Revenue Notice #18-03: Capital Equipment - Revocation of Revenue Notice #96-08

Introduction

Revenue Notice # 96-08, which instructs contractors on how to draft a purchasing agent agreement for use when they are purchasing and installing capital equipment into real property, is revoked.

Department Position

Enacted in 2017, Minnesota Statutes, section 297A.61, subdivision 58(b) excludes from the definition of “real property” for sales tax purposes any tools, implements, machinery and equipment installed into real property for use in a business or production activity conducted thereon that qualifies for exemption under Minnesota Statutes, section 297A.68 regardless of size, weight or method of incorporation into the real property.

Due to this law change, when a contractor installs machinery and equipment that qualifies for exemption under Minnesota Statutes, section 297A.68, subdivision 5, they are no longer improving real property but are making a retail sale of tangible personal property, regardless of how the item is incorporated into the real estate. Consequently:

• The contractor can purchase the qualifying machinery and equipment exempt for resale.
• The customer can purchase the qualifying machinery and equipment exempt by providing a completed exemption certificate to the contractor at the time of sale.

Note: If the customer is also purchasing other improvements to real property, they must specify in detail the exempt items or risk loss of the exemption under Minnesota Statutes, section 297A.73.

Due to this law change, the instructions provided in Revenue Notice # 96-08 are no longer needed.

Revenue Notice # 96-08 is hereby revoked effective for sales and purchases after May 31, 2017, the effective date for 2017 Laws, 1st Special Session, ch. 1, art. 3, sec. 8.

Signed by Lee Ho, Deputy Commissioner
Published in the Minnesota State Register on December 17, 2018.