Minnesota Sales Tax Changes
Effective October 1, 2017
There are upcoming changes to the Transit Improvement Area Sales and Use Tax, as well as rate changes for other jurisdictions.
When to Charge Local Taxes
As a general rule, local sales tax should be charged to customers on all sales made in a local taxing area, unless the customer provides an exemption certificate. The local tax applies to anyone who is from outside the city or county and picks up items in the local area for business or personal use. This applies even if the customer takes the items outside of the local tax area.
Example: If a contractor (outside the locality) buys and picks up materials in a city with a local tax, the local tax rule applies to this sale.
Changes Beginning October 1, 2017
The Transit Improvement Area Sales and Use Tax (includes the counties of: Anoka, Dakota, Hennepin, Ramsey, and Washington). The $20 vehicle excise tax in this district will end September 30, 2017. Starting October 1, 2017, these counties will implement their own Transit Sales and Use Tax and $20 vehicle excise tax. Hennepin and Ramsey will have a 0.5% Transit Tax. Anoka, Dakota, and Washington counties will have a 0.25% Transit Tax.
All businesses registered for the Transit Improvement Area Sales and Use Tax will be automatically registered for the New Transit Sales and Use Tax. The transit sales and use tax applies to taxable purchases for business or personal use. Companies registered for a new local tax that does not apply can either report a zero on that tax line, or delete the tax line from the sales and use tax account.
Example: ABC Company is located in downtown Minneapolis. Currently they pay a sales and use tax rate of 7.775% (Minnesota state tax 6.875%, Hennepin County 0.15%, Minneapolis 0.50%, and Transit Improvement 0.25%). As of October 1, 2017, they will need to charge a sales tax rate of 8.025%: The Minnesota state tax of 6.875%, Hennepin county tax rate of 0.15%, Minneapolis tax of 0.50%, and the new Hennepin County Transit tax of 0.50%.
Other jurisdiction rate changes include:
- Carver County will have a .5% transit sales and use tax
- Clay County will have a .5% sales and use tax
- Fairmont will have a .5% sales and use tax
- Moose Lake will have a .5% sales and use tax
- New London will have a .5% sales and use tax
- Proctor sales and use tax will increase to 1.0% (up from .5%)
- Spicer will have a .5% sales and use tax
- Wright County will have a .5% transit sales and use tax
Sales Tax Calculator
The Minnesota Department of Revenue website has a sales tax calculator to determine the state and local sales and use tax rate to apply to taxable purchases. To find the appropriate sales tax rate for a particular jurisdiction, enter a valid address and city, or enter the full nine digit zip code. The nine digit zip code method is the most accurate. The sales tax calculator does not include any special local taxes, such as lodging taxes or liquor.
For additional information, visit the Minnesota Department of Revenue website. Click for a table listing all of the local taxes. The Department has free classes and webinars on sales and use tax, which are held throughout the state. Click for the full class schedule including locations, dates, and times.
If you have questions about the changes or would like assistance with tax planning, Smith Schafer can help! For additional information or if you have questions, click to contact us.