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Tax Law

All-or-Nothing: Minnesota Supreme Court Rules Taxpayer Not Entitled To Exemption for Online Computer Data Retrieval Equipment

The Minnesota Supreme Court held that a taxpayer that sold data technology services was not eligible for Minnesota’s sales tax exemption for computer equipment used in online data retrieval systems because the underlying information was “not equally accessible to all of its customers.”

Minnesota provides a sales tax exemption for, among other things, “machinery and equipment used primarily to electronically transmit results retrieved by a customer of an online computerized data retrieval system.” Minn. Stat. Ann. § 297A.68, Subd. 5(a). In turn, the statute defines an “online data retrieval system” as a “system whose cumulation of information is equally available and accessible to all its customers.” Id., Subd. 5(d)(8) (emphasis added).

Because the taxpayer’s customers obtained access only to their own collection of documents, and could not access or view other customers’ documents, the Supreme Court ruled that the taxpayer’s service did not meet the qualifying definition of an “online data retrieval system,” which requires that the information on the computer system be available to all customers. In reaching this conclusion, the Supreme Court examined the intent of the sales tax exemption and the plain meaning of the term “data retrieval” and concluded that the taxpayer’s proposed interpretation was untenable and would have made the exemption too broad.


Kroll Ontrack, LLC v. Comm’r of Revenue, 931 N.W.2d 371 (Minn. 2019)