subpart.

Packaging materials do not include reusable containers, reusable pallets, or other reusable materials that are used to ship tangible personal property between production facilities, or for handling, storing, or moving materials within the confines of business premises.

"Container" means the articles in which tangible personal property is placed for shipment and delivery, such as cartons, cans, and bags. Container does not include items that are used primarily to facilitate loading, unloading, handling, transportation, or storage of products, such as bakery delivery carts, bread trays, skids, pallets, milk carts, and milk crates.

Items A to M govern the tax status of specific packaging materials and containers.

A. Price tags, shipping tags and address labels, packing slip envelopes, invoices, and advertising matter to be used in connection with the sale of property or to be enclosed with property sold are not packaging materials.

B. Labels that are used to identify the contents of a package are exempt. For example, a grocery store is engaged in production when it cuts and wraps meat or produce. The content labels that are used on the meat or produce are not taxable because they are packaging material. Price labels that do not contain any content information are not packaging materials and are taxable.

C. Returnable containers constitute equipment and generally are not within the scope of the exemption provided under Minnesota Statutes, section 297A.68, subdivision 2. However, purchases of returnable containers for use in packaging food and beverage products are within the exemption by specific statutory authorization. See Minnesota Statutes, section 297A.68, subdivision 2.

D. Returnable containers are designed and ordinarily used for more than one-time use as containers. They are customarily expected or required to be returned by customers for reuse. Vendors commonly require a deposit or payment by the customer with the understanding that the amount of the deposit will be refunded either in cash or in credit when the container is returned. Regardless of the condition or appearance of the container, it is a returnable container if the vendor requires a deposit or payment from the customer and if there is an express or implied agreement that the deposit will be refunded upon return of the container.

E. Deposits that are charged to customers as security for the return of containers are not subject to tax if separately stated on the invoice or billing.

F. Purchases of materials used to repair or recondition taxable returnable containers by the owners of those containers are taxable.

G. Nonreturnable containers are considered packaging material. The sale of nonreturnable containers used to package an article of tangible personal property for sale is exempt.

H. Internal packaging materials are those used inside of packages and containers in order to shape, form, preserve, stabilize, or protect the contents. All internal packaging materials purchased for use in packaging food and beverage products are exempt.

I. If the internal packaging materials are not being used to package food and beverage products, then the taxability of those packaging materials depends on whether they are returnable. If the materials are returnable, then they are treated as machinery or equipment and are taxable. If the materials are not returnable, then they are not taxable.

J. External packaging materials are those used under, outside of, and among packages and containers to protect, brace, pad, or cushion the packages or containers against damage, motion, shock, or breakage while being shipped. These materials are commonly known as dunnage and are exempt when purchased for use in industrial or agricultural production of tangible personal property and used to ship products to customers. However, sales of these same items to vendors of transportation services are taxable unless otherwise exempted by Minnesota Statutes, sections 297A.61 to 297A.995. If the materials are returnable, they are equipment and are taxable. If the external packaging materials are not returnable, they are not taxable.

K. External packaging materials do not include items that are used primarily to facilitate loading, unloading, handling, transportation, or storage of products, such as bakery delivery carts, bread trays, skids, pallets, milk carts, and milk crates.

L. The taxability of skids and pallets depends on whether they are returnable. If the skids and pallets are returnable, they are equipment and taxable. If the pallets and skids are not returnable, they are not taxable.

M. Sales of packaging materials, such as bags, wrapping paper, boxes, and clothes hangers, to vendors of services are not exempt under Minnesota Statutes, section 297A.68, subdivision 2. Meat locker operators are vendors of services when they cut meat furnished by their customers into smaller pieces, which they wrap and place in cold storage for the customers' convenience. Sales of wrapping paper, tape, and other materials to vendors for this purpose are taxable. However, meat locker operators who also make retail sales as well as cutting meat furnished by their customers may purchase wrapping materials exempt for resale and report and pay use tax on the portion of the wrapping materials used in performing the cutting service.

Subp. 7. Road building materials.

The definition of production found in Minnesota Statutes, section 297A.25, subdivision 9, includes the production of road building materials. When a manufacturer of road building materials purchases materials that will be used or consumed in the manufacturing of asphalt, bituminous mix, or other road building materials to be sold at retail, those purchases are not taxable. For purposes of this exemption, it does not matter that the road building materials will ultimately be sold for use in building parking lots and driveways. When that person sells the road building materials to someone who will use them to build or repair roads, or for any other nonexempt purpose, the entire sales price of the road building materials is subject to tax.

When a person produces road building materials for the person's own use in building or repairing roads, including a contract to build or repair roads for others, the materials used to produced the road materials are not exempt as materials used or consumed in industrial production. Because the person puts them to that person's own use in building, improving, or repairing roads, that person is not selling the road building materials at retail, as required for the exemption, but is engaged in improving real property. That person must pay sales or use tax on any materials used to make the road building materials that the person is going to use.

Subp. 8. Taxable equipment.

The exemption provided by Minnesota Statutes, section 297A.25, subdivision 9, does not include machinery, equipment, implements, tools, accessories, appliances, contrivances, furniture, or fixtures used in production, or fuel, electricity, gas, or steam used for space heating or lighting. Accordingly, a sales or use tax is imposed on not only a machine itself but on any repair parts for it. The tool or accessory that performs the work of the machine, including saw blades, grinding wheels, cutters, files, molds, dies, patterns, jigs, printing plates, and similar items, are also taxable unless exempted under subpart 9 as short-lived separate detachable units.

Materials or fabrication labor purchased by a person engaged in agricultural or industrial production are taxable if used to manufacture or fabricate equipment, tools, or similar items which are not intended for resale, but for the person's own use in the production process. Examples of materials are plastic, metal, or wood used in making patterns or jigs, and sand used in making molds. However, if the equipment, tools, or similar items to be manufactured or fabricated would qualify under subpart 9 as short-lived separate detachable units, then the materials and fabrication labor are exempt.

Subp. 9. Separate detachable units.

The exemption for industrial and agricultural production, provided under the provisions of Minnesota Statutes, section 297A.25, subdivision 9, includes accessory tools, equipment, and other short-lived items that satisfy the following conditions: (1) they are separate detachable units; (2) they are used in producing a direct effect upon the product; and (3) they have an ordinary useful life of less than 12 months.

All three conditions must be satisfied before an item is exempt. The item must be used to produce personal property intended to be sold ultimately at retail. If the item is used for maintenance purposes, or to produce other tooling for in-house use, it is not exempt. For purposes of this exemption, the words "separate detachable units," "used in producing a direct effect," and "ordinary useful life," have the meanings given them in items A to C.

A. "Separate detachable units" means accessory tools, equipment, or short-lived items that are attached to machinery when being used. These items are generally purchased separately from the purchase of the basic machine and do not include the basic machine and its component parts such as belts, pulleys, gears, shafts, and bearings. Examples of items considered to be separate detachable units include, but are not limited to, drill bits, cutting tools, grinding wheels, abrasive and polishing belts, sheets and discs, taps, reamers, printing plates, saw blades, and certain dies, jigs, patterns, and molds; however, if these items are included in the purchase price of the basic machine, and their cost is not separately stated, they are considered as part of the basic machine and taxable. Subsequent replacement of these items is exempt. Hand tools such as hammers, pliers, clamps, wrenches, screwdrivers, crowbars, soldering irons, knives, and power hand tools, are not separate detachable units and are not exempt. Attachments to hand tools are considered separate detachable units only if similarly functioning items attached to machinery would be considered separate detachable units. Examples of hand tool attachments considered to be separate detachable units include drill bits, grinding wheels, sandpaper disks, and sawblades.

B. "Used in producing a direct effect" means accessory tools, equipment, and other short-lived items that are used or consumed in industrial or agricultural production in a manner that directly causes a physical or chemical change upon or within the materials being processed. Examples of items within this exemption include, but are not limited to, drill bits, cutting tools, grinding wheels, abrasive and polishing belts, sheets and discs, taps, reamers, printing plates, saw blades, and certain dies, jigs, patterns, and molds. Examples of items not exempt under this provision are conveyor belts and rollers that only serve to move the product from place to place. The phrase "used in producing a direct effect upon the product" does not require a direct physical contact with the product. Items that do not come into contact with material being processed, and that are not the agents that by direct contact with the product produce physical or chemical changes, are considered to be used in producing a direct effect upon the product if their use serves the purpose of determining the shape, contour, configuration, content, or arrangement of content of the product, or any part of the product, being produced. Such items are considered to be used in producing a direct effect since the desired change in the material being acted upon is accomplished only by the combined effect of the items acting in conjunction with other items that actually have the direct physical contact with the product. Items that are used in creating and/or maintaining a condition that must prevail before a desired physical or chemical change can be effected on a product are not considered as being used to produce a direct effect; i.e., the physical or chemical change sought in the material being processed. To illustrate the application of this rule, the following examples of qualifying and nonqualifying items are given in subitems (1) and (2).

C. "Ordinary useful life" means the life of accessory tools, equipment, and other short-lived items measured by continuous use in production under normal conditions of the user. Continuous use under "normal conditions of the user" means normal but continuous use during the producer's normal business hours. Items that would otherwise qualify that are not used continuously but would last less than 12 months if production required continuous use are exempt. For example, a producer, whose normal conditions include a 15-hour business day, six days a week, uses a mold which otherwise qualifies under items A and B. If the mold had been used continuously during the producer's normal business hours of 15 hours a day, it would have been exhausted in four months. The four months is the mold's ordinary useful life. The producer, however, only uses the item for short production runs, a few days at a time, so it will not wear out for two years. This item qualifies even though the length of time retained is more than 12 months, since the item would not last 12 months if used continuously during the producer's normal business hours. An "ordinary useful life of less than 12 months" can be shown by providing evidence that prior purchases of similar items had useful lives of less than 12 months. Junking, scrapping, wearing out, or disposing of the item is conclusive evidence of the end of its ordinary useful life. Keeping an item after it has been used is not evidence of continued useful life unless the item is reused or is held for reuse in the taxpayer's ordinary production process. Repair (as defined in part 8130.0700) of an item is not evidence of the end of that item's ordinary useful life. For example, when an item that has an ordinary useful life of two years needs a repair six months after it has been purchased, the repair does not mean the item's useful life is six months.

Subp. 10. Building materials.

The purchase of materials or supplies used to construct, repair, or maintain agricultural or industrial buildings is taxable.

Subp. 11. Feeds.

The purchase of feed, feed additives, and feed supplements for use or consumption in agricultural or industrial production is exempt. Such feeds are used or consumed in agricultural or industrial production if they are fed to (1) agricultural animals raised for sale; (2) animals kept for use in agricultural production; (3) farm work stock; and (4) the following animals while they are being raised for sale on a commercial basis: fur-bearing animals, animals used as a source of wool, pets, and research animals. "Agricultural animals" means cattle, sheep, swine, goats, horses, mules, dairy animals, poultry, honey bees, fish, or other animals that are commercially raised for sale. "Farm work stock" means animals, such as draft horses, mules, oxen, and herd dogs, which are used exclusively for farming. "Fur-bearing animal" means a fox, mink, fitch, chinchilla, karakul, marten, nutria, or fisher that is second or later generation raised in captivity. "Pet" means any domesticated animal normally maintained in or near the household of the owner and kept for affection and pleasure rather than for utility or profit. The purchase of feed is subject to tax if it is to be fed to animals that are not used or consumed in agricultural production, or to those animals, such as a pet or a riding horse, that are not being raised for sale on a commercial basis.

Subp. 12. Seeds.

The purchase of seeds or plants to be used or consumed in agricultural or industrial production is not taxable. The purchase of lawn seeds or plants, flower seeds or plants, vegetable seeds or plants, or other similar seeds or plants, for nonproduction use, is taxable. Generally, tree seedlings purchased for windbreaks are not used or consumed in agricultural or industrial production and are taxable. Seeds and trees purchased by farmers for use on land that is part of the Conservation Reserve Program or other specifically enumerated government program are exempted under Minnesota Statutes, section 297A.25, subdivision 9.

Subp. 13. Agricultural production.

A. Under the provisions of Minnesota Statutes, section 297A.01, subdivision 13, the term "agricultural production," as used in Minnesota Statutes, section 297A.25, subdivision 9, includes, but is not limited to, the terms "horticulture," "floriculture," and "raising of pets, fur-bearing animals, research animals, and horses." Agricultural production also includes "aquiculture."

B. Generally, the sale of an animal is taxable because it is the sale of tangible personal property. However, there are some exceptions for certain animals associated with agricultural production. See item C. The purchase of animals for use as pets is taxable. The purchase of animals for use as breeding stock is taxable unless the offspring of that animal, if purchased separately, would otherwise be exempt under this subpart.

C. The purchase of animals that will be used or consumed in agricultural or industrial production is exempt. This includes animals used in research and development. It also includes domesticated animals that are purchased solely as a commercial source of wool, and domesticated fur-bearing animals purchased as a commercial source of pelts. "Solely as a commercial source of wool" means the animals are purchased for use other than as work animals, as pets, for show or exhibition, or for any purpose other than the processing or selling of the wool for profit. The purchase of animals which will be used as food for humans is exempt. The purchase of animals for the purpose of using them as an ingredient in a manufacturing process, such as for the production of food for animals or poultry, is exempt. Game animals and game birds, as defined in Minnesota Statutes, section 97A.015, constitute food for human consumption.

D. Generally, charges for breeding animals are not taxable. However, fees for the breeding of certain racing horses are taxable. See the provisions of Minnesota Statutes, section 297A.01, subdivision 3, clause (h). The purchase of veterinarian services or drugs and medicines used in agricultural or industrial production is not taxable. See part 8130.8700 for more detail regarding veterinarian services. The purchase of semen to be used and consumed in agricultural production is exempt. The initial sale and subsequent refills of liquid nitrogen are treated as a sale of a chemical used in the processing of an agricultural product and are exempt. The sale or lease of liquid nitrogen tanks is taxable. Also taxable are semen supplies such as charts, office records, inseminating gloves, and inseminating catheters.

E. The purchase of farm machinery and equipment such as tractors, combines, corn pickers, milking machines, and other equipment used directly and principally in agricultural production is subject to sales tax at a statutorily reduced rate. See Minnesota Statutes, sections 297A.01, subdivision 15, and 297A.02, subdivision 2, for more details on farm machinery.

F. Equipment and machinery that do not qualify for the farm machinery reduced rate, such as trucks, trailers, air compressors, and ventilator fans, are subject to tax at the general rate. "Farm machinery" does not include repair or replacement parts. See Minnesota Statutes, section 297A.01, subdivision 15. Therefore, it is the general rule that repair or replacement parts of farm machinery are subject to tax at the general rate. Minnesota Statutes, section 297A.25, subdivision 29, however, specifically exempts the gross receipts from the sale of repair and replacement parts, except tires, which are assigned a specific or generic part number by the manufacturer of farm machinery that qualifies for the reduced rate referred to in item E. To qualify for this exemption, the purchaser must be in the business of agricultural production. See Minnesota Statutes, section 297A.25, subdivision 29.

G. The purchase of aquaculture production equipment such as automatic feed systems, net pens, fish counting equipment, oxygen generators, water diversion devices, and other new or used machinery, equipment, implements, accessories, and contrivances used directly and principally in aquaculture production is subject to sales tax at the reduced rate imposed by Minnesota Statutes, section 297A.02, subdivision 2. Repair or replacement parts for aquaculture production equipment are subject to tax at the general rate. See Minnesota Statutes, sections 17.47, subdivisions 2 and 7, and 297A.01, subdivision 19, for more details on aquaculture and aquaculture production equipment.

History

• Statutory Authority: MS s 270.06; 270C.06; 297A.29
• History: 17 SR 1279; 17 SR 2369; L 2005 c 151 art 1 s 114; 35 SR 890

Minn. R. 8130.5550 Special Tooling

Subpart 1. General information.

Special tooling is exempt. "Special tooling" is defined in Minnesota Statutes, section 297A.68, subdivision 6. Special tooling is tooling that is made to specific requirements to produce a part or a series of related parts, which are known at the time the special tooling is manufactured for a single customer. The special tooling itself must be unique. If the tooling is available from a catalog, other sales literature, or over-the-counter, the tooling is standard and not special tooling.

Because special tooling does not need to produce a direct effect upon the product, nor does it need to have an ordinary useful life of less than 12 months, special tooling is usually different from accessory tools as defined in part 8130.5500, subpart 9, (separate detachable units). Certain special tooling may also be exempt from tax as separate detachable units or as accessory tools because the definitions are not exclusive. See subpart 3, item B.

Subp. 2. Component parts.

Materials from which special tooling or component parts are produced by a seller of special tooling need not themselves be unique and useable only by the seller who produces special tooling. For example, metal used to produce special tooling need not be unique metal, only the special tooling produced from the metal needs to be unique. However, special tooling or components of special tooling must be unique, having value and use only for the buyer of special tooling.

Special tooling comprised of components qualifies for the exemption to the extent of the purchase price of the unique components. Unique components are those components which are manufactured for the special tooling and are not standard or reusable. Components of special tooling which can be reused, either in special tooling or general applications, do not qualify for the exemption.

Subp. 3. Nonqualifying items.

A. Machine tools and machinery are usually frames and motors which, through tools and special tooling, perform an action on materials to produce a product. They are commonly purchased in a standard configuration and can be used to produce parts for more than one customer. Attachments to machine tools and machinery that are used with the machine tool or machinery generally are not produced in accordance with special requirements of the purchaser of special tooling and do not qualify for the special tooling exemption. They are not special tooling. Machine tools and machinery and their accessories can be used by any person other than the purchaser who wants to perform a function similar to the purchaser's. This quality excludes them from the definition of special tooling. Examples of machine tools and machinery include:

B. Accessory tools, as included within the definition of separate detachable units, are typically standard items which are loaded into a machine tool or hand-held machine and which produce a direct effect on the product. The definitional conditions required of exempt accessory tools in part 8130.5500 are that: they are separate detachable units; they are used in producing a direct effect upon the product; and they have an ordinary life of less than 12 months. These conditions are not the same as those for special tooling. Generally, accessory tools can be purchased from a catalog or over-the-counter without any special fabrication. Further, usually any person requiring the action of an accessory tool on a product can use the accessory tool, so it is not limited in use or value only to the buyer. For example, anyone who needs thread cut can use a tap, so it has general value and is not special tooling. Although an accessory tool usually does not qualify as special tooling, the statutory definitions do not preclude tangible personal property from qualifying as both an accessory tool and special tooling. If, for example, a cutting tool is made for a special purpose which is unique to a single customer, it qualifies both as an accessory tool and special tooling. Examples of tools that are usually accessory tools are:

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06
• History: 18 SR 1891; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.5600 Publications

Subpart 1.

[Repealed, 31 SR 449]

Subp. 2. Publication defined.

The word "publication" encompasses only written or printed matter, such as a newspaper, magazine, or other printed periodical regularly issued at average intervals not exceeding three months.

"Publication" includes any qualified newspaper as defined by Minnesota Statutes, section 331A.02, together with any supplements or enclosures accompanying such newspaper or representing a part thereof. The term "newspaper" is limited to those publications commonly understood to be newspapers and which are distributed periodically at daily, weekly, or other short intervals for the dissemination of news of a general character and of general interest. The term does not include hand bills, circulars, flyers, or the like, unless distributed as a part of a newspaper as defined. The term "publication" includes "shoppers guides" distributed by a publisher, where space in such publication generally is available to advertisers for the purpose of inducing readers to purchase goods or services from such advertisers.

House organs, trade, professional, and other types of magazines and journals regularly issued at average intervals not exceeding three months are included within the meaning of "publication." "Comic books" are "publications" if published serially under the same title at least once quarterly; however, comic books complete in themselves and without continuity of title and subject matter are not publications.

The following are representative of items not included within the meaning of "publication": books, including those issued at regular or stated intervals, e.g., books sold by a book-of-the-month or other club or organization; so called "one-shot" magazines that have no literary or subject matter connection or continuity between prior or subsequent issues; price lists; hand bills; catalogs; programs; score cards; maps; sheet music; yearbooks; directories; bulletins; political newsletters issued during a campaign only, and not of a continuing nature at regular intervals not exceeding three months; loose leaf or similar personal service publications such as tax information services, labor information services, credit or financial information services (however, special reports not distributed generally are deemed personal services), law cases and briefs; realtors' descriptive listings, financial and statistical reports, unless published as a supplement or enclosure with or part of a qualified newspaper.

Subp. 3.

[Repealed, L 2005 c 151 art 7 s 23]

Subp. 4. Gross receipts from advertising.

The statute specifically provides that the gross receipts from the sale of any advertising material in a publication as defined in Minnesota Statutes, section 297A.68, subdivision 10, are also exempt. It is further provided that such advertising is a nontaxable service. Further, that persons or their agents engaged in the publication or sale of advertising material are providing a nontaxable service with respect to the gross receipts realized from such news gathering or publishing activities including the sale of such advertising.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: 17 SR 1279; L 2005 c 151 art 1 s 114; art 7 s 23; 31 SR 449

Minn. R. 8130.5700 Sales to Exempt Entities, Their Employees, or Agents

Subpart 1.

[Repealed, 34 SR 723]

Subp. 2. Prepared food, candy, or soft drinks, or the furnishing of lodging.

The sale or purchase for a consideration of prepared food, candy, or soft drinks, or the furnishing of lodging as provided in Minnesota Statutes, section 297A.61, subdivision 3, is subject to sales tax.

No exemption from the sales and use tax is therefore allowed for prepared food, candy, or soft drinks purchased by, or lodging furnished to, governmental entities exempted under Minnesota Statutes, section 297A.70, subdivision 2; hospitals and surgical centers exempted under Minnesota Statutes, section 297A.70, subdivision 7; or nonprofit organizations exempted under Minnesota Statutes, section 297A.70, subdivision 4, their employees, or agents, even if the governmental entity, hospital, surgical center, or nonprofit organization is billed directly and pays directly for such services, except that the federal government, its agencies, and instrumentalities are exempt under the intergovernmental tax immunity doctrine where they purchase prepared food, candy, soft drinks, or lodging directly.

Subp. 3. Governmental agency relief orders.

No tax attaches to the delivery of tangible personal property to relief clients on orders issued by a governmental relief agency, provided that the charge thereon is made directly to the governmental agency. In such cases the sale of the property is a sale to the governmental unit. The merchant making such sales need not secure an exemption certificate from the governmental agency. Sales of merchandise and other items directly to an individual who is a relief client are not to be deemed sales to a governmental agency and are subject to tax unless otherwise exempt.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: L 2005 c 151 art 1 s 114; 34 SR 723

Minn. R. 8130.5800 Isolated or Occasional Sales and Sales of Personal Property Used in Trade or Business

Subpart 1. In general.

A. As provided in Minnesota Statutes, section 297A.67, subdivision 23, the sales or use tax does not apply to isolated or occasional sales of tangible personal property or a service made by a person who is not engaged in selling such property or service in the normal course of business. This exemption does not apply to a sale of tangible personal property that is primarily used in a trade or business.

B. Under Minnesota Statutes, section 297A.68, subdivision 25, the sale of tangible personal property that is primarily used in a trade or business is exempt if the sale is not made in the normal course of business of selling that kind of property and the sale meets one of the listed conditions.

Subp. 1a. Definitions.

For purposes of this part, the following definitions apply:

A. "Isolated" means standing alone or solitary.

B. "Normal course of business" is defined in Minnesota Statutes, section 297A.61, subdivision 21. The sale of inventory is considered to be made in the normal course of business and thus is subject to tax. The lease of tangible personal property is subject to tax. Example 1. A bank repossesses secured property. This is part of the bank's business. Repossessed items are considered to be inventory in possession of the bank and the sale by the bank is considered to be made during the normal course of business and is subject to tax. Example 2. A construction company leases excavating and hauling equipment without an operator to another business, when not otherwise in use. The leasing is considered to take place in the normal course of business and is subject to tax. Example 3. A luxury boat business sells one or two boats a year. The sales are taxable because, while the sales are infrequent, they are made in the normal course of business.

C. "Occasional" means occurring at infrequent intervals, as incidental, or as casual; that is, as distinguished from events of a similar nature recurring with some degree of regularity. Example. A person has a garage sale once each year. The sale is considered to be occasional.

D. "Trade or business" means any continuous and regular activity carried on for the production of income from selling goods or performing services. Organizations exempt from federal taxation under Internal Revenue Code, subchapter F, such as organizations exempt under section 501(c)(3), are only considered to be engaged in a trade or business to the extent the activity is unrelated to their exempt purposes. Government organizations, including public schools, are not considered to be engaged in a trade or business since most of their activities are conducted to further a public purpose. However, if the government entity makes sales of surplus equipment or other tangible personal property on a regular basis, it is considered to be engaged in a trade or business. Examples of a trade or business: apartment buildings or other rental property, home day care centers, farms, law offices, manufacturers, retail stores, and restaurants. Examples of entities that are not considered to be engaged in a trade or business: American Red Cross, churches, nonprofit hospitals, and government agencies. Example of an exempt organization engaging in a taxable activity: a nonprofit hospital also has a gift shop that sells taxable items to the general public. The gift shop is considered to be engaged in a trade or business. Sales of items used by the hospital, such as waiting room furniture, are not subject to tax because the hospital is not a business. However, sales of items used by the gift shop, such as shelves or computers used in the store, are taxable, unless one of the exclusions under Minnesota Statutes, section 297A.68, subdivision 25, applies, since these activities are not related to the hospital's exempt purpose.

E. "Primarily used" means used in the trade or business 50 percent or more of its operating time. If it is used less than 50 percent of the time in the trade or business, it is not used primarily in the trade or business and may qualify for the isolated or occasional sale exemption. The seller's use of the equipment is the determining factor. It does not matter how the buyer uses the item. Example. An owner of a lawn mower has a small business operation to mow the neighbors' yards. The lawn mower is used 60 percent of the time for the owner's lawn and 40 percent of the time for the neighbors' lawns. Since the mower is used less than 50 percent of the time in the owner's business, it is not considered to be used primarily in a trade or business.

F. "Substantially all of the assets of a trade or business," as provided under Minnesota Statutes, section 297A.68, subdivision 25, paragraph (a), clause (5), or "substantially all of the property sold," as provided under Minnesota Statutes, section 297A.68, subdivision 25, paragraph (b), clause (1), means 90 percent or more of the total fair market value of tangible personal property and does not include property that is subject to an ad valorem property tax. It also includes the assets of a separate division, branch, or other identifiable segment of a business, if before the sale, the income and expenses attributable to the separate division, branch, or segment could be separately ascertained from the records. If the separate division, branch, or segment is leased or rented, rather than sold, the assets are taxable. Example. A company has a retail hardware business, as well as a building construction division. The records of the businesses are kept separately. The retail hardware business closes while the construction division continues to exist. The sale of all the assets of the hardware business is exempt from tax. Sales of inventory items are taxable.

Subp. 2. Isolated or occasional sales by person other than trade or business.

An isolated or occasional sale of tangible personal property or a service by a person who is not in the business of selling that kind of property or service is not subject to tax.

The following transactions are considered to be isolated or occasional sales because they are infrequent sales of a nonrecurring nature made by a person not engaged in the business of selling tangible personal property or a service.

Example 1. The sale of a used vacuum cleaner by one neighbor to another.

Example 2. Payment from a neighbor for mowing a neighbor's grass or taking care of a pet while the neighbor is on vacation.

Example 3. Sales by executors, administrators, trustees, and other fiduciaries in the liquidation of an estate, except inventory or stock in trade or tangible personal property primarily used in a trade or business.

Example 4. Sales or executions pursuant to a court order or by a court officer, except inventory or stock in trade or tangible personal property primarily used in a trade or business.

Subp. 3. Nonisolated sales.

The following are examples of transactions that are not considered isolated or occasional sales:

A. The sale of property held primarily for sales to customers in the ordinary course of trade or business. Example 1. Leasing company sells to X a bulldozer that was previously used in its business by leasing to others. Since a lease constitutes a sale, leasing company is deemed to be in the business of selling this kind of property. The sale of the bulldozer to X is not an isolated or occasional sale.

B. The infrequent sale of an inventory item by a retailer, jobber, or other vendor, even though such sales do not happen often and only comprise an insignificant part of the vendor's total business. Example 1. Sporting goods store sells one power cruiser during the calendar year. The sale is taxable.

C. Sales that constitute an integral part of a business even though the sale of such tangible personal property is not the primary business of the seller (as the sale of repossessed property by a finance company).

D. The sale of by-products, waste, scrap, and other obsolete and used equipment by a person engaged in a business, when sales are regularly made to employees or to the public to dispose of these items.

Subp. 3a. Sale of property used in trade or business in transactions qualified and reported under Internal Revenue Code.

A. The sale of tangible personal property primarily used in a trade or business is exempt if the sale is not made in the normal course of business of selling such property; the sale occurs in a transaction subject to, or described in, section 118, 331, 332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, or 1033 of the Internal Revenue Code, and the following conditions are met:

B. Limited liability companies are generally treated as either corporations or partnerships for federal income tax purposes and transfers between limited liability companies and their members are covered by one of the Internal Revenue Code sections listed in Item A. Single member limited liability companies that elect to be treated as a corporation are also covered by one or more of the Internal Revenue Code sections listed in item A. However, when a single member limited liability company does not elect to be treated as a corporation for federal income tax purposes, the limited liability company is neither a partnership nor a corporation and transfers between the limited liability company and its one member are not exempt from sales tax under this subpart.

Subp. 3b. Sale of substantially all assets of a trade or business.

A. The sale of tangible personal property primarily used in a trade or business is exempt if the sale is not made in the normal course of business of selling such property and the sale is a sale of substantially all of the assets of a trade or business, as defined in Minnesota Statutes, section 297A.68, subdivision 25, paragraph (b), clause (3), and as defined in subpart 1a, item F. A buyer of property is not subject to use tax if the buyer has a written statement from the seller confirming that the sale of the property is a sale of substantially all of the assets of the business, as defined in subpart 1a. If the buyer has a written statement from the seller to that effect and the seller does not sell substantially all of the assets of the trade or business, the seller is subject to tax on the total amount received.

B. Under Minnesota Statutes, section 297A.68, subdivision 25, paragraph (b), clause (3), the sale of substantially all of the assets has to take place within the period of 12 months. This means that the seller must sell 90 percent or more of the total fair market value of tangible personal property within the 12-month period in order to be exempt from tax.

Subp. 3c. Sale of property used in trade or business in transaction with $1,000 gross receipts limitation.

The sale of tangible personal property primarily used in a trade or business is exempt if the sale is not made in the normal course of business of selling such property and the total amount of gross receipts from the sale of trade or business property made during the calendar month of the sale, as well as sales of property made in the previous 11 months, does not exceed $1,000, as provided under Minnesota Statutes, section 297A.68, subdivision 25, paragraph (a), clause (6). A buyer of property is not subject to use tax if the buyer has a written statement from the seller confirming that the sale of the property meets this requirement. In this case, if the seller sells property for an amount exceeding $1,000, the seller is subject to tax on the total amount received, including the first $1,000. The limitation of $1,000 does not apply when the business sells substantially all of its assets.

Example. A company sells some cabinets and desks for $12,000 during a period of 12 months but it is not a sale of substantially all the assets of the business. The sale of these fixtures does not qualify for the exemption since the amount received exceeds $1,000.

Subp. 3d. Farm auctions.

The sale of tangible personal property sold at a farm auction is exempt if substantially all the property sold is used in the trade or business of farming, or is other nonbusiness property. However, inventory sold by another trade or business is subject to tax.

Example. The following farming equipment is sold at a farm auction: tools, lawn mowers, and other supplies. A neighboring home improvement business sells patio furniture at the farm auction and the auction also includes personal items owned by various individuals. The farming equipment and the personal items consist of 95 percent of the fair market value of the items sold; the home improvement inventory consists of five percent of the items sold. The farming equipment and the personal items are exempt. The items sold by the home improvement business are subject to tax.

Subp. 4. Garage sale or personal sale.

A "garage sale or personal sale" is a sale by a person or persons selling their personal belongings. A garage sale or personal sale does not include flea markets, craft shows, antique shows, coin shows, stamp shows, comic book shows, convention exhibit areas, or similar selling events, as provided under Minnesota Statutes, section 297A.87. A garage sale includes moving sales, estate sales, and other similar sales. If a person does not regularly hold garage sales or personal sales and the items sold have not been collected or purchased for the purpose of resale, the sales are isolated or occasional. A person who collects or purchases items for resale is deemed to be in business, and must obtain a sales and use tax permit and collect and remit tax on sales of taxable items.

If any trade or business assets are sold at the garage sale, sales tax is due on those items.

Example 1. A person sells personal belongings at an annual neighborhood garage sale that was advertised through word-of-mouth, notices on a bulletin board, or an advertisement in the classified section of a newspaper. No sales tax applies.

Example 2. A person sells new or used items that were purchased for the purpose of resale, as well as personal items, at a garage sale. The personal items include some children's toys and a lamp. The person is considered to be carrying on a trade or business and sales tax must be charged on all sales of taxable items that were purchased for resale. The sale of the lamp and the toys is not subject to tax.

Subp. 5.

[Repealed, L 2005 c 151 art 7 s 23]

Subp. 6.

[Repealed, L 2006 c 259 art 6 s 32]

Subp. 7.

[Repealed, 33 SR 771]

Subp. 8. Auctions.

A. For purposes of this part, an auction is a method of selling tangible personal property in a public forum through open and competitive bidding conducted by an auctioneer licensed under Minnesota Statutes, chapter 330. An auction does not include a consignment auction or consignment sale, as defined in subpart 10.

B. The sale of items held in inventory, taxable services, and property primarily used in a trade or business is generally subject to tax, as provided in Minnesota Statutes, section 297A.68, subdivision 25.

C. When tangible personal property is sold in an auction, the sale qualifies as an isolated or occasional sale under Minnesota Statutes, section 297A.67, subdivision 23, if it would qualify as an isolated or occasional sale when sold by the owner of the property, and if the following conditions are met:

D. When the sale is taxable, the person receiving the payment is responsible for collecting and remitting the sales tax on the total sales price of the property. Example 1. An auctioneer conducts an estate sale and sells personal belongings of the deceased person. No tax is due if the conditions provided under this subpart are met. Example 2. An auctioneer purchases 50 tires from an individual. The tires are auctioned to the general public. The sale is subject to tax since the auctioneer took title of the tires and, therefore, is considered to be selling the tires in the normal course of business. Example 3. An insurance company contracts with an auctioneer to sell its used office furniture at an annual auction. The items sold are subject to tax, unless the sales meet the exceptions provided in subparts 3a to 3d. The insurance company is a business and thus Minnesota Statutes, section 297A.67, subdivision 23, does not apply.

Subp. 9. Brokered sales.

A. For purposes of this part, a broker is a person who sells tangible personal property owned by others and who receives a fee or a commission for selling the owner's property. A broker is not an auctioneer.

B. The sale of items held in inventory, taxable services, and property primarily used in a trade or business is generally subject to tax, as provided in Minnesota Statutes, section 297A.68, subdivision 25.

C. When tangible personal property is sold by a broker, the sale qualifies as an isolated or occasional sale under Minnesota Statutes, section 297A.67, subdivision 23, if it would qualify as an isolated or occasional sale when sold by the owner of the property, and the following conditions are met:

D. When the sale is taxable, the person receiving the payment is responsible for collecting and remitting the sales tax on the total sales price of the property. Example 1. The owner of a boat marina sells a boat on behalf of a boat owner who is not in the trade or business of selling boats. The marina owner advertises the boat for sale and obtains offers to purchase the boat. The marina owner informs the buyer of the offers. The boat owner retains the power to accept or reject the offers. Title to the boat passes directly from the owner to the buyer. Payment is made directly to the owner. Upon sale of the boat, the marina owner receives a commission from the seller. This sale is exempt from tax. Example 2. A boat marina negotiates the sale of a boat for the owner of a boat. The owner has no involvement in the negotiation of the sale. Payment for the boat is deposited in the marina's account. The sale is subject to tax.

Subp. 10. Consignment sales and consignment auctions.

A. For purposes of this part, consignment sales are sales in which a retailer maintains a place of business where tangible personal property owned by others is sold by the retailer in the normal course of business. The retailer may also sell property owned by the retailer. A consignment sale is not an auction, as defined in subpart 8.

B. Consignment auctions are events that are regularly scheduled, are open to members of the public to sell their items, and are held at the same location. Consignment auctions are not selling events, as provided under Minnesota Statutes, section 297A.87. Consignment auctions are not auctions, as defined in subpart 8.

C. The sale of items held in inventory, taxable services, and property primarily used in a trade or business is generally subject to tax, as provided in Minnesota Statutes, section 297A.68, subdivision 25.

D. Consignment sales and consignment auctions are exempt from tax if:

E. When the sale is taxable, the person receiving the payment is responsible for collecting and remitting the sales tax on the total sales price of the property. Example 1. A person sells used books on consignment at a retail store. Under the contract, the store determines the selling price of the books. The sale is taxable. Example 2. A person sells a lawn mower at a consignment auction. Title passes from the owner directly to the buyer. Payment is deposited in the auction company's books. The company deducts its fee and then pays the owner a share of the payment. The sale is subject to tax. Example 3. A person rents space from the operator of a craft show to sell craft items. The seller participates in the event for four days. The sales at the show are taxable since the selling event lasts more than three days, as provided under Minnesota Statutes, section 297A.87, subdivision 3.

History

• Statutory Authority: MS s 270C.06; 297A.29
• History: 17 SR 1279; L 2005 c 151 art 1 s 114; art 7 s 23; L 2006 c 259 art 6 s 32; 33 SR 771

Minn. R. 8130.5900 [Repealed, 31 SR 449]

[Repealed, 31 SR 449]

Minn. R. 8130.6000 Airflight Equipment

Subpart 1. General rule.

Sales of airflight equipment to, and the storage, use, or other consumption of such property by airline companies which are subject to tax under Minnesota Statutes, sections 270.071 to 270.079 (hereinafter airflight property tax), are exempt. This part identifies the airflight equipment that is exempted from tax imposed by Minnesota Statutes, section 297A.62.

Subp. 2. Definitions.

The definitions in this subpart apply to this part.

A. "Aircraft" means a contrivance used or designed for the navigation of or flight in the air.

B. "Airflight equipment" means airplanes, aircraft communications and navigational equipment, flight crew equipment, flight simulators, hydraulics equipment, and all parts that are affixed and become component parts including hydraulic fluid, parts necessary for the repair and maintenance of the listed equipment, and any other property subject to assessment under Minnesota airflight property tax. Airflight equipment does not include airplanes with a gross weight of less than 30,000 pounds that are used on intermittent or irregularly timed flights, lubricants, repair equipment and tools, ramp equipment, or other equipment such as broilers, dishes, food boxes, thermos jugs, blankets, and other equipment not subject to assessment under Minnesota airflight property tax.

C. "Airline company" means a person who undertakes, directly or indirectly, to:

D. "Indirectly" means to hold out to the public that a person will undertake to transport persons or property by air and enter into contracts with shippers wherein the person binds itself to discharge such undertakings with regard to particular shipments. Indirect air carriers include travel agents, tour operators, and social clubs which sell tours or air transportation, air freight forwarders and others who were subject to rate regulation, or others who operate very much like an air carrier.

Subp. 3. Exemptions.

An airline company is exempt from sales and use tax when it purchases airflight equipment if it is subject to Minnesota airflight property tax on those purchases. The purchase of flight simulators is specifically exempted in Minnesota Statutes, section 297A.82, subdivision 4, paragraph (d). If an airline company is exempt from airflight property tax, its purchases of airflight property are subject to sales and use tax.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06; 297A.29
• History: 18 SR 2044; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.6100 [Repealed, L 1992 c 511 art 7 s 26]

[Repealed, L 1992 c 511 art 7 s 26]

Minn. R. 8130.6200 Charitable, Religious, and Educational Organizations

Subpart 1. Applicable law.

Minnesota Statutes, section 297A.70, subdivision 4, exempts from sales and use tax the gross receipts from the sale of tangible personal property to, and storage, use, or other consumption of such property by, any corporation, society, association, foundation, or institution organized and operated exclusively for charitable, religious, or educational purposes if the property purchased is to be used in the performance of charitable, religious, or educational functions.

No part of the net earnings may inure to the benefit of any private shareholders.

Sales of telecommunications services under Minnesota Statutes, section 297A.61, subdivision 3, paragraph (i); electricity, gas, water, or steam pursuant to Minnesota Statutes, section 297A.61, subdivision 3, paragraph (e); and admission to places of amusement, recreational areas, or athletic events and the use of amusement devices and athletic or other facilities as provided for in Minnesota Statutes, section 297A.61, subdivision 3, paragraph (g), clause (1), are included in this exemption.

This exemption does not apply to the following sales or purchases:

A. Building, construction, or reconstruction materials purchased by a contractor or a subcontractor as a part of a lump-sum contract or similar type of contract with a guaranteed maximum price covering both labor and materials for use in the construction, alteration, or repair of a building or facility.

B. Construction materials purchased by exempt organizations or their contractors to be used in constructing buildings or facilities which will not be used principally by the exempt organizations.

C. Lease or purchase of a motor vehicle, as defined in Minnesota Statutes, section 297B.01, subdivision 11, unless the lease or purchase meets the requirements for exemption under Minnesota Statutes, section 297A.70, subdivision 4, paragraph (c), or 297B.03, clause (11). For purposes of this part, charitable, religious, or educational purposes are referred to as "exempt purposes," and a nonprofit organization, society, association, foundation, or institution organized and operated exclusively for exempt purposes are referred to as an "exempt organization."

Subp. 1a. Construction materials purchased by an exempt organization.

A. For purposes of this part, "buildings or facilities which will not be used principally by an exempt organization" means buildings or facilities that will be used by the exempt organization for commercial purposes and not to carry out their exempt functions. For example, construction materials purchased by an exempt organization to be used in constructing a building which the exempt organization will lease to another is not used principally by an exempt organization even though the lease payments may be used for an exempt purpose.

B. Materials that are purchased by an exempt organization for use in the performance of its exempt function are included in the exemption under Minnesota Statutes, section 297A.70, subdivision 4. For example, construction materials purchased by an exempt organization for use in its program to weatherize homes for low-income persons may be purchased exempt by an exempt organization.

C. Unless the sale is specifically exempt under Minnesota Statutes, section 297A.71, the exemption from tax under Minnesota Statutes, section 297A.70, subdivision 4, does not extend to building, construction, or reconstruction materials purchased by a contractor under an agreement to erect a building or to alter, repair, or improve real estate for an exempt organization, even if the work contracted for is for use in the performance of the exempt organization's exempt function. See part 8130.1200.

Subp. 2. Charitable organizations.

"Charitable" is used in its generally accepted legal sense to mean a gift, to be applied consistently with existing laws, for the benefit of an indefinite number of persons. Charitable includes relief of the poor, underprivileged, and distressed, the care of the sick, the infirm, or the aged; the erection or maintaining of public buildings and monuments; lessening of the burdens of government; lessening of neighborhood tensions; elimination of prejudice and discrimination; defense of human and civil rights secured by law; providing of qualified low-income housing to qualified persons; and combating of community deterioration and juvenile delinquency. To determine whether an organization qualifies for the charitable exemption, the factors in items A to F will be considered. Each case must be decided on its own particular facts, and it is not essential that every factor mentioned in items A to F be present for an organization to qualify as a charitable organization.

A. whether the stated purpose of the undertaking is to be helpful to others without immediate expectation of material reward;

B. whether the entity involved is supported by donations and gifts in whole or in part;

C. whether the recipients of the "charity" are required to pay for the assistance received in whole or in part;

D. whether the income received from gifts and donations and charges to users produces a profit to the charitable institutions;

E. whether the beneficiaries of the "charity" are restricted or unrestricted and, if restricted, whether the class of persons to whom the charity is available is one having a reasonable relationship to the charitable objectives;

F. whether the dividends, in form or substance, or assets upon dissolution are available to private interests.

Subp. 3. Religious organization.

"Religious" refers to an institution that conducts worship services at regular intervals at an established place of worship that is owned, leased, or borrowed for that purpose, and organizations affiliated with or related to that institution, which exist exclusively for the furtherance of the religious purposes of the institution. The specific merits of a particular religion will not be compared or considered by the department when determining whether an organization is an exempt religious organization for purposes of the Minnesota sales and use tax. An organization claiming exempt status as a religious organization must be able to affirmatively establish its right to the exemption. Only if an organization clearly demonstrates that it is an organization created exclusively for religious purposes will it meet the requirements for tax-exempt status under Minnesota sales and use tax statutes. The criteria the department will use to determine whether an organization is a religious organization includes the criteria in items A to N. Each case must be decided on its own particular facts and it is not essential that every factor mentioned in items A to N be present for an organization to qualify as a religious organization.

A. a distinct legal existence;

B. a recognized creed and form of worship;

C. a definite and distinct ecclesiastical government;

D. a formal code of doctrine and discipline;

E. a distinct religious history;

F. a membership not associated with any other church or denomination;

G. a complete organization of ordained ministers ministering to their congregations;

H. ordained ministers selected after completing prescribed courses of study;

I. a literature of its own;

J. established places of worship;

K. regular congregations;

L. regular religious services;

M. Sunday schools for the religious instruction of the young;

N. schools for the preparation of its ministers.

Subp. 4. Educational organization.

"Educational" means the instruction or training of individuals to improve or develop their capabilities, or the instruction of the public on subjects useful to the individual and beneficial to the community. Examples of educational institutions are primary and secondary schools, colleges and universities, and nonprofit professional and trade schools having a regularly scheduled curriculum, a regular faculty, and a regularly enrolled body of students in attendance at a place where the educational activities are regularly carried on. Educational organizations include PTA, Boy Scouts, Girl Scouts, Camp Fire Girls, YMCA, YWCA, 4-H Clubs, and youth athletic and recreational programs such as Little League. Other educational institutions include museums, zoos, planetariums, symphony orchestras, historical societies, and other similar organizations.

An organization may be educational even though it advocates a particular position or viewpoint, so long as it presents a sufficiently full and fair exposition of the pertinent facts as to permit an individual or the public to form an independent opinion or conclusion.

Subp. 5. Organization and operational tests.

An organization is not exempt as a charitable, religious, or educational organization for sales and use tax purposes unless it is exempt from federal income tax under section 501(c)(3) of the Internal Revenue Code as defined in Minnesota Statutes, section 297A.61, subdivision 22. However, the determination of the Internal Revenue Service that an organization is a nonprofit and tax-exempt organization under the Internal Revenue Code, section 501(c)(3), for purposes of income taxation is not controlling on the issue of whether the organization is an exempt organization for sales and use tax purposes. Likewise, determinations by the Minnesota Department of Revenue that an organization is an exempt organization for income tax purposes does not, by itself, entitle the organization to an exemption from payment of sales and use tax. In order to be an exempt organization, an organization must be organized and operated exclusively for exempt purposes. The following tests will be used in determining whether or not an organization qualifies as an exempt organization:

A. An exempt organization may not be organized or operated for the purpose of making a profit which inures to the benefit of any private shareholder or individual. The organization must be able to demonstrate by its articles of incorporation or if unincorporated, a certified copy of its constitution and bylaws, and its financial statements that:

B. If an organization, by the terms of its articles, has purposes that are broader than the exempt purposes specified in Minnesota Statutes, section 297A.70, subdivision 4, the fact that its actual operations have been exclusively in furtherance of exempt purposes is not sufficient to make it an exempt organization. Similarly, an organization that is organized exclusively for exempt purposes is not an exempt organization if a significant part of its operations are not in furtherance of its exempt purposes.

C. An organization is not an exempt organization if its attempts to influence legislation or intervene or participate in a political campaign (including the publishing or distributing of statements) cause it to lose its exemption from income tax under section 501(c)(3) of the Internal Revenue Code as defined in Minnesota Statutes, section 297A.61, subdivision 22.

D. An exempt organization must serve a public rather than a private interest. Thus, to gain exemption an organization must establish that it is not organized or operated for the benefit of private interests such as designated individuals, the founder or organizer or their family, shareholders of the organization, or persons controlled directly or indirectly by such private interests. An organization which is organized or operated primarily for the benefit of its individual nonexempt members rather than for the benefit of the general welfare does not qualify for exemption.

E. The assets of an exempt organization must be dedicated to an exempt purpose. An organization is not an exempt organization if its net earnings are used in whole or in part to the benefit of shareholders or individuals who have a personal or private interest in the activities of the organization.

Subp. 6. Derivative organizations.

An organization may qualify derivatively for exemption if its members are exempt organizations and the organization is organized and operated exclusively to assist its member organizations in carrying out their exempt purposes.

Subp. 7. Exemption certificates.

Items A to C apply to the application for and the furnishing of exemption certificates.

A. A religious or educational organization must complete and furnish a certificate of exemption when making exempt purchases of tangible personal property. Charitable and youth athletic organizations must apply for and receive an exempt status number and furnish that number when making exempt purchases of tangible personal property. Religious and educational organizations may also apply for and receive an exempt status number.

B. An application for certificate of exempt status must be fully executed and submitted with the necessary supporting documents. No charitable organization making purchases shall be entitled to make those purchases exempt from the sales and use tax unless a certificate of exempt status has been issued by the commissioner of revenue.

C. If the department is provided information sufficient to establish that an organization is organized and operated exclusively for an exempt purpose, exemption will be granted to the organization regardless of the purpose indicated in its application for certificate of exempt status. For example, if an organization claims exemption on the grounds that it is educational, exemption will not be denied if it is, in fact, charitable.

Subp. 8. Taxable sales to exempt organizations.

Certain sales and rentals to exempt organizations remain taxable. Exempt organizations still owe the sales tax when purchasing motor vehicles or when renting motor vehicles. See subpart 1. Sales to exempt organizations are taxable if the items purchased are not used in the performance of the charitable, religious, or educational functions of the exempt organization. The benefits of tax-exempt status are confined strictly to the legal entity that has qualified for such status. Thus, sales to individuals who are affiliated with an exempt organization are taxable even if the sales would be exempt if made directly to the exempt organization.

Items A to D are examples of taxable sales.

A. Sales of all lawful gambling equipment and supplies to any organization conducting gambling activities in accordance with Minnesota Statutes, chapter 349, since this property is not used in the performance of exempt functions.

B. Furniture purchased by a church for use in its parsonage is exempt since it is purchased for use by persons that administer religious activities to the congregation. These items are not purchased for the personal use of any one specific person but rather for the operation of a religious organization.

C. Handbooks, leaders' workbooks, and camping equipment purchased by a Girl Scout troop in its own name and with troop funds are exempt. However, these items are taxable if sold directly to an individual scout.

D. An exempt organization buys a set of golf clubs for a retirement gift for a staff member. The golf clubs are taxable as the gift is not furthering the exempt purpose of the organization.

Subp. 9. Sales by exempt organizations.

No organization is exempt from collecting the tax on taxable retail sales. If an exempt organization makes taxable retail sales, it must collect and remit tax on these sales unless the sales are exempt fundraising sales that meet the requirements of Minnesota Statutes, section 297A.70, subdivision 13 or 14, or the sales are otherwise exempt under Minnesota Statutes, chapters 297A and 297E.

A. Examples of taxable sales:

B. Examples of nontaxable sales:

Subp. 10. Volunteer fire departments.

Volunteer fire departments may qualify for exempt status if they qualify as a charitable organization and are a separate organization from the city. To be considered separate from the city, they must have either their own constitution or articles of incorporation. If a volunteer fire department has been approved for exempt status, its purchases are exempt in the manner provided in items A and B.

A. Exempt volunteer fire departments may purchase property exempt from sales tax and use tax if it is to be used exclusively to prevent fires in the community or to protect property in the community from fire. Subitems (1) to (6) are examples of items that an exempt volunteer fire department may purchase exempt:

B. Purchases made by an exempt volunteer fire department that are not used exclusively to prevent fires in the community or to protect property in the community from fire are taxable. For example, a washing machine used to wash fire protection clothing is taxable.

Subp. 11. Related information.

A. Many senior citizen groups are exempt from the sales and use tax. See Minnesota Statutes, section 297A.70, subdivision 4, paragraph (a), clause (2).

B. Sales of tangible personal property to veterans organizations or their auxiliaries are exempt provided the property is used for charitable, civic, educational, or nonprofit uses and the organization is exempt from federal taxation pursuant to section 501(c), clause 19, of the Internal Revenue Code. See Minnesota Statutes, section 297A.70, subdivision 5.

C. Sales of sacramental wine for sacramental purposes in religious ceremonies are exempt if the wine is purchased from a nonprofit religious organization or a person authorized to import sacramental wine without a license. See Minnesota Statutes, section 297A.70, subdivision 9.

D. Fees to camps or other recreation facilities are exempt if they are owned and operated by an exempt organization under section 501(c)(3) of the Internal Revenue Code as defined in Minnesota Statutes, section 297A.61, subdivision 22, and are used for (i) services primarily for children, adults accompanying children, or persons with disabilities, or (ii) educational or religious activities. See Minnesota Statutes, section 297A.70, subdivision 16. The sale of memberships to an association incorporated under Minnesota Statutes, section 315.44 (YMCAs and YWCAs), or an organization defined in section 315.51 (JCCs), are exempt. This includes onetime initiation fees and periodic membership dues. All separate charges for the privilege of having access to and the use of the association's sports and athletic facilities are taxable. See Minnesota Statutes, section 297A.70, subdivision 12.

E. While purchases of admissions provided for in Minnesota Statutes, section 297A.61, subdivision 3, paragraph (g), clause (1), are exempt when purchased by exempt organizations, sales of admissions by exempt organizations are generally taxable. The following sales of admissions in subitems (1) and (2) are exempt.

F. Receipts from bingo, raffles, and other gambling activities are subject to the tax imposed on lawful gambling. See Minnesota Statutes, section 297E.02.

G. A nonprofit organization that is exempt from federal income taxation under subchapter F of the Internal Revenue Code is not considered to be a trade or business. Therefore, sales of items previously used in the operation of the exempt organization may still qualify for the isolated or occasional sale exemption. However, if an exempt organization operates a trade or business that has little or no relationship to its exempt purposes except to provide funds to carry out those purposes, these activities are considered to be a trade or business. In these instances, the sale of any equipment sold in connection with the trade or business operated by an exempt organization is taxable. See Minnesota Statutes, section 297A.68, subdivision 25.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06; 297A.29
• History: 17 SR 1279; 18 SR 391; L 1993 c 375 art 8 s 14; L 2005 c 151 art 1 s 114; 31 SR 449; 34 SR 723

Minn. R. 8130.6300 Caskets, Burial Vaults, Urns for Cremains, and Memorials

Subpart 1. Caskets, burial vaults, and urns for cremains exempt.

The gross receipts from sales of caskets, burial vaults, and urns for cremains, used for human burial, are exempt under Minnesota Statutes, section 297A.67, subdivision 10, whether made by a distributor to an undertaker or cemetery association, or by an undertaker or cemetery association to the general public. No exemption certificate need be offered by the purchaser.

Subp. 2. Exemption not applicable to memorials.

Treatment:

A. Sales of tombstones, markers, or other memorials and the foundation upon which such tombstones, markers, and other memorials are placed, including the material used in setting the memorials in the cemetery, are considered sales of tangible personal property, and subject to the Sales and Use Tax Law. Memorial dealers are the retailers of such property. The tax applies to the entire amount charged, without deduction for the production cost of cutting, shaping, polishing, or lettering the memorial. However, charges for inscriptions upon a stone subsequent to its erection, constitute receipts from personal services, which, if stated separately, are deductible from the total charge.

B. If the seller agrees to install the memorial in a cemetery, the charge for transporting the memorial to the cemetery and for the labor of setting the memorial in the cemetery are included in the sales price and are taxable.

C. If a cemetery constructs the foundation upon which a memorial is to be placed, and collects the charges from the memorial dealer, who then either collects that amount as a separate charge from a customer or includes it in the total charge for the memorial, the memorial dealer is the retailer of the foundation and must collect and remit the tax on the charges made therefor. The cemetery, under such circumstances, is merely acting for the memorial dealer.

D. If the cemetery collects the charges for foundations directly from customers of the memorial dealer, the cemetery is the retailer and must collect and remit the tax with respect to the charges made for the completed foundation.

E. Sales to memorial dealers and cemeteries of materials, including sand, gravel, cement, and supplies, which are used in the processing of tombstones, markers, or other memorials, and the erection of foundations on which finished tombstones, markers, or other memorials are placed, and which become component parts thereof, are exempt as sales used in industrial production. Sales to memorial dealers and cemeteries of tools, equipment, and supplies which do not become component parts of finished foundations, tombstones, markers, or other memorials are taxable. (See Minnesota Statutes, section 297A.68, subdivision 2).

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: 17 SR 1279; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.6400 Veterans with a Disability; Purchases of Automobiles and Other Conveyances

Subpart 1. General rule.

Minnesota Statutes, section 297A.67, subdivision 11, provides exemption for the gross receipts from the sale of an automobile or other conveyance to a veteran with a disability if the purchaser is assisted by a grant from the United States in accordance with United States Code, title 38, section 3902, as amended.

This exemption is effective for the purchase of vehicles and the purchase of any qualifying adaptive equipment purchased with federal assistance. The exemption shall be applicable for a vehicle as well as adaptive equipment even though the grant was limited to assistance in purchasing only adaptive equipment for such vehicle.

Subp. 2. Procedure.

To effect the exemption, the following procedure should be followed:

A. Have VA form 21-4502 (Application for Automobile or Other Conveyance) or VA form 10-1394 (Application for Adaptive Equipment - Motor Vehicle) completed in full by all parties concerned.

B. When the completed VA form 21-4502 or VA form 10-1394 and copies of the seller's invoices are furnished to the Veterans Administration, the appropriate Veterans Administration official will stamp and sign one copy of the seller's invoice certifying that the purchase was made under the provisions of United States Code, title 38, section 1901, as amended, and return it to the seller with the check in payment of the allowable amount. The seller should keep the copy of the invoice for the seller's records, to verify that the sale was properly exempt.

Subp. 3. Sales tax on motor vehicles.

To be exempt from the sales tax on motor vehicles under Minnesota Statutes, chapter 297B, a veteran with a disability purchasing a motor vehicle with adaptive equipment with funds provided by the Veterans Administration under United States Code, title 38, section 3902, should attach to the motor vehicle purchaser's certificate upon registration either a copy of VA form 21-4502 or VA form 10-1394 with all sections of the form completed. The procedure for obtaining exemption for other conveyances that are not subject to the sales tax on motor vehicles and for adaptive equipment remains the same as in subpart 2.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: 17 SR 1279; L 2005 c 151 art 1 s 114; 31 SR 449; 46 SR 1363

Minn. R. 8130.6500 [Repealed, 31 SR 449]

[Repealed, 31 SR 449]

Minn. R. 8130.6600 Veterans with a Disability; Purchase of Building Materials

Subpart 1.

[Repealed, 31 SR 449]

Subp. 2. Procedure.

The exemption under Minnesota Statutes, section 297A.71, subdivision 11, is not allowed when the building materials are sold to the contractor, subcontractor, builder, or owner, but will be allowed to the recipient of the benefits provided in United States Code, title 38, sections 2101 to 2105, upon the filing of a claim for refund, accompanied by the following documents to substantiate the validity of such claim:

A. claimant's letter of approval of a PH or AH grant under United States Code, title 38, chapter 21, from the claimant's regional VA office;

B. copies of invoices or other evidence substantiating building material costs and payment of applicable sales taxes in the case of materials purchased directly by the claimant;

C. copies of invoices or other evidence substantiating building material costs and payment of applicable sales taxes in the case of materials purchased by a contractor or a subcontractor.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: L 2005 c 151 art 1 s 114; 31 SR 449; 46 SR 1363

Minn. R. 8130.6700 Textbooks

Subpart 1. In general.

Minnesota Statutes, section 297A.67, subdivision 13, exempts the sale of textbooks which are prescribed for use in a course of study in a school, college, university, and private career school to regularly enrolled students.

Subp. 2. Definitions.

For the purposes of this part, the following words, terms, and phrases have the meanings given them in this subpart:

A. "Textbooks which are prescribed for use in a course of study" are defined as any book or other instructional material which is specifically required for a course of study. Encyclopedias, dictionaries, and school supplies such as paper, pencils, and folders are not included within this definition.

B. "School" means:

C. "Private career school" is defined as a school licensed under Minnesota Statutes, section 136A.822.

D. "College" is defined to include all professional schools, paramedical, and other paraprofessional schools and nursing schools.

E. "Regularly enrolled student" is defined as one enrolled in a course of study at a qualifying educational institution with tuition, if required, currently paid. This definition includes correspondence, extension, full-time, and part-time students.

Subp. 3.

[Repealed, 31 SR 449]

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: 17 SR 1279; L 2003 c 130 s 12; L 2005 c 151 art 1 s 114; 31 SR 449; L 2015 c 69 art 2 s 46

Minn. R. 8130.6800 [Repealed, L 1992 c 511 art 7 s 26]

[Repealed, L 1992 c 511 art 7 s 26]

Minn. R. 8130.6900 [Repealed, 31 SR 449]

[Repealed, 31 SR 449]

Minn. R. 8130.7000 [Repealed, 18 SR 83]

[Repealed, 18 SR 83]

Minn. R. 8130.7300 Repealed by subpart

Subpart 1.

[Repealed, 31 SR 449]

Subp. 2.

[Repealed, 31 SR 449]

Subp. 3.

[Repealed, 31 SR 449]

Subp. 4.

[Repealed, 31 SR 449]

Subp. 5.

[Repealed, L 2005 c 151 art 7 s 23; 31 SR 449]

Minn. R. 8130.7400 Uncollectible Debt Deduction

Subpart 1. General rule.

Ordinarily, a deduction for uncollectible debts is allowed only for a person who is reporting on the accrual method of accounting for sales and use tax purposes. However, if a cash basis taxpayer accepts an unsecured check in payment for a sale, reports the sale, and subsequently determines that the check is uncollectible, the taxpayer is entitled to an uncollectible debt deduction. In addition, a certified service provider may claim a bad debt allowance on behalf of the provider's client. Uncollectible debts (commonly referred to as bad debts) will be recognized as a deduction for sales tax purposes only when given recognition by a direct charge-off for federal income tax purposes or, if the retailer is not required to file income tax returns, charged off in accordance with generally accepted accounting principles. Consequently, no anticipatory or statistical method of estimating future uncollectible debts will be allowed by the commissioner. See Minnesota Statutes, sections 289A.50, subdivision 2b, and 297A.81.

Subp. 2. Deduction determination.

If a debt becomes uncollectible, either in whole or in part, in a reporting period subsequent to the period in which the transaction that gave rise to the uncollectible debt occurred, the retailer may deduct the uncollectible debt from the gross receipts for the reporting period in which the uncollectible debt is determined to be uncollectible in accordance with the following rules.

A. If the uncollectible debt arose in respect of a sale required to be included in gross receipts, subject to a tax imposed under the Sales and Use Tax Law, the entire amount of the debt remaining uncollected is allowed as a deduction.

B. If the uncollectible debt arose in respect of a sale partly subject to the tax imposed under the Sales and Use Tax Law and partly exempt thereunder, the amount of the uncollectible debt allowed as a deduction is the amount derived by multiplying the uncollectible debt by the percentage that the taxable sale bears to the total sales.

C. If the uncollectible debt arose in respect of two or more sales made at successive intervals, payments made before the date the debt became uncollectible must be applied, first to the earliest sale upon which there is an unpaid balance, and to following sales in successive order.

Subp. 3. Excess carryover.

In the event that the seller is entitled to an uncollectible debt deduction in excess of the amount the seller is required to report for the month in which the debt is determined to be uncollectible, the balance of the deduction may be used in a subsequent month.

Subp. 4. Repossessions.

In the case of repossessions, an uncollectible debt deduction is allowable only to the extent that the pro rata portion of all payments and credits, attributable to the cash sales price of the merchandise is less than the net contract balance (after excluding unearned insurance and finance charges) at the date of repossession.

Subp. 5. Recovery of uncollectible debts previously deducted.

If an uncollectible debt deduction is taken and the taxpayer subsequently collects the debt in whole or in part, the amount collected must be included in the first return filed after collection, and the amount of tax thereon must be paid with the return.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.25; 297A.27; 297A.29
• History: 15 SR 693; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.7500 Repealed by subpart

Subpart 1.

[Repealed, 31 SR 449]

Subp. 2.

[Repealed, 31 SR 449]

Subp. 3.

[Repealed, 46 SR 1308]

Subp. 4.

[Repealed, 31 SR 449]

Subp. 5.

[Repealed, L 2003 c 127 art 6 s 18]

Subp. 6.

[Repealed, 46 SR 1308]

Subp. 7.

[Repealed, L 2014 c 308 art 9 s 94]

Subp. 8.

[Repealed, 46 SR 1308]

Minn. R. 8130.7501 Returns and Records

Subpart 1. Definitions.

For purposes of this part, the following definitions apply.

A. "Accurate and complete records" means all records necessary to determine the correct tax liability under Minnesota Statutes, chapter 297A, and all records necessary for proper completion of the sales and use tax return.

B. "Electronic data processing" means any processing of data that uses an electronic format.

C. "Electronic record" means a collection of related information stored in any electronic format, and includes information stored in a point of sale system. For purposes of this item, "point of sale system" means a system that electronically records transaction data for the purpose of computing, compiling, or processing transaction data, and includes an electronic cash register as defined in Minnesota Statutes, section 289A.14, paragraph (c).

D. "Hardcopy record" means any document, record, report, or other data maintained in a tangible format.

E. "Taxpayer" means any person liable for any tax imposed by Minnesota Statutes, chapter 297A, or for the collection thereof.

Subp. 2. Consolidated returns permitted.

Under Minnesota States, section 289A.11, subdivision 1, if the person required to file a return has two or more places of business at which the person engages in transactions subject to tax, the person may elect to file a consolidated sales and use tax return for all such places of business under the following conditions:

A. the taxpayer has been granted a sales and use tax account number by the commissioner;

B. the taxpayer furnishes to the commissioner the business name and address and reporting information for each separate place of business; and

C. the taxpayer makes available at the address used by the taxpayer on the consolidated return the information pertinent to each separate place of business in order that the commissioner may be able to perform a proper audit with respect to the return so filed.

Subp. 3. Records; general.

A. A taxpayer shall maintain accurate and complete records. A taxpayer shall make such records available to the department or its authorized representative upon request. Such records include but are not limited to:

B. A taxpayer may discard redundant information, including but not limited to duplicate records, provided the integrity of the audit trail is preserved and responsibilities under this part are met.

C. Upon department request, a taxpayer shall provide a description of the business process that created the retained records. Such description must include the relationship between the records and tax documents prepared by the taxpayer and measures employed to ensure integrity of the records. Upon department request, a taxpayer shall also demonstrate:

Subp. 4. Electronic records and electronic data processing.

A. Electronic records used to establish a taxpayer's compliance with this part must:

B. Requirements for the electronic data processing portion of a taxpayer's accounting system must be similar to that of a manual accounting system, in that an adequately designed accounting system must incorporate methods and records that satisfy the requirements of this part.

C. A taxpayer shall maintain records providing a general description of or documentation regarding the electronic data processing portion of the accounting system, including but not limited to the following:

D. A taxpayer's electronic data processing system must include a method of producing visible and legible records which provide information necessary to determine the correct tax liability. The department may require a taxpayer to produce such visible and legible records in the form of hardcopy records if such records are necessary to determine the correct tax liability or provide a more efficient means of determining the correct tax liability.

Subp. 5. Hardcopy records.

A. Except as specifically provided in this subpart and in subpart 3, item B, taxpayers are not relieved of the responsibility to retain hardcopy records that are created or received in the ordinary course of business as required by existing law.

B. If hardcopy records are not created or received in the ordinary course of business, the department may require the taxpayer to generate hardcopy records if such records either:

C. Hardcopy records generated at the time of a transaction must be retained unless all details necessary to determine the correct tax liability relating to the transaction are subsequently received and retained by the taxpayer in accordance with this part.

D. A taxpayer required to produce a hardcopy record under this part satisfies the requirement if the taxpayer produces a digital version of the hardcopy record, such as a portable document format or PDF, that is verifiably identical to the hardcopy record.

Subp. 6. Record retention.

A. Consistent with the generally applicable statute of limitations for department assessments of sales tax found in Minnesota Statutes, section 289A.38, subdivision 1, all records required to be retained under this part must be preserved for a period of not less than 3-1/2 years.

B. If a taxpayer acts in a manner that triggers an extension of the generally applicable statute of limitations for department assessments of sales tax under Minnesota Statutes, section 289A.38 (e.g., submitting a false or fraudulent return or omitting from a return an amount of taxes in excess of 25 percent of taxes reported in the return), records required to be retained under this part must be preserved for a period of not less than the applicable extension of the statute of limitations.

C. The required record retention time frames provided in this subpart apply unless the department:

Subp. 7. Record-related services provided by third parties.

A taxpayer may contract with a third party to provide services related to sales tax record-keeping requirements. Such a contract does not relieve a taxpayer of its compliance responsibilities under Minnesota law.

Subp. 8. Failure to maintain records.

The department may consider a taxpayer's failure to maintain accurate and complete records as evidence of the taxpayer's negligence or intent to evade tax.

A. Records are not accurate and complete records if they do not comply with this part, which includes failure of a taxpayer's records to:

B. Records are also not accurate and complete records if the:

C. If a taxpayer fails to maintain accurate and complete records, the taxpayer may be subject to various consequences and penalties, including but not limited to the following:

History

• Statutory Authority: MS s 270C.06; 297A.77
• History: 46 SR 1308

Minn. R. 8130.7600 Repealed by subpart

Subpart 1.

[Repealed, 31 SR 449]

Subp. 2.

[Repealed, 15 SR 693; 31 SR 449]

Subp. 3.

[Repealed, 15 SR 693; 31 SR 449]

Subp. 4.

[Repealed, 15 SR 693; 31 SR 449]

Subp. 5.

[Repealed, 31 SR 449]

Subp. 6.

[Repealed, 31 SR 449]

Minn. R. 8130.7700 Repealed by subpart

Subpart 1.

[Repealed, 31 SR 449]

Subp. 2.

[Repealed, 15 SR 693; 31 SR 449]

Subp. 3.

[Repealed, 31 SR 449]

Minn. R. 8130.7800 [Repealed, L 1990 c 480 art 1 s 45]

[Repealed, L 1990 c 480 art 1 s 45]

Minn. R. 8130.7900 Return Filing; Failure to File

Subpart 1. Duty to file returns.

The following persons making taxable sales or taxable use of tangible personal property in Minnesota, or holding a sales and use tax permit, must file returns pursuant to Minnesota Statutes, chapter 289A:

A. any retailer located in Minnesota;

B. any retailer maintaining a place of business in Minnesota;

C. any retailer who has voluntarily filed an application for a permit under Minnesota Statutes, section 297A.83, subdivision 1, paragraph (b), and has been granted one;

D. any retailer making retail sales from outside this state to a destination within this state if the retailer engages in the regular or systematic soliciting of sales from potential customers in this state;

E. a purchaser making use of items obtained with an exemption certificate for other than the exempt purpose (see Minnesota Statutes, section 297A.73);

F. a person upon whom liability for use tax is imposed by Minnesota Statutes, section 297A.63; and

G. any person holding a direct pay authorization.

Subp. 2.

[Repealed, 31 SR 449]

Subp. 3.

[Repealed, 31 SR 449]

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.25; 297A.27; 297A.29
• History: 15 SR 693; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.8000 Repealed by subpart

Subpart 1.

[Repealed, L 2003 c 127 art 6 s 18]

Subp. 2.

[Repealed, 15 SR 693; L 2003 c 127 art 6 s 18]

Subp. 3.

[Repealed, 15 SR 693; L 2003 c 127 art 6 s 18]

Subp. 4.

[Repealed, L 2003 c 127 art 6 s 18]

Subp. 5.

[Repealed, 15 SR 693; L 2003 c 127 art 6 s 18]

Subp. 6.

[Repealed, L 2003 c 127 art 6 s 18]

Subp. 7.

[Repealed, L 2003 c 127 art 6 s 18]

Minn. R. 8130.8100 Claim for Refund

Subpart 1. In general.

A person, as defined in Minnesota Statutes, section 297A.01, subdivision 2, who has overpaid sales or use tax for any period, may file a claim for refund with the commissioner for the amount of the overpayment. The claim for refund must be submitted on a department form as prescribed by the commissioner and be completed in the manner prescribed therein. The claim must set forth in detail the grounds for each adjustment and the facts supporting those grounds.

Subp. 2. Requirements for refund claim.

Conditions to be met before the commissioner will entertain a claim for refund:

A. The person filing a claim for refund must have paid the tax and filed the sales and use tax return upon which the claim is based directly to the commissioner (or the tax was collected from such person other than by means of court action in district court, either at law or in equity by the commissioner), except the following:

B. A claim for refund must be filed within two years after the tax was paid in full, or within three and one-half years from the date prescribed for filing the return, whichever period expires later. See Minnesota Statutes, section 289A.40, subdivision 1. If the commissioner and the claimant have consented to extend the time for assessment of tax under Minnesota Statutes, section 289A.42, subdivision 1, the claim may be filed within the extended period. For purposes of ascertaining whether a claim for refund is timely filed with the commissioner, a return filed before the date on which the return was due will be determined to have been filed on the date when due. A return postmarked on the date due will be determined to have been filed as of that date.

C. A claim filed by a corporation must bear the signatures and titles of the officers having the authority to sign for the corporation. Whenever it is necessary to have the claim executed by an attorney or agent on behalf of the claimant, an original, executed power of attorney specifically authorizing the agent or attorney to sign the claim on behalf of the claimant must accompany the claim. If a return is filed by a person who dies after filing a return, and a refund claim is filed by a legal representative of the decedent, certified copies of the letters testamentary, letters of administration, or other similar evidence must be filed with the claim to show the authority of the executor, administrator, or other fiduciary by whom the claim is filed. If an executor, administrator, or other fiduciary files a return and thereafter a refund claim is filed by the same fiduciary, documentary evidence to establish the legal authority of the fiduciary need not accompany the claim, provided a statement is made on the claim showing the return was filed by the fiduciary and that the latter is still acting in such capacity. If a vendor has collected from a purchaser and remitted to the state a tax on a transaction that is not subject to tax under Minnesota Statutes, chapter 297A, the tax, and any interest earned on the tax, is refundable to the vendor only if and to the extent that the vendor submits written evidence that the tax and interest will be returned by the vendor to the purchaser or credited to amounts due to the vendor by the purchaser.

Subp. 3. Commissioner action.

Action taken by the commissioner after a claim for refund is filed:

A. Upon receipt of a claim for refund, the commissioner will examine the return and make any investigation or examination of any of the accounts and records pertaining to the claim that the commissioner considers necessary. The commissioner will then prepare written findings, either denying or allowing the claim, in whole or in part, and will mail a notice to the person filing the claim at the address stated on the return or to any other address furnished by the claimant in writing.

B. The amount allowed by the commissioner as a refund is first applied against any sales or use tax owed to the commissioner by the claimant, and any remaining balance due the claimant may be applied against any other delinquent tax liability owed by the claimant. Interest will be computed on the amounts refunded or credited from the date of overpayment to the date when the refund or credit is authorized by the commissioner, except for capital equipment claims and claims pursuant to Minnesota Statutes, section 297A.25, subdivision 43. See Minnesota Statutes, sections 289A.56, subdivision 4, and 297A.15, subdivisions 5 and 6. The interest rate on overpayments will be the interest rate that the commissioner establishes under Minnesota Statutes, section 270C.40, subdivision 5, to be charged on unpaid taxes. The interest rate will be adjusted annually and will become effective annually when the interest rate on unpaid taxes changes. See Minnesota Statutes, sections 270C.405 and 289A.56, subdivision 1.

C. If a claim for refund made by a vendor is based upon overpayment of sales tax by a purchaser to the vendor, the commissioner, for purposes of ascertaining the validity of the claim, may request substantiation of the overpayment by the purchaser, or examine the purchaser's records. If the commissioner is unable to establish the validity of the overpayment after conducting an examination of the purchaser's records, the commissioner will deny the claim.

Subp. 4.

[Repealed, 15 SR 693]

Subp. 5. One dollar limitation.

No refund will be made where the amount is $1 or less.

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.25; 297A.27; 297A.29
• History: 15 SR 693; L 2005 c 151 art 1 s 114,116; 46 SR 1363

Minn. R. 8130.8200 [Repealed, 15 SR 693]

[Repealed, 15 SR 693]

Minn. R. 8130.8300 Repealed by subpart

Subpart 1.

[Repealed, L 2003 c 127 art 6 s 18]

Subp. 2.

[Repealed, L 2003 c 127 art 6 s 18]

Subp. 3.

[Repealed, 15 SR 693; L 2003 c 127 art 6 s 18]

Subp. 4.

[Repealed, 15 SR 693; L 2003 c 127 art 6 s 18]

Subp. 5.

[Repealed, 15 SR 693; L 2003 c 127 art 6 s 18]

Subp. 6.

[Repealed, L 2003 c 127 art 6 s 18]

Minn. R. 8130.8400 [Repealed, 31 SR 449]

[Repealed, 31 SR 449]

Minn. R. 8130.8700 Veterinarians

Subpart 1. In general.

The veterinarian is primarily engaged in the business of rendering professional services to the owners of animals, through care, medication, and treatment of such animals. The veterinarian is the user and consumer of all tangible personal property such as drugs, medicines, bandages and dressings, serums, tonics, and vitamins used in connection with the performance of services unless the veterinarian bills the customer separately for the services rendered and the materials used in the course of rendering such services. Except for the agricultural production exemptions provided in Minnesota Statutes, section 297A.69, and except as provided otherwise in this part, the veterinarian must pay sales or use tax on items used to provide services and must collect and report sales tax on retail sales of taxable goods and services.

Subp. 2. Retail sale.

Retail sales by the veterinarian of tangible personal property and taxable services that are not used or consumed in agricultural production or are not used to provide a taxable service are taxable. For example, worm pills sold for treatment of the family pet dog would be taxable. The veterinarian may accept exemption certificates from persons engaged in agricultural production, or in the boarding, breeding, raising, owning, or keeping of horses, or in providing taxable services such as pet grooming or the furnishing of lodging, board, and care services for animals, for retail sales of items that are used or consumed in those endeavors.

Subp. 3. Bundled transaction.

If the veterinarian administers a drug, medicine, or supply to an animal other than an agricultural production animal or horse and merely charges for services and absorbs the cost of drugs and other materials in a service charge, no tax should be charged by the veterinarian. The veterinarian is the consumer of such drugs and materials and the sale of the drugs or material by the supplier to the veterinarian is a taxable retail sale. If the veterinarian both sells a drug, medicine, or supply and administers it to an animal other than an agricultural production animal or horse, and also separately states the charges for such items and the charge for the veterinary service, then the sale of such drugs and materials by the veterinarian is a taxable retail sale. The veterinarian may purchase these items exempt for resale and must charge tax on the sales price to the customer. "Administers" means the item is injected, fed, or applied to the animal.

Subp. 4. Use tax reporting period.

If the sales tax was not paid on items at the time of purchase from suppliers because they are purchased for resale or for an exempt use, and the veterinarian afterward puts the items to taxable use, then the veterinarian must report the use tax due thereon in the sales and use tax return covering the period in which taxable use was made of the item by the veterinarian.

Subp. 5. Agricultural animal practice and horses.

Materials purchased by a veterinarian to be used or consumed in the care, medication, and treatment of horses and agricultural production animals may be purchased exempt from tax by providing the retailer with an exemption certificate. Materials are used or consumed when the materials, following their use by the veterinarian in the care, medication, and treatment of a horse or an agricultural production animal, are substantially without value and of no further practical use.

A. Examples of materials that may be purchased exempt by veterinarians if used or consumed in the care, medication, and treatment of horses and agricultural production animals include, but are not limited to, antiseptics; bandages; disposable blades, needles, and syringes; drugs; magnets; mastitis treatments and tubes; nitrogen; tattoo ink; vaccines; diagnostic and testing supplies; and lab chemicals and reagents.

B. Examples of items that are taxable when purchased by veterinarians, either because they are not used in the care, medication, and treatment of a horse or an agricultural production animal or because after such use they are not substantially without value and are of further practical use, include, but are not limited to, administrative and office supplies, informational pamphlets and videos, as well as machinery, equipment, implements, tools, accessories, appliances, contrivances, furniture, fixtures, laboratory and surgical equipment, truck boxes, head gates, semen tanks, medical instruments, and other durable items. See part 8130.5500, subpart 13, for more detail regarding the agricultural production exemption.

Subp. 6. Items given away.

Taxable items given to customers as part of a service, for good will purposes, or donated to a charitable or civic organization, are taxable to the veterinarian. Veterinarians do not owe sales or use tax if the items given away have been received from a vendor as a free sample or promotional item.

Subp. 7. Boarding and pet grooming services.

Boarding and pet grooming services are taxable. Materials and supplies used or consumed in providing taxable boarding and pet grooming services are exempt. Materials and supplies are used or consumed when the materials, following their use by the veterinarian in boarding and pet grooming services, are substantially without value and of no further practical use.

A. Durable supplies and equipment used to provide these services are taxable, since following the boarding or pet grooming service they are not substantially without value and are of further practical use. Examples of durable supplies and equipment include collars, leashes, cages, grooming tables, clippers, combs, and scissors.

B. Pet grooming services include, but are not limited to, shampooing, clipping, trimming, and nail cutting. If these services are performed by a veterinarian for surgical preparation or for treating or preventing illness or disease, they are not taxable. Pet grooming services do not include grooming services for horses and horseshoeing and hoof trimming services.

C. Boarding services for horses are not taxable. For other animals, boarding services provided by a veterinarian are not taxable if the boarding service is for medical reasons - that is, hospitalization, observation, or other veterinary purposes. "Other veterinary purposes" does not include administering medication to a pet when the pet owner normally could administer the medication. If administering such medication is the sole service provided by the veterinarian aside from boarding, then the boarding service is taxable. However, if the veterinarian not only administers medication which the pet owner normally could administer, but also boards the pet for hospitalization, observation, or other veterinary purposes, then the boarding service is not taxable.

History

• Statutory Authority: MS s 270.06; 270C.06; 297A.29
• History: 17 SR 1279; 29 SR 217; L 2005 c 151 art 1 s 114

Minn. R. 8130.8800 Commercial Artists and Photographers

Subpart 1. General rule.

Commercial artists and photographers engaged in the creation or production of art work for sale to advertisers, printers, and others for reproduction, display, or use in the preparation or production of advertising or industrial materials, designs, etc., are regarded as retailers for sales and use tax purposes. Consequently, sales by them of drawings, sketches, paintings, illustrations, photographs, motion picture films, audio and video tapes, negatives, transparencies, mats, plates, engravings, designs, lettering, signs, show cards, posters, assemblies (key lining and paste-ups), and all other forms of tangible personal property are subject to the sales and use tax, whether or not the materials utilized are furnished by the customer. The tax applies to the total price charged, including amounts attributable to personal services of models, assistants, etc., and to preliminary art which becomes physically incorporated into finished art as for example, when the finished art is made by inking directly over a pencil sketch or drawing. Separately stated charges for preliminary art, in the form of roughs, visualizations, comprehensives, and layouts, when the preliminary art does not become physically incorporated into finished art shall be considered charges for services and not subject to tax.

Subp. 2. Retouching.

Retouching constitutes a step in the process of preparing photographs or other art work for reproduction and is done to improve the quality of the reproductions. Tax applies to charges for photo retouching unless it can be clearly demonstrated that the retouching is done only for the purpose of repairing or restoring a photograph to its original condition.

Subp. 3. Items consumed in production.

Since commercial artists and photographers are engaged in the production of tangible personal property intended to be sold ultimately at retail, purchases by them of items which are used or consumed in such production, whether or not the items so used become ingredients or constituent parts of the property produced, are exempt from the tax in accordance with the provisions of Minnesota Statutes, section 297A.25, subdivision 9. Machinery, equipment, implements, tools, accessories, appliances, contrivances, furniture, and fixtures used in such production and fuel, electricity, gas, or steam used for space heating or lighting, are not included within this exemption.

Commercial artists and photographers are users or consumers of, and must pay tax on, materials utilized in the preparation or production of preliminary or creative art work used to display ideas to prospective customers where no contract is made for sales of finished art to the customer.

Subp. 4.

[Repealed, L 2005 c 151 art 7 s 23]

History

• Statutory Authority: MS s 270C.06; 297A.29
• History: L 2005 c 151 art 1 s 114; art 7 s 23

Minn. R. 8130.8900 Florists and Nurseries

Subpart 1. Taxable transactions.

The following transactions are subject to sales or use tax:

A. Sales at retail by florists, nurseries, or other producers or vendors of flowers, wreaths, bouquets, potted plants, hospital baskets, funeral designs, seeds, nursery seedling stock, trees, shrubs, plants, sod, soil, bulbs, sand, rock, and all other floral or nursery products, whether grown by such vendors or not, are taxable sales of tangible personal property. When a florist or nursery prepares a floral arrangement for a customer, the entire transaction is taxable, including all charges for labor and materials even if separately stated on the bill. When a florist or nursery prepares a floral arrangement for a customer who has provided the flowers or other materials, the labor charge by the florist or nursery constitutes fabrication labor and is taxable.

B. Retailers of floral or nursery products who also perform lawn, garden, arborist, tree, bush, and shrub services must collect tax on those services. Lawn, garden, arborist, tree, bush, and shrub services are taxable pursuant to Minnesota Statutes, section 297A.01, subdivision 3, paragraph (j), clause (vi). These services are taxable even though the services are provided incident to the sale of tangible personal property.

C. Purchases of machinery, equipment, implements, tools, accessories, appliances, contrivances, furniture and fixtures, and fuel, electricity, gas, or steam used for space heating or lighting are taxable unless purchased for resale.

D. When a Minnesota florist or nursery sells flowers or other tangible personal property to an out-of-state customer and delivers the items to the customer or a third person within this state, that transaction is taxable. An out-of-state customer is one who is not physically present in Minnesota when placing the order. This item only applies to orders taken directly from the customer by the Minnesota florist or nursery. This item does not apply to telegraphic orders as described in subpart 3.

E. When a Minnesota florist or nursery sells flowers or other tangible personal property and delivers the items to someone other than the person who made the purchase, the transaction is taxable even if delivery is to a point outside of Minnesota. The transaction is a sale at retail made in this state and thus is subject to sales tax.

Subp. 2. Exempt transactions.

The following transactions are not subject to sales or use tax:

A. Sales of trees, plants, seeds, or similar items to persons for use in agricultural production of tangible personal property for resale are exempt (upon presentation of proper exemption certificates to the vendors). For example, stock purchased for the purpose of reforestation where forest products will be later harvested in the form of Christmas trees, posts, poles, pulpwood, etc., are exempt. See part 8130.5500.

B. Purchases by florists, nurseries, or other like producers or vendors of plants and other tangible personal property which are ultimately sold with the plants, including nonreturnable containers, descriptive labels, stickers, and cards affixed to such containers, peat moss, sand, gravel, crushed rock, shavings, sticks, trellises, and plant ties, to be placed in pots or cans with plants, are exempt as purchases for resale. Purchases of nursery stock, seeds, plants, spray materials, and fertilizers to grow nursery stock for resale are exempt as items to be used or consumed in agricultural production. Purchases of electricity and fuel used or consumed in production are also exempt, except that the portion used for space heating or lighting is taxable. See part 8130.5500.

C. When a Minnesota florist or nursery sells flowers or other tangible personal property and delivers the items to the customer outside the state by common carrier, parcel post, United States mail, or the florist's or nursery's own delivery vehicles, the transaction is exempt.

Subp. 3.

[Repealed, L 2014 c 308 art 11 s 8]

Subp. 4.

[Repealed, 16 SR 2055]

History

• Statutory Authority: MS s 270.06; 270C.06; 297A.29
• History: 16 SR 2055; L 2005 c 151 art 1 s 114; L 2014 c 308 art 11 s 8

Minn. R. 8130.9000 Soft Water Equipment and Service Dealers

Subpart 1. Sales.

Sales of water softening equipment and tanks which are attached by a dealer to real property leased or owned by the purchaser are exempt from Minnesota sales tax as sales of improvements to real property. Sales to dealers of such water softening equipment and tanks are considered retail sales and are subject to the tax at the time of sale to the dealer. Sales of equipment, tanks, replacement parts, salts and other chemicals directly to customers are taxable at the retail price if not installed by the dealer.

Subp. 2. Rentals.

Receipts from the rental of water softening equipment and tanks, regardless of how attached to the premises of the lessee, are subject to the sales and use tax. The rental, lease, or lease coupled with an option to purchase such equipment and tanks constitutes a sale at retail of tangible personal property. The tax applies to charges for the delivery and installation of rented equipment and tanks, including charges to replace or exchange such equipment or tanks, regardless of whether those charges are separately stated on the initial invoice or billing, or whether the installation is performed by the lessor of the equipment and tanks. Sales to dealers of equipment and tanks intended to be used only for leasing to customers are considered sales for resale.

Subp. 3.

[Repealed, 31 SR 1801]

History

• Statutory Authority: MS s 270C.06; 297A.29
• History: L 2005 c 151 art 1 s 114; 31 SR 1801

Minn. R. 8130.9100 Sales and Rentals of Mobile Homes and House Trailers

Subpart 1. Sales or rentals of property not permanently affixed to realty.

The sale, rental, or use of a mobile home or house trailer which is not permanently affixed to realty, including all equipment placed thereon by the dealer or manufacturer and included in the selling price, is a sale, rental, or use of tangible personal property. Dealers selling such property should collect sales or use taxes. If such property is subsequently registered as a recreational vehicle by the purchaser, credit against the motor vehicle excise tax imposed by Minnesota Statutes, chapter 297B, will be allowed for sales taxes paid to the dealer.

Lessors of such property should collect sales or use taxes on the rental payments.

Subp. 2. Property permanently affixed to realty.

In some cases, mobile homes or house trailers may lose their identity as personal property because of alterations made to them. Such property will be considered to be real property if all of the following criteria are met:

A. The unit must be affixed to the land by a permanent foundation or in a manner similar to other real property in the district.

B. The unit must be connected to public utilities, especially water and sewer or have its own well and septic tank system or be commensurate with other real property in the district insofar as these facilities are concerned.

C. The wheels must be removed. Sales of property meeting these criteria are exempt sales of real property.

Subp. 3. Exempt lodging.

Where mobile homes and house trailers are permanently affixed to realty in accordance with subpart 2, amounts received by the lessor for the rental or use solely for the purpose of lodgings by the lessee for a continuous period of 30 days or more are exempt.

History

• Statutory Authority: MS s 270C.06; 297A.29
• History: L 2005 c 151 art 1 s 114

Minn. R. 8130.9200 [Repealed, 17 SR 2106]

[Repealed, 17 SR 2106]

Minn. R. 8130.9250 Advertising

Subpart 1. Definitions.

A. "Advertising" is the expression of an idea created and produced for reproduction and distribution through means such as television, radio, newspapers, newsletters, periodicals, trade journals, publications, books, magazines, standardized outdoor billboards, direct mail, point-of-sale displays, leaflets, brochures, fliers, and package design, and which is designed to promote sales of a particular product or service or to enhance the general image of the advertiser. Advertising includes public service messages that are designed to affect the behavior of the public, and messages that are political in nature.

B. "Advertising agency" is any person that is directly responsible to an advertiser for, and whose functions as a business include the creation of advertising. Creation of advertising means developing concepts or ideas to express the advertising message.

C. "Advertiser" is a person who contracts to purchase, or have delivered to a third party on its behalf, advertising.

Subp. 2. In general.

The sale, use, or other consumption (hereinafter referred to as a sale) of advertising ordinarily constitutes a sale of a nontaxable service, and hence is not subject to Minnesota sales or use tax. However, if the means of expressing the advertising is through tangible personal property that has a primary functional use independent of its advertising message, the sale of the advertising will be treated as a taxable sale of tangible personal property. It shall be presumed that the advertising has a primary functional use independent of its advertising message, and the burden is on the taxpayer to prove that the advertising does not have a primary functional use independent of its advertising message.

If a person creates advertising for its own use, all of its purchases of tangible personal property are subject to sales tax. This part, with the exception of subparts 11 and 13, does not apply to such a person. For purposes of subparts 11 and 13, such person shall be treated as an advertiser.

Subp. 3. Nontaxable items.

The following are examples of items the sale of which are usually considered to be nontaxable within the meaning of this part because: (1) the items meet the definition of advertising, and (2) the means of expressing the advertising message is not through tangible personal property that has a primary functional use independent of its advertising message:

A. certain printed materials including:

B. radio commercials including cassettes and tapes of them;

C. television commercials including cassettes, tapes, films, and slides of them;

D. other audio or visual commercials including cassettes, tapes, films, and slides of them;

E. print media advertising, including:

F. billboard ads, transit advertising (bus, rail, taxi, airport), and shopping mall and sports arena advertising and displays; and

G. direct marketing materials not distributed by mail.

Subp. 4. Taxable items.

The following are examples of items the sale of which is usually considered to be taxable within the meaning of this part because either: (1) the items fail to meet the definition of advertising, or (2) the means of expressing the advertising message is through tangible personal property that has a primary functional use independent of its advertising message:

A. specialty advertising, examples of which include key chains, glassware, frisbees, rulers, pens, calendars, buttons, matchbooks, paper napkins, clocks, and notebooks;

B. business cards and stationery;

C. books;

D. annual reports, except as provided in Minnesota Statutes, section 297A.68, subdivision 10;

E. training and educational materials;

F. business identification signs;

G. employee benefit materials and plan descriptions;

H. business directories, including yellow pages;

I. warranty books and product instructions; and

J. advertising, including items described in subpart 3, if mass produced or reproduced in quantities in excess of that reasonably anticipated to be necessary for an advertising campaign, but only to the extent of such excess.

Subp. 5. Charges by an advertising agency to an advertiser for services related to the creation and production of taxable and nontaxable advertising.

In the case of nontaxable advertising no portion of the gross receipts allocable to services related to the creation or the production of the advertising is taxable, since the item constitutes exempt advertising services.

In the case of taxable advertising, all of the gross receipts allocable to all services related to the creation or production of the taxable advertising are taxable. Gross receipts allocable to the creation or production of advertising include all costs incurred in the conception, creation, developing, planning, and design of the advertising, as well as the placing of the advertising.

Subp. 6. Preliminary art.

The Minnesota sales or use tax does not apply to gross receipts allocable to services which relate to preliminary art, film, or tape. Preliminary art, film, or tape, means art, film, or tape prepared for the purpose of conveying or demonstrating an idea or concept for acceptance by a buyer before the final approval is given by a buyer for finished art or finished film or tape. Examples of preliminary art, film, or tape include roughs, visualizations, comprehensives, layouts, sketches, drawings, paintings, designs, story boards, rough cuts of film and tape, initial audio and visual tracks, and work prints. In the case of print advertising, finished art is the final art used for actual reproduction by photochemical or other process. In the case of broadcast advertising, finished film and tape means the master tape or film and duplicate prints. Gross receipts are treated as allocable to preliminary art only to the extent that they are separately billed or stated.

Subp. 7. Nonapportioned contracts.

Where a contract or commission or fee agreement or other agreement requires both the creation of nontaxable advertising and taxable advertising by an advertising agency, and when no separate cost is attributed to the taxable advertising, sales tax on the fair market value of the taxable advertising must be collected and remitted to the commissioner at the time of transfer of title or possession of the taxable advertising to the advertiser or its designee. Fair market value of the taxable advertising will include a fair and appropriate allocation of the agency's fee or commission.

Subp. 8. Purchases for use in producing both nontaxable advertising and taxable advertising.

This subpart applies to purchases by an advertising agency of tangible personal property which may used repeatedly, and to tangible personal property which is consumed in part for producing nontaxable advertising and in part for producing taxable advertising.

A. If an advertising agency purchases tangible personal property which is used, but not consumed, with respect to both nontaxable advertising and taxable advertising, the determination of whether the purchase is exempt from sales or use tax is based on the initial contract for which the property is purchased. An example of such tangible personal property is a photograph that may be used in connection with both nontaxable advertising services such as a newspaper ad, and taxable advertising such as a mug. If the initial contract with the advertiser is for nontaxable advertising, the purchase by the advertising agency is subject to sales or use tax, notwithstanding that the purchased property may later be used with respect to taxable advertising. The subsequent sale of taxable advertising using such tangible personal property is not exempt from sales and use tax because of the previous tax payment. If the initial contract with the advertiser is for taxable advertising, the item purchased by the advertising agency may be purchased exempt for resale, notwithstanding that the purchased tangible personal property may later be used with respect to nontaxable advertising. If a contract (or contemporaneously negotiated contracts) with an advertiser is for both taxable advertising and nontaxable advertising, the burden is on the advertising agency to demonstrate the portion of the use that is attributable to each of such categories. If this burden is not met, the contract with the advertiser is deemed to be for nontaxable advertising. An example of this rule may be artwork purchased and used initially in making both a magazine ad and in making a calendar. Where the burden of proof is not met by the advertising agency, the purchase is taxable and the subsequent sale of taxable advertising is not exempt because of the previous tax payment.

B. If an advertising agency expects to consume materials in producing both nontaxable advertising and taxable advertising, all such materials can be purchased exempt for resale. An example of such material is a ream of paper that may be used in connection with the production of nontaxable advertising such as a brochure, and taxable advertising such as a calendar. To the extent that the materials are subsequently consumed in producing nontaxable advertising, the materials are taxable and must be reported as purchases subject to use tax on the agency's sales and use tax return. The percentage of materials consumed in producing nontaxable advertising is multiplied by the total purchase price of the materials to determine the amount of materials subject to tax. The burden is on the taxpayer to demonstrate the portion of usage that is attributable to taxable advertising. If the burden is not met, all the materials consumed are deemed to be for nontaxable advertising.

Subp. 9. Purchases for agency use.

Office supplies, capital equipment, and other materials including those used to prepare preliminary art, which are consumed or used by an advertising agency and do not become an ingredient or component part of taxable advertising to be sold at retail, constitute a retail sale from the vendor to the advertising agency. An advertising agency is the consumer of such tangible personal property. Either the vendor must collect sales tax or the advertising agency must remit use tax on those purchases.

Tangible personal property that becomes an ingredient or component part of taxable advertising to be sold at retail may be purchased exempt for resale.

Subp. 10. Advertisers that are tax-exempt entities.

Advertisers that are tax-exempt entities may appoint advertising agencies as purchasing agents. If a valid purchasing agency appointment is made, the advertiser shall pay no sales or use tax other than what it would have paid had it made the purchase directly. To make a valid appointment of an advertising agency as a purchasing agent, an advertiser must:

A. grant to the agent the ability to bind the principal to pay for purchases made by the agent;

B. require that the agent not purchase materials in its own name;

C. require that all contracts, purchase orders, and other similar writings of the agent shall specifically state that the principal is obligated to pay for materials purchased and that a clear disclosure of the agency relationship is made to the vendor of the materials; and

D. require that the advertising agency make no use of the property for itself or for any client other than the principal. When dealing with advertising agencies acting as purchasing agents for tax-exempt entities, vendors must presume that the agency is the purchaser in the absence of an express statement on a purchase order from an advertising agency that the advertising agency is acting as an agent and that the purchase is within the scope of authority expressed in the agreement. The agency may issue exemption certificates as authorized in part 8130.3000 in the name of the principal and signed by the advertising agency as purchasing agent.

Subp. 11. Advertising materials shipped out of state.

Minnesota Statutes, section 297A.68, subdivision 11, exempts materials designed to advertise and promote the sale of merchandise or services, which material is shipped out of Minnesota for use solely outside the state. This exemption may apply to the purchase of items in final form or to the purchase of an item that is incorporated into a product that ultimately leaves the state. Similarly, the exemption may apply to the purchase of taxable advertising or to the purchase of tangible personal property that is used in creating or producing nontaxable advertising.

This exemption is limited to materials used to advertise and promote the sale of merchandise or services. This exemption does not include any advertising which is done for other purposes such as public service messages not related to advertising or promoting sales of merchandise or services.

When an advertising agency or an advertiser purchases taxable advertising and the advertising agency, the retailer, or the advertiser ships the taxable advertising out of state for use solely outside the state, the advertising agency or advertiser is not subject to sales or use tax with respect to such purchases because it is the purchaser of materials that are designed to advertise and promote the sale of merchandise or services, and the materials are being shipped outside the state for use solely out of state.

When an advertising agency or an advertiser purchases tangible personal property that is used in creating or producing nontaxable advertising, and the advertising agency, the retailer, or the advertiser ships the advertising out of state for use solely outside the state, the advertising agency or advertiser is not subject to sales or use tax with respect to such purchases because it is the purchaser of materials that are designed to advertise and promote the sale of merchandise or services, and the materials are being shipped outside the state for use solely outside the state. An example of this is when an advertising agency or advertiser purchases advertising brochures that will be shipped out of state. The agency or advertiser can purchase the brochures from the printer exempt from tax. The printer can purchase the paper and ink used to print the brochures exempt because they are being purchased for resale, whether or not the advertising agency or advertiser has an exemption for shipments out of state. The advertising agency or the advertiser is eligible for the exemption described in this subpart whether the item it purchases is in final form, such as a finished brochure or whether the item is incorporated into the product that ultimately leaves the state, such as cardboard that is purchased and becomes part of an advertising sign that is shipped out of state.

The rules described in this subpart also apply with respect to an advertising agency if the advertising agency, instead of itself shipping the advertising directly out of state, delivers the advertising to an advertiser within Minnesota for the purpose of subsequently shipping the materials out of state for use solely outside the state. Similarly, the purchase by the advertiser is not subject to sales or use tax with respect to its purchase of the advertising.

This exemption does not apply to purchases that are used to create or produce nontaxable advertising to the extent that these purchases do not get sent outside the state. An example of this is when an advertising agency purchases a photograph that it uses in preparing advertising brochures. The sale of the photograph to the advertising agency is taxable. The sale of the brochures to the advertising agency is exempt to the extent that those brochures will be sent out of state as described in this subpart. Another example is when an advertising agency purchases a master tape that it uses to make copies that will be shipped out of state. The copies or the materials used to make them may be purchased exempt but the purchase price of the master tape is taxable unless that tape is also shipped out of state as described in this subpart.

Subp. 12. Miscellaneous provisions.

When an advertising agency contracts with a recording studio to produce a tape to be used for nontaxable advertising, the recording studio must charge sales tax on all charges to the agency. If the agency hires actors, or directly purchases other exempt services to be used in making the tape, the agency does not pay tax on those purchases. The recording studio only collects tax on the charges it makes to the agency.

If a recording studio or printer has contracted directly with the advertiser to produce a tape or printed material, the studio or printer must charge tax on the amount charged to the advertiser, unless the studio or printer is also doing creative work and is acting as an advertising agency. If the studio or printer is acting as an advertising agency, it must pay tax on all its inputs for nontaxable advertising, and does not collect tax on its charges to the advertiser.

Subp. 13. Effective date.

To the extent that this part is different from previous department applications of the sales and use tax as it applies to the advertising industry, this part is prospective only and is effective March 8, 1993.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06
• History: 17 SR 2106; L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.9300 Sales by Governmental Units; Taxable

Subpart 1. General rule.

Tangible personal property purchased from the United States, the state of Minnesota, and other governmental units is taxable.

Example. The Minnesota state prison makes retail sales of office furniture and other items manufactured there. Such sales are taxable unless exempt under other provisions of the Sales and Use Tax Law.

Subp. 2. Furnishing copies of documents.

If law or ordinance requires a governmental agency to furnish copies of documents held in its files, the furnishing of such copies is a governmental act or service and shall not constitute a taxable retail sale.

Subp. 3. Concessionaires on government property.

Concessionaires operating on government property are retailers making sales in the ordinary course of business. Such concessionaires are required to collect the tax and remit the appropriate amount of tax to the commissioner.

Subp. 4. Disposal of certain government property.

Various levels of government may, in the usual course of business, dispose of used, obsolete, or surplus equipment by means of periodic sales to the public or to its employees. Such sales are not isolated or occasional sales of tangible personal property if regularly made, and are taxable sales unless exempt under other sections of the Sales and Use Tax Law.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06
• History: L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.9400 Advertising Signs and Billboards

Subpart 1. Sign painters.

The sales and use tax applies to retail sales of metal, wood, cardboard, paper, or other type signs, showcards, posters, etc. which are not attached or affixed to real estate by the sellers thereof. Purchases by sign manufacturers or painters of paint and other materials entering into or becoming component parts of such signs, showcards, and posters are exempt. Charges by sign painters for painting signs on buildings, outdoor boards, windows, or other real property, trucks, and similar properties owned by others are exempt as charges for personal services. The sign painter is considered the user or consumer of all paint, etc. used for this purpose and must pay sales or use tax, whichever is applicable, upon all purchases thereof.

Subp. 2. Sales of realty.

Contracts under which the sellers provide signs and attach them to buildings or to structures bolted to buildings or to structures anchored in the ground by means of wood or steel poles or other similar means, so that the signs become nontemporary accessions to such buildings or structures, are deemed to be contracts for the alteration of real property and are thus not transactions subject to the sales tax. Persons who provide and install such signs are the consumers of, and must therefore pay tax on, all purchases of, all component parts, materials, and supplies used in the construction, repair, and maintenance thereof.

Subp. 3. Sign rentals.

The lease charges for rental of real property are not subject to tax. Charges for the lease of signs attached to real property are not taxable. The signs, when attached to buildings, are fixtures becoming real property upon being affixed.

Charges by tenants or owners of buildings, structures, or land for affixation thereon of signs are exempt as charges for the lease or license to use real property.

Subp. 4. Outdoor advertising services.

Persons engaged in the business of selling advertising space (exposure time) on signs, billboards, and other outdoor advertising structures are deemed to be the consumers of all component parts, materials, and supplies used in the construction, repair, and maintenance of such signs and billboards. Sales to such persons of component parts, materials, and supplies are subject to tax. Charges by such persons for advertising space on such signs, billboards, and outdoor advertising structures are exempt as charges for personal services.

History

• Statutory Authority: MS s 270C.06; 297A.29
• History: L 2005 c 151 art 1 s 114

Minn. R. 8130.9500 Repealed by subpart

Subpart 1.

[Repealed, L 2014 c 308 art 11 s 8]

Subp. 1a.

[Repealed, L 2014 c 308 art 11 s 8]

Subp. 2.

[Repealed, L 2014 c 308 art 11 s 8]

Subp. 3.

[Repealed, L 2014 c 308 art 11 s 8]

Subp. 4.

[Repealed, L 2014 c 308 art 11 s 8]

Subp. 5.

[Repealed, L 2014 c 308 art 11 s 8]

Subp. 6.

[Repealed, 18 SR 1891]

Minn. R. 8130.9600 Iron Mining Industry Exemptions

Subpart 1. Scope.

The industrial production exemption provided in Minnesota Statutes, section 297A.68, subdivision 2, is applicable to taconite mining and production operations and to the mining and producing of other ores as well. The exemption applies generally to electricity and all materials other than tools, machinery, and equipment which are used in the production process, and to separate detachable units meeting the criteria specified in part 8130.5500.

Subp. 2. Production process.

In the case of mining, the production process shall be deemed to begin with the removal of overburden from the site of the ore deposit and to end when the last process prior to stockpiling is performed. If the product is not stockpiled prior to shipment, the production process shall be deemed to have ended when the last process prior to loading for shipment has been completed. Subpart 3 sets forth examples of items which are illustrative of the exemption allowable for separate detachable units.

In addition to the general industrial production exemption, Minnesota Statutes, section 297A.68, subdivision 4, provides a specific exemption for items used in the production of taconite. See subpart 4.

To further clarify and illustrate the scope of the exemption, examples of items not considered to be exempt under subparts 1 and 2 are set forth in subpart 5.

Subp. 3. Separate detachable units.

The exemption for separate detachable units used in producing a direct effect upon the product provided in Minnesota Statutes, section 297A.68, subdivision 2. It is applicable to taconite mining and production operations and to the mining and producing of other ores as well. The following items are considered as having a direct effect upon the product and qualify for exemption where they are separate detachable units and their ordinary useful life is less than 12 months:

A. bucket lip on front-end loader used in other than stockpile loading;

B. chunk breaker used to break up pellets fused into chunks;

C. crushed bowls, concaves, mantles;

D. dipper teeth but not dipper teeth adapters;

E. dozer blade cutting edges and end or corner bits plus blade bolts and nuts;

F. drill bits and reamers used in drilling ore body for blasting;

G. drop ball for breaking huge rock chunks;

H. filter cloth or bags;

I. grader blade cutting edges and end bits plus blade bolts and nuts;

J. internal parts of an Erie-type cyclone;

K. magnetic separator covers on rough cobbers;

L. ripper teeth for ground breaking;

M. screen cloth or mesh or panels;

N. splitter castings and grizzly castings used in crushers, loading, and/or storage bins;

O. stationary and movable jaws on jaw crusher; and

P. wear shoes on spiral classifiers.

Subp. 4. Taconite mining and production.

The exemption provided in Minnesota Statutes, section 297A.68, subdivision 4, is applicable only to companies involved in the mining and production of taconite. It exempts grinding rods, grinding balls, and mill liners used in the reduction and processing of the taconite ore.

For purposes of this exemption, the term "mill" includes all of the facilities used to reduce and process the ore. It does not include shovels or mobile equipment.

Any item which is an integral part of the plant equipment as opposed to being a liner serving to protect the equipment is not included within this exemption. Examples of items exempt as liners are:

A. autogenous mill liners, feed and discharge liners;

B. chute liners (this may be a bar or a plate);

C. classifier wear plates and classifier shoes;

D. convey or skirt board rubber liners;

E. crusher bowl liners (concaves), mantle liners, feed and discharge liners;

F. crusher spider caps, rims, liners, shell liners, lower hub liners, pinion shaft liners, feed opening liners, wear rings, torch rings, and other crusher-related liners;

G. cyclone classifier wear plates;

H. cyclone collector wear plates;

I. dump pocket wall liners, wear bars;

J. linatex materials used in pipes, pumps, chutes, hoppers, etc.;

K. mill liner bolts;

L. nordbak kits (other than that used instead of zinc for bowls and mantles);

M. refractory brick in rotary kiln only;

N. rod and ball mill liners, feed and discharge liners;

O. rubber or like materials used as liners in pumps;

P. steel wear plate or alloys used to line hoppers, bins, chutes, pockets, or launders;

Q. urethane materials used to line filter sectors, separator covers, fan blades, vertical classifier internal surfaces, cyclone classifier and collector internal surfaces, pipe fittings, pipe liners, chutes, bins, launders, and sumps; and

R. welding rods used to repair liners or wear plate.

Subp. 5. Nonexempt examples.

Examples of items of tangible personal property which do not come within the exemption provided under Minnesota Statutes, section 297A.68, subdivision 2 or 4, are:

A. all motors and engines (electrical or otherwise);

B. burner tips;

C. chute liners (other than in taconite operation);

D. conveyor belts;

E. conveyor belt wiper and idlers;

F. drum separator lifter bar;

G. filter arm;

H. grate bars not used for sizing;

I. grate side plates;

J. kelly extension;

K. materials and equipment including detachable tools used to maintain or repair plant or mining equipment;

L. pan feeder plates;

M. pump casing;

N. pump impellers;

O. pump side plate;

P. replacement parts used to repair mine or plant equipment;

Q. truck filters;

R. V belts and sheaves;

S. items found on mobile equipment such as:

T. items found on traveling grate such as:

U. all refractories other than refractory brick in rotary kiln, including those used in horizontal and vertical furnaces, preheaters, and annular coolers:

History

• Statutory Authority: MS s 14.388; 270C.06; 297A.29
• History: L 2005 c 151 art 1 s 114; 31 SR 449

Minn. R. 8130.9700 Automatic Data Processing

Subpart 1. In general.

A sales or use tax is imposed upon the gross receipts from selling, leasing, or granting a license to use tangible personal property. When separately stated, the labor charges for repair, service, and maintenance of tangible personal property is not subject to tax. The producing, fabricating, processing, printing, or imprinting of tangible personal property for a consideration for consumers who directly or indirectly furnish the materials used in the producing, fabricating, processing, printing, or imprinting is also subject to tax. The transfer of property produced, fabricated, or printed to the special order of the customer is also subject to tax.

This part sets forth guidelines for the application of the general statutory provisions to transfers of property and service rendered in the automatic data processing industry.

"Automatic data processing services" are those rendered in performing all or part of a series of data processing operations through an interacting assembly of procedures, processes, methods, personnel, and automatic data processing equipment. Automatic data processing services may be provided by manufacturers of data processing equipment, data processing centers, systems designers, consultants, software companies, etc. In addition, there are banks and other businesses which own or lease automatic data processing equipment and use it primarily for their own purposes but occasionally provide services to others. Businesses rendering automatic data processing services will be referred to as "service bureaus."

Subp. 2. Description of terms.

Data processing terms are described as follows:

A. The specific job performance by an automatic data processing installation is called an "application." For example, data processing for a payroll may be called a payroll application.

B. The term "automatic data processing equipment" includes computers and their peripheral equipment as well as punched card tabulating machines.

C. "Coding" means the list, in computer code, of the successive computer instructions representing successive computer operations for solving a specific problem.

D. "Input" means the information or data transferred, or to be transferred, from external storage media (e.g., punched cards, punched paper tape, and magnetic tape) into the internal storage of the computer.

E. "Keypunching" means recording information in cards, paper tapes, or magnetic tapes, discs, or drums by punching holes in the cards, paper tapes or inserting magnetic bits on magnetic tape, discs, or drums, to represent letters, digits, and special characters. Keypunching includes the necessary preliminary encoding or marking of the source documents.

F. "Keystroke verifying" means the use of a machine known as a punched card verifier or tape transcriber, which has a keyboard, to ensure that information punched in a punch card or transcribed on magnetic tape during the keypunching operation has been punched properly. The machine signals when the punched hole on the card and the depressed key disagree, or when the data on magnetic tape differs from depressed keys.

G. "Off-line" is descriptive of a system and the devices in a system in which the operation of equipment is not under the control of a computer.

H. "Online" is descriptive of a system and the devices in a system in which the operation of such system or devices is under control of a computer.

I. "Output" means the information transferred from the internal storage of the computer to an external storage media (e.g., punched cards, magnetic tape, and tabulated listing).

J. "Program" is the complete plan for the solution of a problem, i.e., the complete sequence of automatic data processing equipment instructions necessary to solve a problem. It includes both systems and application programs and subdivisions such as assemblers, compilers, routines, generators, and utility programs.

K. A "proof listing" is a tabulated listing of input.

L. A "source document" is from which basic data are extracted (e.g., sales invoice).

Subp. 3. Taxable transactions, unless otherwise exempt under Minnesota Statutes, chapter 297A.

Certain transactions are treated as follows:

A. Retail sales of new or used data processing equipment are taxable.

B. Leases of equipment are subject to tax. A lease includes a contract by which a lessee secures for a consideration the use of equipment which may or may not be on the lessee's premises if the lessee or the lessee's employees operate the equipment, or if the equipment is operated under the direction and control of the lessee or the lessee's employees. Subleasing receipts are taxable without any deduction or credit for tax paid by the original lessee to the lessor, if the original lessee uses the property in addition to subleasing it. Use of equipment on a time-sharing basis, where access to the equipment is only by means of remote access facilities, is not a taxable leasing of such equipment.

C. Persons who sell or lease data processing equipment may provide a number of training services with the sale or rental of their equipment. Training services, per se, when separately stated, are not subject to the tax. Training materials, such as books, videos, and cassettes, furnished to the trainees for a specific charge are taxable.

D. Generally tax applies to the conversion of customer-furnished data from one physical form of recordation to another. For example, if all or some data in punched cards is duplicated into another set of cards, charges for this service are taxable.

E. When additional copies of records, reports, or tabulations are provided, tax applies to the charges made for the additional copies. "Additional copies" are all copies in excess of those produced on multipart carbon paper simultaneous with the production of the original and on the same printer, whether the copies are prepared by rerunning the same program, by using multiple simultaneous printers, by looping a program such that the program is run continuously, by using different programs to produce the same output product, or by other means. Where additional copies are prepared, the tax will be measured by the charge made by the service bureau to the customer. Charges for copies produced by means of photocopying, multilithing, or by other means are also subject to tax.

F. Sales of mailing lists in the form of cheshire tapes, gummed labels, and heat transfers produced as a result of a computer run are taxable. However, computer-generated mailing lists alone involving no transferable product are not taxable. Where the service bureau, through the use of its automatic data processing equipment, addresses material to be mailed, with names and addresses furnished by the customer or maintained by the service bureau for the customer, tax does not apply to the charge for addressing. Similarly, where the service bureau prepares labels to be affixed to material to be mailed, with names and addresses furnished by the customer or maintained by the service bureau for the customer, tax does not apply to the charge for producing the labels, when the service bureau itself affixes the labels to the material to be mailed.

G. For taxation of retail sales of computer software, see part 8130.9910.

Subp. 4. Nontaxable services.

Certain services are treated as follows:

A. "Processing a client's data" means the developing of original information from raw data furnished by the customer. Examples of automatic data processing operations which result in original information are summarizing, computing, extracting, sorting, and sequencing. Such operations also include the updating of a continuous file of information maintained by the customer with the service bureau. Generally, if a person enters into a contract to process a client's data by the use of a computer program, or through an electrical accounting machine programmed by a wired plugboard, the contracts are nontaxable (except if the contract is in the nature of a lease as outlined in subpart 3, item B). Such contracts usually provide that the person will receive the client's source documents, record data in machine-readable form (such as in punch cards or on magnetic tape), make necessary corrections, rearrange or create new information as the result of the processing, and then provide tabulated listings or record output on other media. This service is considered nontaxable even if the total charge is broken down into specific charges for each step. The furnishing of computer programs and data by the client for processing under direction and control of the person providing the service is nontaxable even though charges may be based on computer time. The true object of these contracts is considered to be a service, even though some tangible personal property is incidentally transferred to the client. "Processing a client's data" does not include:

B. Designing of systems, converting of systems, consulting, training, and miscellaneous services are services which consist of the developing of ideas, concepts, and designs. Common examples of such services are:

C. Persons engaged in providing nontaxable computer services are the consumers of all tangible personal property used in such activities and the tax must be paid on their acquisition of such property.

D. Keypunching and keystroke verifying is an item which covers situations where a service bureau's agreement provides only for keypunching, keystroke verifying, and proof listing of data or any combination of these operations. It does not include contracts under which these services are performed as steps in processing a client's data as described in item A. Agreements providing for keypunching and keystroke verification, or keypunching, providing a proof list, and/or verification of data are not regarded as contracts for the fabrication of punch cards and sales of proof lists. Charges therefore are not taxable, whether the cards are furnished by the customer or by the service bureau. Data from source documents may also be recorded directly on magnetic tape (off-line). This operation may include keystroke verifying and/or proof listing of data and is comparable to the punch card operation. Charges for this operation are not taxable whether the magnetic tapes are furnished by the customer or by the service bureau. No tax applies to charges for the imprinting of characters on a document to be used as the input medium in an optical character recognition system. The tax treatment is the same even though paper tape or other medium were used in the operation.

Subp. 5. Microfilming and/or photorecording services.

Microfilming and photorecording services are treated as follows:

A. Some electronic data processing systems accept signals directly from the computer (online) at high speeds and then records them on microfilm or on photorecording paper. The computer output medium is merely changed from the more common output media of magnetic tape and tabulated listings to microfilm or photorecording paper. When this end product is the result of a complete computer program as outlined in subpart 4, item B, the tax will not apply.

B. In all situations where data is converted by means other than by the use of a complete computer program as outlined in subpart 4, item B, the receipts for microfilming or photorecording are subject to sales tax. An example of this is where data on magnetic tape is converted into combinations of alphanumeric printing, curve plotting, and/or line drawings and put on microfilm or photorecording paper.

Subp. 6.

[Repealed, 18 SR 784]

History

• Statutory Authority: MS s 270.06; 270C.06; 297A.29
• History: 17 SR 1279; 18 SR 784; L 2005 c 151 art 1 s 114

Minn. R. 8130.9910 Computer Software

Subpart 1. Definitions.

For purposes of this part, the following words and phrases have the meanings given them in items A to I.

A. A "sale" and a "purchase" has the meaning given it in Minnesota Statutes, section 297A.01, subdivision 3, clause (k).

B. "Computer program" has the meaning given it in Minnesota Statutes, section 297A.01, subdivision 18, clause (3).

C. "Custom computer program" has the meaning given it in Minnesota Statutes, section 297A.01, subdivision 18.

D. "Canned or prewritten computer program" is defined in Minnesota Statutes, section 297A.01, subdivision 18, to mean a "program that is held or existing for general or repeated sale or lease, even if the prewritten or 'canned' program was initially developed on a custom basis or for in-house use." A computer program is considered to be canned or prewritten if it meets the following guidelines:

E. "Computer" means an electronic device, including word processing equipment and testing equipment, or combination of components that is programmable and that includes a processor (central processing unit or microprocessor), internal memory, and input and output connections. An electronic device otherwise qualifying as a computer remains a computer even though it may be used for information processing, data acquisition, process control, or for the control of manufacturing machinery or equipment. As provided in Minnesota Statutes, section 297A.01, subdivision 18, clause (2), " 'computer' does not include tape-controlled automatic drilling, milling, or other manufacturing machinery or equipment."

F. "Maintenance agreement support services" means error corrections received by any means, consultation services, or technical support for computer programs.

G. "Upgrades or enhancements" means information and directions which provide new or significantly improved functionality to a computer program. It includes information and directions that dictate the function performed by data processing equipment. Computer software, in any form which is provided under a maintenance agreement, and which does not provide new or significantly improved functionality is deemed to be a maintenance agreement support service.

H. "Computer program" means computer software.

I. "Storage media" has the meaning given it in Minnesota Statutes, section 297A.01, subdivision 18, clause (1).

Subp. 2. Tax applications.

A. Sales tax is due on the sale, lease, or license of a canned or prewritten program that is held or existing for general or repeated sale, lease, or license. The sale of canned or prewritten programs is the sale of tangible personal property. Minnesota Statutes, section 297A.01, subdivision 11, defines "tangible personal property" in part to include "computer software, whether contained on tape, discs, cards, or other devices."

B. Sales tax is not due on the sale, lease, or license of a custom computer program. The sale of a custom computer program is a service transaction. The purpose of the transaction is to obtain personalized service and the expert knowledge of the program creator. The transfer of any tangible personal property is incidental to the service being performed.

C. Charges for computer program maintenance furnished for a canned computer program are taxable if the customer is entitled to receive or receives canned computer software upgrades or enhancements. However, charges for computer program maintenance furnished for custom software are not taxable. Maintenance contracts sold in connection with the sale or lease of canned software may provide that the purchaser will be entitled to receive upgrades or enhancements. The maintenance contract may also provide that the purchaser will be entitled to receive maintenance agreement support services.

D. Separately stated charges for written training materials on the use of a canned computer program are taxable. Charges for written training materials on the use of a custom computer program are not taxable, whether or not separately stated. Charges for training services and similarly related services are nontaxable.

E. When a computer and canned computer programs are purchased together, the sales tax is due on the total charge.

F. When a computer and custom computer programs are purchased together, sales tax is due on the total charge if the charge for the custom computer program is not separately stated.

G. Master computer programs which are purchased and used to make copies for sale or lease are property purchased for resale and not subject to sales tax. See Minnesota Statutes, section 297A.01, subdivision 4.

H. Examples of services that do not result in custom software include loading parameters to initialize program settings and arranging preprogrammed modules to form a complete program. No tax results when the modifications to existing prewritten software are required to meet the customers' specific needs. These modifications are considered to be custom programming. When the charges for modification are not separately stated, the records of the transaction may be used to demonstrate to what extent the program has been modified. The department will use the following records to determine the extent of modification to prewritten software when there is not a separate charge for the modification: logbooks, timesheets, dated documents, source codes, specifications of work to be done, design of the system, performance requirements, diagrams of programs, flow diagrams, coding sheets, error printouts, translation printouts, correction notes, and invoices or billing notices to the client. If the charges for modification are not separately stated and the records of the transaction do not adequately document the extent of the modifications, the entire charge for the program is taxable.

I. Canned or prewritten computer programs may be transferred to the customer in the form of punched cards, data on magnetic tape, or by listing the program instructions on coding sheets. In some cases they are usable as written. However, in most cases it is necessary that the program be modified, adapted, and tested to meet the customer's particular needs. The sale of all property, including coding sheets, cards, or magnetic tape, on which or into which such programs have been coded, punched, or otherwise recorded is subject to tax.

J. The temporary transfer of possession of a canned or prewritten computer program, for a consideration, for the purpose of direct use or to be recorded by the customer, is a lease or the granting of a license to use or consume tangible personal property and the tax does apply. Where the consideration consists of license fees or royalty payments for canned or prewritten computer programs, all license fees or royalty payments, present or future, whether for a minimum use or for extended periods, are includable in the measure of tax.

K. Programming changes to a canned or prewritten computer program to adapt it to a customer's equipment, including translating a program to a language compatible with a customer's equipment, are in the nature of fabrication labor and are taxable.

L. Charges for assembler, compiler, utility, and other canned or prewritten computer programs provided to those who lease or purchase automatic processing equipment are subject to tax.

History

• Statutory Authority: MS s 270.06; 270C.06
• History: 18 SR 784; 18 SR 851; 18 SR 887; L 2005 c 151 art 1 s 114

Minn. R. 8130.9912 [Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

[Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

Minn. R. 8130.9913 [Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

[Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

Minn. R. 8130.9916 [Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

[Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

Minn. R. 8130.9920 [Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

[Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

Minn. R. 8130.9930 [Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

[Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

Minn. R. 8130.9956 [Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

[Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

Minn. R. 8130.9958 [Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

[Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

Minn. R. 8130.9968 [Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

[Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

Minn. R. 8130.9972 [Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

[Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

Minn. R. 8130.9980 [Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

[Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

Minn. R. 8130.9992 [Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

[Repealed, L 1995 c 233 art 3 s 8; L 1995 c 248 art 3 s 8]

Minn. R. 8130.9996 [Repealed, 18 SR 1891]

[Repealed, 18 SR 1891]

Chapter 8150 INHERITANCE AND GIFT TAX

Minn. R. 8150.0190 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.0200 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.0400 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.0500 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.0600 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.0700 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1405 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1410 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1415 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1420 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1425 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1430 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1435 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1440 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1445 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1505 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1510 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1515 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1520 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1525 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1540 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1545 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1600 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1800 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.1900 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.2000 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.2100 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.2200 [Repealed, 8 SR 2609]

[Repealed, 8 SR 2609]

Minn. R. 8150.2205 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.2210 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.2300 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Minn. R. 8150.2400 MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

MR 1991 [Obsolete, MS s 14.47, subd. 6, paragraph (b)]

Chapter 8160 TAX ADMINISTRATION AND COMPLIANCE

Minn. R. 8160.0300 Amended Returns

Subpart 1. Application.

This part applies only to income, corporate franchise, and estate taxes under Minnesota Statutes, chapters 290 and 291.

Subp. 2. Effect of filing more than one return before the due date.

If more than one return for a single taxable period is filed by the date prescribed for filing the return (without regard to any extensions), the last return filed by the due date supersedes the previous return or returns. The last return filed by the due date is the taxpayer's original return for the taxable period and is not an amended return.

Subp. 3. Effect of amended returns.

If a taxpayer files an amended return showing tax which is greater than the tax shown on the most recent assessment, the amended return constitutes an assessment which establishes the taxpayer's liability.

If a taxpayer files an amended return showing tax which is less than the tax shown on the most recent assessment, the amended return constitutes a claim for refund under Minnesota Statutes, section 289A.50. Before a claim for refund can be processed, the taxpayer must pay the tax as assessed prior to the claim for refund. The commissioner, however, may use the information contained in the claim for refund to adjust the previous assessment as long as the statute of limitations for adjusting that assessment has not expired.

Subp. 4.

[Repealed, L 2000 c 490 art 13 s 21]

Subp. 5. Time limitations on assessment and collection.

The taxpayer's filing of an amended return does not alter or extend the period of limitation for assessment of tax.

The time limitations for collection of additional tax shown on a taxpayer's amended return begin to run on the date the commissioner receives the amended return.

Subp. 6. Interest and penalties.

The additional tax shown on a taxpayer's amended return bears interest from the date the original return was due to the date the amount of additional tax assessed by the taxpayer on the amended return is paid.

Penalties for failure to timely pay tax under Minnesota Statutes, section 289A.60, subdivision 1, begin to accrue from the date the amended return is received by the commissioner to the date the additional tax assessed by the amended return is paid.

Penalties added to the original return for failure to timely file under Minnesota Statutes, section 289A.60, subdivision 2, are recalculated using the tax liability shown on the amended return as the tax liability on which the penalties are based.

History

• Statutory Authority: MS s 270.06; 270C.06
• History: 17 SR 2106; L 2000 c 490 art 13 s 21; L 2005 c 151 art 1 s 114

Minn. R. 8160.0500 Innocent Spouse Relief and Liability of Divorced, Legally Separated, and Widowed Spouses for Individual Income Tax

Subpart 1. General rule.

For all joint returns, and for combined returns for taxable years 1981 through 1984, the liability of spouses for unpaid individual income taxes is joint and several.

Subp. 2. Innocent spouse relief.

Either spouse, whether the marriage has been dissolved, legally separated, or terminated by the death of the other spouse or not, can apply to the Department of Revenue for innocent spouse relief from joint and several liability. The spouse must qualify for relief under the conditions prescribed in section 6015(b) of the Internal Revenue Code, and the regulations and federal court cases interpreting that code section.

If either spouse is found to qualify for innocent spouse relief from payment of an income tax amount, the other spouse is then solely liable, in full, for that amount.

Subp. 3. Liability of divorced, legally separated, and widowed spouses; calculation.

In the case of divorced, legally separated, and widowed spouses, either spouse, or the surviving spouse, may apply to the Department of Revenue for a division of their joint income tax liability into two separate liabilities due from each spouse. Application must be made, in writing, by providing a copy of the decree of dissolution of marriage, decree of legal separation, or death record of the deceased spouse, and a copy of the state and federal tax returns, including required attachments and schedules, for the tax year of the liability. The formula for dividing the liability between the spouses is based upon a calculation of what their proportionate shares of the tax would be if they had filed separate returns.

Solely for the purpose of apportioning the liability between the spouses, the criteria in items A, B, and C shall be used.

A. Income, deductions, credits, exemptions, estimated payments, tax payments, and tax refunds attributable to, earned by, paid by, or paid to, solely one spouse shall be assigned to that spouse.

B. All of the items in item A that are attributable to, earned by, or paid to both spouses jointly, or paid from joint funds of both spouses, shall be divided equally between the spouses.

C. For purposes of additional assessments of income tax, the separate return apportionment shall be made solely based upon the additional assessment, without regard to any of the items in item A that are reported on the original return. If innocent spouse relief is granted from liability for an additional assessment of income tax, the additional assessment is not included in the calculation of the separate return formula. For example, H and W file a return without remitting the tax. Then, an additional assessment is made, and one of the spouses is granted innocent spouse relief from payment of the assessment. If the spouses are divorced, legally separated, or widowed, their liabilities are their shares of the tax not remitted with the return, and that amount is apportioned as follows:

Subp. 4. Election of remedies; effect of innocent spouse relief and separate liability determinations.

Subject to subpart 3, item C, the separate return formula for calculating the liability of each spouse can be applied both to taxes reported on a return but not paid and to additional assessments of income tax. Innocent spouse relief applies only to additional assessments.

In the case of additional assessments, when an innocent spouse claim is allowed, the separate liability calculation is not available; conversely, when a separate liability calculation is allowed, innocent spouse relief is not available.

An innocent spouse relief determination or separate liability calculation, or any combination thereof, does not increase or reduce the amount of the underlying tax liability owed jointly by both spouses, whether married, divorced, legally separated, or widowed, that was owing prior to the granting of relief or calculation of the formula.

Subp. 5. Notice requirements; appeal rights.

When either spouse applies for a separate liability calculation, the Department of Revenue must mail a copy of its proposed apportionment of liability to the other spouse at his or her last known address. In the case of a widowed spouse, notice must be mailed to the personal representative of the estate of the deceased spouse. The notice to the other spouse shall not be considered a disclosure violation under Minnesota Statutes, chapter 270B. The other spouse then has 30 days from the date of mailing of the notice in which to contest the separate liability calculation shown in the proposal. If the other spouse applies for innocent spouse relief, the department must make the innocent spouse determination first.

If either spouse applies for innocent spouse relief, the relief cannot be granted unless the department first gives notice to the other spouse of its intent to grant the relief. The other spouse then has 30 days in which to contest the granting of innocent spouse relief to the applicant spouse. If the other spouse applies for a separate liability calculation, the department must make the innocent spouse determination first.

A denial or granting of innocent spouse relief or an apportionment of a liability between spouses, once it becomes final, is not appealable administratively, but is appealable to the Minnesota Tax Court in the manner provided in Minnesota Statutes, chapter 271.

History

• Statutory Authority: MS s 14.388; 270.06; 270C.06
• History: 17 SR 1758; 25 SR 971; L 2001 1Sp9 art 15 s 32; L 2005 c 151 art 1 s 114; 46 SR 1363

Minn. R. 8160.0620 Returns Made by Commissioner

Subpart 1. Making returns.

If a taxpayer fails to file a required return, the commissioner may make a return for the taxpayer under Minnesota Statutes, section 270C.33, subdivision 3. For the purposes of this part, the terms in items A and B have the meanings given.

A. A "commissioner filed return" means a return made by the commissioner under Minnesota Statutes, section 270C.33, subdivision 3.

B. The "filing date" of a commissioner filed return means the date the commissioner makes and files the return for the taxpayer under Minnesota Statutes, sections 270C.33, subdivision 3, and 270C.62.

Subp. 2. Status of commissioner filed return and taxpayer's return.

A commissioner filed return is prima facie correct and valid when filed, but the filing of a commissioner filed return does not satisfy the taxpayer's obligation to file a return.

If, after a commissioner filed return has been filed, the taxpayer files a return, the commissioner will allow the tax shown on the taxpayer's return to establish the taxpayer's current tax liability (except where the commissioner filed return is on judicial appeal or the tax liability has been adjudicated).

Subp. 3. Adjusting the commissioner filed return.

Anytime before the taxpayer files a return, the commissioner may adjust the commissioner filed return by making a subsequent commissioner filed return or by issuing an order of assessment. After the taxpayer has filed a return, the commissioner may not adjust the tax liability shown on that return by making a commissioner filed return. To adjust the taxpayer's return, the commissioner must issue an order of assessment.

Subp. 4. Limitation on time for assessment.

The period of limitations on assessment does not begin to run on the filing date of a commissioner filed return. The period of limitation for assessment begins to run on the date the taxpayer files a return. See Minnesota Statutes, section 289A.38.

Subp. 5. Appealing a commissioner filed return.

A taxpayer cannot administratively appeal the tax liability shown on a commissioner filed return. However, the commissioner may determine, based on information supplied by the taxpayer, that the taxpayer is not required to file.

The taxpayer may appeal the requirement to file or the tax liability shown on a commissioner filed return to Tax Court under Minnesota Statutes, section 271.06. An appeal to the Tax Court must be made within 60 days from the filing date of the commissioner filed return.

Subp. 6. Interest and penalties.

Interest under Minnesota Statutes, section 289A.55, subdivision 2, and penalties under Minnesota Statutes, section 289A.60, subdivisions, 1, 2, and 3, continue to accrue during the period in which the taxpayer may appeal a commissioner filed return to Tax Court and while an appeal is pending.

Subp. 7. Collection.

The periods of limitation for collection of tax shown on a commissioner filed return begin to run on the filing date of the commissioner filed return. The filing date constitutes the date of assessment of the tax.

If, after a commissioner filed return has been filed, the commissioner or the taxpayer assesses tax and the tax shown on that subsequent assessment is less than or equal to the amount of tax shown on the commissioner filed return, the date of assessment of the commissioner filed return remains in effect. If the amount of tax shown on a subsequent assessment is greater than the amount shown on the commissioner filed return, the date of assessment for the tax in excess of the amount shown on the commissioner filed return is the date of the subsequent assessment.

History

• Statutory Authority: MS s 270.06; 270C.06
• History: 17 SR 2106; L 2005 c 151 art 1 s 114,116; 46 SR 32

Minn. R. 8160.0630 Orders of Assessment Issued When No Return Has Been Filed

Subpart 1. Sending an order of assessment.

If a taxpayer fails to file a required return, the commissioner may send an order of assessment to the taxpayer under Minnesota Statutes, section 270C.33.

Subp. 2. Status of the order of assessment and the taxpayer's return.

An order of assessment establishes the taxpayer's tax liability. The taxpayer, in any related action or proceeding, has the burden of establishing the incorrectness or invalidity of the order of assessment. The sending of an order of assessment does not satisfy the taxpayer's obligation to file a return. If the taxpayer files a return after an order of assessment has been sent, the taxpayer's obligation to file a return is satisfied, but the taxpayer's return does not establish a new tax liability (except to the extent that the tax shown on the taxpayer's return exceeds the tax shown on the order of assessment).

Subp. 3. Limitation on time for assessment.

The period of limitations on assessment does not begin to run on the date of the order of assessment. The period of limitations on assessment begins to run on the date the taxpayer files a return. See Minnesota Statutes, section 289A.38.

Subp. 4. Appealing the order of assessment.

A taxpayer may obtain reconsideration of an order of assessment through administrative review under Minnesota Statutes, section 270C.35, or may appeal to the Tax Court under Minnesota Statutes, section 271.06. If the taxpayer has not filed a return for the period for which administrative review is requested and the requirement to file is not in dispute, the taxpayer's written administrative appeal must include a return.

If the taxpayer fails to file a timely administrative appeal or a timely appeal to Tax Court, the taxpayer must pay the tax in full, but may file a claim for a refund under Minnesota Statutes, section 289A.50. If the taxpayer has not filed a return for the period for which a refund is claimed, a return must be filed as part of the refund claim.

Subp. 5. Interest and penalties.

Interest payable to the commissioner under Minnesota Statutes, section 289A.55, subdivision 2, continues to accrue during the periods allowed for administrative review, appeal to Tax Court, and payment. Penalties for failure to make and file a return under Minnesota Statutes, section 289A.60, subdivision 2, continue to accrue until the taxpayer files a return for the tax type and period upon which the order is based. Penalties for failure to pay tax under Minnesota Statutes, section 289A.60, subdivision 1, continue to accrue until the taxpayer pays the amount assessed.

Subp. 6. Collecting the assessment.

The periods of limitation on collection begin to run on the date of the order of assessment.

If, through administrative review or Tax Court appeal, the taxpayer meets the burden of establishing the invalidity of the order of assessment and the tax liability determined on review or appeal is less than or equal to the amount of tax shown on the order of assessment, the date of assessment remains the date of the order of assessment.

History

• Statutory Authority: MS s 270.06; 270C.06
• History: 17 SR 2106; 26 SR 435; L 2005 c 151 art 1 s 114,116

Chapter 8165 REVENUE RECAPTURE

Minn. R. 8165.0100 Revenue Recapture; Identifying Information

In addition to the name and social security number of the debtor as required by Minnesota Statutes, section 270A.04, subdivision 3, the commissioner of revenue may require an agency making a revenue recapture claim to furnish any of the following information in order for the commissioner to correctly identify the debtor:

A. the address of the debtor;

B. a former address of the debtor;

C. the name and social security number of the debtor's spouse;

D. the name and social security number of the debtor's ex-spouse;

E. the name and address of the debtor's employer or a former employer; and

F. the names of dependents of the debtor.

History

• Statutory Authority: MS s 270A.04; 270C.06
• History: 17 SR 1229; L 2005 c 151 art 1 s 114

Minn. R. 8165.0200 Suspension of Claimant Agency Status

Subpart 1. Commissioner's power to suspend.

A claimant agency defined under Minnesota Statutes, section 270A.03, subdivision 2, shall be suspended from participation in the Revenue Recapture Act for a violation of the act after due notice and an opportunity for hearing.

For purposes of this part, the terms used have the same meaning as in Minnesota Statutes, chapter 270A. The specified proceedings shall be governed by the procedure for contested case proceedings as provided in Minnesota Statutes, chapter 14.

Subp. 2. Reasons for suspension.

A claimant agency shall be suspended from filing new claims or receiving offsets on existing claims, if the agency has done one of the following:

A. failed to remit to a spouse who does not owe the debt the spouse's properly allocated share of a joint tax refund which has been recaptured to satisfy a debt of the liable spouse;

B. filed claims on debts for which the time period allowed by law for collecting the debt has expired;

C. failed to notify the commissioner to remove from revenue recapture satisfied debts or debts for which the time period allowed by law for collecting the debt has expired;

D. failed to notify debtors of the basis and validity of the agency's claim, whether the debtor might be exempt, or of the debtor's right to a contested case hearing; or

E. violated any other provisions of Minnesota Statutes, chapter 270A.

Subp. 3. Warning.

Whenever a claimant agency has violated a provision of the Revenue Recapture Act, the commissioner shall notify the claimant agency in writing of the specific violation committed. The notification must contain a warning to the claimant agency that if the violation continues, the commissioner shall commence a proceeding for suspension from participation in the Revenue Recapture Act. The claimant agency must mail its reply to the notice within 30 days after the notice is mailed and when necessary, correct any deficiencies.

Subp. 4. Proceeding.

A. If a claimant agency fails to comply with the warning in subpart 3, the commissioner shall send a written notice to the claimant agency, providing the following information:

B. If the commissioner receives written notice of a claimant agency's request for a contested case hearing, the commissioner must schedule a hearing within 30 days after the request is mailed. The claimant agency must be billed for and pay one-half of the costs of the hearing.

Subp. 5. Disciplinary actions.

If the claimant agency fails to timely request a hearing, or if upon completion of the contested case proceedings the commissioner makes a determination to suspend the claimant agency, the commissioner shall send written notice of the suspension to the claimant agency. The suspension begins as of the date of the notice. The commissioner's determination must explain the basis for the disciplinary action being taken.

Subp. 6. Petition for reinstatement.

Beginning 90 days after suspension, a suspended claimant agency may petition the commissioner for reinstatement to participate in the Revenue Recapture Act. The petition must be supported with documentation that the claimant agency has corrected the prior violations and has taken steps to ensure that the prior violations will not be repeated. The commissioner shall review the petition and make a determination within 30 days as to whether the claimant agency may be reinstated to participate in the Revenue Recapture Act. If the petition is denied by the commissioner, the claimant agency may request the commissioner in writing for a contested case hearing within 30 days after the notice of denial is mailed. If the commissioner receives written notice of a claimant agency's request for a contested case hearing, the commissioner must schedule a hearing within 30 days after the request is mailed. The claimant agency must be billed for and pay one-half of the costs of the hearing. Upon completion of the contested case proceedings, the commissioner shall send the claimant agency written notice of the commissioner's decision.

History

• Statutory Authority: MS s 270.06; 270C.06
• History: 26 SR 771; L 2005 c 151 art 1 s 114

Minn. R. 8165.0300 Debts to Claimant Agencies

Subpart 1. Notice to debtor.

Under Minnesota Statutes, section 270A.08, subdivision 1, a claimant agency is required to send notice to a debtor asserting its right to a refund or a part of a refund. The agency must advise the debtor in that notice of the provisions of Minnesota Statutes, section 270A.03, subdivision 5, when the claims are submitted for the following types of obligations:

A. an obligation of a current recipient of assistance based on an overpayment of an assistance grant;

B. a debt that is owed to a program of which the debtor is a client as of the date of the notice and the debtor is a current recipient of SNAP, transitional child care, or transitional medical assistance; or

C. an obligation to pay a claimant agency for medical care, including hospitalization. The notice must explain that debtors receiving assistance may be exempt from revenue recapture under items A and B, and debtors with income below specified levels may be exempt under item C.

Subp. 2. Definition of debtor; disclosure to claimant agencies.

In addition to the specifications provided under Minnesota Statutes, section 270A.03, subdivision 4, the term "debtor" means a taxpayer of record with the department at the time the claim is filed. The commissioner is authorized to disclose to the claimant agency that the debtor against whom the agency is attempting to file a claim under the Revenue Recapture Act is not a taxpayer of record, pursuant to Minnesota Statutes, section 270A.11.

Subp. 3. Debt for medical care.

A debt is not subject to revenue recapture if it is a legal obligation to pay a claimant agency for medical care and if the debtor's income does not exceed the amount provided in the table in Minnesota Statutes, section 270A.03, subdivision 5. For purposes of that table, the word "income" means income as defined in Minnesota Statutes, section 290.067, subdivision 2a.

History

• Statutory Authority: MS s 270.06; 270C.06
• History: 26 SR 771; L 2003 1Sp14 art 1 s 106; L 2005 c 151 art 1 s 114; L 2019 1Sp9 art 1 s 42

Minn. R. 8165.0400 Nonliable Spouse

Subpart 1. Allocation of fee.

The $10 fee charged by the commissioner under Minnesota Statutes, section 270A.07, subdivision 1, shall not be allocated to the share of refund due to the spouse who does not owe the debt. When one or more revenue recapture claims are made against a refund and the nonliable spouse is due 100 percent of the refund, the department shall return each $10 fee to the nonliable spouse.

Subp. 2. Time limit to request an allocation of refund.

The right of a spouse who does not owe a debt to request payment from the claimant agency of that spouse's share of the refund expires 18 months after the date of the notice sent by the department under Minnesota Statutes, section 270A.07, subdivision 2, paragraph (b).

Subp. 3. Allocation of joint income tax refund.

In the case of an allocation of a joint income tax refund under Minnesota Statutes, section 270A.03, subdivision 7, if the total taxable income as determined under Minnesota Statutes, section 290.01, subdivision 29, is zero, the refund must be allocated based upon each spouse's share of federal adjusted gross income.

History

• Statutory Authority: MS s 270.06; 270C.06
• History: 26 SR 771; L 2005 c 151 art 1 s 114

Chapter 8170 DISCLOSURE OF RETURN INFORMATION

Minn. R. 8170.0100 Disclosure in Investigation; Third-Party Returns

Subpart 1. Disclosure of return information.

Return information of a taxpayer can be disclosed to taxpayers under investigation if it is pertinent return information of a third party.

Subp. 2. Definitions.

For purposes of Minnesota Statutes, section 270B.06, subdivision 2, and this part, the definitions in items A and B apply.

A. "Investigation" means an inquiry by the Department of Revenue into whether a taxpayer is liable for a state tax, or whether a taxpayer's return or refund claim is correct. The investigation is not concluded until the taxpayer is found not to be liable, the taxpayer's return or refund claim is accepted, the taxpayer's liability or deficiency is satisfied, or the taxpayer's appeal is finally determined.

B. "Pertinent return information of a third party" means information regarding the liability or refund of one taxpayer which affects another taxpayer's liability or refund. Examples of such information are:

History

• Statutory Authority: MS s 270B.19; 270C.06
• History: 17 SR 1608; L 2005 c 151 art 1 s 114,116

Chapter 8175 FAILURE TO PAY TAXES

Minn. R. 8175.0100 Repeated Failures to Pay Taxes

Subpart 1. Definition of pattern of repeated failures.

A. Taxpayers who have demonstrated a pattern of repeated failures to pay taxes by the due date are subject to a penalty under Minnesota Statutes, sections 289A.60, subdivision 5a; 297E.12, subdivision 6; 297F.19, subdivision 6; and 297G.18, subdivision 6. For purposes of imposing this penalty, a "pattern of repeated failures" means that during the previous 25 months the taxpayer has not paid tax by the due date for the same tax type on at least three occasions. If one or more of the occasions is a failure to pay as defined in item D, subitem (1), then the pattern must be at least four occasions.

B. If there are separate taxes imposed under the same chapter of Minnesota Statutes or separate taxes that are required to be reported on one return and paid at the same time, "same tax type" means all taxes imposed under that chapter, or all taxes, fees, or other payments required to be reported on that return and paid at the same time.

C. For purposes of withholding tax, "failure to pay" means failure to make all deposits due during the quarterly reporting period by the due date of the quarterly return.

D. Failure to pay includes:

E. Instances of making a late payment, where the late payment penalty has been abated because the taxpayer established reasonable cause for the lateness, are not included in the definition of pattern of repeated failures under this subpart.

F. For purposes of measuring the 25-month period, if the time in which to pay tax has been extended and the tax is not paid within the extended time period, the late payment violation is considered to have occurred on the original due date of the tax.

Subp. 2. Notice.

If a taxpayer meets the criteria under subpart 1, a penalty for repeated failures to pay taxes cannot be imposed unless the commissioner gives the taxpayer written notice. The notice must be sent to the taxpayer's last known address ten days before the next tax payment after the notice is due. The ten days commence on the day following the date of the notice. The notice must contain a description of the previous late payment violations, including the tax type and tax period, and a warning that the penalty will be imposed upon future violations. The notice remains in effect for any late payment violations for the same tax type or types occurring after the date of the notice. If a length of time passes after the notice so that there are two or less violations in the preceding 25-month period, including violations upon which a penalty for repeated failures to pay taxes has been imposed, the notice expires. If penalties are subsequently imposed under subpart 3, the correctness of the notice may be appealed as indicated in subpart 4.

Subp. 3. Amount of penalty.

After a taxpayer establishes a pattern of delinquencies that meets the criteria under subpart 1, and the notice required by subpart 2 has been given, the penalty for future late payment violations is 25 percent of the amount of tax, as finally determined by the commissioner to be owing, that is not paid by the due date. The penalty is in addition to other applicable penalties or charges imposed by law.

Subp. 4. Appeal rights.

If a 25 percent penalty is imposed, the taxpayer may file a request for an abatement of the penalty on the ground that there is reasonable cause for the late payment upon which the penalty is imposed. Also, in the same time and manner as making a request for an abatement, the taxpayer may appeal the imposition of the penalty on the ground that the notice under subpart 2 is incorrect. The right to contest the notice does not include claiming that there was reasonable cause for the lateness of a late payment violation listed in the notice, if the time in which to request an abatement of the late payment penalty for that violation has expired. The procedure under this subpart is governed by Minnesota Statutes, section 270C.34.

Subp. 5. Effective date.

For purposes of determining whether a taxpayer meets the criteria under subpart 1, violations for late payment of taxes can occur before or after March 1, 1994.

History

• Statutory Authority: MS s 14.388; 270C.06; L 1993 c 375 art 10 s 51
• History: 18 SR 1891; L 2003 c 127 art 7 s 14; L 2005 c 151 art 1 s 114,116; 49 SR 1151