SF536

Purpose

This bill creates a refundable exemption in Minnesota sales and use tax for materials used to build new residential housing. It adds a new subdivision (Subdivision 55) to Minnesota Statutes 297A.71 to specify what counts as construction materials for residential housing and how the exemption works with the tax system.

Main Provisions

• Adds Subd. 55, “Construction materials for residential housing,” to Minnesota Statutes 2024 section 297A.71.
• a) Defines the exemption: Materials and supplies used or consumed in, and equipment incorporated into, the construction of new residential housing are exempt from sales tax.
• b) How the exemption is handled: The tax on purchases that are exempt under paragraph (a) must be imposed and collected as if the standard tax rate under section 297A.62, subdivision 1 applied, and then refunded under section 297A.75. In other words, the tax is charged at the point of sale and then refunded to reflect the exemption.

Significant Changes to Existing Law

• Expands the set of items exempt from sales tax to include construction materials and equipment used in the construction of new residential housing.
• Establishes a refundable mechanism for these purchases by using the existing refund process (refunding the tax through 297A.75).

Who Is Affected

• Builders, developers, suppliers, and purchasers of materials used in constructing new residential housing, as the exemption applies to materials, supplies, and equipment used in construction.

Practical Implications

• Lower effective cost for building new homes due to the refundable sales tax on construction materials.
• Administrative process will require claims for refunds under the existing 297A.75 framework.

Relevant Terms construction materials, residential housing, materials and supplies, equipment incorporated, exempt, sales tax, refundable exemption, Minnesota Statutes 2024, 297A.71, subdivision 55, 297A.75, rate under section 297A.62, refund.