Effective for sales or purchases made after June 30, 2013, Minnesota now adopts the “Amazon Rule,” stating that an out-of-state business making retail sales (that has no other Minnesota presence) is presumed to have a Minnesota sales tax collection requirement. As a result, after June 30, 2013 Minnesota residents and businesses who purchase online from vendors such as Amazon should expect to find sales tax imposed by the vendor on those orders.

New exemptions from sales tax

The exemption for drugs and medical devices is expanded to include purchases covered by Medicare and Medicaid; single patient use items of durable medical equipment; accessories and supplies for use of durable medical equipment for home use only; and other accessories and supplies for the use of prosthetic devices. The effective date is July 1, 2013.

The exemption for capital equipment has been amended to allow the purchase of the equipment tax-free, rather than paying the tax first and then applying for a refund, as it has been in the past. The effective date is September 1, 2014.

There are other specific exemptions, but these two are more likely to be of greater concern for most persons. The State will be issuing a full detail of the changes to the sales tax provisions, along with the many different effective dates in the near future.

New digital tax on sales and purchases

Specified digital products that are transferred electronically are now included in the definition for tangible personal property for sales and use tax. Essentially, digital audio, audiovisual, books and other goods such as electronic greeting cards would be subject to tax after June 30, 2013.

Additional business to business services

Repair of electronic and precision equipment such as computer-related hardware, TV’s and Radios, communication equipment, scientific instruments and medical equipment are subject to tax from business to business. Repair and maintaining commercial and industrial equipment (excluding furniture and fixtures) are also subject to tax from business to business. Warehousing and storage of tangible personal property are subject to tax from business to business, except for agricultural products, refrigerated storage, electronic data and self-storage services. The warehousing tax does not take effect until April 1, 2014. The other items take effect July 1, 2013.

Short term automobile leases

Effective July 1, 2013, the rental motor vehicle tax for short-term rentals of 28 days or less is increased from 6.2 percent to 9.2 percent.

Taxable retail sales new inclusions

Motor vehicle paint and materials sold by a repair or body shop are now subject to sales tax.

Most of these changes, as well as others we have not necessarily included, will need additional guidance from the Department of Revenue. This post is meant to be a summary of key provisions from the recent omnibus bill that was recently enacted. Contact your tax advisor with specific questions.