SF4518

Purpose

• The bill relates to sales and use taxation and aims to provide a framework for businesses to collect tourism improvement district charges from purchasers. It also modifies how the definition of “sales price” is calculated under Minnesota law, by amending Minnesota Statutes 2024 sections 297A.61 subdivision 7 and 428B.02 subdivision 4.1.6.

Main provisions

• Defines “Sales price” as the measure subject to sales tax, meaning the total amount of consideration for which personal property or services are sold, leased, or rented, regardless of how it is paid (cash, credit, or other forms), and valued in money.
• Includes components of the sale in the sales price, such as:
  • The seller’s cost of property, materials, labor or service costs, interest, losses, all costs of transportation to the seller, taxes on the seller, and other seller expenses.
  • Charges by the seller for services necessary to complete the sale, with certain exceptions (delivery and installation charges are addressed separately).
  • Delivery charges, with specific treatment for delivery of tax-exempt property (allocation rules based on percentage of value or weight when delivery charges are allocated that way).
  • Installation charges.
• Excludes certain amounts from the sales price, including:
  • Discounts (cash terms or coupons) that are not reimbursed by a third party and are taken by the purchaser.
  • Interest financing and carrying charges from credit extended on the sale if the amount is separately stated on the invoice or similar document.
  • Taxes legally imposed directly on the consumer that are separately stated on the invoice or document (including a service charge if the business collects it from the purchaser).
• Addresses third-party price reductions and how they affect the sales price:
  • If the seller actually receives consideration from a party other than the purchaser that is tied to a price reduction or discount, and the seller must pass that reduction through to the purchaser, the seller may treat the related consideration as part of the sales price under certain conditions.
  • The inclusion of such third-party reductions requires that the price reduction or discount is fixed and determinable at the time of sale, and one of the following is true:
  • The purchaser presents a coupon, certificate, or other documentation authorized or granted by a third party with the understanding that the third party will reimburse the seller.
  • The purchaser identifies as a member of a group or organization entitled to the discount (a common “preferred customer” card does not count as such membership).
  • The price reduction is identified as a third-party price reduction on the invoice or related documentation.
• Notes that the bill updates how these elements appear on invoices and supports price reductions passed through to purchasers when these conditions are met.

Significant changes to existing law

• Reframes the definition of “sales price” to more inclusively capture all relevant consideration and to clarify what counts or does not count for sales tax purposes.
• Expands or clarifies treatment of delivery and installation charges in the calculation of the sales price.
• Tightens the handling of discounts, including those from third parties, and requires pass-through conditions to determine when third-party price reductions are included in the sales price.
• Explicitly ties tourism improvement district charges into the underlying sales-tax framework by adjusting how charges related to these districts are collected or accounted for in the sale price.

Potential implications

• Businesses may need to adjust invoicing and pricing disclosures to reflect the updated definition of sales price.
• Tax reporting could change to ensure tourism improvement district charges are collected consistently with the revised sales price calculation.
• Consumers might see changes in how discounts, coupons, and third-party price reductions affect the taxable amount.

Relevant Terms - tourism improvement district charges - sales price - measure subject to sales tax - total amount of consideration - cash, credit, personal property, services - delivery charges - installation charges - seller’s costs - materials, labor, service costs - transportation costs - taxes on the seller - discounts - coupons - third-party price reductions - coupon certificate - third-party price reduction - pass-through - invoice - price reduction or discount - group or organization - preferred customer card - tax-exempt property - service charge (section 428B.03) - Minnesota Statutes 2024 section 297A.61 subdivision 7 - Minnesota Statutes 2024 section 428B.02 subdivision 4.1.6