Has Your Company Paid Too Much Tax?

Minnesota companies are often surprised to learn they unknowingly paid too much sales tax or missed credits and deductions they were owed. This is a quick checklist to determine if your company may be overpaying the State of Minnesota for some commonly missed tax opportunities.

Sales and Use Tax Refunds

Minnesota is the only state in the nation that requires manufacturers to pay sales tax upfront on refundable transactions related to capital equipment, repair parts, etc. We estimate $85-100 million of available refunds goes unclaimed each year by Minnesota companies. For example, we have recovered over $50 million for our corporate clients.

2015 Legislative Update:

Effective July 1, 2015, the state of Minnesota will no longer charge sales tax upfront on capital equipment and several other items that has consistently yielded $85 million or more annually to the general fund. Companies should identify whether they are owed refunds due to this change.

Research Credits

No lab coats are required for companies that qualify for research tax credits. Companies with new or improved products/processes, software, or research expenses on the books may qualify for these tax credits.


Your tax reduction opportunities may include

  • cost segregation,
  • meals & entertainment, and
  • domestic production activities deductions

For example, if you have over $500,000 reported on schedule M-3 for Meals and Entertainment, instead of settling for a 50% haircut, you should consider performing a statistical sample to reclassify transactions that are 100% deductible. Also, you may be entitled to a deduction of up to 9% of your net income via the Domestic Production Activities Deduction (DPAD) if you are producing or manufacturing a product in the United States.

Next Steps

ThreeFive is part of a consulting community that represent companies on a contingency basis (they are only paid if money is saved), so there is low risk to finding missed tax opportunities.

About the Author:

This article was written by ThreeFive, a firm that helps corporations that have unknowingly paid too much in sales tax, or are due credits and deductions on their annual return. Learn more at www.threefive.com or contact Bob Willbanks, 612.298.1176, bwillbanks@threefive.com or Steve Erickson, 612.353.6372, serickson@threefive.com.

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