Minnesota — Sales & Use Tax

Minnesota imposes a combined state sales and use tax of 6.875% on retail sales of tangible personal property and certain enumerated services made in or delivered to Minnesota. The tax consists of two components: a base rate of 6.5% and an additional constitutionally required rate of 0.375% that expires July 1, 2034.

Source: Minn. Stat. § 297A.62, subd. 1 Source: Minn. Stat. § 297A.62, subd. 1a

## What transactions are taxable

A "retail sale" subject to tax means (1) any sale, lease, or rental of tangible personal property for any purpose other than resale, sublease, or subrent in the normal course of business, and (2) any sale of an enumerated service for any purpose other than resale.

Source: Minn. Stat. § 297A.61, subd. 4

Tangible personal property includes physical goods that can be seen, weighed, measured, felt, or touched and expressly includes electricity, water, gas, steam, and prewritten computer software (whether delivered electronically or otherwise).

Source: Minn. Stat. § 297A.61, subd. 10

Taxable services are specifically enumerated under statute and include, among others: (1) admission to places of amusement, recreational areas, or athletic events; (2) furnishing parking or storage of motor vehicles in a parking lot or ramp; (3) telecommunications services; (4) detective, security, and armored car services; and (5) lawn care and certain property maintenance services. Services not expressly listed are not taxable.

Source: Minn. Stat. § 297A.61, subd. 3(g)

## Complementary use tax

Minnesota imposes a complementary use tax at the same 6.875% rate on the storage, use, distribution, or consumption of tangible personal property or taxable services in Minnesota when no sales tax was paid at the time of purchase. The use tax typically applies when a Minnesota purchaser buys taxable goods or services from an out-of-state seller that does not collect Minnesota sales tax.

Source: Minn. Stat. § 297A.63 Source: Minnesota Department of Revenue, Sales and Use Tax

## Local sales taxes

Sales tax in Minnesota is imposed at both state and local levels. Many political subdivisions impose additional local general sales taxes and special local taxes on specific items such as lodging, restaurant meals, liquor, admissions, and entertainment. The combined state and local rates as of July 2026 range from 6.875% (state rate only) to as high as 9.875% in certain jurisdictions, including St. Paul. Effective July 1, 2026, Meeker County imposes a new 0.5% transit sales and use tax, increasing the total local tax burden for transactions in that county. The Minnesota Department of Revenue provides a regularly updated Local Sales and Use Tax Guide and a Local Sales and Use Tax Chart (current as of July 2026) enumerating all local general and special rates and their effective dates.

Source: Minn. Stat. § 297A.99 Source: Minnesota Department of Revenue, Local Sales and Use Tax Guide Source: Minnesota Department of Revenue, Local Sales and Use Tax Chart – Effective 7/1/2026

The Minnesota Department of Revenue administers both state and local general sales taxes centrally through a single permit and filing system; sellers file one return that covers all applicable jurisdictions.

Source: Minnesota Department of Revenue, Taxes and Rates

Remote sellers without a physical presence in Minnesota must register and collect sales tax if, during the prior 12-month period, they make more than $100,000 in retail sales to Minnesota destinations OR conduct 200 or more separate retail sales to Minnesota destinations. Either threshold triggers the collection obligation. Sellers must register and begin collecting tax by the first day of the calendar month occurring no later than 60 days after exceeding either threshold.

Source: Minn. Stat. § 297A.66, subd. 1(c) Source: Minnesota Department of Revenue, Sales Tax FAQs for Remote Sellers

Marketplace provider collection and liability — current rule as of July 2024

Minnesota imposes a sales and use tax collection obligation on marketplace providers facilitating taxable sales into the state. As of June 30, 2024, the Legislature amended Minn. Stat. § 297A.66 to add a new Subdivision 3a and repeal portions of prior liability relief language. This update substantially narrows the scope of relief for marketplace providers.

Key statutory provisions after the 2024 amendment:

• The marketplace provider remains the deemed retailer for all facilitated sales and is primarily liable for collecting and remitting sales and use tax under Minn. Stat. § 297A.66, subd. 3(a).
• If the marketplace provider fails to collect tax due to reliance on information provided by a marketplace seller, the provider is relieved from liability only if the noncollection resulted from incorrect information supplied by the marketplace seller (not merely incomplete or insufficient information). This change took effect June 30, 2024, and is codified at Minn. Stat. § 297A.66, subd. 3a. Broader relief for "incorrect or insufficient" information is no longer available. The provider must prove the error was caused by incorrect information to shift liability.
• If the provider and seller are related persons (as defined in subdivision 4(b)), no such relief is available—the provider is liable.
• Liability may also shift by written agreement, where the seller has registered and both parties agree in writing that the seller will collect and remit tax (Minn. Stat. § 297A.66, subd. 2(b)).

Voluntary Disclosure Any party with uncollected and unpaid tax—whether provider or seller, depending on liability—may seek relief under Minnesota’s Voluntary Disclosure Program. This allows for anonymous application, limits on look-back, penalty waiver (except interest), and resolution via a voluntary disclosure agreement, provided neither party is under audit or contact.

Summary of material 2024 change:

• The prior language allowing relief for "incorrect or insufficient information" has been repealed. Relief is now much more limited and applies only to "incorrect information" due to the new Subd. 3a effective June 30, 2024.

Source: Minn. Stat. § 297A.66, subds. 2, 3, 3a Source: Minnesota Department of Revenue, Voluntary Disclosure Program

Not yet human confirmed. Major legislative update effective for tax periods beginning after June 30, 2024.

Sales of tangible personal property for resale in the normal course of business are exempt from Minnesota sales tax, provided the seller obtains a fully completed exemption certificate from the purchaser at the time of sale or within 90 days after the sale. The certificate may be a blanket certificate for continuing future purchases. Sellers must retain exemption certificates and, upon request by the Commissioner, produce them within 120 days; failure to do so creates a presumption that the claimed exemption is disallowed, though the seller may rebut this by showing reasonable cause or by providing alternative proof of the exempt nature of the sale.

Drop shipment transactions and out-of-state resale certificates: Minnesota law expressly addresses drop shipment transactions involving a supplier (which may be out-of-state), a Minnesota customer, and a vendor or reseller who never takes physical possession of the goods. Under Minn. Stat. § 297A.665, subd. 3, a supplier may accept an exemption certificate from its customer or reseller for resale purposes—even if that customer or reseller is not registered to collect or remit Minnesota sales and use tax. If a Minnesota tax ID is unavailable, the out-of-state registration number or federal EIN may be entered instead. Minnesota Form ST3 or an equivalent exemption certificate—such as the multistate Streamlined Sales and Use Tax Agreement (SSUTA) form—can be accepted as proof of exemption, provided it is completed in good faith.

Responsibility for tax collection in drop shipment scenarios:

• If the supplier or vendor is required (or voluntarily registered) to collect Minnesota sales tax and receives a valid resale exemption certificate, no sales tax is collected on the transaction.
• If the resale certificate is not furnished, the supplier must collect and remit Minnesota sales tax to the purchaser.
• If neither the supplier nor the out-of-state vendor is required to collect the tax, liability for use tax passes to the Minnesota end customer, who must self-assess and pay use tax directly.

Documentation required: Suppliers or vendors must obtain and retain a properly executed exemption certificate (Form ST3 or accepted equivalent) for all sales accepted as exempt for resale, including drop shipments. Failure to do so may result in liability for uncollected tax.

Source: Minn. Stat. § 297A.61, subd. 4(a)(1) Source: Minn. Stat. § 297A.665(b), (subd. 3) Source: Minn. Stat. § 297A.72 Source: Minnesota DOR Fact Sheet 110 (Jan. 2023)

Minnesota determines the filing frequency for sales and use tax based on a retailer’s average monthly tax liability, including both state and local taxes administered by the Commissioner of Revenue.

Monthly filing (default) Most retailers must file monthly, with returns and payments due by the 20th day of the month following the close of the reporting period. This is the default filing status unless the retailer qualifies for and is granted quarterly or annual filing authorization.

Quarterly filing authorization A retailer may request authorization to file and pay sales and use taxes quarterly if:

• The retailer’s average sales and use tax liability is $500 or less per month for any quarter of a calendar year, and
• The retailer has substantially complied with the tax laws during the preceding four quarters.

Authorization remains valid as long as each quarterly return shows tax liability of less than $1,500 per quarter and the compliance standard is maintained. Quarterly returns are due by the 20th day of the month following the close of each calendar quarter (April 20, July 20, October 20, January 20).

Annual filing authorization A retailer may request annual filing if:

• The average monthly sales and use tax liability is $100 or less during a calendar year, and
• The retailer maintains substantial compliance with tax laws.

If granted, the annual return remains permitted as long as the tax liability is less than $1,200 per year and compliance continues. The annual sales tax return for businesses is due by February 5 following the close of the calendar year. (Individual annual use tax filers have a due date of April 15 per Minn. Stat. § 289A.11.)

Commissioner’s discretion The Commissioner has discretion to grant quarterly or annual authorization if projected liabilities are below the threshold limits. These approvals are subject to the same dollar limits and compliance requirements.

Electronic filing and payment All sales and use tax returns must be filed electronically using the Minnesota Department of Revenue’s e-Services system. Businesses with prior year liability of $10,000 or more must pay electronically.

Source: Minn. Stat. § 289A.18, subds. 2–3, 5 Source: Minnesota Department of Revenue, Filing Returns and Recordkeeping

Minnesota exempts clothing and footwear from sales and use tax without regard to price. "Clothing" means all human wearing apparel suitable for general use. Unlike Massachusetts, New York, or other states with dollar thresholds, Minnesota's exemption applies to clothing items at any price point, making it one of the broadest clothing exemptions in the United States.

What qualifies as exempt clothing

Exempt clothing includes everyday apparel suitable for general use, regardless of whether it is actually worn for work, recreation, or daily activities. The statute explicitly includes—among many other items—aprons (household and shop), athletic supporters, baby receiving blankets, bathing suits and caps, belts and suspenders, boots, coats and jackets, costumes, disposable diapers (child and adult), ear muffs, footlets, formal wear, garters and garter belts, girdles, gloves and mittens for general use, hats and caps, hosiery, insoles for shoes, lab coats, neckties, overshoes, pantyhose, rainwear, rubber pants, sandals, scarves, shoes and shoe laces, slippers, sneakers, steel-toed shoes, underwear, uniforms (athletic and nonathletic), and work clothes.

The critical test is whether the item is "suitable for general use." An item qualifies even if it has protective qualities or is designed for a particular profession, so long as a person could reasonably wear it outside that specific context. For example, flame-resistant work shirts, high-visibility reflective jackets, hospital scrubs, chef's whites, coveralls, and general work uniforms all qualify as exempt clothing because they can be worn for everyday purposes. Steel-toed shoes are expressly included in the statute's enumeration of exempt clothing.

Costumes are exempt clothing. However, costume masks, patches, and emblems sold separately from the costume are taxable accessories.

Clothing accessories and equipment — taxable

Clothing accessories or equipment are not exempt and remain fully taxable. "Clothing accessories or equipment" means incidental items worn on the person or in conjunction with clothing. Taxable accessories include, but are not limited to:

• Briefcases
• Cosmetics
• Hair notions (barrettes, hair bows, hairnets)
• Handbags
• Handkerchiefs (decorative; a scarf worn for warmth is exempt clothing)
• Jewelry
• Nonprescription sunglasses
• Umbrellas
• Wallets
• Watches
• Wigs and hairpieces

Sports or recreational equipment — taxable

Sports or recreational equipment is taxable. "Sports or recreational equipment" means items designed for human use and worn in conjunction with an athletic or recreational activity that are not suitable for general use. Taxable sports and recreational equipment includes, but is not limited to:

• Ballet and tap shoes
• Cleated or spiked athletic shoes
• Ski boots
• Roller skates and ice skates
• Gloves designed for a specific sport (baseball, bowling, boxing, hockey, golf gloves)
• Goggles
• Hand and elbow guards
• Life preservers and vests
• Mouth guards
• Shin guards
• Shoulder pads
• Wetsuits and waders

Standard sneakers remain exempt because they work for everyday wear. The dividing line is whether the item is built for a single sport or recreational activity; once a shoe is cleated, spiked, or otherwise designed exclusively for one activity, it is taxable sports equipment rather than exempt clothing.

Protective equipment — taxable

Protective equipment designed to shield the wearer from injury or disease and not suitable for general use is taxable. Taxable protective equipment includes helmets, safety goggles, face shields, hard hats, and similar items. Note the distinction: clothing that has protective qualities (such as flame-resistant shirts or steel-toed shoes enumerated in the statute) does not become taxable protective equipment if the item is suitable for general use. The exemption turns on whether the item can reasonably be worn as part of everyday apparel, not whether it happens to protect the wearer.

Fur clothing — taxable

Fur clothing is taxable. "Fur clothing" means human wearing apparel that is required to be labeled as a fur product under federal law and the value of the fur is more than three times the value of the next most valuable component. "Fur" means any animal skin with the hair, fleece, or fur fibers attached; it does not include leather, suede, or other animal skins where the fur fiber was completely removed in the processing.

Sewing materials

Sewing materials that are typically incorporated into the construction of clothing—fabric, thread, zippers, interfacing, buttons, trim, and similar items—are exempt from sales tax regardless of whether they are actually used for making clothing. This exemption is found in Minn. Stat. § 297A.67, subd. 27. Sewing equipment (sewing machines, scissors, needles) is taxable.

Services performed on clothing

Some services performed on clothing are taxable. Alteration services are taxable when separately stated on the customer invoice; if the alteration charge is included in the clothing sales price without separate statement, no sales tax is due on the entire transaction. Laundry, dry cleaning, pressing, dyeing, and shoe repair services are taxable services under Minn. Stat. § 297A.61, subd. 3(g).

Effective date and legislative history

Minnesota's clothing exemption was enacted as part of the state's conformity with the Streamlined Sales and Use Tax Agreement in 2000 (2000 Minn. Laws ch. 418, art. 1, § 11) and became effective with the comprehensive recodification of Minnesota's sales tax statutes. The exemption has remained in place without a sunset provision or price cap.

Source: Minn. Stat. § 297A.67, subd. 8 Source: Minn. Stat. § 297A.61, subd. 46 (fur clothing definition) Source: Minnesota Department of Revenue, Clothing Sales Source: Minnesota Department of Revenue, Sales Tax Fact Sheet 105 – Clothing

Minnesota exempts “food and food ingredients” from sales and use tax as defined in Minn. Stat. § 297A.67, subd. 2. This includes substances in liquid, concentrated, solid, frozen, dried, or dehydrated form, sold for human ingestion or chewing, and consumed for taste or nutritional value.

However, the exemption does not apply to certain categories explicitly carved out by statute. The following are not exempt and are taxable even if sold as food:

• Candy (does not contain flour and requires no refrigeration)
• Soft drinks (sweetened nonalcoholic beverages, except those with milk, milk substitutes, or >50% juice)
• Dietary supplements (must bear a “Supplement Facts” label per federal rules)
• Prepared food (foods sold heated, with utensils provided, or a combination of ingredients assembled by the seller, except for bakery items and foods merely sliced, repackaged, or pasteurized)
• Alcoholic beverages and tobacco (express exclusions)
• Food sold through vending machines

The terms “candy,” “soft drinks,” “dietary supplements,” and “prepared food” are further defined in Minn. Stat. § 297A.61, subds. 31–34. For example, a sweetened bottled tea is taxable as a soft drink, a flour-based granola bar is exempt (not “candy”), and a deli-made sandwich or prepared salad is taxable as “prepared food.”

The Minnesota Department of Revenue mirrors these statutory definitions in its rules: exempt “food and food ingredients” include, but are not limited to, common groceries such as milk, cheese, bread, vegetables, fruits, cereals, spices, and coffee. Items excluded above remain taxable even if sometimes sold in grocery aisles.

Source: Minn. Stat. § 297A.67, subd. 2 Source: Minn. Stat. § 297A.61, subds. 31–34 Source: Minn. R. 8130.4700, subp. 2

In Minnesota, prewritten (“canned”) computer software—regardless of how delivered (physical media, download, or load-and-leave)—is taxable as tangible personal property. Custom software, developed to a purchaser’s specifications, is exempt if the charges for customization are separately stated. Subscriptions to online-hosted software (SaaS) are not taxable. Specified digital products (digital audio works, digital audiovisual works, digital books), other digital products (e‑greeting cards, online games, digital codes), when transferred electronically, are taxable; informational or illustrative digital items (e.g., charts, digital photos, logos, designs) are exempt.

Why

• Prewritten software is taxable. Under Minn. Stat. § 297A.61, subd. 3(f), transfers of prewritten computer software—“whether delivered electronically, by load and leave, or otherwise”—are considered “sales and purchases,” making them taxable. “Tangible personal property” expressly includes prewritten computer software under subd. 10(a). The statutory definition of “prewritten computer software” in subd. 17 confirms that even modified prewritten software remains taxable unless modification charges are separately stated.
• Custom software exemption. The DOR’s official “Computer Software and Digital Products” guide specifies that custom software—created to meet a specific customer’s requirements—is not taxable, distinguishing it from canned software.
• SaaS is not taxable. The same DOR guide clearly states that subscriptions to online-hosted software are not taxable, nor are separately stated maintenance or upgrade charges.
• Specified and other digital products are taxable when transferred electronically. Minn. Stat. § 297A.61, subd. 3(l) and subds. 50–56 define taxable categories of digital products delivered electronically. The DOR’s “Digital Products” guide enumerates taxable items—digital audio works, audiovisual works, books, e‑greeting cards, games, digital codes—and exempt items like digital news access, charts, digital photos, logos, and designs.

Source: Minn. Stat. § 297A.61 Source: Minnesota Department of Revenue, Computer Software and Digital Products Source: Minnesota Department of Revenue, Digital Products

Not yet human confirmed.

Minnesota law generally requires the Department of Revenue to assess additional sales or use tax within 3½ years after the later of the tax return's due date or the actual date of filing. For claims of refund by taxpayers, the statute of limitations is also 3½ years from the due date (including any extension for timely filed returns), or within one year from an assessment—whichever is later.

Exceptions and extensions:

• There is no limitation period for assessment when a return was false, fraudulent, or not filed (Minn. Stat. § 297A.91, subd. 3).
• If more than 25% of sales or use tax is omitted from the return, the state may assess within 6½ years of the due date or filing (Minn. Stat. § 297A.91, subd. 4).
• The limitation periods for assessment may be extended by written agreement between the taxpayer and Commissioner (Minn. Stat. § 297A.91, subd. 7).
• During bankruptcy or court-ordered stays, the statute is suspended until 30 days after the stay ends or bankruptcy case closes (Minn. Stat. § 297A.91, subd. 8).

Why: These periods are established by statute to govern both assessments and refunds, to provide certainty in tax administration while allowing flexibility in cases of fraud, substantial underreporting, or bankruptcy.

Source support:

• Authority: Minnesota Statutes § 297A.91, subds. 1, 3, 4, 5, 7, 8 – establishes all limitations, exceptions, extension, and suspension rules.
• Classification: Direct statutory support for both DOR and taxpayer actions.

Caution / review status: Not yet human confirmed.

Source: Minn. Stat. § 297A.91

Minnesota imposes penalties and interest for sales and use tax violations. The principal rules are set forth in Minn. Stat. § 289A.60 (penalties), § 289A.55 (interest on underpayments), and § 289A.56 (interest on overpayments), with the annual interest rate established under § 270C.40 and § 270C.405.

Civil Penalties — Minn. Stat. § 289A.60

• Late filing or late payment: A penalty equal to 5% of the unpaid tax if a return is filed or payment is made after the due date. If the failure continues, an additional 5% is imposed after 30 days (10% total), and a further 5% is imposed after 60 days (15% total).
• Intentional disregard or negligence: A 10% penalty may be imposed for negligence or intentional disregard of law or rules, not due to fraud.
• Fraud intent to evade: A penalty of 50% of the tax or deficiency applies for fraudulent intent to evade tax.
• Use of false or improper exemption certificate: The greater of $100 or the tax not paid due to the certificate, if used to evade tax.
• Electronic payment violations: A 5% penalty applies for required tax payments not made electronically, once the taxpayer has been notified of the electronic payment requirement.
• Stacking rules: Generally, late penalties and additional negligence/fraud penalties may be stacked only as expressly permitted by the statute.

Source: Minn. Stat. § 289A.60

Interest on Underpayments and Late Payments — Minn. Stat. § 289A.55; § 270C.40

• Interest accrues on unpaid tax from the original due date until paid. Filing extensions do not stop interest accrual.
• The interest rate is set annually by the Commissioner based on the federal short-term rate, plus 3 percentage points, adjusted each January 1.
• The current and historical rates are published by the Department of Revenue.

Source: Minn. Stat. § 289A.55 Source: Minn. Stat. § 270C.40

Interest on Overpayments (Refunds) — Minn. Stat. § 289A.56; § 270C.405

• For timely, detailed refund claims, interest is allowed from the date of the tax payment to the date the refund is paid. If the claim lacks detail or is filed after the statute of limitations, interest begins to accrue from the date the claim is filed.
• The rate for refund interest matches the rate for underpayment interest under § 270C.405.

Source: Minn. Stat. § 289A.56 Source: Minn. Stat. § 270C.405

Abatement and Reasonable Cause

• The Commissioner may abate (waive) all or part of a penalty if failure to comply is due to reasonable cause and not willful neglect, upon written application with supporting facts. See Minn. Stat. § 289A.60, subd. 4.

Source: Minn. Stat. § 289A.60

Caution / review status: Not yet human confirmed — statute text controls penalty types and stacking, but practitioners should review current DOR-published interest rates and administrative abatement practices for precise application in a given year or case.

This section has been consolidated into the main 'Food and Food Ingredients Exemption—Scope, Definitions, and Specific Exceptions' section above. All key statutory definitions, exclusions, and taxability tests for groceries, prepared food, candy, soft drinks, dietary supplements, and vending-machine food are now fully addressed in that consolidated section. Please refer to the updated main coverage above for current law and detailed statutory citations.

No substantive content remains in this location; duplicate coverage removed as of 2026-07-01.

Source: See updated section above for full statutory and regulatory citations.

Minnesota’s sales and use tax applies distinctly to prewritten ("canned") computer software, digital products, and subscriptions to online-hosted software (SaaS). This consolidated section reflects both statutory law and authoritative Minnesota Department of Revenue (DOR) administrative guidance current as of July 1, 2026.

Prewritten (Canned) Software — Taxable (Statute-Controlled) Under Minn. Stat. § 297A.61, subds. 3(f), 10, and 17, the sale or license of prewritten computer software is taxable as tangible personal property, regardless of delivery method (physical media, electronic download, or otherwise). Custom-developed software is exempt if charges for customization are separately stated and the software is developed specifically for the purchaser. These rules are fully controlled by statute with no material administrative carve-outs.

Digital Products — Taxable, Unless Specifically Exempt (Statute and DOR Guidance) Specified digital products—including digital audio works, audiovisual works, and digital books—are taxable when transferred electronically under Minn. Stat. § 297A.61, subds. 3(l), 50–56. The DOR’s "Computer Software and Digital Products" publication and Fact Sheet 177 (Oct. 2025) provide additional interpretive examples of statutory categories. Typical taxable digital products include digital music, movies, streaming video, ebooks, and digital codes. Statutory and DOR guidance exempt items like digital news access, digital charts, certain digital photos, or designs.

SaaS (Online-Hosted Software) — Not Taxable by Official DOR Policy There is no specific provision in Minnesota statute or administrative rule expressly classifying SaaS (subscriptions to remotely hosted software without delivery of a software copy) as taxable or exempt. However, as of July 2026, the Minnesota Department of Revenue's official published guidance states that "subscriptions to use online-hosted software are not taxable." This position appears in the DOR’s “Computer Software and Digital Products” guide and is binding administrative policy for practitioners unless and until the law or guidance changes. Practitioners should be aware that this is policy-based—there is no direct statutory definition—and that future legislative or regulatory changes could alter the treatment. It is not appropriate to infer taxability or exemption for SaaS in contradiction to DOR's official published position, but practitioners should continue to monitor for future updates.

Summary Table (as of July 1, 2026):

• Prewritten software (any delivery): Taxable (Statute)
• Custom software (if separately stated): Exempt (Statute)
• Specified digital products (statutory categories): Taxable (Statute)
• Other digital goods (per DOR Fact Sheet): Taxable unless specifically exempted (Statute + DOR)
• SaaS/Online-hosted software: Not taxable per DOR published guidance (agency policy; not codified by statute)

Source: Minn. Stat. § 297A.61 Source: Minnesota Department of Revenue, Computer Software and Digital Products Source: Minnesota Department of Revenue, Computer Software and Digital Products Fact Sheet 177 (Oct. 2025)

Not yet human confirmed. Reflects published DOR policy and legal authority as of July 1, 2026.

Minnesota uses destination-based sourcing for sales and use tax purposes. The controlling statute is Minn. Stat. § 297A.668, which provides a specific hierarchy for determining the location (situs) of a sale for state and local tax purposes. These rules apply to sales of tangible personal property, taxable services, and digital goods, regardless of whether the seller is in-state, out-of-state, or selling remotely.

General rule (destination sourcing): Sales are sourced to the location where the purchaser receives the product, as determined by the delivery address or, if there is no delivery, by the purchaser’s address associated with the payment method. There is no distinction in the sourcing rules based on whether the seller is physically present in Minnesota or is a remote seller; all sellers must follow the same statutory hierarchy when collecting sales tax on sales to Minnesota customers.

Sourcing hierarchy (Minn. Stat. § 297A.668):

1. If the purchaser receives the product at the seller’s place of business, tax is sourced to that location.
2. If the product is not received at the seller’s place of business, tax is sourced to the delivery address specified by the purchaser (this covers most shipped or delivered sales).
3. If there is no delivery address, tax is sourced to the purchaser’s address as shown on the payment instrument or billing information.
4. If none of these apply, sourcing defaults to the address from which the item was shipped or electronically delivered.

Application to in-state and remote sellers: Minnesota law does not carve out special sourcing treatment for remote sellers or marketplace facilitators. The same hierarchy and destination-based rule apply. This reflects the state’s participation in the Streamlined Sales and Use Tax Agreement (SSUTA), intended to standardize sourcing rules and ensure equal treatment for all sellers, regardless of location.

Practical effect:

• For in-store pickup, tax is sourced (and the rate determined) by the store’s location. (See Minn. Stat. § 297A.668, subd. 2.)
• For shipped or delivered goods or digital products, tax is determined by the shipping or delivery address within Minnesota. (See Minn. Stat. § 297A.668, subd. 3–4.)
• Local sales taxes administered by the Department of Revenue are applied based on the delivery destination. The Minnesota Department of Revenue publishes a Local Sales and Use Tax Chart quarterly as an official administrative publication listing currently applicable local rates. (See Local Sales and Use Tax Chart – Effective July 2026.)

Authority and DOR guidance: Source: Minn. Stat. § 297A.668 Source: Minnesota Department of Revenue, Sales and Use Tax Source: Minnesota Department of Revenue, Local Sales and Use Tax Chart – Effective 7/1/2026

Not yet human confirmed. Interpretive summary, welded to statutory and DOR publication as of 2026-07-01.

Note: The Local Sales and Use Tax Rate Guide (Q2 2026) previously cited is now superseded and no longer accessible. The Local Sales and Use Tax Chart (as of July 2026) is provided by the DOR as a live, regularly updated administrative publication listing all current local rates.

Minnesota law provides several important sales and use tax exemptions for the manufacturing sector, chiefly for capital equipment and materials consumed in industrial production. The primary authorities are Minn. Stat. § 297A.68, subds. 2 and 5, as further described by the Minnesota Department of Revenue’s Fact Sheet 103 (Capital Equipment).

Capital Equipment Exemption (Minn. Stat. § 297A.68, subd. 5):

• Capital equipment is exempt from sales and use tax if it is used by the purchaser at least 50% of its operating time to manufacture, fabricate, mine, or refine tangible personal property to be sold at retail.
• “Capital equipment” includes machinery, equipment, and pollution control equipment integral to the manufacturing process, as well as qualifying material handling and storage devices at the production site.
• Both purchases and certain leases of capital equipment qualify.

Exclusion List (see Fact Sheet 103 & statute):

• Exemption does not apply to equipment used primarily for non-production purposes (including office equipment, vehicles used on public roads, furniture, building materials or fixtures becoming real property, or equipment used in general facility maintenance).
• Repair and replacement parts do not qualify as capital equipment but may qualify separately.

Materials Consumed in Industrial Production (Minn. Stat. § 297A.68, subd. 2):

• Materials that are essential to and used or consumed in industrial production and become part of a product to be sold (or are consumed/destroyed in production) are exempt. This covers items like chemicals, catalysts, lubricants, gases, or other materials consumed.
• Utilities are not covered by subd. 2; they have their own exemptions (subds. 4 and 12), not detailed here.

Documentation & Procedures:

• At point of purchase, a completed exemption certificate (Form ST3) must be provided to the seller.
• If tax was erroneously paid, a refund claim may be filed with the DOR within 3.5 years of purchase.
• Purchasers must retain records to substantiate use and exemption eligibility.

Practical Examples (Per DOR Fact Sheet 103):

• Included: Automated manufacturing robots, conveyor systems used exclusively on the production line, raw materials bins, pollution control devices located within production flow.
• Excluded: Forklifts used in both production and warehousing, HVAC systems for general building use, shelving for finished goods, safety equipment (unless integral to process), real property improvements, delivery vehicles.

Key statutory requirements:

• 50% or more operating time in qualified activities at a qualifying facility.
• Purpose of transforming, fabricating, or refining tangible property for sale.
• Strict construction: DOR and courts closely scrutinize mixed-use equipment and support strict recordkeeping for substantiation.

Source: Minn. Stat. § 297A.68, subd. 5 (Capital equipment exemption) Source: Minn. Stat. § 297A.68, subd. 2 (Materials consumed in industrial production) Source: Minnesota Department of Revenue, Capital Equipment Fact Sheet 103

Not yet human confirmed. See cited authorities for specific edge cases and request a DOR ruling for unusual or borderline equipment.

Sellers in Minnesota must retain resale certificates and all other sales tax exemption documentation for at least 3½ years after the due date of the return, or the actual date the return was filed, whichever is later. This period aligns with the general statute of limitations for the Department of Revenue to assess additional tax or require evidence supporting an exemption.

Legal authority for document retention

• Minnesota Rules 8130.7501, subpart 2(A) formally states that "every person subject to tax shall maintain and preserve suitable records of all receipts, purchases, and sales... for a period of not less than three and one-half years after the return is filed or the date the return was required to be filed, whichever is later."
• Exemption certificates (including resale certificates—Form ST3) fall within this definition of required records.
• If a statute of limitations is extended because of fraud, substantial omission, or agreement with the Commissioner, sellers must retain records—including exemption documentation—for the longer applicable period under Minn. Stat. § 289A.38.

Timing for obtaining exemption certificates

While the retention period is set by Minn. R. 8130.7501, sellers must also obtain valid exemption certificates either at the time of sale, within 90 days after sale, or within 120 days after a request from the Commissioner. Failure to do so may result in tax being assessed on the transaction (Minn. Stat. § 297A.665).

Practical guidance Recordkeeping requirements for exemption documentation are strictly enforced. Maintaining electronic or paper copies of exemption certificates, including resale or blanket certificates, protects against assessment, especially during audits. Retain the certificates for as long as the limitations period may remain open—including any extensions beyond the basic 3½ years in cases of underreporting, fraud, or signed agreements.

Source: Minn. R. 8130.7501, subp. 2(A); Minn. Stat. § 289A.38; Minn. Stat. § 297A.665

Minnesota requires individual consumers to self-report and pay use tax on taxable purchases of tangible personal property and taxable services when Minnesota sales tax was not collected by the seller. This applies to out-of-state and online purchases where no sales tax was charged, as well as to purchases where the sales tax paid was less than the amount due in Minnesota.

Statutory requirement Minnesota Statutes § 297A.63 imposes use tax on individuals for the storage, use, distribution, or consumption within the state of tangible personal property or taxable services purchased for personal use, if sales tax was not paid. The obligation to pay is on the consumer, not the out-of-state (unregistered) seller. There is no statutory de minimis threshold—any untaxed taxable purchase is subject to use tax, regardless of the dollar amount.

How individuals report and pay use tax The Minnesota Department of Revenue provides a line (“state use tax”) on Form M1, the Minnesota Individual Income Tax Return, for reporting and remitting consumer use tax. Taxpayers can report the exact amount of use tax owed or use the Department’s worksheet or use-tax tables published in the Form M1 Instructions, which allow for a simplified calculation if individual untaxed purchases do not exceed a specified aggregate dollar threshold in the tax year (e.g., under $1,000, as set administratively—not by statute—and subject to change; see current M1 instructions for details). For purchases above the simplified threshold or for taxable items such as boats, ATVs, or vehicles (which must be reported separately), the actual use tax must be calculated and paid.

Filing deadline and payment Use tax reported on the individual income tax return is due by the income tax deadline (generally April 15). Individuals not otherwise required to file a Minnesota income tax return can use Form UT1, Individual Use Tax Return, to report and pay use tax. There are no statutory penalty or interest exceptions for small-dollar use tax underreporting; failure to pay may result in assessment, penalty, and interest under Minn. Stat. § 289A.60.

Key references

• Authority: Minn. Stat. § 297A.63 (imposition), § 289A.11 (reporting and due dates), and Department of Revenue guidance (M1 instructions, Use Tax fact sheets).
• There is no statutory de minimis reporting threshold, and the Department provides a simplified estimated-use-tax table for small-dollar purchases as an administrative convenience, not as a legal exemption.

Source: Minn. Stat. § 297A.63 Source: Minn. Stat. § 289A.11 Source: Minnesota Department of Revenue, Use Tax for Individuals Source: Minnesota Department of Revenue, 2025 Form M1 Instructions

Minnesota imposes a range of special-purpose local sales taxes in addition to the general state (6.875%) and general local option sales taxes. These taxes are levied by certain cities or counties and apply exclusively to particular types of transactions—most frequently to lodging (hotel/motel stays), prepared food and beverages (restaurants, bars, and caterers), liquor, and admissions or entertainment venues.

Transactions subject to special local taxes:

• Local lodging taxes: Cities and counties may impose an additional percentage on hotel, motel, or similar accommodations, on top of other sales taxes.
• Local food and beverage taxes: Certain cities—including Minneapolis, Duluth, St. Paul, Bloomington, Mankato, and others—impose extra taxes on prepared food and beverage sales at restaurants, bars, and event venues.
• Local liquor, admissions, and entertainment taxes: Applied by a number of municipalities on top of standard sales tax rates on alcoholic beverages, tickets, and admissions to local events.

What's new—material changes effective July 1, 2026: As of Q3 2026, several new local sales and lodging taxes take effect. Notably:

• Chisago Lakes Area and Fairmont both impose a new 3% local lodging tax effective July 1, 2026.
• Meeker County imposes a 0.5% transit sales and use tax from July 1, 2026.
• Waseca imposes a new 3% local lodging tax effective July 1, 2026.

These new rates are reflected in the Minnesota Department of Revenue’s Special Local Taxes guide (May 2026). Sellers must apply these taxes on qualifying lodging stays and, for Meeker County, on applicable transactions in addition to any state or preexisting local taxes.

Impact on total rates by transaction type: When these special-purpose taxes apply, the effective rate on a transaction can materially exceed the general combined state and local rate. Hotel stays or restaurant meals in cities subject to these new lodging taxes can now be taxed at total rates higher than before, with the practical top end as of July 2026 now up to 13.375%. In contrast, cities without these special local taxes remain in the 6.875% to 9.875% range.

Legal authority: General local sales taxes are authorized under Minn. Stat. § 297A.99. Many special-purpose local taxes (e.g., lodging, food, liquor) are enabled by specific legislative acts or city ordinances, and are administered by the Department of Revenue. Always consult the DOR’s quarterly Special Local Taxes guide and the department’s “Special Local Taxes” page for up-to-date rates and coverage by jurisdiction.

Effective dates and caution: Rates and the scope of local taxes change frequently. The rates and coverage described reflect changes effective July 1, 2026, as listed in the May 2026 DOR guide. Consult the latest DOR publications for the most current information when determining specific local sales, lodging, or entertainment tax obligations.

Source: Minnesota Department of Revenue, Special Local Taxes (May 2026) Source: Minnesota Department of Revenue, Special Local Taxes Source: Minn. Stat. § 297A.99

Not yet human confirmed. City-level enabling authority may not always be referenced in state statute; verify the latest DOR guides and city ordinances for full legal scope and maximum rates as of Q3 2026.