MN

Minnesota Sales Tax Tips for Online Sellers

by Mark Faggiano

MN sales tax

This blog post may now be out of date. For our most up-to-date info on Minnesota sales tax, check out our “Minnesota Sales Tax Guide for Businesses.”

If your business operates within or you sell to people in the state of Minnesota, you may have wondered if you have to worry about sales tax. When do you have to collect it? Does your business have nexus in the state? What’s the correct amount of sales tax to collect anyway?

To clear these questions up, we thought we’d take a look at sales tax within the state of Minnesota.  We’ll get to the bottom of Minnesota sales tax so you can get back to doing what you love, sourcing, selling and making a profit.

You’re an online seller, but don’t live in Minnesota
Unless you fit into the definition of nexus below, you don’t have to worry about sales tax in Minnesota if you operate out of the state. At least, not yet – make sure to keep up on any news about changing internet sales tax laws!

You live in and/or operate a business in Minnesota
If you operate a physical business in Minnesota, you must register your business in the state. The Sales Tax Booklet shows you who needs to register and how to do about it doing it.

You must also collect sales tax. The sales tax rate you collect depends on where your customer lives since Minnesota is a destination based sales tax state. The Minnesota base sales tax rate is 6.875%, but you must add any applicable local rates, too.

So for example, although the base rate is 6.875, if your customer lives in St. Paul, you would pay a total of 7.625%. If they live in the Anoka area, you would pay 7.125%. Use TaxJar’s handy Sales Tax Calculator to quickly look up local sales tax rates in Minnesota.

If you are an online seller, live out-of-state, and use a fulfillment service (like FBA)
There are no Amazon fulfillment warehouses in Minnesota, so FBA will not create nexus for you in this state.

However, that’s not the end of the story. The state recently ruled that 3rd party fulfillment does create sales tax nexus in Minnesota.

The Minnesota Department of Revenue’s website lists several criteria for what constitutes nexus in the state. You have Minnesota sales tax nexus if you’re a seller and you:

  • Have an office, distribution, sales, sample room location, warehouse, or other place of business in Minnesota
  • Have a representative, agent, salesperson, or solicitor either on a permanent or temporary basis
  • Deliver items into Minnesota in your own vehicles
  • Provide taxable services in Minnesota
  • Have entered into an agreement with a solicitor for the referral of Minnesota customers and your gross receipts over 12 months is at least $10,000

If any of the above applies to you, then you must register your business for Minnesota. Even if you don’t live in Minnesota, the process of collecting sales tax for you is essentially the same as it is for someone who lives in Minnesota, because of the destination-based tax. Combine the basic state rate, 6.875%, with the local sales tax rate of the area you are shipping to to get your total.

Collecting the correct sales tax rate
If you operate within the state or have nexus within Minnesota, you must collect sales tax. So to get down to the nitty-gritty, how much do you have to worry about collecting.

Take another look at the Sales Tax Booklet to get an idea of what you owe. The basic sales tax rate for the state is 6.875%, but you must also take local rates into account. For an example, if your customer is in the Dakota area, you would add the base rate to the local rate to pay a 7.125%. The Scott area appears to not have a local rate so you would pay the base rate of 6.875%.

Also, make sure you’re collecting on shipping as well, as Minnesota considers shipping, handling, and installation charges taxable.

Confused? Don’t be – just use TaxJar’s Sales Tax Calculator to find all the local sales tax rates in Minnesota you need.

Filing sales tax in Minnesota
If you need to file a sales tax return in Minnesota, TaxJar has your back. You can now enroll in AutoFile for the state of Minnesota and we’ll automatically file your sales tax return for you! Find out more at TaxJar.com.

Summing It Up: Minnesota is a destination based sales tax state
First off, if you operate out of the state and don’t have nexus in Minnesota, you don’t have to worry about sales tax.

If you do fall in one of the other two categories, you have to pay sales tax. The base rate is 6.875%, but Minnesota is a destination based sales tax which means you have local rates to worry about. How much you charge depends on where the item is shipped. Add the base rate to the local rate to get your total. Also, be sure to take shipping, handling, and installation charges into account, as Minnesota considers those charges fair game for sales tax.

Do you have experience selling in Minnesota? Any questions about Minnesota sales tax? Comment below to get the discussion going!

  • Angela W

    I’m looking to start a business in Minnesota. I would be selling exclusively online. My supplier is based in California and Drop-ships directly to the customer. I know I have to charge sales tax for any customers from MN but I’m very confused as to whether I need to charge any other sales tax. I looked at the Minnesota Department of Revenue site and it wasn’t much help so any advice would be greatly appreciated. Thanks

  • Hi Angela, Drop shipping is such a complex topic that we highly recommend you get a CPA in your corner. Here’s what we’ve written about it in the past: http://taxjar.wpengine.com/drop-shipping-sales-tax/

  • Freedom61

    This is my 1st online venture but 2nd business. I’m about to launch my first website selling digital products. As Angela mentioned below, I looked into the Dept. of Rev. site which wasn’t much help and I contacted them. They stated that I must collect from those that live in MN. I haven’t set up a payment processor yet but I’m assuming customers add their address during the time they pay? Do you know of any payment processors that will automatically figure out how many customers are from MN and I’d have to pay the tax on those purchases? I’d prefer not to spend hours to trying to sort through hundreds or even thousands of customer’s names.
    This is somewhat of a bummer because unlike my 1st business, I can’t necessarily add the 7.27% sales tax to my sales page stating that MN Residents must pay sales tax on their e-books.
    I’m sure if I read more on your site that I’ll figure out the answer to this question but do I just have to collect from MN residents and not any other states?

  • Hi there,

    Most shopping carts will charge sales tax for you. What shopping cart platform are you using? We have whitepapers about how to set up sales tax collection on many different platforms, which you can find here:

    http://www.taxjar.com/learn-sales-tax/

  • Pingback: November Sales Tax Deadlines for Online Sellers()

  • Hello!

    I sell a line of clothing online (my own website) and wholesale to retailers. My business is registered in MN and I also live in MN, but clothing is not taxed in MN. Therefore I do not charge sales tax to my direct customers or retailers in MN. However, when I sell my clothing at physical events in other states, do I need to charge sales tax?

    Thank you!
    Lea

    • Hi Lea,

      It depends on the state and their sales tax rules. Here’s a list of states that require or exempt sales tax on clothing: http://taxjar.wpengine.com/sales-tax-on-clothing/

      Also, most states will want you to file for a temporary sales tax permit if you’ll just be there for a few days or less, but some consider that if you have sales tax nexus in that state if you are there even just one day. You need to check with each state, but here’s a list of more info about states and how to contact them to get you started: http://www.taxjar.com/states

      I hope this helps!

  • Pingback: Which States Charge Sales Tax Based on Click-Through Nexus?()

  • Pingback: August Sales Tax Deadlines for Online Sellers()

  • I create personalized crafts and sell to MN residents but also sell out of state. My only nexus is Minnesota. Do I collect MN sales tax on out of state client sales?

    • Hi Dana,

      You only need to collect sales tax from buyers in the state(s) where you have nexus. So if you only have nexus in MN, just collect sales tax from customers with a MN ship-to address. I hope that helps!

      • Yes this was very helpful – confirms what a bookkeeper friend of mine thought was the accurate process. Thank you so much!

  • Pingback: August Sales Tax Due Dates 2015()

  • Pingback: October Sales Tax Due Dates 2015()

  • Joshua Grieger

    I sell fba online have a Corp out of Delaware ,live in mn but no office and have office in ND do I need to collect sales tax?

    • Hi Joshua, You have nexus in your home state, so it sounds like you’d need to collect sales tax from Minnesota buyers: http://taxjar.wpengine.com/home-state-nexus/

      Also, if you sell on FBA then having inventory stored for sale in Amazon warehouses gives you sales tax nexus. Here’s more about this: http://taxjar.wpengine.com/fba-sales-tax-nexus/

      A good place to start is our FBA Sales Tax Guide. It’s a quick read but will get you started on FBA sales tax (including step-by-step instructions to make sure you’re set up in Seller Central.) It can be found here: http://www.fbasalestax.com

      Good luck with your business!

  • Pingback: A Guide to Sales Tax Nexus in All U.S. States()

  • Pingback: February Sales Tax Due Dates 2016()

  • Jameson Michelle

    Hello, I live, buy products, create and ship all from Minnesota, out of my home which I pay taxes on. Would I only charge sales tax for items that are taxed in Minnesota? And would I charge everyone as if my business was brick and morter? Thank you!

  • Jameson Michelle

    Hello, I live, buy products, create and ship all from Minnesota, out of my home which I pay taxes on. Would I only charge sales tax for items that are taxed in Minnesota? And would I charge everyone as if my business was brick and morter? Thank you!

    • You charge sales tax based on the ship to location, and you only charge sales tax to buyers in states where you have sales tax nexus. So if you only have nexus in Minnesota, you’d only charge sale tax to Minnesota buyers. You can learn more about sales tax basics here: http://www.taxjar.com/guides/intro-to-sales-tax/ I hope this helps!

    • You charge sales tax based on the ship to location, and you only charge sales tax to buyers in states where you have sales tax nexus. So if you only have nexus in Minnesota, you’d only charge sale tax to Minnesota buyers. You can learn more about sales tax basics here: http://www.taxjar.com/guides/intro-to-sales-tax/ I hope this helps!

  • Michael G. Hickey

    Hello, I am starting a resale business and will be buying liquidation and pallets to be resold online. I have a federal ID and am wondering if I will need a resale certificate in Minnesota or any other licenses. Any help would be appreciated.

  • Pingback: July Sales Tax Due Dates 2016()

  • Pingback: October Sales Tax Due Dates 2016()

Start your 30 day free trial of TaxJar. No credit card required.
Processing...
Thank you! Your subscription has been confirmed. You'll hear from us soon.
Subscribe to the TaxJar Sales Tax Blog
ErrorHere