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Legislature > House of Representatives > House Research > Taxes > Major State Aids & Taxes

Major State Aids & Taxes: Sales/Use Tax

Program Description

Sales tax is imposed by the state on the gross receipts of all persons who sell, lease, or rent tangible personal property at retail or provide taxable services. The use tax complements the sales tax and is imposed at the same rate on the storage, use, or consumption in Minnesota of taxable, tangible personal property purchased from any retailer, unless the Minnesota sales tax was already paid on these items. Since July 1, 2009, the rate has been 6.875 percent.

Major exemptions include: food consumption off premises, clothing, prescribed and nonprescribed drugs and medications, gasoline and special fuels taxed under the motor fuels excise tax, publications issued at intervals of three months or less (except over-the-counter magazines), motor vehicles subject to the 6.5 percent sales tax on motor vehicles, materials used or consumed in agricultural or industrial production, textbooks, residential heating fuels and water services, and industrial capital equipment.

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Tax Amount and Reporting

Calendar Year 2013 Sales/Use Tax: $5.5 billion (gross)
$5.2 billion (net after refunds)
$4.4 billion from residents and in-state sellers

A total of $5,475.4 million in state sales/use taxes was collected during calendar year 2013. The net amount of sales/use tax after the reduction of capital equipment refunds of $228.0 million was $5,247.4 million. (This includes refunds paid on other exempt purchases where the tax is paid at the time of purchase and then refunded, mainly for some specific capital projects.) Of the $5.2 billion in net sales taxes, about $866 million was collected from returns filed by out-of-state vendors, resulting in $4.4 billion allocated to Minnesota. The amount collected from returns filed by out-of-state sellers is not allocated to Minnesota in this data since the taxpayer's residence and/or place of business is unknown, nor is it included in the five-year historical table below. The table shows the amount and share of taxes that were allocated to Minnesota (paid by residents and in-state sellers) and the portion not allocated to Minnesota (paid by out-of-state sellers) over the last ten years.

Sales/Use Taxes
(In thousands and after capital equipment refund)
Allocated to Minnesota Not Allocated to Minnesota
Year Amount Percent Amount Percent Total
2004 3,542,797 85.9 579,820 14.1 4,122,617
2005 3,625,842 84.7 652,956 15.3 4,278,798
2006 3,729,834 84.2 701,410 15.8 4,431,245
2007 3,753,243 83.6 737,234 16.4 4,490,477
2008 3,704,922 83.6 725,751 16.4 4,430,673
2009 3,282,128 84.1 620,690 15.9 3,902,818
2010 3,792,834 84.1 719,073 15.9 4,511,908
2011 3,975,604 84.0 758,966 16.0 4,734,571
2012 4,192,302 83.7 815,555 16.3 5,007,858
2013 4,421,957 83.6 865,535 16.4 5,287,492

Most of the amounts not allocated to Minnesota is a tax on sales made by out-of-state businesses to Minnesota residents, which are reported on a single non-Minnesota return. The amount not allocated to Minnesota has gradually increased from about 14 percent to over 16 percent.

The sales tax amounts contained in this report exclude any local sales taxes that cities impose. Local sales taxes are used primarily to support specific capital projects. As of December 2013, the cities of Albert Lea, Austin, Baxter, Bemidji, Brainerd, Clearwater, Cloquet, Fergus Falls, Hutchinson, Lanesboro, Mankato, Marshall, Medford, Minneapolis, New Ulm, North Mankato, Proctor, Rochester, St. Paul, Two Harbors, Worthington, and St. Cloud-area cities imposed a 0.5 percent general sales tax. The cities of Duluth and Hermantown, and Cook County imposed a 1 percent general sales tax; Hennepin County imposed a 0.15 percent general sales tax; and a Transit Improvement Area consisting of Anoka, Dakota, Hennepin, Ramsey, and Washington counties imposed a 0.25 percent general sales tax.

The amounts shown in the statewide tables are net of the capital equipment refund; the amounts shown by geographic region in the maps are also net of the total remitted by out-of-state sellers. Because sales tax is reported in the county where the seller is located, higher amounts tend to be reported in counties with a regional center (e.g., Twin Cities, Duluth, Rochester, etc.).

Sales/use tax data was obtained from the Department of Revenue.

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Recent Law Changes

The tax rate was 3.0 percent in 1967 and has risen gradually over time. The most recent increase, from 6.5 percent to 6.875 percent, is a temporary increase imposed from July 1, 2009, to June 30, 2034. The extra revenue from this temporary rate increase is constitutionally dedicated to fund clean water, parks and trails, and arts and cultural heritage.

The legislature fairly often modifies the goods and services included in the sales tax base. Some of the most significant changes in recent years include the following:

  • 2011: exempting most purchases by townships
  • 2012: exempting materials used to construct a new professional football stadium
  • 2013: exempting most purchases by cities and counties; imposing the tax on most digital products; imposing the tax on repair and maintenance services for most business equipment; repealing an exemption for telecommunication equipment; and providing a number of construction exemptions for certain businesses

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    Per Capita Maps

    Map of sales/use tax per capita by countyMap of sales/use tax per capita by economic development region

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    The Past Five Years of Sales/Use Tax

    The table below shows the distribution of sales/use tax in thousands of dollars for the past five years for the state and economic development regions. The graph shows total dollars of sales/use tax for that same time period in nominal and constant (inflation-adjusted) dollars.

    Sales/Use Tax, Residents and In-State Sellers: Calendar Years 2009 to 2013
    Nominal dollars, in thousands
    2009 2010 2011 2012 2013 5-Yr. Chg. Aid
    State $3,282,128 $3,792,834 $3,975,605 $4,192,302 $4,381,851 34%

    Northern Regions
    Northwest (1)
    Headwaters (2)
    Arrowhead (3)
    West Central (4)
    Five (5)
    East Central (7E)
    31,723
    43,281
    190,860
    122,858
    85,895
    53,128
    36,342
    47,072
    225,147
    130,640
    93,169
    58,105
    37,344
    48,906
    234,675
    135,705
    94,576
    59,309
    40,376
    51,790
    251,467
    145,029
    101,085
    62,030
    41,188
    54,954
    250,075
    149,159
    104,737
    65,321
    30
    27
    31
    21
    22
    23

    Southern Regions
    Six East (6E)
    Upper MN Valley (6W)
    Central MN (7W)
    Southwest (8)
    Nine (9)
    Southeastern MN (10)
    54,376
    16,384
    194,241
    55,808
    114,736
    237,314
    65,057
    19,118
    222,919
    62,218
    127,896
    267,180
    69,557
    20,291
    235,872
    73,110
    134,165
    281,645
    75,359
    20,433
    251,451
    69,666
    140,468
    297,877
    72,934
    20,697
    261,112
    69,297
    140,448
    307,801
    34
    26
    34
    24
    22
    30
    Total Nonmetro $1,303,408 $1,200,604 $1,354,862 $1,425,155 $1,537,723 28%

    Metro Region
    Hennepin County
    Ramsey County
    Remaining Metro
    1,117,487
    355,761
    608,277
    1,295,300
    429,869
    712,803
    1,369,147
    444,105
    737,198
    1,436,127
    466,470
    782,676
    1,519,920
    496,077
    828,132
    36
    39
    36
    Total Metro $2,081,524 $2,437,972 $2,550,450 $2,685,273 $2,844,128 37%

    Statewide Sales/Use Tax, Residents Only

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    March 2017

House Research Department  ♦  600 State Office Building, Saint Paul, MN  55155  ♦  House.Research@house.mn  ♦  651-296-6753