Does Minnesota charge sales tax on services?
by October 12, 2023
The majority of U.S. states require merchants to charge sales tax on tangible personal property (TPP), otherwise known as physical goods. Many states also implement sales and use tax on digital goods and SaaS. Because the economy has shifted over time from a manufacturing economy to a service economy, states are now looking to generate revenue by taxing services.
Here’s what merchants need to know about taxing services in the state of Minnesota, which has a state sales tax rate of 6.875%.
Does Minnesota charge sales tax on services?
Services in Minnesota are generally not taxable, but there are a few exceptions:
- Admissions to places of amusement, recreational areas, and athletic events
- Providing the use of amusement devices, such as bowling alleys, video games, jukeboxes, billiards tables, ski lifts, and games of chance
- Providing the use of health clubs, spas, tanning facilities, reducing salons, steam baths, and athletic facilities
- Granting memberships to a club, association, or other organization that provides access to a sports or athletic facility
- Building cleaning and maintenance, disinfecting, and pest control services
- Delivery of aggregate materials by a third party, provided the materials are not used in road construction
- Detective, security, burglar and fire alarm, and armored car services
- Laundry and dry cleaning services, including cleaning, pressing, repairing, altering and storing clothes
- Linen supply service
- Carpet, drapery, and upholstery cleaning
- Lawn, garden, and tree and shrub services
- Lodging and related services by a hotel, rooming house, resort, campground, motel, or trailer camp
- Massages
- Motor vehicle towing, washing, waxing, rustproofing, and cleaning services
- Nonresidential parking services, for motor vehicles in parking lots, parking ramps, buildings or other places, not to include parking at a meter.
- Pet grooming, boarding, and care services, such as dog walking, pet sitting, and pet waste removal
- Telecommunication services, associated ancillary services, and pay television services
Please keep in mind that this is a guideline, and you should consult with a sales tax professional to determine if the services your business provides should be subject to state sales tax. For an in-depth look at Minnesota sales tax, TaxJar’s guide to sales tax in Minnesota and the Minnesota Department of Revenue has more details.
How to stay compliant with sales tax when you sell services
Managing all the moving parts of sales tax can be challenging. Are accounting services taxed? What about hair care or car maintenance? They may not be taxed in your state today, but sales tax laws change all the time. TaxJar makes it easier for you to stay current with it all, especially as you scale your business across states.
If you need to charge sales tax on services, TaxJar takes all of these state laws into account and makes your job simple. To learn more about TaxJar and get started automating your sales tax compliance, start a free, 30-day trial today.
