Updates from the Department of Revenue

Revenue Notice: Electricity Used in Agricultural Production

The Minnesota Department of Revenue issued a recent notice to clarify the sales tax exemption for electricity used in agricultural production. Notice # 07-01 states that the use of electricity to heat, cool, light, and ventilate facilities in which agricultural animals are housed, is consumed and used directly in the agricultural production process and is therefore exempt from the sales tax. Thermal and air quality control is necessary to maintain the health of and prevent disease in agricultural production animals. The notice goes on to clarify that electricity used in the nonproduction portions of the facility, such as office and administrative areas, is not exempt.

DOR Valuation Rules

Because of the impact the new rule will have on local governments, the Legislature is very seriously considered raising the class rates on utility property from 2.0% to 3.0% for generation property and from 2.0% to 2.25% for transmission and distribution property. The Senate tax bill also contains a provision to delete the exemption for generation personal property from the state general levy. On the positive side, the Senate tax bill also contains an upfront sales tax exemption for capital equipment, rather than a sales tax refund.