Minnesota Sales Tax and Invoicing Rules for 2026

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.

Step-by-step: register and start collecting in Minnesota

1. Confirm nexus status — physical presence triggers immediate nexus. Economic nexus applies at $100,000 in retail sales OR 200 retail transactions to Minnesota buyers in the prior 12 months.
2. Register through e-Services — apply for a Minnesota sales tax permit via the Department of Revenue's online portal. Permits issue within 5–7 business days at no charge.
3. Configure state + local rates — Minnesota state rate is 6.875%. Minneapolis adds 0.5% (and a 3% prepared food/beverage tax in entertainment district), Saint Paul adds 0.5% lodging tax, and several counties have transit improvement taxes. Combined rates range 6.875%–8.375%.
4. Capture exemption forms — Minnesota uses Form ST3 (Certificate of Exemption) for resellers, manufacturers, agriculture, and nonprofits. Multi-state SST certificates also accepted.
5. File via e-Services — required for nearly all sellers. Frequency: monthly ($500+/month), quarterly ($100–$500/month), or annual. Returns due 20th of the month following the period.

Real Minnesota compliance situations

• A Minneapolis food truck charges 6.875% state + 0.5% city + 3% downtown entertainment district food/beverage = 10.375% during downtown events. The truck's POS uses geofencing to apply the right rate based on actual location of sale — a critical detail Minnesota auditors check.
• A Saint Paul boutique sells clothing exclusively. Most clothing is exempt in Minnesota (a meaningful state exception), but accessories like jewelry, handbags, and protective gear are taxable. They itemize every receipt to avoid charging tax on exempt apparel.
• A Duluth-based outdoor gear retailer ships statewide. They configured ZIP-based rate logic for transit improvement taxes that apply in some counties but not others. Cook County's 1% transit tax tripped them up until corrected via voluntary disclosure.

More Minnesota FAQs

Is clothing taxable in Minnesota? Most general clothing is exempt — a notable consumer-friendly exception. Exclusions from the exemption: clothing accessories, sporting equipment, protective equipment, and clothing rentals (formal wear). Children's clothing, footwear, and most apparel are exempt.

Is SaaS taxable in Minnesota? Yes — Minnesota taxes SaaS and pre-written software delivered electronically as of legislative changes in recent years. Custom software is generally exempt. Digital products (downloads, streaming) are also taxable.

Does Minnesota have a sales tax holiday? No — Minnesota has consistently declined to enact a state-level sales tax holiday. Some legislators have proposed one but bills haven't advanced.

What about ride-share, lodging, and rental car tax? Minnesota imposes additional taxes on these: 6.875% state + local city/lodging taxes (often 5–13% combined for hotels), plus rental car tax of 9.2% in metro counties.