Sales & Use Tax Division - Minnesota Department of ...•Use Tax for local governments: Sales tax is...

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.

http://www.taxes.state.mn.us/taxes/sales/other_supporting_content/Mankato_general_notice.pdf

http://www.taxes.state.mn.us/taxes/sales/other_supporting_content/Mankato_general_notice.pdf

http://www.taxes.state.mn.us/taxes/sales/other_supporting_content/Worthington_general_notice.pdf



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

http://www.taxes.state.mn.us/

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.


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.


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



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



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


What’s Not Taxable?

Areas of Interest


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.


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.


Areas of Interest


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.


Areas of Interest


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.


https://www.mndor.state.mn.us/ur/jsp/Login.jsp




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.

http://www.revisor.leg.state.mn.us/stats/297A/665.html

http://www.revisor.leg.state.mn.us/stats/297A/

http://www.revisor.leg.state.mn.us/stats/297A/72.html

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).


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.


Areas of Interest

• Sales tax on fuel surcharges.


construction activities or for heating commercial

buildings.


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


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.


Areas of Interest

• Special fuel taxes and Power Take-off tax refunds.


• 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


refunds.


• 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.


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


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


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?


construction activities or for heating commercial buildings.


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.


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.


For Information on Fact Sheets, Revenue Notices, Newsletters and Law Changes see:

www.taxes.state.mn.us

April 30, 2009

Sales & Use Tax Division

Sales & Use Tax Division - Minnesota Department of ...•Use Tax for local governments: Sales tax is...

Documents

Transcript of Sales & Use Tax Division - Minnesota Department of ...•Use Tax for local governments: Sales tax is...