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Minnesota Offers Tax Exemptions for Heating


 Minnesota. Cold.

Minnesota can be uncomfortably cold during the winter. Surely even Garrison Keillor considers flying south when the daily high hovers around 10 degrees Fahrenheit. It's good to learn, then, that the state exempts most utilities used for heating residences.

The weather outside is frightful

Ordinarily, sales of electricity, gas, water or steam are subject to tax in Minnesota. However, in the spirit of keeping folks in the North Star State warm, sales of the following are not taxable:

  1. "Natural gas or electricity sold for residential use… for the billing months of November, December, January, February, March and April when sold to metered customers who use it as their primary source of heat."
  2. "Fuel oil, coal, wood, steam, hot water, propane gas and LP gas delivered to a residence."

It's worth noting that only the primary source of heat is tax exempt. For example, any folks keeping their homes warm with space heaters, electricity and natural gas (it does get cold there, remember?) must pay sales tax on the two additional sources of heat.

Furthermore, the fuels listed  in #2 above are only exempt when delivered to residence. If they're delivered to a non-residence, they are subject to tax. If they're picked up by a customer rather than delivered, they are subject to tax.

Residential and commercial, combined

If utilities used to heat residences are tax exempt in Minnesota, utilities used to heat commercial spaces are not. What to do, then, when a building is used for both residential and commercial purposes?

According to the Minnesota Department of Revenue, when there are separate meters for residences and commercial spaces, it's easy: sales to residences are exempt and sales to commercial spaces are not. When residences and commercial spaces share a meter, taxability is based on the percentage of the building used for each purpose. If more than 50% of the square footage of the building is used as a residence, the exemption applies; if more than 50% of the square footage of the building is used commercially, sales tax applies to utilities.

Under construction

The DOR also clarifies that "utilities supplied for residential heating during construction of a residence are not taxable."

Conundrum

Firewood delivered to the home and used at home in a wood stove or fireplace is exempt. Firewood used during camping trips or picnics, however, is not tax exempt.

But what if you take firewood from your home supply, pile it into your truck and take it camping? Hmmm.

How does your business keep abreast of changing sales tax rates, laws, and exemptions? An automated solution makes it simple.

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Minnesota State Rates

photo credit: Sri Dhanush via photopin cc


Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.