Menu

House Research Navigation

Print Twitter RSS Email

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: unprepared food, 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.

Jump to top


Tax Amount and Reporting

Calendar Year 2014 Sales/Use Tax: $5.7 billion (gross)
$5.4 billion (net after refunds)
$4.5 billion from residents and in-state sellers

A total of $5,662.0 million in state sales/use taxes was collected during calendar year 2014. The net amount of sales/use tax after the reduction of capital equipment refunds of $225.5 million was $5,436.5 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 $5.4 billion in net sales taxes, about $926 million was collected from returns filed by out-of-state vendors, resulting in $4.5 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
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 4,431,851 83.5 865,535 16.5 5,247,386
2014 4,510,068 83.0 926,466 17.0 5,436,534

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 17 percent.

The sales tax amounts contained in this report exclude any local sales taxes that cities and counties impose. Local sales taxes are used primarily to support specific capital projects. As of December 2014, 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 counties of Becker, Beltrami, Douglas, Rice, and Wadena imposed a 0.50 percent sales tax for transit, and the county of Olmsted imposed a 0.25 percent sales tax for transit.

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.

Jump to top


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
  • 2014: exempting most purchases by special districts; repealing the 2013 imposition of the tax on repair and maintenance services for most business equipment; reinstating the exemption for telecommunications equipment that was repealed in 2013; exempting purchases of coin-operated entertainment and amusement devices
  • Jump to top


    Per Capita Maps

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

    Jump to top


    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 2010 to 2014
    Nominal dollars, in thousands
    2010 2011 2012 2013 2014 5-Yr. Chg. Aid
    State $3,792,834 $3,975,605 $4,192,302 $4,381,851 $4,510,068 19%

    Northern Regions
    Northwest (1)
    Headwaters (2)
    Arrowhead (3)
    West Central (4)
    Five (5)
    East Central (7E)
    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
    40,565
    56,634
    267,435
    152,028
    108,083
    69,327
    12
    25
    19
    16
    16
    19

    Southern Regions
    Six East (6E)
    Upper MN Valley (6W)
    Central MN (7W)
    Southwest (8)
    Nine (9)
    Southeastern MN (10)
    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
    74,855
    20,478
    271,833
    68,584
    145,073
    313,327
    15
    7
    22
    10
    13
    17
    Total Nonmetro $1,354,862 $1,425,155 $1,507,029 $1,537,723 $1,590,223 17%

    Metro Region
    Hennepin County
    Ramsey County
    Remaining Metro
    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
    1,578,540
    489,873
    851,432
    22
    14
    19
    Total Metro $2,437,972 $2,550,450 $2,685,273 $2,844,128 $2,919,845 20%

    Statewide Sales/Use Tax, Residents Only

    Jump to top

    December 2017

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