What is the sales tax rate in Minnesota?
The general sales tax rate in Minnesota is 6.875% as of 2023. However, local jurisdictions can add additional taxes, so the total sales tax rate can be as high as 8.875% in certain areas. Both local and state sales taxes apply to retail sales of certain goods and services.
Sales Tax Minnesota: When should you start collecting Sales Tax in Minnesota?
As a business owner in Minnesota, you must collect sales tax if you have a nexus within the state. This includes both a physical and economic presence. You’re required to collect sales tax on taxable goods and services sold to customers in the state.
Minnesota Physical Sales Tax Nexus
Physical sales tax nexus in Minnesota implies that a business has a physical presence within the state.
Sales Tax Physical Nexus checklist for Minnesota
Here are the conditions that establish a physical nexus in Minnesota:
- Having an office, distribution, sales, or sample room location, warehouse, storage place, or other place of business.
- Maintaining a representative, agent, salesperson, canvasser, or solicitor in the state.
- Selling at retail at a fair, flea market, convention, or trade show, or delivering goods in a vehicle owned by the person.
Minnesota Economic Nexus: Revenue, Thresholds and Transactions
Economic nexus in Minnesota applies to sellers that have made over 200 retail sales or 100,000 dollars in gross revenue from retail sales into the state during a period of 12 consecutive months. In such a case, your business has an economic nexus with Minnesota, and you must collect and remit sales tax.
Which services are taxable in Minnesota?
In Minnesota, some services are subject to sales tax. These include:
- Repair and maintenance services for personal property.
- Laundry and dry cleaning services.
- Building cleaning and maintenance.
- Detective, security, burglar, fire alarm, and armored car services.
- Pet grooming services.
Minnesota Sales Tax on Products: How to Calculate What Your Business Should be Charging
To calculate the sales tax on a product in Minnesota, multiply the sales price by the combined state and local sales tax rate. For instance, if a product costs $100 and the combined sales tax rate is 7.875%, you would charge $7.88 in sales tax.
Is there a Minnesota clothing tax?
Minnesota is one of the few states that does not impose any type of sales tax on clothing sales for general use.
Clothing accessories, sports and recreational equipment, and protective gear are however taxable.
A number of clothing alteration and repair services are also taxable.
Minnesota Online Sales Tax: Are SaaS and Digital Services Taxable?
As of 2023, digital goods, including the sale, lease, or license of software, are taxable in Minnesota. If you’re selling digital goods or software products, you need to collect sales tax from Minnesota customers.
SaaS Sales Tax Minnesota: Should SaaS providers start collecting sales tax?
No, remotely accessed software subscriptions such as SaaS are generally not subject to sales tax in Minnesota.
However, with states such as Washington actively updating their legislation to address the rise of SaaS and its possible taxability, other states may soon follow in their footsteps and Minnesota SaaS sales tax may soon be part of the compliance journey.
How can a business get a sales tax permit in Minnesota?
To get a sales tax permit in Minnesota, you can apply online at the Minnesota Department of Revenue’s website. You will need your Federal Employer Identification Number (FEIN) or Social Security Number (SSN), business details, NAICS code, and other relevant information.
Collecting Sales Tax in Minnesota as a Business
Businesses with a sales tax permit must collect sales tax on all taxable goods and services. Accurate records of all transactions, including the tax collected, must be maintained for future reference and auditing purposes.
Minnesota Sales Tax Return Due Dates Explained
Sales tax returns in Minnesota are typically due on the 20th day of the month following the reporting period.
What is the required frequency for sales tax returns in Minnesota?
The frequency of filing sales tax returns in Minnesota depends on the average tax liability. If you make less than $100 per month, you should file annually (due date: February 5 of the following year). If you make between $100 to $500 per month you should file quarterly (due dates: April 20, July 20, October 20, and January 20). If you make more than $500 per month, you should file monthly (due date: 20th day of the following month).
