What is Sales and Use Tax?
Do I have to register my business?
You must register to collect sales tax if you make taxable retail sales in Minnesota. This includes sellers outside Minnesota who:
- 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; or
- provide taxable services in Minnesota.
See Revenue Notice #00-10, Sales and Use Tax – Nexus Standards for criteria on determining when an out-of-state retailer is required to register, collect and remit Minnesota sales or use tax on sales made into Minnesota.
If you make retail sales in any city or county with a local sales tax, you must also register to collect that local tax (see line 5).
If you sell only nontaxable items, you do not need to register.
If you do not make taxable sales, but make purchases subject to use tax, you must register to remit use tax.
It is against the law to make taxable retail sales or provide taxable services in Minnesota without being registered.
Affiliates of Minnesota businesses are required to collect and remit Minnesota sales tax on sales made into Minnesota.
An entity is an affiliate of a Minnesota business if the related entity promotes the affiliate’s business or provides services to the out-of-state entity and the retailer and entity are related parties. A retailer and entity are related parties if at least one of the following is true:
- One of the parties owns directly or indirectly at least 50 percent of the other party’s outstanding stock;
- One of the parties is a partnership, estate or trust that owns directly or indirectly at least 50 percent of the capital, stock or value of the other party; or
- An individual stockholder or the stockholder’s family owns directly or indirectly at least 50 percent of the value of outstanding stock of both entities.
For example, if two entities are related and the in-state entity advertises, promotes or facilitates the establishment or maintenance of a market in Minnesota for an out-of-state seller, the in-state entity creates nexus for the out-of-state seller.
In addition, if the in-state entity provides services to the out-of-state seller (such as accepting returns from the seller’s customers, resolving complaints from the seller’s customers, etc.), the in-state entity also creates nexus for the out-of-state seller.
After you register your business
(you can register your business for Sales and Use Taxes through Minnesota e-Services here.)
Line 2: Months of operation
Skip line 2 if you do business year round.
If your business is seasonal, check the boxes for the months you normally operate. You will be required to electronically file returns for those months only. You must file returns even if there is no tax to report.
Line4: Filing frequency
Your filing frequency is based on the average amount of sales tax you collect and the use tax you owe in one month. Check a box to indicate your filing cycle as monthly, quarterly or annually.
If you will make taxable sales in Minnesota at only one event or during one month and do not intend to make future taxable sales, check the box for one-time filing. Before you resume making taxable sales, contact our office to reactivate your Minnesota tax ID number.
Line 5: Local taxes
If you are doing business—selling taxable items or performing taxable services—in any of the following cities or counties that impose a local tax, check the applicable boxes on line 5 to register for local authorization.
All local taxes are separate from, and in addition to, the Minnesota state general sales tax. Local taxes are subject to the same penalties, interest and enforcement provisions as the state sales tax.
Line 6: Multiple locations
If you operate your business from more than one permanent location, you may choose to apply for:
- separate ID numbers and file separate tax returns for each location, or
- a single ID number and file one
- consolidated tax return for all locations.
If your business is described below, do not apply for separate ID numbers, since they are not permanent locations. If you:
- sell at craft shows;
- are a vending machine operator who has more than one vending machine location;
- perform services at various locations, such as janitorial or landscaping services; or
- do business from a vehicle that moves from place to place; you must file for a single ID number.
Learn more at our Minnesota Sales Tax FAQ for Sellers and Retailers.
CREDITS: This is an excerpt from A Guide to Starting a Business in Minnesota, provided by the Minnesota Department of Employment and Economic Development, Small Business Assistance Office, Twenty-eighth Edition, January 2010, written by Charles A. Schaffer, Madeline Harris, and Mark Simmer. Copies are available without charge from the Minnesota Department of Employment and Economic Development, Small Business Assistance Office.