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Stay ahead of the tax game in 2024 with our Minnesota Sales Tax Guide, offering comprehensive coverage of compliance, rates, and business regulations.
Minnesota sales tax at a glance
Minnesota sales tax rates & calculations in 2023
The Minnesota sales tax rate in 2023 is between 6.875% and 9.875%. This comprises a base rate of 6.875% plus mandatory local rates up to 3%.
Depending on the local sales tax jurisdiction, the total tax rate can be as high as 9.875%.
List of local sales tax rates in Minnesota
You can look up the full table of sales tax rates in each city and county in Minnesota. Here’s a snippet of the same:
FAQs
How do you calculate Minnesota sales tax?
To calculate Minnesota sales tax, you can use the following formula:
Sales tax = (6.875% + local rate) * purchase price
For instance, if the local rate is 1.25%, and the purchase price is $100, then the sales tax would be $8.13.
Is the Minnesota sales tax destination-based or origin-based?
Minnesota is a destination-based sales tax state. Sales tax is based on where the product or service is delivered.
Is Minnesota a streamlined sales tax state?
Yes, Minnesota is a full member state of the Streamlined Sales and Use Tax Agreement (SSUTA).
Sales tax nexus table in Minnesota
FAQs
Do I need a Minnesota seller's permit if I’m only a wholesaler?
Yes, you need a Minnesota seller's permit if you only sell wholesale. Most sales, retail or wholesale are required to pay sales tax with a valid resale certificate.
Do I need a Minnesota seller's permit if I only sell temporarily in the state?
Yes, in most cases, if you are making retail sales in Minnesota, even temporarily, you need a seller's permit to collect and remit sales tax. There are no exceptions for temporary sellers.
What’s exempt from sales tax in Minnesota
Exemptions include food, clothing, prescription drugs, medical devices, farm machinery and equipment, manufacturing materials, textbooks, and more. You can find the complete list here.
FAQs
Are groceries taxable in Minnesota?
Most food for home consumption is exempt from Minnesota sales tax under the food exemption. Prepared foods, soft drinks, candy, and dietary supplements are taxable.
Is clothing taxable in Minnesota?
Clothing is exempt from Minnesota sales tax. Exceptions include accessories, unique protective clothing, and fur clothing.
Are digital products taxable in Minnesota?
Yes, digital products like digital books, music, movies, etc., are taxable in Minnesota.
Is software-as-a-service (SaaS) taxable in Minnesota?
Most SaaS products that charge a subscription fee with the software being hosted online are exempt from tax. Even if you provide custom software and offer maintenance services, you’re exempt from Minnesota sales tax.
Are services taxable in Minnesota?
Most services unless specifically included are exempt from sales tax in Minnesota. Some services like installation, fabrication, printing, etc., are taxable in Minnesota. Professional services and custom services are generally exempt.
Excise taxes in Minnesota (alcohol, tobacco, gasoline, fuel, marijuana)
- Gasoline - $0.285 per gallon
- Cigarette - $0.69.2 per pack of 20
- Liquor - 6.875% state general rate sales tax + a 2.5% liquor gross receipts tax + any local taxes
Food and beverage tax in Minnesota
Most food and drink sold by an eating establishment is taxable unless a specific exemption applies. This includes bars, restaurants, food trucks, and retailers or others who sell prepared food or drinks.
Prepared Food Sales
Any food prepared by the seller or sold with eating utensils provided by the seller is taxable. For more information, see Prepared Food.
Catering Sales
Catering services are taxable, including:
- Charges for delivery, preparation, or services
- Drinks
- Food
- Rentals of chairs, tables, tablecloths, and tableware
Personal Chef Services
Charges for a personal chef to prepare food, when the customer provides the food and food ingredients, is not taxable.
Remote sellers in Minnesota
Out-of-state sellers with nexus in Minnesota must register, collect, file, and remit applicable Minnesota sales tax. Economic nexus rules apply based on sales volume or transactions.
Discretionary taxes in Minnesota (local sales taxes)
Many counties and cities in Minnesota impose a local sales tax on top of the state sales tax. Rates range from 0.5% to 3%.
Collecting sales tax in Minnesota
Let’s look at the steps to collect sales tax in Minnesota now.
How to collect sales tax in Minnesota if you are not based in Minnesota (Out-of-State)
Even if you do not have a physical presence in Minnesota, you must register to collect sales tax if you meet the economic nexus thresholds:
- $100,000 in sales shipped to Minnesota addresses over the past 12 months
- 200 or more separate retail transactions delivered into Minnesota over the past 12 months
There are also specific rules that can create nexus and sales tax obligations, including:
- Attending conventions, trade shows or temporary sales events
- Voluntary disclosure agreements
- Owning or leasing property in Minnesota
- Having inventory stored in Minnesota fulfillment centers
Register for a Minnesota Tax ID Number and sales tax permit online through the Minnesota Department of Revenue website. Once registered, you must begin collecting applicable state and local sales tax rates even if you do not have a physical location in Minnesota.
Should you collect sales tax on shipping charges in Minnesota?
If the product sold is taxable, delivery and shipping charges are also considered part of the sales price. So shipping and handling charges associated with sales of taxable tangible personal property or services are also subject to Minnesota sales tax.
Some examples of taxable delivery charges:
- Shipping fees listed separately on invoices
- Handling fees to pack, ship, or deliver items
- Transportation charges to deliver items to customers
So yes, as a seller making taxable sales in Minnesota, you must collect sales tax on any delivery or shipping fees charged to the customer.
Filing and paying sales taxes in Minnesota
You must file Minnesota Sales and Use Tax returns electronically through the Department of Revenue e-Services system. Payments can also be made electronically or by check with a payment voucher.
Sales tax return filing schedule and due dates in Minnesota
The Minnesota DOR assigns a filing frequency to businesses based on their anticipated taxable sales. This schedule is either monthly, quarterly, or annually. The following due dates apply to Minnesota sales tax returns:
Monthly:
You must file monthly returns if your average monthly tax collections exceed $500. The due date is the 20th day of the following month.
Quarterly:
You can file quarterly returns if your average monthly tax collections are between $100 to $500.
Annual:
You can file an annual return if your average monthly tax collections are less than $100. The due date is February 5 of the following year.
Filing penalties in Minnesota
The penalty for late filing is 5% of the tax not paid on time. An additional 5% penalty can apply for late payment. The maximum penalty is 25% for repeat late payments.
When are returns due in Minnesota?
Minnesota sales tax returns are due by the 20th of the month following the end of the filing period for monthly filers. Quarterly and annual filers have specific due dates.
FAQs
What are the Minnesota sales tax due dates?
Monthly returns are due by the 20th of the following month. Quarterly returns are due April 20, July 20, October 20, and January 20. Annual returns are due February 5 of next year.
I didn’t collect any Minnesota sales tax during this period. Do I still need to file a return?
Yes, you must file a $0 sales tax return even if you did not make taxable sales or collect sales tax for the period.
Can I get an extension on filing my Minnesota sales tax return?
You have an automatic extension until October 16 and do not need to file an extension. However, this does not apply to paying taxes as the state will charge the penalties if you delay the same.
Can I amend a Minnesota sales tax return?
You can file an amended sales tax return in Minnesota to correct errors or omissions within 3.5 years of the original due date. You may owe additional tax, interest, and penalties on an amended return.
What is the penalty for filing and paying Minnesota sales tax late?
Minnesota charges a 5% late filing penalty and 5% late payment penalty. Interest accrues at 5% annually. Total penalties and interest are capped at 25% of the tax due.
Audit & appeals process
Minnesota's audit & appeals process involves several steps if a business is audited and disputes the findings. It starts with the auditor assessing additional tax due.
The business can first appeal directly to the auditor to contest the results. If unsatisfied, they can formally appeal to the Minnesota Tax Court within 60 days. Further appeals can be made to the Minnesota Supreme Court.
Minnesota sales tax audit process
The typical audit process in Minnesota involves the following key steps:
- Notification letter - The Minnesota Department of Revenue sends an initial notification letter to inform the business that they have been selected for a sales and use tax audit. This letter details the audit timeframe, records that must be made available, and possible site visits.
- Pre-audit review - The business can request a pre-audit review before fieldwork begins. This is an informal discussion with the auditor to explain specific situations and discuss potential issues or exemptions. It helps provide context for the auditor.
- Field audit - The auditor conducts fieldwork to examine the business's books, records, systems, processes, and internal controls related to sales tax compliance. This involves site visits to interview personnel, observe operations, and verify physical assets/inventory.
- Audit findings - After concluding the audit, the auditor summarizes the results in an audit report with an assessment of additional tax liabilities. Supporting schedules specify any errors, omissions, denied exemptions, etc., resulting in tax underpayments.
- Appeal with the auditor - The business can dispute the audit findings and assessment with more documentation and explanations. The goal is to obtain relief from the auditor directly by justifying treatment based on the tax law.
- Notice and demand - If the audit results are unchanged after the appeal, the MN DOR issues a notice and demands to pay the outstanding tax plus accrued interest and penalties.
- Formal appeal – As a last resort, the business can file a tax petition to formally appeal the assessment to the Minnesota Tax Court within 60 days of the notice date. Further appeals are possible to the MN Supreme Court.
What to expect during the audit?
The auditor will review your Minnesota sales tax returns, exemptions claimed, nontaxable transaction documentation, resale certificates, and other records to verify reporting compliance.
After the audit – Appealing the results
You should try contesting unfavorable audit findings first with the auditor before making a formal appeal. Provide any additional documentation and explain why you disagree with the assessment. Formal appeals can be complex and expensive.
How to register for sales tax in Minnesota.
To register for Minnesota sales tax, visit the Minnesota Department of Revenue website and apply online for a Minnesota Tax ID Number and Sales Tax Account. Have details on your business, products/services, estimated sales, etc., ready.
Once registered, you must charge applicable Minnesota sales tax rates on taxable transactions and file returns to remit the tax. Use sales tax software or manually track, collect, and remit tax.
Registration requirements for online sellers in Minnesota
Remote sellers must register if they:
- Have >$100,000 in annual sales shipped to Minnesota customers
- Make 200+ separate retail transactions for delivery into Minnesota
- Use a marketplace facilitating >$100,000 in Minnesota sales
There are also registration requirements for attending trade shows, owning property, or storing inventory in the state.
Cost of registration for a Minnesota sales tax license
It is free to register and obtain a Minnesota Sales Tax Account with the Department of Revenue.
More Information & Contacts
For sales tax filing, appeals, and registration in Minnesota, contact:
- Authority: Minnesota Department of Revenue
- Phone: (651) 296-6181
- Website: www.revenue.state.mn.us
There you have it—a comprehensive guide on Minnesota's sales tax rules and regulations. Need help filing taxes for your ecommerce store? Get a demo with Numeral now.
