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What is Taxed and Exempted in MN?
- The Minnesota state sales tax rate is 6.875%.
- Depending on local municipalities, the total tax rate can be as high as 8.375%.
- Cities and/or municipalities of Minnesota are allowed to collect their own rate that can get up to 1.5% in city sales tax.
- When buying taxable goods in Minnesota, sales tax is collected at the point of purchase. Use tax applies if sales tax was not paid initially.
- Use tax may apply to online or out-of-state purchases if sales tax was not collected at the time of sale. The use tax rate is the same as the regular Minnesota sales tax rate.
Items Exempt from Sales Tax in MN
- Baby clothing (including receiving blankets used as clothing) is not taxable.
- Digital goods, which are nontangible versions of tangible goods, are not taxable.
- Menstrual products like tampons are exempt from sales tax in Minnesota.
- Food and prescription medicine are exempt from sales tax in Minnesota.
- Shoes are generally not taxed.
Taxable Items in MN
- Examples of taxable apparel include athletic uniforms and cleated athletic shoes.
- Accessories such as handbags and jewelry are subject to sales tax.
- Clothing accessories, most protective equipment, sports and recreational clothing and equipment, and fur clothing are taxable.
Tax Rates in Minnesota
- The state’s income tax rates range from 5.35% to 9.85%
- The average effective state and local tax rate in Minnesota is 8.05%.
- Minnesota also has a sales tax of 6.875% and a gas tax of 28.6 cents per gallon.
Automating Minnesota Sales Tax Collection
- If you accidentally collect sales tax on a product that isn’t taxable in Minnesota, you create a negative customer experience.
- Not taxing clothing will cost the state about $443 million this year in lost revenue, according to the Minnesota Department of Revenue.
Use Tax Explanation
- Use tax is a sales tax on purchases made outside one’s state of residence for taxable items.
- Use tax may be due on items used, stored, or consumed in one’s state of residence and on which no tax was collected at the time of purchase.