Quick Highlights on Minnesota Sales Tax
| Detail | Value |
|---|---|
| State Sales Tax Rate Range | 6.875–8.875% |
| Base State Sales Tax Rate | 6.875% |
| Local Rate Range | 0–2% |
| Economic Nexus Sales Threshold | $100,000 |
| Transactional Threshold | 200 transactions (OR with sales threshold) |
| Reference Period | Preceding 12 calendar months |
| Registration Deadline | Next transaction after threshold is crossed |
| Revenue Authority | Minnesota Department of Revenue |
| Online Filing Portal | e-Services |
As a business, do I need to collect sales tax in Minnesota?
Businesses are required to collect sales tax in Minnesota if they have a sales tax nexus in the state. This includes having a physical presence or reaching a specific sales level, which establishes an economic nexus. This is why understanding Minnesota state sales tax obligations is crucial for compliance.
Do I have a physical nexus in Minnesota?
A physical nexus in the state of Minnesota is established if your business has a physical presence in the state, like an office, warehouse, or store. Even temporary physical presence, like participating in trade shows or craft fairs, can create a nexus.
In Minnesota, physical nexus is triggered by employees or contractors in any role — including back-office, administrative, and support functions, not just customer-facing roles.
How do I know if I have an economic nexus in Minnesota?
An economic nexus in Minnesota is determined by your sales volume. If your enterprise meets the threshold, you must register for a Minnesota sales tax permit, collect tax on sales shipped to Minnesota, and remit that tax to Minnesota Department of Revenue.
In Minnesota, economic nexus is established if your sales in the state exceed $100,000 OR the number of transactions exceeds 200, based on Preceding 12 calendar months.
Marketplace sales (e.g., Amazon, eBay) are included when calculating whether you've exceeded the Minnesota economic nexus threshold.
Sales made for resale are excluded from the nexus threshold calculation for Minnesota.
Non-taxable sales are included in the nexus threshold calculation for Minnesota.
Once you cross the threshold, you must register by Next transaction after threshold is crossed.
Which goods are taxable in Minnesota?
In Minnesota, sales tax applies to:
- Retail sales of tangible personal property
- Specified digital products (digital audio, audiovisual, and books)
- Prewritten computer software
- Certain enumerated services including laundry, parking, telecommunications, and building maintenance
- Prepared food and candy
- Clothing (furs and accessories are taxable; most general clothing is exempt)
Minnesota taxes fewer services than some states but has a broad tangible property tax base.
What items are exempt from sales tax in Minnesota?
Minnesota exempts the following from sales tax:
- Most clothing and footwear (Minnesota is one of few states that exempts clothing)
- Food and food ingredients for home consumption (unprepared groceries)
- Prescription drugs and medical devices
- Capital equipment used in manufacturing
- Agricultural production inputs
- Sales to government entities and qualifying nonprofits
Is SaaS taxable in Minnesota?
Cloud-based SaaS accessed via the internet without software transfer is not taxable in Minnesota. Prewritten software delivered or downloaded locally is taxable. Custom software is exempt. SaaS is currently not taxable in Minnesota. However, sales tax laws change frequently — always verify the latest guidance with your tax advisor.
How can a business get a sales tax permit in Minnesota?
To obtain a sales tax permit in Minnesota, businesses need to register with the Minnesota Department of Revenue. Registration can be completed online through the e-Services.
You will need to provide detailed information about your business, including business type, ownership details, and the nature of your business activities.
When should a business file sales tax in Minnesota?
Sales tax returns in Minnesota are generally due on the 20th day of the following month for the previous period. Based on your annual tax liability, you may qualify for a less frequent filing schedule:
- Quarterly filing: Available if your annual tax liability is below $1,500 (returns due 20th day of the month following the end of the quarter)
- Annual filing: Available if your annual tax liability is below $500 (returns due February 5th of the following year)
Note: Minnesota charges a $0.50 retail delivery fee on deliveries totaling $100 or more. This fee applies in addition to sales tax and must be separately collected and remitted.
You can file your Minnesota sales tax return through the e-Services at https://www.mndor.state.mn.us/tp/eservices/.
Does Minnesota offer a timely filing discount?
Minnesota does not offer a timely filing discount or vendor compensation credit.
What are the penalties for late filing in Minnesota?
Minnesota imposes the following penalties for non-compliance:
- Late filing penalty: 5% of the tax due per month (or part of a month), up to a maximum of 25%
- Late payment penalty: 5% of the unpaid tax
- Interest: Accrues on unpaid tax from the due date at the statutory rate
- Fraud penalty: 50% of the underpayment for fraudulent returns
Penalties may be waived for reasonable cause upon written request.
Is shipping taxable in Minnesota?
In Minnesota, the taxability of shipping and handling depends on how the charge is presented. Generally: • Taxable: If the shipping charges are mandatory or included in the price of a taxable item. • Non-Taxable: If shipping is separately stated on the invoice and provided as an optional service to the customer. Note: If you ship a mix of taxable and non-taxable goods in Minnesota, the shipping charge must usually be prorated to determine the taxable portion. Confirm current rules with Minnesota Department of Revenue at https://www.revenue.state.mn.us/.
Does Minnesota have a Remote Seller program?
Minnesota requires remote sellers who exceed the economic nexus threshold to register, collect, and remit sales tax using standard state rates.