MN House introduces bill to exempt fiber for broadband from sales and use taxes

Minnesota House of Representatives reports…

Taxes can be complicated, but sometimes tax law makes things more complicated than they need to be. Take, for example, the Border-to-Border Broadband Development Grant Program that Minnesota launched in 2014.

It was designed to make the internet more accessible to residents throughout the state, and, in 2017, its accompanying tax provisions were revised to create a sales tax exemption for such telecommunications capital equipment as fiber and conduit. Or so legislators thought.

It turns out that the Department of Revenue had a narrow interpretation of what constituted “telecommunications capital equipment,” applying it only to telephone service. Hence, companies providing both phone and internet through their fiber optic cables have had to, for tax purposes, separate out the portions of fiber that have data or information from those used exclusively for telephone service. And that’s hard to do.

HF4422 is out to fix that. Sponsored by Rep. Julie Sandstede (DFL-Hibbing), it would exempt from state sales and use taxes any fiber and conduit purchased by broadband or internet service providers to provide retail internet access service. The exemption would be effective retroactively for sales and purchases made after July 1, 2017, with a special refund provision governing refund claims for the retroactive purchases.

The bill was laid over…

The House Taxes Committee laid the bill over, as amended, Thursday for possible inclusion in the omnibus taxes bill, which is expected to be released on Monday. Its companion, SF3480, sponsored by Sen. Torrey Westrom (R-Elbow Lake), awaits action by the Senate Taxes Committee.

The Department of Revenue estimates the change would reduce the General Fund by $14 million in fiscal year 2023 and $6.3 million in the 2024-25 biennium.

This entry was posted in Funding, MN, Policy by Ann Treacy. Bookmark the permalink.

About Ann Treacy

Librarian who follows rural broadband in MN and good uses of new technology (blandinonbroadband.org), hosts a radio show on MN music (mostlyminnesota.com), supports people experiencing homelessness in Minnesota (elimstrongtowershelters.org) and helps with social justice issues through Women’s March MN.

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