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. The taxation of various transactions (such as services and shipping) may vary from state to state, as can policies on topics such as whether the special taxes or installation fees included in the purchase price are also subject to sales tax. For sales with taxable and exempt products, taxes must be charged based on the percentage or weight of the taxable goods.
Companies in other states must collect and remit sales or use taxes from Minnesota on all taxable sales made while in the state. The state of Minnesota requires that sales tax be charged on shipping costs if the items shipped are subject to taxes. Shipping and handling charges in Minnesota are considered part of the sales price, even when indicated separately, and should apply to taxable sales and omitted from exempt sales. Books are taxable in the state of Minnesota, so Mary charges her customers a lump-sum sales tax of 7.625% on all sales.
Taxing transactions involving services, shipping and installation of tangible goods can be complicated, as several laws apply to slightly different situations. It is important for companies to review the laws and regulations established by the Minnesota Department of Revenue to stay up to date on what assets are taxable and which are exempt, and under what conditions. If taxable and non-taxable items are shipped together, the percentage (based on the sales price or weight of the item or items in question) of the shipping costs related to the taxable items must be taxed. All sales of tangible movable property and some services are subject to tax, unless there is a legal exemption or the purchaser files a completed Form ST3, Certificate of Exemption.
