fbpx

Minnesota Sales Tax 2022 for Businesses: A Complete Guide

“The Minnesota Sales Tax for businesses is 6.875%.”

How Much is the Minnesota Sales Tax for Businesses?

Minnesota’s state sales tax rate is 6.875 percent. Depending on the local government, the total tax rate could be as high as 8.375 percent. Municipalities, counties, school districts, transportation districts, and SPDs (special purpose districts) are all permitted to levy a sales tax in Minnesota. Managing and maintaining Minnesota’s sales tax is difficult because it has so many jurisdictions.

The sales tax does not apply to food, clothing, prescriptions, or non-prescription pharmaceuticals. Also, the sales tax can reach 9.53 percent in some places.

Minnesota Sales Tax

Threshold Limit

6.875%

$100,000 economic sales threshold and 200 transactions threshold.

So are you a business owner in Minnesota? This blog is a must-read for you. Here, we will see when to collect Minnesota Sales Tax, how to file, and a lot more. Let’s begin.  

Do You Need to Collect Minnesota Sales Tax?

Alan Chen

Free 30-Min Strategy Session

By the end of this Strategy Session, you will have a clear understanding of the next steps you can take for your business to take advantage of the tax deductions you are missing out on.

Sales tax in Minnesota levies on the sale of tangible products and some services. The vendor is responsible for collecting the tax and remitting it to the appropriate state tax authorities. As a result, the seller serves as a de facto collector.

Start by completing the following three questions to see if you need to collect sales tax in Minnes

  • Do you have a Minnesota nexus?
  • Are you selling Minnesota residents taxable goods or services?
  • Do your customers have to pay sales tax?

If you answered yes to all three questions, you must register with the state tax authorities, collect the correct amount of sales tax per transaction, file returns, and remit the money to the state. But the question arises is what you are selling taxable? Let’s see.

Is What You Are Selling Eligible for Minnesota Sales Tax?

In Minnesota, services are often not taxed. In contrast, if your service involves manufacturing or creating products, you may be liable for product sales taxes.

With a few exceptions, retail sales of tangible goods are taxable in Minnesota. Clothing, infant items, and over-the-counter medications are among the exceptions. 

Therefore, if your business is taxable under Minnesota Sales Tax, you must grab the knowledge about the tax collection rate.

Minnesota Sales Tax Collection

Minnesota is a state with a destination-based sales tax. So, if you live in Minnesota, collecting sales tax can be difficult since you must collect sales tax at the rate applicable to your buyer’s ship-to address.

If you’re based in another state but have a sales tax nexus in Minnesota, collect sales tax at the rate of your buyer’s ship-to address.

Which Sales Tax Rate to Collect?

In some states, the seller’s location and the sale’s origin (origin-based sourcing) determine the sales tax rates, laws, and restrictions. Others charge sales tax dependent on the buyer’s location and the sale’s destination (destination-based sourcing).

Minnesota is a travel-oriented state. This means that for all taxable purchases, you must apply the sales tax rate set by the ship-to address. The following table shows different sales tax rates for different categories.

Sales Tax

Percentage / Amount

State Sales Tax Rate

6.875%

Average Local Sales Tax Rate

0.61%

Combined State & Average Local Sales Tax Rate

7.49%

Sales & Local General Sales Tax Collection per Capita

$1152

State Cigarette Tax Rate (per 20 pack)

$3.703

Note-  Minnesota law exempts some commodities from sales tax. Most supermarket items, feminine hygiene products, and medical supplies are examples.

How to File Minnesota Sales Tax?

To file Minnesota sales tax, you need to follow three simple steps:

  • Calculate the taxable amount
  • File the sales tax return
  • Make a payment 

Tax Filing Frequency

When you apply for a sales tax permit, the state assigns you a filing frequency. In most states, the amount of sales tax you collect from state buyers determines the frequency with which you file sales tax.

You must file and remit sales tax in Minnesota on a monthly, quarterly, or annual basis.

The 20th of the month after the reporting period is nearly always the deadline for Minnesota sales tax returns. (The yearly sales tax return, which is due February 5th of the year following the taxable period, is an exception.) If the reporting deadline falls on a weekend or holiday, the sales tax is usually due the following business day.

Therefore, this is how you can file Minnesota Sales Tax. but what if you fail to file the tax before the due date? Obviously, it is subject to some penalties and interest.

What if You Fail To File Before the Due Date?

If you file your Minnesota sales tax return late, a late filing penalty will be chargeable as well as interest on any unpaid tax.

The Minnesota DOR may grant you an extension if you missed a Minnesota sales tax filing deadline due to circumstances beyond your control (e.g., weather, accident). You may, however, need to present evidence to back up your allegation.

Penalties and Interest

Hopefully, you won’t have to worry about this section because you’re already filing and remitting Minnesota sales tax correctly and on time. However, mistakes do occur in the actual world.

If you miss a deadline for filing your sales tax return, remember that “better late than never” and file your return as soon as possible. Failure to submit returns and remit collected tax on time may result in penalties and interest charges; the longer you delay filing, the higher the penalty and interest will be.

If you’re thinking about buying a firm, it’s a good idea to contact the Minnesota Department of Revenue and ask about the current status of the deal. You’ll be responsible for all outstanding Minnesota sales and use tax liabilities once you’ve purchased the firm.

Need Assistance With Minnesota Sales Tax?

Team Freecashflow.io specializes in assisting online business owners to solve tax and accounting-related issues. Warner Brothers, EY, and Paramount Pictures are just a few of the multibillion-dollar firms where our colleagues have worked. You can count on us for tax and accounting assistance. Feel free to contact us!

Share on twitter
Share on linkedin
Share on email

Free E-book for E-Commerce Entrepreneurs

9 Most Crucial eCOM Tax Deducations The IRS Doesn’t Want You to Know
Share on facebook
Share on twitter
Share on linkedin

Explore More

Blog

Accounting for Cryptocurrency: A Complete Guide

Cryptocurrency is nowadays becoming a robust financial backbone for businesses. This digital, decentralized financial alternative to traditional centralized finance leverages the potential of financial technology

Boost Your E-Commerce Business Now

drop us a line and keep in touch
Alan Chen

Schedule Your Call with Alan!

Hate working with accountants that don’t understand your online business?

By the end of this Strategy Session, you will have a clear understanding of the next steps you can take.

 This Call Is Completely FREE.

Take Less Than 60 Seconds To Share What You Love

Share on facebook
Facebook
Share on twitter
Twitter
Share on reddit
Reddit
Share on linkedin
LinkedIn