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Minnesota has enacted a number of sales and use tax nexus amendments, including marketplace nexus and affiliate nexus provisions. The state has amended the definition of "retailer maintaining a place of business in this state" to include a retailer who has storage in Minnesota, employs a Minnesota resident who works from a home office in Minnesota, has a marketplace provider or other third party operating in Minnesota under the retailer’s authority for any purpose, including facilitating and processing sales. A retailer is represented by a marketplace provider in Minnesota if the retailer makes sales in Minnesota facilitated by a marketplace provider that maintains a place of business in Minnesota.

 

”Marketplace provider“ means any person who facilitates a retail sale by a retailer by: 

 

  • listing or advertising for sale by the retailer in any forum, taxable tangible personal property, services, or digital goods that are subject to tax under this chapter; and
  • either directly or indirectly through agreements or arrangements with third parties collecting payment from the customer and transmitting that payment to the retailer regardless of whether the marketplace provider receives compensation or other consideration in exchange for its services. 

 

A retailer with total taxable retail sales to customers in Minnesota of less than $10,000 in the 12-month period ending on the last day of the most recently completed calendar quarter is not required to collect and remit sales tax if it is determined to be a retailer maintaining a place of business in the state solely because it made sales through one or more marketplace providers. This provision does not apply to a retailer that is or was registered to collect sales and use tax in Minnesota.

 

A marketplace provider will be required to collect and remit sales and use taxes for all facilitated sales for a retailer, and will be subject to audit on the retail sales it facilitates unless either: 

 

  • the retailer provides a copy of the retailer's registration to collect sales and use tax in Minnesota to the marketplace provider before the marketplace provider facilitates a sale; or
  • upon inquiry by the marketplace provider or its agent, the commissioner discloses that the retailer is registered to collect sales and use taxes in this state. 

 

A marketplace provider will not be liable for failure to file and collect and remit sales and use taxes if the marketplace provider demonstrates that the error was due to incorrect or insufficient information given to the marketplace provider by the retailer. This does not apply if the marketplace provider and the marketplace retailer are related parties.

 

Nexus is also established if a retailer who is a remote seller has an entity perform duties on its behalf which is considered affiliate nexus.  Common ownership is not required. An entity is considered an affiliate of a retailer for nexus purposes if the entity:

 

  • has the same or a similar business name as the retailer and sells, from a location or locations in Minnesota, taxable tangible personal property, digital goods, or services that are similar to those sold by the retailer;
  • maintains an office, distribution facility, salesroom, warehouse, storage place, or other similar place of business in Minnesota to facilitate the delivery of tangible personal property, digital goods, or services sold by the retailer to its customers in Minnesota;
  • maintains a place of business in Minnesota and uses trademarks, service marks, or trade names in Minnesota that are the same or substantially similar to those used by the retailer, and that use is done with the express or implied consent of the holder of the marks or names;
  • delivers, installs, or assembles tangible personal property in Minnesota, or performs maintenance or repair services on tangible personal property in Minnesota, for tangible personal property sold by the retailer;
  • facilitates the delivery of tangible personal property to customers of the retailer by allowing the customers to pick up tangible personal property sold by the retailer at a place of business the entity maintains in Minnesota; or
  • shares management, business systems, business practices, or employees with the retailer, or engages in intercompany transactions with the retailer related to the activities that establish or maintain the retailer’s market in Minnesota.

 

Additionally, the requirement that, in order to be considered affiliated entities, the retailer and entity must be related parties is repealed.

 

The marketplace and affiliate nexus amendments are effective on the earlier of July 1, 2019, or the date of a U.S. Supreme Court decision modifying its decision in Quill Corp. v. North Dakota, so that a state may require retailers without a physical presence in the state to collect and remit sales tax. However, if a federal law is enacted authorizing a state to impose a requirement to collect and remit sales tax on retailers without a physical presence in the state, the Commissioner of Revenue must enforce the nexus amendments to the extent allowed under federal law. (Ch. 1 (H.F. 1 a), First Special Session, Laws 2017)

(06/08/2017)

On April 27, 2017, a bipartisan group of senators introduced the Marketplace Fairness Act of 2017 (MFA). Similar legislation was introduced in both 2013 and 2015 and failed to be enacted both times. If enacted, the legislation would authorize states meeting certain requirements to require remote sellers that do not meet a "small seller exception" to collect their state and local sales and use taxes. The small seller exception is set again at $1 million of remote sales annually. The only other significant change from the 2015 version is a prohibition of making the effective date during the 4th quarter of the calendar year. For information on the previous versions of the bill, visit Senate Introduces Marketplace Fairness Act of 2015.  

 

On April 27, 2017, a bipartisan group of lawmakers introduced the Remote Transactions Parity Act (RTPA) of 2017. Similar legislation was introduced in 2015 but failed to be enacted. Like the MFA, the legislation would also create sales and use tax collection obligations for remote sellers, but has some differences and additional provisions. Some key differences from the Marketplace Fairness Act include a different definition of a small seller.  The RTPA has a phased in threshold starting at $10million in year one, then $5million, then $1million.  In year 4, there is no threshold.  In addition to the monetary thresholds, any seller that sells on an electronic marketplace is considered a small seller.  A difference from the 2015 version of the bill is an inclusion of a definition of remote seller which specifies when a company is NOT a remote seller which includes physical presences for more than 15 days in a state, leasing or owning real property and using an agent to establish or maintain the market in a state if the agent does not perform business services in the state for any other person during the taxable year.  For more information on the Remote Transaction Parity Act of 2015, visit House Introduces Remote Transactions Parity Act of 2015. (Marketplace Fairness Act of 2017, Remote Transactions Parity Act of 2017)

(05/04/2017)

The Minnesota Department of Revenue has reminded taxpayers that annual sales and use tax returns are due on February 6, 2017. Annual filing is available for taxpayers who have an average of $100 or less tax due each month. Taxpayers must file a return if they are reporting $0 in tax. (Bulletin, Minnesota Department of Revenue, January 9, 2017)

(01/19/2017)

The Minnesota Supreme Court has affirmed the Tax Court’s award of attorney fees to a taxpayer in a sales and use tax case since the application for attorney fees was timely filed and the Tax Court did not abuse its discretion by finding that the Commissioner’s position was not substantially justified. The taxpayer had properly collected sales tax from its customers on sales of its manufactured products, but the Commissioner assessed additional use taxes and interest on the components that the taxpayer purchased to manufacture its products. The Tax Court disagreed with the Commissioner's assessment, finding that the component purchases were not taxable retail sales of building materials, supplies, or equipment for the improvement of real property. The Tax Court held that the taxpayer’s subsequent application for attorney fees was timely and the Commissioner’s position was not substantially justified by a reasonable basis in law and fact. The Minnesota Supreme Court affirmed the Tax Court’s decision. The Supreme Court held that the Commissioner relied on superseded law and argued incorrectly that the trade-fixtures doctrine is not applicable to tax cases and the statute’s definition of real property is applicable only to property tax cases and is not applicable to sales or use tax cases. The Commissioner’s position misread or overlooked statutes and relevant precedent and was not substantially justified by a reasonable basis in law and fact. This is a significant win for the taxpayer and we recommend that in the case of an audit that takes unreasonable positions, the statute should be reviewed to determine if a claim for attorney fees can be claimed against the state as it can here in Minnesota.  (Commissioner of Revenue v. Dahmes Stainless, Inc., Minnesota Supreme Court, No. A15-1920, August 31, 2016)

(11/16/2016)

On August 25, 2016, House Judiciary Committee Chairman Robert Goodlatte released a discussion draft of the Online Sales Simplification Act of 2016. The legislation would implement a “hybrid origin” approach for remote sales. Under the legislation, states could impose sales tax on remote sales if the origin state participates in a clearinghouse.In this case, the tax is based on the origin state’s baseand taxability rules. The rate would be the origin state rate, unless the destination state participates. In that case, the rate used would be a single state-wide rate determined by each participating destination state. A remote seller would only remit sales tax to its origin state for all remote sales. Only the origin state would be able to audit a seller for remote sales. Non-participating states would not be able to receive distributions from the clearinghouse. Sellers would be required to provide reporting for remotes sales into participating states to the Clearinghouse so it can distribute the tax to the destination state. We will continue to monitor activity and update when the official bill is introduced.  (Discussion draft of Online Sales Simplification Act of 2016)

(09/08/2016)

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