Business-related warehousing and storage services will be subject to state sales tax in Minnesota, effective April 1, 2014.
Sales tax will apply to tangible personal property (owned and stored by businesses) that can be “seen, weighted, measured, felt or touched.” Digital storage services are not subject to sales tax in Minnesota.
Exemptions
As with most sales tax laws, a number of exemptions apply. These are the:
- Warehousing and storage of agricultural products (produced on a farm, such as grain or animal products) and refrigerated storage;
- Warehousing and storage of electronic data;
- Warehousing and storage services provided by a parent company or affiliated group: as with storage fees when a “company stores its inventory in its own warehouse, separate from its production facility;” and
- “Self-storage services that the purchaser cannot deduct as a business expense on its federal corporate or income tax return.”
According to the Minnesota Department of Revenue notification, self-storage services include:
- “Purchase or rental of secure areas, rooms, units or compartments where the property owner retains the custody and care of items being stored, and controls the storage and removal of them;” and
- Storage of motor vehicles, recreational vehicles, and boats (as long as the storage fee cannot be deducted as a business expense).”
However, self-storage services do not include rental of entire warehouses, “or storage where the service provider’s staff handles storage and removal of the items.”
Businesses have time to digest the new law before it takes effect next April. Additional information on how the Department of Revenue will implement the law will be released in the future.
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