Purpose of the Bill

This bill aims to introduce a new gross receipts tax on specific business-to-business services in Minnesota. The objective is to enhance state revenue through taxing certain services provided by one business entity to another.

Main Provisions

• Gross Receipts Tax: A 2% tax is imposed on the gross receipts from retail sales of specified taxable services between business entities within Minnesota. The services include legal, accounting, engineering, consulting, and various types of repair and maintenance services.
• Tax Collection and Remittance: Businesses can collect this tax from their clients, provided it is separately stated on the receipt. The collected tax must be remitted to the Minnesota Commissioner of Revenue.
• Use Tax: If a business purchases taxable services within Minnesota but the service provider is not subject to this tax, the business must pay a use tax at the same rate.
• Credits for Taxes Paid in Other States: Businesses can claim a credit for taxes paid to other states on the same transactions, up to the amount that would be payable under Minnesota law.

Significant Changes to Existing Law

• A new tax category is introduced specifically targeting business-to-business transactions for a range of professional and technical services.
• It complements existing sales taxes under chapter 297A and income taxes under chapter 290 by adding another layer of tax specific to these service transactions.
• Adjustments to tax filing, reporting, and enforcement proceedings to handle this new category under state revenue rules.

Relevant Terms

• Gross receipts
• Business-to-business services
• Retail sale
• Taxable services
• Use tax
• Revenue commissioner
• Nexus