It is important for businesses to understand the taxability of items they use in their operations and be aware of their use tax obligations. Let’s delve into the details and guidelines provided by the Minnesota Department of Revenue.
Taxable Purchases:
Items used to operate your business are generally taxable unless a specific exemption applies. This includes a wide range of general items, cooking and serving equipment, utilities, and taxable services. Here are some examples:
TAXABLE PURCHASES
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EXAMPLES
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- Cash register tapes
- Cleaning supplies
- Computer hardware and software
- Free candy and matches
- Furniture and fixtures
- Menus
- Office equipment and supplies
- Paper towels
- Toilet tissue
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- Cooking and serving equipment
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- Appliances
- Cookware
- Dishes and glassware
- Linens
- Silverware
- Tablecloths
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- Electricity
- Gas for cooking and heating
- Water
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- Building cleaning and maintenance
- Detective and security
- Lawn and garden care
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It’s important to note that eating establishments generally do not qualify for the industrial production and capital equipment exemptions.
Vehicles and Trailers:
Licensed vehicles and trailers are subject to the 6.5% Motor Vehicle Sales Tax, separate from the state general sales tax. Additionally, installing equipment and utilities to convert a vehicle or trailer to serve food is taxable.
Use Tax:
If you make a taxable purchase for your business and the seller does not charge Minnesota sales tax, you are responsible for paying use tax on the cost of those items. Use tax is also applicable in various other situations. Here are some common scenarios where you may owe use tax:
- Buying taxable items or services online without paying sales tax
- Withdrawing an item from inventory for personal use, donation, or giveaway
- Buying taxable items outside of Minnesota
- Buying taxable items in another Minnesota city or county with a lower or no local sales tax
- It’s important to understand your use tax obligations, especially if your business is located in an area with local taxes.
Understanding taxable purchases and use tax is essential for businesses operating in Minnesota. In this blog post, we have outlined the guidelines provided by the Minnesota Department of Revenue regarding the taxability of various items used in business operations and the use tax obligations.
For more detailed and specific information, we recommend referring to the official resources and guidelines provided by the Minnesota Department of RevenueTaxable Purchases and Use Tax | Minnesota Department of Revenue (state.mn.us).
Get in touch with Prudent Accountants and stay informed and compliant with tax regulations to ensure accurate reporting and a smooth business operation.
