Upload
others
View
4
Download
0
Embed Size (px)
Citation preview
Tom Woessner, Audit Manager
April 30, 2009
Sales & Use Tax Division
Current Events
• Minnesota – Wisconsin Collaboration Project.
• Governor’s Executive Order dated January 13, 2009.
• MN & WI agencies must identify potential service
arrangements.
• Goals: Cost savings and operating efficiencies.
Current Events • Proposed Collaborations:
• WI Tax Refund Interception Program (offset refunds for
income tax debtors who have debt in one state but reside
in another.
• Exchange information on residency and homestead
status.
• Share best-practices in tax administration, auditing,
taxpayer education, scanning and imaging,
correspondence workflow, etc.
• Collaborate on the use of information technology.
• Share information on cigarette & tobacco tax systems.
Current Events • Proposed Collaborations:
• Joint audit projects involving registration of boats.
• Reciprocal audit referrals from border areas.
• Share information on high-dollar cross border purchases.
• Team up on audits of large businesses, share best
practices.
• Share economic forecasts and key tax studies.
• Share best practices for recruiting and hiring.
• List continues to grow.
Current Events
• Mankato imposed a 0.5% tax on food and beverages
sold at restaurants or places of refreshment and a 0.5%
tax on entertainment beginning 04-01-09.
http://www.taxes.state.mn.us/taxes/sales/other_supporting_content/Mankato
_general_notice.pdf
• Worthington imposed a 0.5% sales and use tax on 04-01-
09.
http://www.taxes.state.mn.us/taxes/sales/other_supporting_content/Worthing
ton_general_notice.pdf
See Fact Sheet 164 & 164S for other local taxes.
Current Events
• Sales tax increase effective July 1.
• The Sales tax rate will increase to 6.875% beginning July
1, 2009.
• The funds will be used to protect our drinking water
sources; protect, enhance, and restore our wetlands,
prairies, forests, and fish, game, and wildlife habitat;
preserve our arts and cultural heritage; support our parks
and trails; and protect, enhance, and restore our lakes,
rivers, streams and groundwater.
See Sales Tax Newsletter 2008.
Where to get information?
Web address: www.taxes.state.mn.us
Sales & Use tax assistance: 651-296-6181
Business registration: 651-282-5225
Withholding: 651-282-9999
Business Education Group: 651-297-4213
TDD ( Minnesota Relay): 651-297-5353
Where to get information? • What’s Available on the DOR website?
• Sales & Use Tax Newsletters
• Sales & Use Tax Forms & Instructions
• Sales Tax Rate Calculator
• Tax Information:
• Sales & Use Tax Fact Sheets
• Revenue Notices
• Law Change Bulletins
• And much more!
www.taxes.state.mn.us
Areas of Interest
Areas of Interest • Border state sales tax differences.
Basis MN ND SD WI
Retail Price Tax Tax Tax Tax
Shipping Tax Tax Tax Tax
Installation Taxed
if TPP
NT if separately
stated
Tax Taxed if
TPP
Repair parts Tax NT unless
stated
Tax Tax
Repair labor NT NT Tax Tax
Fabrication Tax Tax itemized Tax Tax
Areas of Interest • Border state sales tax differences.
Basis MN ND SD WI
Food Products Most NT Most NT Tax Most NT
Restaurant Tax Tax Tax Tax
Water Residential NT NT Tax NT
Electricity Tax* NT Tax Tax
Clothing NT Tax Tax Tax
Prescriptions NT NT NT NT
*Except 6 month residential heating, industrial and agricultural production.
Areas of Interest
• Local governments:
Local governments include Minnesota and non-Minnesota
counties, cities, townships, local municipalities, and most
local government instrumentalities, political subdivisions,
commissions, special districts, and government boards.
Most sales and purchases by local governments are taxed
using general guidelines.
See Fact Sheet 142, Sales to Government
Areas of Interest
• Local governments:
Specific exemptions apply to local governments.
To claim exemption, the local government must give the
seller a fully completed Certificate of Exemption, Form
ST3, and use the applicable exemption code.
Local taxes.
Local governments are exempt from local general sales
or use taxes. However, they must pay other types of
local taxes, such as restaurant, liquor or lodging taxes.
See Fact Sheet 142, Sales to Government
Areas of Interest
• Use Tax for local governments:
Sales tax is generally charged by the seller at the time of
sale. However, if the seller does not charge Minnesota
sales tax on equipment, supplies, or other taxable items,
and no exemption applies, the local government must pay
Minnesota state use tax.
Report state use tax on the cost of the item purchased
when you electronically file your sales and use tax return.
See Fact Sheet 146, Use Tax for Businesses.
Areas of Interest • When do you charge Use Tax vs. Sales Tax?
• Use tax complements and is similar to the sales tax.
• Use tax and sales tax rates are identical.
• Use tax is based on your cost of taxable purchases.
• Use tax may be due when you bring items into MN.
• Use tax may be due when items are taken out of
inventory for a taxable use.
• Use tax is also due if a seller does not charge
Minnesota sales tax on taxable items.
• Local use tax may also be due.
See Fact Sheet 164, Local Sales and Use Taxes.
Areas of Interest • Explain what is taxable and what is not:
What’s Taxable?
297A.61 Subd. 3. [SALE AND PURCHASE.] (a) "Sale" and "purchase"
include, but are not limited to, each of the transactions listed in this
subdivision. (b) Sale and purchase include any transfer of title or
possession, or both, of tangible personal property, whether absolutely
or conditionally, and the leasing of or the granting of a license to use or
consume, for a consideration, tangible personal property, other than a
manufactured home used for residential purposes for a continuous
period of 30 days or more. (c) Sale and purchase include the
production, fabrication, printing, or processing of tangible personal
property for a consideration for consumers who furnish either directly or
indirectly the materials used in the production, fabrication, printing, or
processing.
Areas of Interest
• Explain what is taxable and what is not:
What’s Taxable? Admission &
Amusement
Fees
Aircraft Building materials,
supplies &
equipment
Cable & satellite
TV Services
Candy & soft
drinks
Prewritten
Computer
software
Delivery charges Fabrication Labor Installation
Labor
Local
Governments
Lodging Machinery, equipment,
tools, accessories,
appliances, furniture &
fixtures
Machinery, office
equipment
Meals & drinks Motor vehicles,
leases & rentals
Prepaid
telephone
calling cards
Certain Specific
Services
Tobacco products
excluding
cigarettes
Vending
machine sales
Waste
management
services
Note: This list is very general. See related fact sheets for complete details.
Areas of Interest • Explain what is taxable and what is not:
What’s Not Taxable?
• Items exempt by law
• Seller does not have to prove why tax wasn’t charged.
• Items exempt with an exemption certificate
• Requires a fully completed exemption certificate at the
time of sale.
• Form ST3, Certificate of Exemption, is used to claim
exemption.
• a “single-purchase” certificate for just one transaction
• a “blanket certificate” applies to future purchases.
Areas of Interest • Explain what is taxable and what is not:
What’s Not Taxable? Admission
tickets – schools
Advertising
materials
Air flight
equipment
Agricultural
production
materials
Ambulances
Aquaculture
equipment
Bullet resistant
body armor
Caskets, urns &
burial vaults
Cigarettes Clothing
Labor – real
property
Court-reporter
transcripts
Cross-country ski
passes
Custom computer
software
Deliveries
Detachable tools Discounts
offered by seller
Drugs &
medicines
Electricity & natural
gas – residential –
November to April
Water –
residential
Note: This list is very general. See related fact sheets for complete details.
Areas of Interest • Explain what is taxable and what is not:
What’s Not Taxable? Farm
machinery
Feminine
hygiene
products
Automatic
fire safety
sprinkler sys.
Vehicle
Conversion
cost –
disabled
Food
Fuel oil, coal,
wood, etc –
residential
heating.
Fundraising
sales
Gasoline
Health care
products
Horses Industrial
production
materials
Installment
payments
Interest or
finance
charges
Logging
equipment &
parts
Meals for
children –
education
Meals &
drinks –
hospitals
Medical
equipment
Mill liners,
grinding rods &
balls
Used mobile
homes
Motor
vehicles
Newspapers
&
publications
Occasional
sales
Packing
materials
Patent, trademark
& copyright
Note: This list is very general. See related fact sheets for complete details.
Areas of Interest • Explain what is taxable and what is not:
PC & related
software –
schools
Petroleum
products
Prizes –
events fewer
6 days
Public safety
radio comm.
Systems
Real property Repair labor
Resale Sacramental
wine
Ship repair &
parts
Ski area
equipment
Solar energy
equipment
Special
tooling
Telecomm.
Equipment
Textbooks Trade-in
allowance
Waste-
management
containers
Wind energy
conversion
systems
Note: This list is very general. See related fact sheets for complete details.
What’s Not Taxable?
Areas of Interest
• Explain what is taxable and what is not:
Example – labor or real property vs. equipment
• Listed separately or lump sum
Installation labor:
• Setting an item into position, or to connect, adjust or
program it for use.
• Installation charges by the seller are taxable.
• Installation charges by a third party are taxable if
installed item is taxable when sold.
See Fact Sheet 152, Labor.
Areas of Interest • Explain what is taxable and what is not:
Example – labor or real property vs. equipment
• Listed separately or lump sum
Fabrication labor
• Makes or creates a product or alters an existing
product into a new or changed product.
• Fabrication labor is taxable.
• Customer provided materials for the products that will
be created or altered is taxable.
See Fact Sheet 152, Labor.
Areas of Interest
• Explain what is taxable and what is not:
Repair labor:
• Labor to restore an item so that it can be used for its
original purpose.
• Separately stated charges for repair labor are not
taxable.
• If the material and labor charges are lumped together,
the entire charge is taxable.
See Fact Sheet 152, Labor.
Areas of Interest
• Explain what is taxable and what is not:
Construction labor:
• If an item becomes a permanent attachment to real
property, installation labor is not taxable - improvement
to real property.
• Items that generally stay with the building when it is
sold to another party. Examples include hot water
heaters, furnaces, garage doors, doors, windows,
gutters, roof, carpet, and deck.
See Fact Sheet 128, Contractors.
Areas of Interest • Special city sales taxes.
• St. Cloud imposes a 1% tax on liquor and food sold at
restaurants and “places of refreshment” located within the
city limits.
• Minneapolis lodging tax is 3%.
• Rochester lodging tax is 4%.
• St. Paul lodging tax is 3%.
• Minneapolis Downtown liquor tax. The 3% liquor tax
applies to retail on-sales of alcoholic beverages, including
wine and 3.2 beer, sold at licensed on-sale liquor
establishments such as bars, hotels, motels, restaurants,
and clubs in the downtown Minneapolis taxing area.
Areas of Interest • Special city sales taxes.
• Minneapolis Downtown restaurant tax. A 3% restaurant tax
applies to food and beverages sold by restaurants,
caterers or “places of refreshment” in the downtown
Minneapolis taxing area.
• Minneapolis 3% entertainment tax applies to:
• admission fees;
• the use of amusement devices and games;
• food, drinks and merchandise sold in public places
during live performances;
• short-term lodging within the city limits.
See Fact Sheet 164 & 164S for other local taxes.
Areas of Interest
• Federal tax on phone bills.
• The taxable amount includes all charges for optional
and associated services, such as:
call forwarding • call waiting • caller ID • custom
calling features connection and disconnect charges •
demand charges • detailed billing charges • directory
assistance charges • FCC fees • fixed or basic
monthly charges • franchise fees • hookup fees • line
charges • local telephone number portability charges
• minimum charges • one-time charges • priority
Areas of Interest
• Federal tax on phone bills.
calling • reconnection fees • service charges •
standby fees • surcharges • TDD charges • universal
service fees • voice mail/messaging
Note: Federal excise tax directly imposed on the customer
is not included in the base price subject to sales tax if it is
separately stated on the customer’s bill.
See Fact Sheet 119, Telecommunication Services.
Areas of Interest • Explain taxable services and labor. The following services are taxable.
112 Building Cleaning and Maintenance (for commercial
and residential buildings)
113 Motor Vehicle Towing, Washing, Rust proofing
114 Detective and Security Services
119 Telecommunication Services
120 Laundry and Dry Cleaning Services
121 Lawn and Garden Care, Tree and Bush Service,
Landscaping
122 Pet Grooming, Boarding, and Care Services
162 Massages (not medically authorized)
166 Parking Services
Areas of Interest • Refund of sales/use taxes paid.
Capital equipment:
• Equipment used for manufacturing, fabricating, mining or
refining tangible items to be sold ultimately at retail;
electronically transmitting results retrieved by a customer
of an on-line computerized data-retrieval system; or for
generating electricity or steam to sell at retail.
• You may file only two capital equipment refund claims per
year.
• Use Form ST11, Capital Equipment Refund Claim.
See Fact Sheet 103, Capital Equipment and Sales & Use Tax
Instruction Booklet.
Areas of Interest
• Refund of sales/use taxes paid.
Purchaser refunds:
• To claim a refund of sales tax paid to a vendor in error.
• You may file only two purchaser refund claims per year.
• To qualify, you must be registered to report sales or use
tax and the total amount requested on each refund claim
must be over $500 in tax.
• Use Form ST11-PUR, Purchaser Sales Tax Refund
Claim.
See Sales & Use Tax Instruction Booklet.
Areas of Interest
• Refund of sales/use taxes paid. Amended Return
• The procedures for amending Minnesota sales and use
tax filings changed in December 2008. You no longer are
required to calculate the difference between amounts
originally reported and the correct amounts. You will be
prompted to enter the corrected amounts instead.
• To amend a sales and use tax return, go to our website at
www.taxes.state.mn.us and click “Login to e-File
Minnesota” on the e-Services menu, which leads you to
our secure site for the department’s filing and paying
system.
Areas of Interest
• Refund of sales/use taxes paid. Amended Return
• If your amended return shows:
• No tax due and no refund, you will receive a
confirmation number with the date and time you filed.
• A refund, indicate whether you want us to mail you a
check or deposit your refund directly into your bank
account. If you choose direct deposit, enter your bank
routing and account numbers. Do not take credit for
the overpayment on other returns. Click “Continue” to
file your return.
Areas of Interest
• Refund of sales/use taxes paid.
Amended Return
• If your amended return shows:
• An amount due, select “Pay electronically with this
return” and enter your banking information to
schedule your electronic payment at this time.
• If you are not required to make electronic payments,
you can call our office and ask that we send you a
payment voucher. File your amended return
electronically and send us your check along with the
payment voucher.
Areas of Interest • Sales to Tribal Governments and individual
tribal members. Sales to tribal governments:
• All eleven tribal governments and any businesses
owned by the tribal governments may buy or lease goods,
services, and vehicles either on or off the reservation for
their own use exempt from sales tax.
• A purchase order, payment voucher, or work order
showing the tribal government is the purchaser, or an
exemption letter to the tribal government from DOR is
sufficient evidence of exemption.
See Fact Sheet 160, Indians.
Areas of Interest
• Sales to Tribal Governments and individual
tribal members.
Sales to individual tribal members:
• Sales made off the reservation to an individual Indian are
taxable.
• Sales made on a reservation are subject to sales tax only
if the DOR has entered into an agreement with the tribal
government.
See Fact Sheet 160, Indians.
Areas of Interest • Capital equipment (definition) and leases.
• Capital equipment means machinery and equipment
purchased or leased, and used in Minnesota by the
purchaser or lessee primarily for manufacturing,
fabricating, mining, or refining tangible personal property
to be sold ultimately at retail if the machinery and
equipment are essential to the integrated production
process of manufacturing, fabricating, mining, or refining.
• Capital equipment includes machinery and equipment
used primarily to electronically transmit results retrieved
by a customer of an on-line computerized data retrieval
system.
See Fact Sheet 103, Capital Equipment.
Areas of Interest
• Rental equipment vs. hired equipment.
• Subd. 14a. Lease or rental.
(a) "Lease or rental" means any transfer of possession or
control of tangible personal property for a fixed or
indeterminate term for consideration. A lease or rental
may include future options to purchase or extend.
(b) Lease or rental does not include:
(1) a transfer of possession or control of property
under a security agreement or deferred payment plan
that requires the transfer of title upon completion of the
required payments;
Areas of Interest • Rental equipment vs. hired equipment.
(2) a transfer of possession or control of property under an
agreement that requires the transfer of title upon
completion of required payments and payment of an
option price does not exceed the greater of $100 or 1% of
the total required payments; or
(3) providing tangible personal property along with an
operator for a fixed or indeterminate period of time. A
condition of this exclusion is that the operator is
necessary for the equipment to perform as designed. For
the purpose of this subdivision, an operator must do more
than maintain, inspect, or set up the tangible personal
property.
Areas of Interest • Sales of inventory items; salvage or used items
sold.
• Government agencies are not considered to be a trade
or business since all of their activities are conducted to
further a public purpose.
• If the agency makes sales of surplus equipment or
other tangible personal property on a regular basis
these sales are, and always have been, taxable.
See Fact Sheet 132, Occasional Sales of Business Equipment
& Goods.
Areas of Interest
• Exemption certificates.
Minnesota Statutes section 297A.665, provides that all sales
are presumed to be taxable and that the burden is on the
retailer to prove that the item is being purchased for resale
or is otherwise exempt from tax under Minnesota Statutes
chapter 297A. Minnesota Statutes section 297A.72,
subdivision 1, provides that for sales and purchases
occurring after December 31, 2001, a fully completed
exemption certificate conclusively relieves the retailer from
collecting and remitting the tax if taken from the purchaser at
the time of sale.
Areas of Interest • Exemption certificates.
A fully completed exemption certificate must include the
following:
• Purchaser’s name and address.
• Purchaser’s type of business.
• Purchaser’s signature.
• Purchaser’s MN tax ID number or ID issued by another
state or FEIN or driver’s license or other valid state-issued
ID number.
• Reason for exemption.
See Sales Tax Newsletter 2008.
Areas of Interest
• Point of sale.
• What rules determine whose sales tax to charge?
• Charge the sales tax that applies in your taxing
jurisdiction when the customer picks up the product
or service at your location.
• Charge sales tax based on where the product is
shipped or the service is provided to the customer.
• If neither applies, charge sales tax based on the
address you have for the customer.
Areas of Interest
• Special fuel taxes and Power Take-off tax
refunds.
• General rules:
• Tax paid on gasoline or special fuel used to operate a
power takeoff unit (PTO) or auxiliary engine fueled from
the same supply tank as the highway vehicle is
refundable. The refund claim is based on only the fuel
consumed by the PTO or auxiliary engine. Fuel
consumed during idling time is not eligible for refund.
See Fact Sheet 400, Power Take-off Refunds
Areas of Interest • Special fuel taxes and Power Take-off tax refunds.
• Petroleum tax:
• Most fuel used for highway purposes is subject to petroleum
tax.
• This includes motor fuel (gasoline or diesel fuel, also
called “special fuel”) used in all licensed motor vehicles.
• It also includes fuel for motorboats, all-terrain vehicles,
aircraft, and most snowmobiles.
• When you buy gasoline from a pump at a gas station, the
price already includes petroleum tax (both state and
federal).
See Fact Sheet 400, Power Take-off Refunds
Areas of Interest
• Special fuel taxes and Power Take-off tax refunds. • Sales or use tax:
• Sales or use tax is due on petroleum products used for
non-highway purposes.
• Generally, sales or use tax applies to fuel used in
construction activities or for heating commercial buildings.
• The amount subject to use tax includes the cost of the
fuel, federal petroleum tax, the Petrofund “clean-up” fee,
and any inspection fees imposed. Use tax is due for the
period when the refund or credit is received.
See Fact Sheet 400, Power Take-off Refunds
Areas of Interest
• Sales tax on fuel surcharges.
• Generally, sales or use tax applies to fuel used in
construction activities or for heating commercial
buildings.
• The amount subject to use tax includes the cost of the
fuel, federal petroleum tax (which is a tax imposed at
the wholesale level) the Petrofund “clean-up” fee, and
any inspection fees imposed.
Areas of Interest
• Special fuel taxes and Power Take-off tax
refunds.
• Sales tax on fuel surcharges:
• Additional charges such as fuel surcharges added to
the sale of a taxable item are included in the taxable
sales price of the item and are taxable.
• Sales to governments:
• The federal government may buy all fuel exempt
from both state petroleum tax and sales or use tax.
See Fact Sheet 400, Power Take-off Refunds
Areas of Interest
• Special fuel taxes and Power Take-off tax refunds.
• Sales to governments:
• State and local governments are exempt from federal
petroleum tax.
• State and local governments are not exempt from state
petroleum tax.
• If state and local governments buy dyed fuel and use the
fuel in taxable ways, they must pay the state petroleum tax
directly to the State or to the supplier at the time of
purchase.
• Contact the Petroleum Tax at 651-296-0889 to set up an
account to pay any state petroleum tax due.
Areas of Interest
• Special fuel taxes and Power Take-off tax
refunds.
• Sales to governments:
• State and local governments owe sales tax unless
petroleum tax has been paid and not refunded, or unless
a sales tax exemption applies.
• Exception. Fuel used by the state or a local government
in marked police vehicles, ambulances, and fire
apparatus is exempt from sales or use tax.
See Fact Sheet 400, Power Take-off Refunds
Areas of Interest
• Gravel tax.
The 2008 legislature made a change to the imposition of tax
on delivery of aggregate materials by third party haulers.
Simply stated:
• Delivery charges by 3rd party haulers are exempt if the
aggregate will be used in road construction.
• Delivery charges by the seller are taxable.
Areas of Interest
• Gravel tax.
Aggregate purchases. Purchases of gravel, sand and
other aggregate materials are not exempt from sales tax for
road construction.
Only exemption for gravel:
• Sales to townships for road and bridge maintenance.
• Charges for delivery of gravel purchased by townships.
Counties, cities and other government agencies pay sales
tax on gravel used to build roads. In addition, delivery
charges by the seller of the gravel are also taxable.
Areas of Interest
• Gravel tax.
3rd party Delivery charges.
Effective for sales on or after 7-1-08, charges by third
party haulers to deliver aggregate is taxable unless the
aggregate is for use in road construction. Charges by
3rd party haulers for delivery of aggregate for any use
other than road construction is taxable unless another
exemption applies (industrial production, resale, exempt
entity, etc.) This is true even if the hauler is required to
put the aggregate material "substantially in place."
Areas of Interest
• Gravel tax.
Delivery charges by the seller.
Charges for delivery of aggregate are taxable if the sale
of the aggregate is taxable.
Areas of Interest
• Common audit findings.
• Not accruing use tax on...
• Police department taxable purchases - ammo,
guns, tires, etc.
• Software updates
• Election equipment
• Lawn/Tree services
• Printed materials
• Videos and other training aides
Areas of Interest
• Common audit findings.
• Not charging sales tax on…
• Copies
• 911 Signs that are not installed
• Used/surplus equipment
• Rental of pavilions, parks, quarry entrance
• Animal control - this can go either as use tax or
sales tax depending if they are charging their
residence
• Plat maps
• League fees
Your Questions
• Are there certain vendors that deal with
County governments that “flag” use tax due?
• Only a vendor who does not hold a MN sales & use tax
permit.
• Is it correct to charge sales tax when we sell
maps to the public?
• Yes.
Your Questions
• Is sales tax due on proceeds from the sale of off
road equipment at a County auction?
• Government agencies are not considered to be a trade
or business since all of their activities are conducted to
further a public purpose.
• However, if the agency makes sales of surplus equipment
or other tangible personal property on a regular basis
these sales are, and always have been, taxable.
• A regularly scheduled auction held on a quarterly or
annual basis is considered a regular basis and is taxable.
See Fact Sheet 132, Occasional Sales of Business Equipment
Your Questions • Utility bills – Should we be paying sales tax on
the base charge for water or only on our water
usage at our garages?
• If you own the utility, tax is due on the inputs.
• If you buy from a separate entity, tax is due on the sales
price.
• Water for non-residential use is taxable.
See Fact Sheet 129, Utilities Used in Production and 157,
Residential Utilities.
Your Questions • Are we exempt from sales tax on the purchase
of a boat for bridge inspections?
• There is no exemption for boats used to inspect bridges
or other structures.
• There is an exemption for sales to a TOWN of gravel and
machinery, equipment and accessories, except motor
vehicles, use exclusively for road and bridge
maintenance.
See Fact Sheet 142, Sales to Governments
Your Questions
• Is it correct to pay use tax when we purchase
rock from a farmer? • Yes, if the farmer is in the business of selling rock,
aggregate, sand, etc.
• Is it correct to pay use tax when we purchase
oats and hay from a farmer for
seeding/sodding? • Yes, same as above.
Your Questions
• Are local governments exempt from paying a
city tax on items sold within their city limits?
• Local governments do not pay local sales or use tax.
• Local governments include cities, towns, counties,
instrumentalities, political subdivisions, commissions,
special districts and governmental boards. No exemption
certificate is necessary.
• State sales tax generally applies.
• Local governments are not exempt from paying any
special local taxes imposed such as restaurant, liquor or
lodging taxes.
Your Questions
• Are local governments exempt from paying a
city tax on items sold within their city limits?
See Fact Sheet 142, Sales to Governments, Fact Sheet 164,
Local Sales and Use Taxes and Fact Sheet 164S, Special
Local Taxes
Your Questions • Are local governments exempt from paying a
city tax on items sold within their city limits?
What’s taxable?
• Local governments. Sales to most local governments
(including counties, cities, towns, commissions, boards
and special taxing districts) are taxable. Some schools,
hospitals, nursing homes, libraries and towns, however,
can make exempt purchases.
See Fact Sheets 111, Schools – Sales and Purchases;
135, Fire Fighting, Police and Emergency Equipment;
139, Libraries; and 142, Sales to Governments.
Your Questions • What is nexus? Physical presence in a taxing jurisdiction.
• What creates nexus?
• Owns real property.
• Leases or rents tangible property.
• Have sales personnel or service technicians.
• Make deliveries in own vehicle.
• Deliver with a company vehicle.
• Maintains, occupies or uses a place of business,
permanently or temporarily.
• How does it impact a County’s tax liability? • May determine whether you pay sales tax or use tax.
• May determine whether or not you collect tax.
Your Questions
• If you buy gravel for road construction from
John Smith, but hire Diane Johnson to deliver it:
• Is the gravel from John Smith taxable?
Yes, if he is in the business of selling gravel.
• Is the delivery charge from Diane Johnson
taxable?
No, delivery charges by a third party hauler for delivery
of aggregate material for use in road construction are
not taxable.
Your Questions • If you buy gravel for road construction from
John Smith and have John Smith deliver the
gravel:
• Is the gravel taxable?
Yes, assuming John Smith is in the business of selling
gravel.
• Is the deliver charge taxable?
Yes, if the purchase of the gravel is taxable the
delivery charge by the seller is taxable even if the
gravel will be used for road construction. (The
exemption only applied to third party haulers.)
Your Questions
• Does tax have to be recalculated on invoices
from local businesses before the local
government pays the invoice?
• Only if local tax was charged or if an exemption applies.
Your Questions
• What is taxable and not taxable to townships?
• Sales to local governments, including counties, cities,
townships, commissions, boards, special taxing districts,
etc., are taxable. There are some exceptions. The local
government must give sellers a purchase order, payment
voucher, work order or Form ST3 to purchase the
following exempt from tax.
Exceptions:
• Leases of vehicles used as ambulances by ambulance
services licensed by the EMS Regulatory Board.
Your Questions • What is taxable and not taxable to townships?
• Biosolids processing equipment and materials
incidental to installation for wastewater treatment facilities.
• Bullet-resistant body armor.
• Chore and homemaking services for the elderly and
disabled that are purchased by a local government
specifically for elderly and disabled individuals.
• Correctional facility meals for inmates.
• Emergency rescue vehicle repair and replacement parts.
• Firefighter personal protective equipment.
Your Questions
• What is taxable and not taxable to townships? • Fuels used in ambulances, fire apparatus and marked
police vehicles.
• Gravel, machinery, equipment and motor vehicles
(except pickup trucks) used exclusively for road
and bridge maintenance if purchased by a town.
• Purchases by hospitals and nursing homes owned and
operated by local governments.
• Purchases by public and legislative libraries.
• Metropolitan Council. MTC buses, light rail transit
vehicles and repair parts.
• Purchases by school districts and public schools.
Your Questions
• What is taxable and not taxable to townships?
• Solid-waste disposal facility machinery and equipment.
• Transit program vehicles that meet certain criteria.
See Fact Sheet 111, Schools – Sales and Purchases; 135, Fire
Fighting, Police, and Emergency Equipment;139, Libraries;
and 142, Sales to Governments.
Your Questions
• How is sales tax on fuel purchases supposed to
be calculated?
• Generally, sales or use tax applies to fuel used in
construction activities or for heating commercial buildings.
• The amount subject to use tax includes the cost of the
fuel, federal petroleum tax (which is a tax imposed at the
wholesale level) the Petrofund “clean-up” fee, and any
inspection fees imposed.
Your Questions
• What are the differences for “on road use” vs.
“off road use”?
Petroleum products. Petroleum products are exempt
under certain conditions:
• Gasoline, motor fuel, natural gas and propane on which
Minnesota gasoline excise tax has been paid and not
refunded.
• Fuels used or consumed in agricultural or industrial
production.
• Fuels for use in ambulances, municipal fire apparatus and
marked police vehicles.
Your Questions
• What are the differences for “on road use” vs.
“off road use”?
• Petroleum products used to improve agricultural land by
constructing, maintaining and repairing drainage ditches,
tile drainage systems, grass waterways, water
impoundment and other erosion-control structures.
• Petroleum products used in a passenger snowmobile for
off-highway business use to operate a resort.
• Used motor oil.
See Fact Sheet 116, Petroleum Products.
Your Questions • When is software taxable?
The sale, lease or license to use a canned or prewritten
computer software program is taxable. The software may
be delivered to the customer by any means, including:
• electronically • discs
• internet download • CD ROM
• load and leave • tape
All payments for prewritten computer software are
taxable, including those billed on a periodic basis (i.e.,
weekly, monthly, yearly), or on a per use or per hit basis.
A multiple-use license for prewritten computer software is
taxable.
Your Questions • Is it different if you have it customized?
Custom computer software:
• Custom computer software program is not taxable.
• It is prepared to the special order of the customer.
• It generally requires consultation and an analysis of the
customer’s requirements.
• The program may be transferred in the form of written
procedures or contained or recorded on tapes, discs,
cards or another device.
• It also may include documentation or manuals designed
to facilitate the use of the custom computer program.
See Fact Sheet 134, Computer Software.
Your Questions
• Is it different if you have it customized?
Computer software, packaged or canned.
• The sale, lease or license to use a canned or prewritten
computer software program is taxable.
• A prewritten computer software program that is modified
to meet one specific customer’s needs is a custom
software program only to the extent of the modifications.
• The price for the prewritten program is taxable.
• The price for modifying or adapting the program is not
taxable if separately stated on the bill.
See Fact Sheet 134, Computer Software.
Your Questions
• Is the installation taxable?
• Installation or set up of a computer system, or
installation of hardware or prewritten software upgrades,
is taxable.
• This is true when the installation charges are billed by the
seller of the system and when billed by a third party hired
only to do the installation.
• Amounts paid to reimburse the expenses of the installer
for travel, lodging, meals, etc., are part of the installation
charge and are also taxable.
See Fact Sheet 134, Computer Software.
For Information on Fact Sheets, Revenue Notices, Newsletters and Law Changes see:
www.taxes.state.mn.us
April 30, 2009
Sales & Use Tax Division