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Learn the fundamentals of sales tax
Do you need to collect sales tax in Minnesota?
You’ll need to collect sales tax in Minnesota if you have nexus there. There are two ways that sellers can be tied to a state when it comes to nexus: physical or economic. Physical nexus means having enough tangible presence or activity in a state to merit paying sales tax in that state. Economic nexus means passing a states’ economic threshold for total revenue or the number of transactions in that state.
Do you have physical nexus in Minnesota?
Minnesota considers a seller to have physical nexus if you have any of the following in the state:
- have an office; distribution, sales, or sample room location; warehouse or other place of business in Minnesota, either directly or by a subsidiary
- have a representative, agent, salesperson, canvasser, or solicitor in Minnesota, on either a permanent or temporary basis, who operates under the authority of the retailer or its subsidiary for any purpose, such as repairing, selling, delivering, installing, soliciting orders for the retailer’s goods or services, or leasing tangible items in Minnesota;
- deliver items into Minnesota in their own vehicles;
- provide taxable services in Minnesota
- have entered into an agreement with a solicitor for the referral of Minnesota customers for a commission and your gross receipts over 12 months is at least $10,000
You can read more about what Minnesota’s state law has to say about sales tax nexus here.
Do you have economic nexus in Minnesota?
Effective October 1, 2019, Minnesota considers businesses who make over $100,000 in gross revenue in the last 12 months or makes sales into Minnesota in more than 200 separate transactions in the previous 12 months to have economic nexus. This means the state considers these vendors obligated to collect sales tax from buyers in the state. You can read Minnesota’s economic nexus guidance for businesses here.
Is what you’re selling taxable?
Services in Minnesota are generally not taxable. However – if the service you provide includes creating or manufacturing a product, you may have to deal with the sales tax on products.
Retail sales of tangible products are taxable in Minnesota, with a few exceptions. These exceptions include things like clothing, baby products and over-the-counter drugs. You can review what is and isn’t taxable in Minnesota in their online Sales and Use Tax Guide.
Is SaaS taxable in Minnesota?
SaaS is non-taxable in Minnesota. (Source)
How to get a sales tax permit in Minnesota
There are a few options to get a sales tax permit in Minnesota:
- You may register for a Minnesota tax ID number online at Minnesota e-Services.
- You may register with a paper form here.
- You may register by telephone by calling 651-282-5225 or 1-800-657- 3605.
You need this information to register for a sales tax permit in Minnesota:
- Your Federal employer ID number (FEIN), if applicable
- Your legal name or sole-proprietor name and business address
- Your business name (DBA), if applicable
- Your North American Industry Classification System (NAICS) code.
- The names and Social Security numbers of the sole-proprietor, officers, partners or representatives
- The email address and name of a contact person
It’s free to apply for a sales tax permit in Minnesota. Other business registration fees may apply.
Collecting Sales Tax
Minnesota is a destination-based sales tax state. So if you live in Minnesota, collecting sales tax can be challenging as you will need to collect sales tax at the rate of your buyer’s ship to address.
You can look up your local sales tax rate with TaxJar’s Sales Tax Calculator. You can also consult the Minnesota Department of Revenue’s sales tax rate map of Minnesota for a visual guide to calculating sales tax in cities like Duluth and Minneapolis.
If you are based in another state but have sales tax nexus in Minnesota, do the same thing: collect sales tax at the rate of your buyer’s ship to address.
Should you collect sales tax on shipping charges in Minnesota?
The state of Minnesota wants you to charge sales tax on shipping charges to your customers if the items you shipped are taxable. If the items you shipped are not taxable, then you also don’t have to charge sales tax on shipping charges.
Read a full explanation of sales tax on shipping in Minnesota here.
When are Returns Due?
When you file and pay Minnesota sales tax depends on two things: your assigned filing frequency and your state’s due dates.
How often will you file sales tax returns in Minnesota?
States assign you a filing frequency when you register for your sales tax permit. In most states, how often you file sales tax is based on the amount of sales tax you collect from buyers in the state.
In Minnesota, you will be required to file and remit sales tax either monthly, quarterly, or annually.
Minnesota sales tax returns are almost always due the 20th of the month following the reporting period. (The exception is the annual sales tax return, which is due February 5th the year following the taxable period.) If the filing due date falls on a weekend or holiday, sales tax is generally due the next business day.
Filing Sales Tax
When it comes time to file sales tax in Minnesota you must do three things:
- Calculate how much sales tax you owe
- File a sales tax return
- Make a payment
How to Calculate How Much Sales Tax You Owe in Minnesota
Calculating how much sales tax you should remit to the state of Minnesota is easy with TaxJar’s Minnesota sales tax report.
All you do is connect the channels through which you sell – including Amazon, eBay, Shopify, Square and more – and we’ll calculate exactly how much sales tax you collected. All the information you need to file your Minnesota sales tax return will be waiting for you in TaxJar. All you have to do is login.
How to File and Pay Sales Tax in Minnesota
You have three options for filing and paying your Minnesota sales tax:
- File online – File online at the Minnesota Department of Revenue. You can remit your payment through their online system. If you have a sales and use tax liability of $10,000 or more in the state’s fiscal year (July 1 June 30), you must pay all taxes electronically beginning with the next calendar year.
- File by phone – Call 1-800- 570-3329 to file by touch-tone phone. If you have a sales and use tax liability of $10,000 or more in the state’s fiscal year (July 1 – June 30), you must pay all taxes electronically beginning with the next calendar year.
- AutoFile – Let TaxJar file your sales tax for you. We take care of the payments, too. You’ll never have to worry about spreadsheets, calculations or filling out complex sales tax returns.