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January 16, 2024
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The Minnesota sales tax is a tax imposed on the retail sale, lease, rental, or license to use tangible personal property and various services in Minnesota. As an ecommerce business owner selling taxable goods or services in Minnesota, you are responsible for registering, collecting, reporting, and remitting Minnesota sales tax.
This guide provides an overview of Minnesota sales tax requirements, rates, and regulations to help your business stay compliant.
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%.
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:
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.
Minnesota is a destination-based sales tax state. Sales tax is based on where the product or service is delivered.
Yes, Minnesota is a full member state of the Streamlined Sales and Use Tax Agreement (SSUTA).
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.
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.
Exemptions include food, clothing, prescription drugs, medical devices, farm machinery and equipment, manufacturing materials, textbooks, and more. You can find the complete list here.
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.
Clothing is exempt from Minnesota sales tax. Exceptions include accessories, unique protective clothing, and fur clothing.
Yes, digital products like digital books, music, movies, etc., are 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.
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.
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.
Any food prepared by the seller or sold with eating utensils provided by the seller is taxable. For more information, see Prepared Food.
Catering services are taxable, including:
Charges for a personal chef to prepare food, when the customer provides the food and food ingredients, is not taxable.
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.
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%.
Let’s look at the steps to collect sales tax in Minnesota now.
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:
There are also specific rules that can create nexus and sales tax obligations, including:
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.
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:
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.
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.
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.
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.
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.
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.
Yes, you must file a $0 sales tax return even if you did not make taxable sales or collect sales tax for the period.
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.
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.
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.
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.
The typical audit process in Minnesota involves the following key steps:
The auditor will review your Minnesota sales tax returns, exemptions claimed, nontaxable transaction documentation, resale certificates, and other records to verify reporting compliance.
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.
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.
Remote sellers must register if they:
There are also registration requirements for attending trade shows, owning property, or storing inventory in the state.
It is free to register and obtain a Minnesota Sales Tax Account with the Department of Revenue.
For sales tax filing, appeals, and registration in Minnesota, contact:
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.
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%.
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:
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.
Minnesota is a destination-based sales tax state. Sales tax is based on where the product or service is delivered.
Yes, Minnesota is a full member state of the Streamlined Sales and Use Tax Agreement (SSUTA).
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.
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.
Exemptions include food, clothing, prescription drugs, medical devices, farm machinery and equipment, manufacturing materials, textbooks, and more. You can find the complete list here.
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.
Clothing is exempt from Minnesota sales tax. Exceptions include accessories, unique protective clothing, and fur clothing.
Yes, digital products like digital books, music, movies, etc., are 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.
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.
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.
Any food prepared by the seller or sold with eating utensils provided by the seller is taxable. For more information, see Prepared Food.
Catering services are taxable, including:
Charges for a personal chef to prepare food, when the customer provides the food and food ingredients, is not taxable.
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.
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%.
Let’s look at the steps to collect sales tax in Minnesota now.
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:
There are also specific rules that can create nexus and sales tax obligations, including:
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.
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:
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.
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.
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.
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.
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.
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.
Yes, you must file a $0 sales tax return even if you did not make taxable sales or collect sales tax for the period.
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.
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.
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.
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.
The typical audit process in Minnesota involves the following key steps:
The auditor will review your Minnesota sales tax returns, exemptions claimed, nontaxable transaction documentation, resale certificates, and other records to verify reporting compliance.
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.
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.
Remote sellers must register if they:
There are also registration requirements for attending trade shows, owning property, or storing inventory in the state.
It is free to register and obtain a Minnesota Sales Tax Account with the Department of Revenue.
For sales tax filing, appeals, and registration in Minnesota, contact:
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.
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Deb Mukherjee
Deb is the head of marketing at Numeral. He has worked with the likes of Shopify and Wonderment and has helped countless ecommerce stores scale through seamlessly. With a background in finance, he often finds himself advising stores on sales tax and good financial systems.
With Numeral, you spend five minutes or less every month on sales tax. We’re the white-glove service you are looking for that’s run by ecommerce operators and CPAs.
No long-term contract. No credit card required.
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