Minnesota charges a sales tax of 6.875 percent on most taxable items. Only six states have a higher sales tax rate than Minnesota. Some popular items are exempt from sales tax in Minnesota, such as clothing, legal drugs, newspapers and unprepared food. Although Minnesota has a narrower sales tax base than most states in the region, sales tax is still charged on most goods and services.
Admission Fees
Minnesota collects sales tax on fees charged to gain admission to health clubs, golf clubs, movies, amusement parks, recreational areas, etc. Fees charged for the use of tanning facilities are also taxable.
One-time health club initiation or membership dues are taxable; however, membership dues paid to the YMCA, YWCA, or Jewish Community Centers of Minneapolis and St. Paul are exempt from sales tax.
Building Materials and Supplies
Materials and supplies used to build or improve real property are taxable in Minnesota.
Cable and Satellite Television Services
Minnesota collects sales tax on charges for cable, satellite and pay-per-view television.
Candy and Soft Drinks
Candy is not included in the food exemption in Minnesota. Interestingly, if flour is listed as one of the ingredients in a candy item, the item is not taxable. However, if the item is sold from a vending machine, it is taxable, regardless of whether it contains flour.
Computer Software
Computer software that is already written is taxable; however, custom software that is developed according to the specifications of a customer is not taxable.
Delivery Charges
Sales tax is collected on delivery charges in Minnesota if the item being delivered is taxable.
Labor
Minnesota charges sales tax on labor to produce or install taxable items. Labor to repair an item is not taxable.
Leases and Rentals of Motor Vehicles
Sales tax is charged up front for motor vehicle leases if the vehicle's gross weight is 10,000 lbs. or less, regardless of whether the vehicle is new or used or is used for business or personal use.
Machinery, Equipment, Appliances, Furniture, Etc.
Sales tax is charged on machinery, appliances, furniture, etc., in Minnesota on both new and used items. Sales tax paid on certain machinery and equipment may be eligible for a refund if the machinery or equipment is being used in retail manufacturing.
Prepared Food and Drinks
Food items that are prepared by the seller are taxable in Minnesota. Also, all sales made from a vending machine are taxable.
Liquor is subject to the 6.875 percent sales tax as well as a 2.5 percent gross receipts tax.
Services
Most services are taxable in Minnesota, including vehicle towing and washing, security, laundry, cleaning, lawn care, landscaping, pet grooming, and parking services.
Utilities
Minnesota collects sales tax on utility charges, including electricity, telephone, gas and water. However, residential customers are exempt from sales tax on natural gas or electricity November through April if it is the primary heat source for the residence.