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Minnesota Sales Tax Guide

By Cristina Garza

Minnesota, known as the land of 10,000 lakes, is the 32nd state in the union. It's the birthplace of many wonderful inventions, including masking and scotch tape as well the bundt pan. It's also the birth [and last resting] place of one of the all-time legends of Rock and Roll, Prince. Throw in the Mall of America and you have a classic example of an American melting pot. If you’re one of the proud small business owners calling Minnesota home, you’ll need to stay in compliance with the Minnesota Department of Revenue's sales and use tax laws to keep things in check. No problem! We have assembled this all-in-one guide for sales tax so that you can meet all the sales tax requirements for a small business in Minnesota. 

After reading this guide, you will have learned:

  • How to be prepared for your call with the Minnesota Department of Revenue.
  • How to contact the Minnesota Department of Revenue.
  • When to charge sales tax in Minnesota.
  • What goods, products, and services are taxable in Minnesota.
  • When you establish a sales tax nexus with the state of Minnesota, and the nuances of various thresholds.
  • How to register for a sales tax license in Minnesota.
  • How to collect sales tax in Minnesota.
  • How to file and pay sales tax in Minnesota.

If, after reading, you still have any questions to help you determine your tax sales obligations in Minnesota and how to fulfill them, we are here for your small business bookkeeping needs! 

 

 


Minnesota Sales Tax Contacts

Minnesota Sales Tax Contacts

 

✅  Do you need to get in touch with the Minnesota Department of Revenue?

✅  Are you uncertain about whether to visit, call them, or contact them through their website?  

✅ Do you wonder what information you should have ready before you contact them?

 

If you answered “Yes” to any of these questions, please read onward, as we have just the information you need! :)

The Minnesota Department of Revenue is reachable by phone at 651-296-6181. 

You can also contact them via their website, visit their office, or send them an email. Calling will likely yield the most prompt response. 

When you do call the Minnesota Department of Revenue, you will want to have some information on hand. It will save time to have the following information easily accessible before you call: 

  • Taxpayer Name
  • EIN
  • Sales & Use Tax ID Number

If you are calling on behalf of an individual or a business, or having a third party call on your behalf, you must have a Minnesota Power of Attorney (form 184, PDF) signed before you call or else you will waste your time; they will only help if you have a completed ARD form. 

Should you have more questions, please feel free to contact us so we can assist you with your sales tax needs.

 

 


Minnesota Sales Tax Registration

Minnesota Sales Tax Registration

 

Are you a new business selling tangible property in Minnesota? If yes, you are going to want to register your business with the Minnesota Department of Revenue so that you can pay your sales tax on time. 

You needn’t fret as this is a fairly simple process and one for which we’re about to fully prepare you. We are going to outline the steps below so you are totally ready to register for your sales tax license.

 

 

Here we go! Remember...

Preparation is key. 

Let’s get started!

 

 

How do I register to collect sales tax in Minnesota?

You can most quickly register your Minnesota state sales tax permit by visiting the Minnesota Department of Revenue site and following the instructions provided.

If, for some reason, you prefer the paper version, Minnesota offers a sales tax registration (PDF) you can print and mail in. 

 

 

What information do I need to register for a Minnesota sales tax permit?

Great question!

Before you sign up for Minnesota sales tax permit you’ll want the following information on hand:

  • Business name
  • Business entity type 
  • Description of business activities
  • Date business activities began or will begin
  • Business address and mailing address
  • Business contact information
  • Associated business entities 
  • NAICS code that best matches the business
  • Federal Employer Identification Number (FEIN)

Don’t forget! Preparation is key. When you have all this information ready, you can go online and register for your permit at the Minnesota Department of Revenue website. 

 

 

How much does it cost to register for a Minnesota sales tax permit?

The cost to register a new sales tax ID in Minnesota is $0. Zilch. Nada. Bupkis. We are always happy to give this answer! :) 

 

 

Do I need a Federal Tax ID Number or EIN to register for a Minnesota sales tax permit?

Yes! You will certainly need one, but if you don’t already have one and need to get a new EIN, it’s a straightforward process. You can register for a Federal EIN right here :). 

 

 

Which agencies in Minnesota do I need to additionally register with?

You may additionally need to contact some of the following agencies: 

You’ll want to think this through and do some research and investigating; every business is unique and, because of that, different rules, regulations, and laws may apply. 

We suggest contacting the Minnesota Department of Revenue to verify which additional government agencies you may be required to register with. 

 

*****

 

Yippee!!!

You are now prepared to register for your Minnesota sales tax permit in Minnesota. 

Let’s summarize what we have covered so far:  

  • Have all the required information easily accessible before registering online.
  • Acquire a tax ID or EIN before registering for a Minnesota sales tax permit.
  • Register online at the Minnesota Department of Revenue site.
  • Look into what other agencies you may have to additionally register with.

Registering for your Minnesota sales tax permit will be stress free as long as you are adequately prepared. We always recommend organizing all the essential information in a folder, preferably mirroring paper files with a system like Box.com or Dropbox (something we’re happy to handle for our customers). 

 

 


Minnesota Sales Tax FAQ

Minnesota Sales Tax FAQ 

 

By now, you may have already contacted the Minnesota Department of Revenue and applied for a Minnesota sales tax permit. 

Once you have a license to collect and remit sales taxes in Minnesota, you will probably be asking yourself two questions: 

  • When do I charge a sales tax in Minnesota?
  • What goods and services are subject to sales taxes in Minnesota? 

We are going to go over the most common sales tax questions our clients ask. We believe the answers to these questions will help you appreciate the nuances of taxable goods so you can be confident in fulfilling your tax obligations. 

Let’s start with the first question…

 

 

What goods and services are considered taxable in Minnesota?

With few exceptions, all sales of tangible personal property are considered taxable sales in the state of Minnesota. Most services are not taxed though there are a few, like janitorial services, that are.

 

The bottom line is …

Your business must pay taxes on sales of any non-exempt goods.

 

*****

 

Let’s now review some of our clients’ frequently asked questions:

  • Is Minnesota an Origin or Destination sales tax State?
  • What creates sales tax nexus in Minnesota?
  • What is the economic threshold in Minnesota?
  • Does Amazon have fulfillment centers in Minnesota?
  • Does Minnesota have a Click-Through Nexus?

To best understand your tax obligations, new businesses need to consider how they are doing business and the type of relationships they have with buyers and any third parties to their transactions (such as affiliate marketers). 

 Let’s discuss some questions that will help you understand the nature of your small business and the subsequent tax implications.   

 

 

 

Is Minnesota an origin or destination-based sales tax state?

Minnesota is a destination-based sales tax state. This means you charge sales tax based on the location of the purchaser rather than that of the seller. Minnesota is, unfortunately, not one of those lovely states that doesn’t have any additional local taxing. Different cities and counties can create a different taxing picture:

 

Because of the variability, Minnesota offers a sales tax calculator as well as other local tax lookup tools.

 

 

 Protip: Charge the customer tax based on their location.

 

 

What creates a tax nexus with the state of Minnesota?  

Having nexus, also known as "sufficient business presence,” with Minnesota means your business has established a taxing connection with a state. When this happens, you are required to collect and remit sales tax in Minnesota because you created a sales tax Nexus.

Even if your business maintains its main headquarters in another state, you may still have to charge and pay sales tax to the Minnesota Department of Revenue even if you never step foot in Minnesota.   

So, how do you create a sales tax nexus in Minnesota?

 

What creates sales tax nexus?

 

A business establishes a nexus in Minnesota by:

  • having a business location in Minnesota;
  • having property stored in Minnesota;
  • employing any person in Minnesota;
  • contracting with a salesperson or other agent in Minnesota;
  • leasing equipment used in Minnesota;
  • performing services in Minnesota;
  • licensing the use of intangible property in Minnesota, or transporting property in Minnesota using the taxpayer’s vehicles.

Let’s talk a bit more specifically about where your goods are stored, such as in the instance of an Amazon warehouse. 

 

 

Does Amazon have fulfillment centers in Minnesota?

Yes, just one of them at the time of this article’s publishing:

  • 2601 4th Ave E // Shakopee, MN // 55379

This is relevant if you sell your products on Amazon or are recognized as an Amazon FBA (Fulfillment by Amazon) seller. When Amazon stores your products in one of its fulfillment centers in any state, including Minnesota, this triggers a sales tax requirement. If Amazon is storing your products in a warehouse in Minnesota, you have created a taxing connection with the state of Minnesota.

We can help guide your small business through this! We use tools like A2X and Wherestock to identify where our clients' inventory is currently being held and shipped from so that we can keep them in compliance.

 

 

Does Minnesota have economic nexus?

Yes! This means that even if your business isn’t located in the state or doesn’t in any traditional way create nexus, you may still have to register and pay sales tax in Minnesota.

The threshold for creating economic nexus with Minnesota is currently: over $100,000/year over ten transactions, or over 100 sales total

This is set to change! Starting October 1st, 2019, the threshold will change to $100,000/yr in sales to Minnesota purchasers or 200 separate transactions in a year. Remote sellers will be required to register if they meet either threshold. 

For more information keep an eye on Minnesota DOR’s remote sellers FAQ page.

 

 

Does Minnesota have click-through nexus?

Yes, Minnesota does have “click-through nexus” which refers to revenue made from referring sales (sometimes referred to as third-party sales). This only applies to those making revenue from sales in excess of $10,000 in a year.

 

 

Is Minnesota a streamlined sales tax state?

Yes! Since October, 2005 Minnesota has been a full member of Streamlined Sales Tax.

If you are planning on taking advantage of the Streamlined Sales Tax as a business, it is recommended that you use a Certified Service Provider (though businesses may opt to register themselves without a CSP). Ultimately the aim of streamlined sales tax is to simplify payment of sales and use tax to multiple different states. It isn’t required that you utilize them, but it can significantly reduce complexity to do so, especially if your business sells in multiple states.

 

 

More effectively manage your tax needs by keeping this guide handy. 

You and your business can be better equipped to avoid situations like paying fines, paying back taxes that you did know you had to pay in the first place, or facing an audit by the tax authorities in Minnesota.

 

 


Collecting Sales Tax in Minnesota

Collecting Sales Tax in Minnesota

 

By now you know if you are a business that has established a nexus with Minnesota. So you have an understanding about whether, or when, you are required to collect sales tax. Knowing this is just half the battle! Now, we are going to help you with the next half of the battle: how to navigate the process of collecting taxes.

Let’s review some common questions our clients have asked regarding their Minnesota Sales Tax obligations. 

  • How do I collect Minnesota Sales Tax?
  • Who is eligible for Minnesota Sales Tax exemptions?
  • What should I do if my customer is exempt from sales tax in Minnesota?
  • What happens if I lose a Minnesota nontaxable transaction certificate? 

After reading this, you will be better equipped to determine when --and when not-- to collect sales tax in Minnesota.

 

 

How do I collect Minnesota sales tax?

Because Minnesota is a destination-based sales tax state, your business should charge sales tax based on the location of the purchaser, at the time of the transaction. This is usually as simple as configuring the Point-of-Sales system accordingly.  

 

 

What are the current Minnesota sales tax rates?   

At the time of this article’s publication, Minnesota’s state-wide sales tax rate is 6.85%. But because Minnesota sales tax rates differ based on locality, we suggest utilizing this link to stay up to date on your location.

It always helps to be accurate and up to date with this type of information! :) 

 

 

What is exempt from Minnesota Sales Tax?

Here is a sample list of exemptions: 

  • purchases for resale
  • Medical supplies
  • Groceries, unprepared food 
  • Agricultural supplies
  • Manufacturing machines, supplies

Minnesota’s Department of Treasury Non-taxable goods page goes into more detail. Beyond that, everything is included in taxable goods. 

 

 

Who are eligible for Minnesota sales tax exemptions?

At this point, you should know what products are exempt from sales tax in Minnesota. You also want to know who may be exempt. 

Under Minnesota law, the type of buyer or the way the goods will be used can qualify can buyer for a sales tax exemption. A good example of this is a merchant purchasing goods for resale, aka a wholesaler.

Other common examples of an exempt buyer may include:

  • Government agencies
  • Non-profit organizations
  • Religious groups
  • Out-of-state buyers (should their business not have nexus in their home state).

For more information, check out Minnesota Department of Revenue’s exemption requirement page.

 

 

What should I do if my customer is exempt from sales tax in Minnesota?

Purchasers who are tax exempt must have completed an exemption certificate ST-3 (PDF) and must present their completed exemption certificate at the time of purchase. It is then up to the seller to hang on to this exemption certificate. Failure to do so may leave you unable to justify tax exempt sales.

 

 

What happens if I lose a Minnesota Sales Tax exemption certificate?

This is an entirely avoidable situation! Finding out you’ll be audited and then discovering you cannot produce a required exemption certificate is a bad day. That scenario would mean you could be held liable to pay all taxes on behalf of the buyer. This whole ordeal could be easily avoided by taking proper care with your paperwork… which happens to be one of our specialties! :) 

 

 

Does Minnesota have a sales tax holiday?

No, the tax man doesn’t let up for even a minute in Minnesota :( Boo! 

 

***** 

We have now covered who you need to collect sales taxes from, how to determine whether goods for sale are deemed taxable, what goods and services fall under tax exemptions, who is eligible for tax exemption certificates, and, finally, the process of collecting sales tax in Minnesota state. 

Now that we’re this far down the rabbit hole there’s only one thing we need to learn about next… how to pay the piper! 

 

 


Filing and Paying Sales Tax in Minnesota

Filing and Paying Sales Tax in Minnesota

 

It is time to talk about filing and paying your sales taxes in Minnesota. In this section, We are going to cover the following frequently asked questions from our clients:

  • When is Minnesota Sales Tax due?
  • What are the Minnesota Sales Tax thresholds?
  • What if a Minnesota Sales Tax filing date falls on a weekend or holiday?
  • How do I file a Minnesota Sales Tax Return?
  • How do I correct a Minnesota Sales Tax return?
  • What happens if I don’t collect sales tax?
  • What happens if I file or pay my sales tax return late?
  • Do I need to file a return if I don’t collect any sales tax in Minnesota?
  • If I close my business, do I need to file a final sales tax return?
  • Does the Minnesota Department of Revenue offer a discount for filing on time?

By the time you finish reading this, you will feel confident enough to file and pay your Minnesota Sales Tax.

 

 

When is Minnesota sales tax due?

Minnesota sales tax payments are due no later than the 20th day following the reporting interval for monthly and quarterly filers. Annual filers must file by February 5th. 

 

 

What are the Minnesota Sales Tax filing interval thresholds?

The thresholds for filing intervals are:

 

Tax Amount Owed monthly*

Filing interval

$100 or less

Annually

From $100.01 to $500

Quarterly 

$500.01 or more

Monthly

 

*based on actual sales for existing companies or projected for new ones

 

Not sure how to determine your tax filing frequency?

You can review your eCommerce or Point-of-Sale Software to see the volume of sales you have generated. 

Don't worry though! The state will let you know when your due dates change. :) 

Keep an eye out for notices in your mail from the State of Minnesota so that you don't miss any shift in deadlines.

 

 

What if a Minnesota sales tax filing date falls on a weekend or holiday?

The deadline is moved to the next business day, typically the Monday following the weekend or the day after the holiday. Where possible, we always suggest filing well before the holiday, of course ;). 

 

 

How do I file a Minnesota sales tax return?

Paper: Do not pass go, do not collect $200 (no paper filing option is available in Minnesota). 

Electronic: File online via the Minnesota Department of Revenue website and submit payment via EFT. 

 

 

How do I correct a Minnesota sales tax return?

Paper: Not applicable or available.

Electronic: Correct the submitted return via the Minnesota Department of Revenue website and submit payment via EFT [if necessary]

 

 

What happens if I fail to collect sales tax?

Minnesota requires businesses with nexus to collect and remit sales tax on all applicable purchases. If you were required to collect sales tax and failed to do so for whatever reason, that’s a big time no-no! The business will be held liable for the due tax.

Always make sure to collect sales tax at the point of sale. Attempting to collect after the fact will be time consuming and most likely unsuccessful. 

 

 

Protip: You are still be responsible for remitting sales taxes even if you failed to collect them. 

 

 

What happens if I file or pay my sales tax return late?

The Minnesota Department of Revenue charges separate penalties for late filing and late payment.

 

Late filing will engender a 5% penalty, even if paid on time.

 

Failure to pay will result in increasing penalties; 5% for the first month, 10% for the second, and 15% for the third month going forward.

 

 

Do I need to file a return if I don’t collect any sales tax in Minnesota?

Yes indeedy! Minnesota requires businesses file a “Zero-Tax” return even when they have no sales during a taxing period. 

 

 

If I close my business, do I need to file a final sales tax return?

Yes, Minnesota requires businesses to file a final return via the when closing their doors. 

 

 

Does the Minnesota Department of Revenue offer a discount for filing on time?

Nope! For dessert you get more broccoli 🥦! :) 

 

 

*****

 

Now that we have covered all the bases for filing and paying sales taxes in the state of Minnesota, you should feel more at ease about the process.

 

Some things to remember:

  • Due dates are important. If anything, file and pay your taxes early.
  • There are three payment plans for filing and paying your sales taxes depending on how much you collect in sales tax on average in a month.
  • You can file and pay your taxes electronically or by mail
  • If you need to amend a return, you may do so electronically or by paper.
  • If you don’t collect sales tax and you were supposed to, you (not the buyer) is liable to pay the sales tax to the state of Minnesota.
  • You will have to pay late fees if you fail to file your tax return on time and/or if you fail to make your tax payment on time.
  • Even if you collect no sales tax, you still need to file a return.
  • You need to file a “Final return” when you close your business.

 

Now you are ready to file and pay your sales tax in Minnesota! If you have any more questions, feel free to contact us.

  

Click here if you think sales tax is boring. Book a meeting.

 


Please note: This blog is for informational purposes only and the information is accurate as of 8/5/2019. If you want legal advice on sales tax law for your business, please contact a Sales Tax 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.