Minnesota 2023 Sales Tax Guide

Minnesota Sales Tax in a Word

Minnesota Sales Tax Contacts

Do You Have Nexus in Minnesota?

Hey there, small business adventurers! Before you embark on your Minnesota sales tax journey, you'll need to determine if you have "nexus" in the state. Nexus is a fancy term for a significant connection or presence that requires you to collect, report, and remit sales tax. But fear not, intrepid entrepreneurs, for we're here to help you navigate the various types of nexus and their implications for your business.

What Creates Sales Tax Nexus in Minnesota?

In Minnesota, there are several ways your business can establish sales tax nexus, including physical, economic, affiliate, click-through, and marketplace nexus. Let's explore each type and how it might apply to your small business.

physical nexus in Minnesota

Physical nexus occurs when your business has a tangible presence in Minnesota, such as:

• Owning or leasing property (e.g., office, warehouse, storefront)

• Having employees or sales representatives in the state

• Storing inventory in the state

• Participating in trade shows or events

If any of these scenarios apply to your business, congratulations! You've got physical nexus in Minnesota and must collect, report, and remit sales tax.

economic nexus in Minnesota

Economic nexus is established when your business generates a significant amount of revenue or conducts a certain number of transactions in Minnesota, even without a physical presence. As of 2021, you have economic nexus in Minnesota if, during the previous 12-month period, your business has:

• At least $100,000 in gross revenue from sales in the state, or

• 200 or more separate transactions in the state

If you meet either of these criteria, it's time to roll up your sleeves and tackle Minnesota sales tax!

affiliate nexus in Minnesota

Affiliate nexus arises when your business has a relationship with another entity in Minnesota that helps promote or sell your products or services. This may include:

• Parent, subsidiary, or sibling companies with a presence in the state

• In-state agents or representatives who refer customers to your business

If your business has such relationships in Minnesota, you've got affiliate nexus and must collect, report, and remit sales tax.

click-through nexus in Minnesota

Click-through nexus occurs when your business enters into agreements with in-state affiliates who refer customers to your website through a link or promotional code. You have click-through nexus in Minnesota if:

• Your in-state affiliates receive a commission or other compensation for referrals, and

• Your total gross revenue from these referrals exceeds $10,000 in the previous 12 months

If this sounds like your business, it's time to gear up for Minnesota sales tax!

marketplace nexus in Minnesota

Marketplace nexus comes into play when your business sells products or services through a marketplace facilitator (e.g., Amazon, eBay, Etsy) that has a presence in Minnesota. In this case, the facilitator is generally responsible for collecting, reporting, and remitting sales tax on your behalf. However, it's crucial to verify this arrangement and ensure compliance with Minnesota sales tax laws.

Now that you're well-versed in the various types of nexus, you're ready to determine your sales tax obligations in Minnesota and conquer the world of sales tax with confidence. As always, your allies at Accountingprose are here to support you on your small business adventure, offering expert guidance and assistance every step of the way.

Minnesota Sales Tax Registration

Greetings, small business trailblazers! Once you've determined that you have nexus in Minnesota, it's time to register for a Minnesota sales tax license. Fear not, for we're here to guide you through the registration process step by step, ensuring your business is all set to collect, report, and remit sales tax in the Land of 10,000 Lakes.

How to Register for Sales Tax in Minnesota

To register for a Minnesota sales tax license, follow the steps below:

1. Gather your information: Before you begin the registration process, make sure you have the following information handy:

   • Your business name, address, and contact information

   • Your Social Security Number (SSN) or Federal Employer Identification Number (EIN)

   • A description of your business activities

   • The date your sales will begin in Minnesota

   • Your anticipated total monthly sales in the state

2. Create an e-Services account: To register for a sales tax license, you'll need to create an account with the Minnesota Department of Revenue's e-Services system. Visit the e-Services registration page and follow the instructions to set up your account.

3. Apply for a sales tax license: Once you've logged into your e-Services account, navigate to the "Business Registration" section. Fill out the online application with the information you gathered in step 1. Be sure to double-check your entries for accuracy before submitting the form.

4. Wait for approval: After submitting your application, the Minnesota Department of Revenue will review your information and, if approved, issue you a sales tax license. This process typically takes around two weeks, but may vary depending on the volume of applications. Once you receive your license, you'll be ready to start collecting sales tax on your taxable sales in Minnesota.

How Much Does it Cost to Register for a Minnesota Sales Tax License?

Great news, small business heroes! There is no fee to register for a Minnesota sales tax license. So, you can channel your financial resources toward growing your business and conquering the world of sales tax.

Do I Need a Federal Tax ID Number or EIN to Register for a Minnesota Sales Tax License?

Which Agencies in Minnesota Might I Need to Register With Additionally? 

In addition to registering for a sales tax license with the Minnesota Department of Revenue, your business may also need to register with other state agencies, depending on your specific operations and activities. Some common agencies small businesses may need to register with include:

• Minnesota Secretary of State: If your business is structured as a corporation, limited liability company (LLC), or partnership, you'll need to register with the Minnesota Secretary of State. Visit their website for more information and to access the necessary forms.

• Minnesota Department of Employment and Economic Development (DEED): If you have employees in Minnesota, you'll need to register with DEED for unemployment insurance, workers' compensation, and other employment-related matters. Visit the DEED website to learn more and register.

• Minnesota Department of Labor and Industry: Depending on your industry, you may need to register with the Minnesota Department of Labor and Industry for occupational licensing or safety requirements. Visit their website to explore their resources and determine if registration is necessary for your business.

And there you have it! By following these steps and registering with the appropriate agencies, your business will be well-prepared to traverse the Minnesota sales tax landscape with confidence and ease.

Collecting Sales Tax in Minnesota

Is Minnesota aN Origin or Destination Sales Tax State? 

Minnesota is a destination-based sales tax state. This means that sales tax rates are determined by the location of the buyer, rather than the location of the seller. So, when you're calculating the sales tax rate to apply to a transaction, you'll need to consider the buyer's shipping address or the location where the product is picked up or the service is provided.

What Sales are Subject to Sales Tax in Minnesota?

In Minnesota, sales tax generally applies to the sale of tangible personal property and certain services. Some examples include:

• Physical goods, such as furniture, electronics, and clothing

• Installation, repair, or maintenance services for tangible personal property

• Rental of tangible personal property

• Digital products, like e-books, streaming services, and digital downloads

Be sure to consult the Minnesota Department of Revenue's website for a comprehensive list of taxable items and services.

Is Software as a Service (SaaS) taxed in Minnesota?

What is Exempt from Minnesota Sales Tax?

Minnesota exempts certain items and services from sales tax, including:

• Groceries, prescription medication, and clothing (with some exceptions)

• Agricultural and industrial production materials and equipment

• Educational materials and services

• Certain medical and dental services and equipment

For a more detailed list of exemptions, visit the Minnesota Department of Revenue's website.

Who is Eligible for Minnesota Sales Tax Exemptions?

What Should I Do If My Customer is Exempt from Sales Tax in Minnesota?

If your customer is exempt from sales tax in Minnesota, you must obtain a completed and signed exemption certificate from them. Keep this certificate on file to prove that the sale was exempt, in case of an audit. Remember, it's your responsibility as the seller to maintain accurate and up-to-date records of all exemption certificates.

What Happens If I Lose a Minnesota Sales Tax Exemption Certificate?

If you lose an exemption certificate, it's essential to request a new copy from your customer as soon as possible. Failing to maintain proper records of exemption certificates could result in penalties or fines during an audit. Keeping digital copies of these certificates is a great way to ensure they're always accessible and secure.

And there you have it! By understanding the intricacies of collecting sales tax in Minnesota, you're well on your way to mastering the world of sales tax. As always, your allies at Accountingprose are here to support you on your small business journey, offering expert guidance and assistance every step of the way.

Filing and Paying Sales Taxes in Minnesota

As you continue your sales tax journey in Minnesota, the next step is learning how to file and pay your sales taxes properly. Don't worry, though – we're here to guide you through the process, ensuring you stay on the right side of the Minnesota Department of Revenue.

What If a Minnesota Sales Tax Filing Date Falls on a Weekend or Holiday?

How Do I File a Minnesota Sales Tax Return?

Filing a Minnesota sales tax return is a breeze with the state's e-Services system. Follow the steps below to file your sales tax return online:

1. Log in to your e-Services account: Visit the Minnesota Department of Revenue e-Services website and log in to your account.

2. Locate the correct tax period: On your account dashboard, find the tax period for which you need to file your sales tax return. Make sure to double-check that you're working with the correct period to avoid any confusion or errors.

3. Enter your sales data: For the selected tax period, you'll need to enter information about your taxable sales, exempt sales, and the total amount of sales tax you've collected. Be sure to include any local sales taxes you've collected for sales within Minnesota. As you input your data, the e-Services system will automatically calculate the sales tax you owe.

4. Review and submit: Before submitting your sales tax return, take a moment to review your entries and ensure their accuracy. If everything looks good, click "Submit" to complete your sales tax return.

5. Pay your sales tax: After submitting your return, you'll need to pay the sales tax you owe. The e-Services system offers several payment options, including direct bank transfers (ACH debit), credit or debit card payments, and electronic check payments.

By following these steps, you can confidently file your Minnesota sales tax return and stay in compliance with the state's sales tax laws.

What are the various penalties that can be assessed for sales tax filing in Minnesota?

In Minnesota, penalties can be assessed for late filing and payment of sales tax, as well as for underpayment of tax. Here's a breakdown of the penalties:

• Late filing: A penalty of 5% of the unpaid tax will be assessed if you file your return late.

• Late payment: A penalty of 5% of the unpaid tax will be assessed if you pay your sales tax late.

• Underpayment: If you underpay your sales tax, a penalty of 5% of the underpaid tax will be assessed.

In addition to penalties, interest will be charged on any unpaid tax, starting from the due date of the return until the tax is paid in full.

5 Tips to Avoid Common Mistakes When Filing Minnesota Sales Tax Returns

In Conclusion: Conquering Minnesota Sales Tax Returns Together

As you navigate the world of Minnesota sales tax returns, remember that you're not alone. With a little diligence, organization, and the help of these tips, you can master the ins and outs of sales tax compliance. As a small business owner, you have the power to overcome any challenges that come your way, and we at Accountingprose are here to support you in this journey.

Whether it's understanding filing frequencies, verifying local tax rates, or staying organized with accurate records, these tips can make a world of difference in ensuring a smooth and accurate sales tax filing experience. Don't hesitate to reach out to your Accountingprose team for guidance, advice, or assistance – we're here to help you succeed, every step of the way.

So, go forth and conquer your Minnesota sales tax returns, small business champions! With the right tools and support, you'll be able to focus on growing your business while maintaining compliance with the Minnesota Department of Revenue. Here's to your continued success and partnership in the small business adventure!

Have sales tax in more than one state?

Check out All of our Sales Tax Guides

And don't forget to check out our blog about Economic Nexus, which serves as an invaluable resource for businesses who have sales that are subject to sales tax. 

This blog is for informational purposes only and the information is accurate as of 2023-06-19. If you want legal advice on sales tax law for your business, please contact a State and Local Tax (SALT) professional. Keep in mind that sales tax regulations and laws are subject to change at any time. While we strive to keep our blog current, this blog possibly may be out of date by the time you review it.