Committee lays over bill to speed refunds for cigar wholesalers

The House Taxes Committee on Monday moved House File 926, a bill intended to change when Minnesota’s tobacco tax applies to cigars brought into the state by wholesalers and to speed refunds when inventory is shipped out of state.

Supporters and the Department of Revenue told the committee the measure would ease cash‑flow burdens on small fulfillment businesses while preserving the state’s right to collect tax on products ultimately sold in Minnesota.

House File 926, as amended by the DE2 amendment, would allow wholesalers to document cigars stored in Minnesota that are destined for out‑of‑state sale and to hold those items exempt from upfront Minnesota tobacco tax until sale into Minnesota. The author said the change is modeled on an Illinois law and was developed with the Department of Revenue.

"We store, ship, and fulfill orders for boutique cigar brands across the country," said Angelo Fraboni, identified as one of the owners of Founders Cigar Company. "We are required to pay Minnesota's tobacco tax upfront on every cigar that enters our warehouse, regardless of whether it's ever sold in the state." Fraboni told the committee his firm made 1,528 total shipments and that 207 of those stayed in Minnesota, and described a months‑long refund process for taxes that had already been paid.

Joanna Baerz, legislative director for the Minnesota Department of Revenue, told the committee the agency had worked with the bill’s author and had no formal policy position, but that the language was in a form the department could administer. "We think it's in a good shape of where we can administer, address a lot of our concerns with the original language," Baerz said.

Committee members voted to adopt the DE2 amendment. After public testimony and department comment, the committee laid House File 926, as amended, over for possible inclusion in the omnibus tax bill.

Why it matters: The bill does not change Minnesota’s cigar tax rate or the state’s authority to tax products sold in Minnesota. Instead, it changes the timing of tax collection for inventory that wholesalers can document as destined for sale outside Minnesota; proponents said that will reduce administrative burdens for small businesses and reduce refund backlogs for the Department of Revenue.

Other details from the hearing: - The author said the bill was intended to address a specific ‘‘hiccup’’ in how wholesalers are taxed when they import cigars into Minnesota and store them for interstate fulfillment. - Fraboni said he had cigars received in December 2022 that remained in storage and that a refund request submitted in June of the prior year had not been returned until March, creating cash‑flow problems for small businesses. - The Department of Revenue confirmed it collaborated on the draft language and could administer the change as written.

Votes and formal actions: - DE2 amendment to House File 926: amendment adopted (voice vote; committee recorded "Aye" and "Motion prevails"). - Motion to lay over House File 926, as amended, for possible inclusion in the omnibus tax bill: motion renewed and laid over (no roll‑call tally recorded in transcript).

Speakers (as identified in the record): - Chairman Nash, Chair/author of House File 926 (legislator) - Angelo Fraboni, owner, Founders Cigar Company (business) - Joanna Baerz, Legislative Director, Minnesota Department of Revenue (government) - Representative Smith (legislator, moved April 1 minutes)

Authorities referenced: - Minnesota tobacco tax law (inventory taxation of wholesaler stock; not otherwise specified) — referenced_by:["hf926-cigar-wholesaler-tax-refund"] - Illinois law (model for exemption timing; not specified) — referenced_by:["hf926-cigar-wholesaler-tax-refund"]

Clarifying details: - Shipments cited by testifier: 1,528 total shipments since launch; 207 remained in Minnesota (figures given by Angelo Fraboni). - Example refund delay: refund request submitted in June (prior year) and paid in March (testifier’s description of timeline). - The bill does not change tax rates or the state's authority to tax sales that occur within Minnesota; it realigns timing of taxation for documented out‑of‑state sales.

Proper names: [{"name":"Founders Cigar Company","type":"business"},{"name":"Minnesota Department of Revenue","type":"agency"}]

Community relevance: {"geographies":["Minnesota"],"funding_sources":[],"impact_groups":["small fulfillment businesses","wholesalers"]}

Discussion vs. decision: {"discussion_points":["cash‑flow burdens for small wholesalers","lengthy refund processing by Department of Revenue","modeled on Illinois law"],"directions":[],"decisions":["DE2 amendment adopted","House File 926 laid over for possible inclusion in omnibus tax bill"]}

Meeting context: {"engagement_level":{"speakers_count":4,"duration_minutes":50,"items_count":1},"implementation_risk":"low","history":[{"date":"not specified","note":"Reported refund delays in prior year; bill modeled on Illinois law"}]}

Searchable_tags:["HF926","cigar wholesalers","tobacco tax","refunds","Minnesota Department of Revenue"]

Provenance:{"transcript_segments":[{"block_id":"block_2","local_start":0,"local_end":127,"evidence_excerpt":"I will move House File 9 26, and the motion will be to later for possible including the anonymous tax bill.","reason_code":"topicintro"},{"block_id":"block_32","local_start":0,"local_end":181,"evidence_excerpt":"No, thank you, Chair Nash. We appreciate your time. And so I'll renew my motion that House File 9 26 as amended be laid over for possible inclusion in the marvelous, omnibus tax bill that is about to come before us.","reason_code":"topicfinish"}]}