Purpose of the Bill

The purpose of this bill is to impose a gross receipts tax on certain business-to-business services in Minnesota. This tax aims to generate additional revenue for the state's general fund by taxing transactions between businesses.

Main Provisions

• Definition of Taxable Services: The bill specifies that services such as legal, accounting, architectural, engineering, research and development, management consulting, and various repair and maintenance services will be subject to the tax.
• Imposition of Tax: A 2% gross receipts tax is imposed on the sale of these services from one business to another. Businesses providing these services have the option to collect this tax from their clients, clearly stating it on the invoice or bill.
• Use Tax: A use tax applies to services used in Minnesota even if they are bought from entities outside the state, at the same 2% rate.
• Credit for Taxes Paid in Other States: Businesses can receive a tax credit if they have already paid a similar tax on the same services in another state, capped at the amount of tax Minnesota would impose.
• Collection Requirements: Businesses with a presence in Minnesota must collect and remit this tax to the state.
• Administrative Provisions: Existing tax enforcement and administrative procedures in Minnesota law will apply to this new tax.
• Handling of Revenue: Collected tax revenues, including any penalties or interest, will be allocated to the state's general fund.

Significant Changes to Existing Law

This bill introduces a new category of taxation under Minnesota tax laws, specifically targeting business services transactions that may not have been previously taxed. It sets up a comprehensive framework for collecting, reporting, and managing this new type of tax.

Relevant Terms

• Gross receipts tax
• Business-to-business services
• Legal services
• Accounting services
• Management consulting
• Repair and maintenance services
• Tax credit for out-of-state taxes