Minnesota Sales Tax Rates

Total Range for 2024

6.875%–8.375%

Minnesota department of revenue logo

Why do you need to collect sales tax in Minnesota?

If you’re selling goods and services in Minnesota then sales tax might apply! To determine your obligation, you need to understand “nexus,” which ties businesses to states for tax purposes.

Two types of nexus exist:

  1. Physical Nexus: Having a physical presence, like an office, warehouse, or employees in Minnesota, triggers this type. If you do, you likely need to collect sales tax.
  2. Economic Nexus: This kicks in when your sales within Minnesota exceed a certain economic threshold. Even without a physical presence, surpassing this threshold requires collecting sales tax.

In Minnesota, there is also a transaction threshold of 200, which means that even if your sales aren’t over $100,000 if you’ve sold more than 200 items then you still need to pay sales tax.

Is what you’re selling taxable in Minnesota?

Now that you understand the basics of Minnesota sales tax, let’s determine if your specific products or services are subject to it.

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How to register for sales tax in Minnesota

Before you make any taxable sales in Minnesota, you must register for a Minnesota Tax ID Number and a Sales and Use Tax account.

Here’s how to register:

  • Online: Go to the Minnesota Department of Revenue’s Business Tax Registration https://www.mndor.state.mn.us/tp/eservices/_/. This is the recommended method for faster processing and confirmation.
  • By phone: Call the department at 651-282-5225 or 1-800-657-3605 (toll-free).

Additional Information:

  • You’ll need your North American Industry Classification System (NAICS) code when registering. You can find your NAICS code using a search tool on the U.S. Census Bureau website https://www.census.gov/naics.
  • After registering, you’ll receive a confirmation with a temporary password to access the e-File Minnesota system for filing and paying taxes electronically.

How to collect sales tax in Minnesota

To collect sales tax in Minnesota:

  1. Register: Get a Sales and Use Tax account.
  2. Know the Rate: Use a state tax calculator to find the combined sales tax rate for your area.
  3. Collect at Sale: Add the sales tax to the sales price at checkout. Most systems do this automatically.
  4. Keep Records: Track your sales and sales tax collected.
  5. Remember: File and pay sales tax electronically (details on filing frequency can be found on the state’s website).
Example:

Let’s say you’re running a small clothing store in Minneapolis, Minnesota. A customer wants to buy a t-shirt for $20.00 (before tax).

Sales Tax:

  • Sales Tax = Item Price x Sales Tax Rate
  • Sales Tax = $20.00 x 6.875%
  • Sales Tax = $1.38 (rounded to two decimal places)

Final Price:

  • Final Price = Item Price + Sales Tax
  • Final Price = $20.00 + $1.38
  • Final Price = $21.38

FAQs

Do you have a physical nexus in Minnesota?

A business has physical nexus in Minnesota if it has a physical presence in the state that creates a connection strong enough to require them to collect and remit sales tax. Here’s what establishes physical nexus in Minnesota:

  • Owning or Leasing Property: Owning or leasing a warehouse, office, retail store, or any other place of business in Minnesota creates physical nexus.
  • Representatives in Minnesota: Having a salesperson, solicitor, delivery person, or any agent who operates in Minnesota on your behalf (full-time or temporary) establishes nexus.
  • Inventory Storage: Storing inventory in a warehouse or fulfillment center located in Minnesota creates nexus.
Do you have an economic nexus in Minnesota?

You have economic nexus in Minnesota if your out-of-state business makes sales above a certain threshold within the state over a specific period. Here’s how to determine economic nexus in Minnesota:

  • Thresholds: Minnesota has two economic nexus thresholds:
    • Sales Revenue: If your business makes $100,000 or more in gross sales to Minnesota customers within a 12-month period, you have economic nexus.
    • Transaction Volume: If your business conducts more than 200 separate sales transactions into Minnesota within a 12-month period, regardless of the total sales amount, you also have economic nexus.
What is use tax in Minnesota?

In Minnesota, use tax acts as a counterpart to the state’s sales tax. Here’s a breakdown of what it is and how it applies:

  • Rate: The use tax rate in Minnesota is the same as the general sales tax rate, which is currently 6.875%. Local sales tax rates might also apply depending on the location where the item is used.
  • Purpose: Use tax ensures that you pay the appropriate sales tax on taxable goods you purchase outside of Minnesota but intend to use within the state.
  • Who Pays It: Minnesota residents (individuals and businesses) are responsible for paying use tax on taxable purchases made out-of-state that they bring into Minnesota for use.
Do you need a seller/reseller permit?

In Minnesota, a seller’s permit isn’t the exact term used.  What you actually need is a Minnesota Tax ID Number and a Sales and Use Tax account. This essentially functions the same way as a seller’s permit in other states.

Here’s a quick breakdown:

  • Needed for Sales Tax Collection: If you make taxable sales in Minnesota, you’ll need this tax ID and account to collect and remit sales tax to the state.
  • Not for Tax-Free Purchases: Obtaining this tax ID doesn’t grant you the right to purchase items tax-free for resale.
  • Resale Certificate Needed: To buy items wholesale or tax-free for resale in Minnesota, you’ll need a Certificate of Exemption (Form ST3). This form is filled out by the purchaser and given to the seller to document the tax-exempt resale.
How to get a sales tax permit/license in Minnesota?

In Minnesota, you don’t obtain a traditional “sales tax permit” or license.  Instead, you need to register for a Minnesota Tax ID Number and a Sales and Use Tax account. This accomplishes the same purpose of authorizing you to collect and remit sales tax on taxable sales within the state.

Here’s how to register:

  • Online: This is the recommended method for faster processing. Head to the Minnesota Department of Revenue’s webpage.
  • Phone: Call the department.
When are Minnesota's Returns Due?

The due date for your Minnesota sales tax return depends on your filing frequency, which is determined by your total sales volume. Here’s a breakdown:

  • Monthly Filers: If your total sales tax liability is expected to be $1,000 or more in a quarter, you’re considered a monthly filer. The return and payment for monthly filers are due by the 20th day of the following month.
  • Quarterly Filers: Businesses with a projected sales tax liability of less than $1,000 per quarter but at least $1,000 annually fall under quarterly filing. The return and payment for quarterly filers are due on the last day of the month following the end of the quarter.
  • Annual Filers: Businesses with a projected annual sales tax liability of less than $1,000 are considered annual filers. The annual return, however, is due on a different date: February 5th of the following year
How to file sales tax in Minnesota

Filing Electronically (Recommended):

  1. Minnesota e-File System: Minnesota requires electronic filing of sales tax returns through their e-File Minnesota system. You can access it here: https://www.revenue.state.mn.us/file-income-tax-return.
  2. Login Credentials: Use your Minnesota Tax ID Number and the temporary password received during registration. If you’ve lost your password, you can reset it online.
  3. Prepare Your Return: Gather your sales and sales tax collection records for the filing period.
  4. Follow the Prompts: The e-File system will guide you through entering your sales tax information. It might have options to upload your sales data if you use accounting software.
  5. Payment: You can make your sales tax payment electronically through the e-File system while filing the return.

Alternative Filing Methods (Not Recommended):

  • Paper Forms: Paper forms are available but not the preferred method due to slower processing and potential errors. You can find them on the Department of Revenue’s website.
Is anyone exempt from sales tax in Minnesota?
  1. Exempt Items: Certain goods and services are not subject to sales tax regardless of who purchases them. Here are some common examples:
  • Clothing and apparel for general use (with some exceptions like fur clothing, sports equipment, and protective gear)
  • Food (grocery items)
  • Prescription and over-the-counter drugs for humans
  • Services (except for a few specific situations where the service directly creates a tangible good)
  1. Exempt Organizations: Certain non-profit organizations may qualify for an exemption from paying sales tax on purchases they make. However, this exemption is not automatic and requires approval from the Minnesota Department of Revenue. Here are some organizations that might qualify:
  • Charitable organizations
  • Religious organizations
  • Educational organizations
  • Senior citizen groups (meeting specific requirements)
  • Cemeteries owned by religious organizations

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