Minnesota Sales Tax and Invoicing Rules for 2026

TL;DR: Minnesota has a 6.875% state sales tax with local additions pushing combined rates to 7.125%–8.875%. Clothing is exempt. Economic nexus applies at $100,000 in sales OR 200 transactions. Minnesota is an SST member state.

State sales tax rate

Minnesota levies a 6.875% state general sales tax — one of the higher state rates in the country. Local jurisdictions add 0.25%–2.0% in additional taxes.

Minneapolis and St. Paul both have combined rates around 8.025%. Duluth reaches approximately 8.875% with its local tourism and transit taxes. Some special taxing districts apply additional levies.

Minnesota uses destination-based sourcing as a Streamlined Sales Tax member state.

Nexus rules

Physical nexus is established by offices, employees, inventory, or property in Minnesota.

Economic nexus triggers at $100,000 in gross retail sales OR 200 or more retail transactions delivered into Minnesota in a twelve-month period. Either threshold creates nexus.

Marketplace facilitators must collect and remit on behalf of third-party sellers. Minnesota is a full member of the Streamlined Sales Tax (SST) agreement, and out-of-state sellers can register through the SST system.

Invoice requirements

The Minnesota Department of Revenue requires sellers to maintain complete records. Invoices should include:

• Seller's name, address, and Minnesota tax ID number
• Date of sale
• Buyer information
• Description of goods or services
• Sale price
• Tax rate and tax amount (shown separately)
• Total

Items that are exempt (clothing, food) must be clearly distinguished from taxable items on the invoice. For exempt sales, retain the buyer's Minnesota Certificate of Exemption (Form ST3) or the SST exemption certificate. Records must be kept for at least three and a half years from the return due date.

Exemptions and special cases

Clothing is exempt in Minnesota — most apparel and footwear are not subject to sales tax. Fur clothing, sports and recreational equipment, and accessories (jewelry, watches) are exceptions and remain taxable.

Groceries (unprepared food) are exempt. Prescription drugs are exempt.

Capital equipment used in manufacturing is eligible for a refund of sales tax paid (not an upfront exemption — you pay tax at purchase and apply for a refund). SaaS is generally not taxable in Minnesota — the state has not classified cloud-based software as taxable tangible personal property.

However, prewritten software delivered electronically is taxable. Digital products (e-books, digital audio, digital video) are taxable under Minnesota's specified digital products provisions.

Filing frequency and deadlines

Filing frequency depends on liability:

• Monthly — annual liability over $1,200
• Quarterly — liability between $500 and $1,200
• Annually — liability under $500

Monthly returns are due the 20th of the following month. Quarterly returns are due the 20th of the month following the quarter. Annual returns are due February 5.

Minnesota does not offer a vendor discount for timely filing. Electronic filing is required for most businesses.

Penalties for non-compliance

Late filing incurs a 5% penalty on unpaid tax if filed within 30 days, plus an additional 5% if more than 30 days late (up to 10% total).

Interest accrues at a rate set by the Commissioner. An additional extended delinquency penalty of up to 5% may apply if tax remains unpaid 180 days past due. Minnesota participates in SST audit programs and multi-state data sharing.

FAQ

Is all clothing exempt in Minnesota?

Most everyday clothing and footwear is exempt. However, fur clothing, athletic and protective equipment (cleats, helmets, pads), and accessories like jewelry and watches are taxable. The exemption applies to general apparel.

Are digital products taxable in Minnesota?

Yes, specified digital products including digital audio, digital books, digital video, and digital audio-visual works are taxable. However, SaaS and cloud-based software accessed without downloading are generally not taxable under current law.

How does the capital equipment refund work?

Businesses that purchase qualifying capital equipment (machinery used in manufacturing) pay sales tax at the time of purchase and then apply for a refund from the Department of Revenue. This differs from states that provide upfront exemptions.

Find the combined rate for any Minnesota address with InvoiceQuickly's tax rate tool.