Minnesota Sales Tax Guide: Rates & Compliance for Businesses

Minnesota sales tax at a glance

Minnesota sales tax rates and calculations

The Minnesota sales tax rate ranges from 6.875% to 9.875%. This comprises a base rate of 6.875% plus local rates of 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

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%.

The Minnesota Department of Revenue publishes a full list of sales tax rates in each city and county in Minnesota. Here’s a brief sample for some counties:

Minnesota sales tax rates, calculations, and compliance FAQs

How do you calculate Minnesota sales tax?

To calculate Minnesota sales tax, you combine the base rate and the local rate, and then multiply that by the purchase price.

For instance, if the local rate is 1.25%, the combined sales tax rate would be 8.125%. And if 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 (the customer’s location).

Is Minnesota a Streamlined Sales Tax state?

Yes, Minnesota is a full member state of the Streamlined Sales and Use Tax Agreement (SSUTA).

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Sales tax nexus in Minnesota

Nexus rules determine who is required to register, collect, file, and remit sales tax. Here’s an overview of sales tax nexus rules for Minnesota:

What’s exempt from sales tax in Minnesota?

Exemptions include food (excluding prepared meals), clothing, prescription drugs, medical devices, farm machinery and equipment, manufacturing materials, textbooks, and more. 

Minnesota sales tax exemptions 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 such as digital books, music, and movies are taxable in Minnesota.

Is software as a service (SaaS) taxable in Minnesota?

Many SaaS products are not taxable in Minnesota, but taxability depends on how the software is delivered and used. Businesses should review Minnesota guidance for electronically delivered software and digital products.

Are services taxable in Minnesota?

Most services are exempt from sales tax in Minnesota. Some services, such as installation, fabrication, and printing, are taxable.

Are food and beverages taxable in Minnesota?

Most food and drink sold by an eating establishment is taxable. This includes bars, restaurants, food trucks, retailers, and others who sell prepared food or drinks. 

Any food prepared by the seller or sold with eating utensils provided by the seller is taxable. Catering services (including delivery and preparation charges) are also taxable.

Charges for a personal chef to prepare food when the customer provides the food and ingredients are not taxable.

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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 and/or services, and estimated sales (and so on) 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 at least $100,000 in annual sales shipped to Minnesota customers
• Make at least 200 separate retail transactions for delivery into Minnesota
• Use a marketplace facilitating at least $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.

Minnesota sales tax registration and permits FAQs

Do I need a Minnesota seller's permit if I’m only a wholesaler?

No. If you make only wholesale sales in Minnesota, you generally do not need a Minnesota seller’s permit as long as all of your sales are for resale and you obtain valid resale exemption certificates from your customers. Wholesale sales for resale are typically exempt from Minnesota sales tax when properly documented.

Do I need a Minnesota seller's permit if I sell only 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.

Collecting sales tax in Minnesota

Even if you do not have a physical presence in Minnesota, you must register to collect sales tax if you meet one of the state’s 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 in Minnesota
• 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?

Yes, as a seller making taxable sales in Minnesota, you must collect sales tax on any delivery or shipping fees charged to the customer. If the product sold is taxable, delivery and shipping charges are also included in the sales price. 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

Filing and paying sales taxes in Minnesota

You must file Minnesota Sales and Use Tax returns electronically through the Minnesota 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 Department of Revenue assigns a filing frequency to businesses based on their anticipated taxable sales. This schedule is either monthly, quarterly, or annually. 

Monthly

You must file monthly returns if your average monthly tax collections exceed $500. 

The due date is the 20th day of the month following the reporting period. If the 20th falls on a holiday or weekend, the due date is the next business day.

Quarterly

You can file quarterly returns if your average monthly tax collections are between $100 and $500.

The due date is also the 20th day of the month following the reporting period. If the 20th falls on a holiday or weekend, the due date is the next business day. 

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 (or the next business day if February 5 falls on a holiday or weekend).

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.

Filing and paying Minnesota sales tax FAQs

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 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.

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Minnesota sales tax audits and appeals

Minnesota's audit and appeals process involves several steps. 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:

1. 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.
2. Pre-audit review: The business may request one. 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.
3. Field audit: The auditor examines 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.
4. Audit findings: After concluding the audit, the auditor summarizes the results in an audit report, including an assessment of any additional tax liabilities. Supporting schedules specify any errors, omissions, denied exemptions, and other relevant business details that have resulted in tax underpayments.
5. Appeal to the auditor: The business can dispute the audit findings and assessment by providing additional documentation and explanations. The goal is to obtain relief directly from the auditor by justifying the treatment under the tax law.
6. Notice and demand: If the audit results are unchanged after the appeal, the Minnesota Department of Revenue issues a notice demanding payment of the outstanding tax plus accrued interest and penalties.
7. Formal appeal: As a last resort, the business can file a tax petition with the Minnesota Tax Court to formally appeal the assessment within 60 days of the notice date. Further appeals to the Minnesota Supreme Court are possible.

What to expect during the audit

The auditor will review your Minnesota sales tax returns, claimed exemptions, documentation of nontaxable transactions, resale certificates, and other records to verify compliance with reporting requirements.

Appealing the results of an audit

You should first contest unfavorable audit findings 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.

Getting help with Minnesota sales tax

For sales tax filing, appeals, and registration in Minnesota, contact:

• Authority: Minnesota Department of Revenue
• Phone: (651) 296-6181
• Website: https://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? Schedule a demo with Numeral to see how we can help.

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