Purpose of the Bill

The bill aims to impose a new gross receipts tax on certain business-to-business services in Minnesota. This tax will support the state by generating additional revenue from these transactions.

Main Provisions

• Gross Receipts Tax: A two percent tax is levied on gross receipts from certain services provided by one business entity to another in Minnesota. This includes services like legal, accounting, architectural, engineering, and various consulting services among others.
• Collection and Remittance: Businesses are not required but may choose to collect this tax from their customers, provided the tax is separately listed on sales documents. The collected tax must be remitted to the state.
• Use Tax: For services used in Minnesota, if the provider has not already paid the gross receipts tax, a use tax at the same two percent rate is imposed on the recipient.
• Interstate Tax Credit: Businesses may receive a credit for taxes paid on these services to other states, up to the amount owed under Minnesota’s tax.
• Administration: The bill details how the tax should be reported, paid, and administered, using existing sales tax procedures as a model.

Significant Changes to Existing Law

• New Tax Introduction: The major change introduced by this bill is the establishment of a new gross receipts tax specifically targeting business-to-business services.
• Tax Credits for Interstate Transactions: The bill introduces a mechanism for businesses to offset Minnesota tax obligations with taxes paid in other states for the same transactions.

Relevant Terms

gross receipts tax, business-to-business services, taxable services, use tax, interstate tax credit, legal services, accounting services, consulting services, architectural services, engineering services.