Taxable Food Items in Minnesota
In Minnesota, food items fall under different tax rules. Candy, sweet baked goods, and breath mints are taxed as candy. Grocery items like milk, vegetables, meat, and cereal are not taxed. Prepared foods sold in bars, restaurants, or sold heated or with utensils provided are taxable. Food prepared off-site or sold cold in grocery stores may be exempt. Bottled water and canned goods are not taxed. Some cities collect an additional local sales tax up to 1.5% on restaurant meals and other goods. At over 6%, Minnesota has one of the highest sales tax rates. But groceries, clothing, newspapers, and prescription drugs are exempt. Understanding rules for taxable goods can save money.
Non-Taxable Items in Minnesota
In the state of Minnesota, services are generally not taxable. While most services are exempt from taxation, there are some exceptions. For instance, a service whose work involves the creation or manufacture of a product is likely to be subject to sales tax. Certain products are exempt from sales tax under Minnesota law. These include most grocery items, feminine hygiene products, and medical supplies. Professional services in Minnesota are usually not taxable unless they result in the production of a product for sale.
Taxable Candy Classification
If an item requires refrigeration, it is not candy. For example, Popsicles and ice cream bars require refrigeration so they are not taxable candy. However, these items are taxable if they are prepared food. Candy that does not require refrigeration is taxable even if it is sold frozen.
Sales Tax in Minnesota
Who pays sales tax in MN? Because Minnesota is a destination-based sales tax state, you would charge your buyer their local 7.78% rate. If you are based in another state but have sales tax nexus in Minnesota, do the same thing: collect sales tax at the rate of your buyer’s ship-to address.
Exemption from Sales Tax
What is exempt from sales tax in MN? Sales of food and beverages for consumption at your place of business are usually taxable at the entire combined state and local sales tax rate unless they are cold food products such as cold sandwiches, milkshakes, smoothies, ice cream, and cold salads sold to-go.