Sales Tax Registration and Filing in Minnesota

Introduction

Navigating the complexities of sales tax registration and filing in Minnesota is crucial for businesses operating within the state. Whether you're a new business owner or an established company expanding into Minnesota, understanding the state's sales tax requirements is essential to ensure compliance and avoid penalties. This guide provides a comprehensive overview of the sales tax registration and filing processes, state-specific rules, and answers to frequently asked questions.

Registration Process

Who Needs to Register?

In Minnesota, businesses that make over $100,000 in gross revenue or conduct more than 200 separate transactions in the state within the last 12 months are required to register for a sales tax permit. This is due to the economic nexus laws effective from October 1, 2019.

How to Register

Businesses can register for a sales tax permit through several methods:

1. Online Registration: The most convenient way is to register online via the Minnesota e-Services.
2. Paper Form: Alternatively, businesses can complete a paper form available on the Minnesota Department of Revenue's website.
3. Telephone Registration: Call 651-282-5225 or 1-800-657-3605 to register by phone.

Required Information

To register, you will need the following information:

• Federal Employer Identification Number (FEIN)
• Legal name or sole-proprietor name and business address
• Business name (DBA), if applicable
• North American Industry Classification System (NAICS) code
• Names and Social Security numbers of the sole-proprietor, officers, partners, or representatives
• Contact person's email address and name

Filing Process

Filing Frequency

Minnesota requires businesses to file sales tax returns either monthly, quarterly, or annually, depending on the amount of sales tax collected. The filing frequency is assigned when you register for your sales tax permit.

Due Dates

Sales tax returns are generally due on the 20th of the month following the reporting period. However, the annual sales tax return is due by February 5th of the following year. If the due date falls on a weekend or holiday, the return is due the next business day.

How to File

Businesses have three options for filing and paying sales tax in Minnesota:

1. Online Filing: File and pay online through the Minnesota Department of Revenue.
2. Phone Filing: Call 1-800-570-3329 to file by touch-tone phone.
3. Electronic Payment: If your sales and use tax liability is $10,000 or more in the state's fiscal year, you must pay all taxes electronically.

State-Specific Rules

Taxable Goods and Services

Most retail sales of tangible products are taxable in Minnesota, with exceptions such as clothing, baby products, and over-the-counter drugs. Services are generally not taxable unless they include creating or manufacturing a product.

Economic Nexus

Businesses with economic nexus in Minnesota must collect sales tax based on the buyer's shipping address, as Minnesota is a destination-based sales tax state.

Shipping Charges

Sales tax must be charged on shipping charges if the items shipped are taxable. If the items are not taxable, then sales tax on shipping is not required.

Additional Fees

• Retail Delivery Fee: Starting July 1, 2024, a 50-cent fee applies to certain retail delivery transactions.
• 988 Prepaid Wireless Fee: A 12-cent fee applies to each retail transaction involving prepaid wireless services starting September 1, 2024.
• Cannabis Tax: Sellers of taxable cannabis products must register to remit the new cannabis tax effective July 1, 2023.

FAQs

What is the sales tax rate in Minnesota?

The statewide sales tax rate in Minnesota is 6.875%. Local jurisdictions may impose additional sales taxes.

Do I need to collect sales tax on digital products?

Software as a Service (SaaS) is non-taxable in Minnesota. However, other digital products may be subject to sales tax.

How do I amend a sales tax return?

To amend a sales tax return, visit the Minnesota Department of Revenue's website and follow the instructions for amending a return.

What happens if I miss a filing deadline?

If you miss a filing deadline, you may be subject to penalties and interest. It's important to file and pay on time to avoid these additional costs.

How can I find more information?

For more detailed information, visit the Minnesota Department of Revenue or consult their sales tax business guide.

By understanding and following these guidelines, businesses can ensure compliance with Minnesota's sales tax laws, thereby avoiding potential fines and maintaining good standing with the state's Department of Revenue.