Minnesota’s Budget Bill Provides Tax Breaks

Minnesota’s House File 20 (“Tax Bill”), passed during the state’s 2011 Special Session and amends Minnesota’s income tax, estate tax, property tax, and sales and use tax laws. The Tax Bill conforms the state’s income tax with the Internal Revenue Code by adopting the most recent federal tax changes, including those contained in the Small Business Jobs Act of 2010; the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010; and the Comprehensive 1000 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011.

Beginning in 2012, the Tax Bill provides a property tax exemption for property subject to the net proceeds tax and used in mining. Examples of exempt property include ore, metal and mineral deposits, and real and personal property used in mining, quarrying, producing, or refining ores, minerals, or metals.

In an effort to provide estate tax relief to family-owned businesses and farms, the Tax Bill allows taxpayers to exclude the combined value of qualified farm property and qualified small business property up to $4 million from the taxpayer’s adjusted taxable estate. Additionally, the Tax Bill allows qualified data centers to obtain refunds of sales tax paid on enterprise information technology equipment and computer software. A qualified data center may claim an exemption from sales tax on electricity used by the data center.

The qualified data center exemption will be in effect between June 30, 2012 and July 1, 2042. But the state cannot refund the sales tax paid until July 1, 2013. A qualified data center is a Minnesota facility that is at least 30,000 square feet and with an initial investment of at least $50 million within a two-year period.

The Tax Bill makes the services of a hotel intermediary subject to sales tax. A hotel or accommodations intermediary is a business, other than a hotel, that charges a fee to facilitate sales of lodging to customers. This includes online sites that directly charge a customer for a room. It does not include travel agents, who book rooms and are compensated by the hotel, but the customer pays the hotel for the room.

The Tax Bill also changes Minnesota’s sourcing rule for florists to follow the same guidelines used by most states. Beginning October 1, 2011, Minnesota florists will collect sales tax when they take an order and accept payment from a customer.

Also, effective October 1, 2011, ringtones are not subject to sales tax, and ticket resellers must collect and remit sales tax on the full price of tickets sold.

TECHNICAL INFORMATION CONTACT:

Leslie S. Hahn
Principal
Ryan
313.230.0104
leslie.hahn@ryan.com