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Minnesota Use Tax on Internet and Out-of-State Purchases

  • Dec 4, 2014 | Gail Cole

 Sales tax or use tax, you have to pay it.tax

Browsing the internet for holiday gifts? Buying gifts from shopping networks or mail-order catalogs? Planning a road trip to shop in another state?  If so, you might owe use tax on those purchases.

The Minnesota Department of Revenue is reminding taxpayers that Minnesota use tax is due when Minnesota sales tax wasn’t paid on taxable goods at the time of sale. This most typically occurs when you buy from businesses that don’t have nexus in Minnesota.

Nexus is triggered when out-of-state sellers meet one of the following conditions:

  • Have a physical presence in Minnesota
  • Have solicitors in Minnesota who refer customers through a link on a website or some other way
  • Have an agreement with an online marketplace that requires them to collect sales tax
  • Have voluntarily registered for a sales tax account through the state or through Streamlined Sales Tax

Minnesotans shopping on Amazon don’t need to worry about tax because the online retailer began collecting Minnesota sales tax on October 1 of this year. If you buy something on eBay from a seller located in Minnesota, you will probably pay sales tax on the transaction. If you buy something from an eBay seller located in another state, you probably won’t pay sales tax and you will owe the state use tax.

Pay the difference

Use tax is also owed on items purchased in Minnesota if the rate of sales tax paid was less than the rate in effect where the item will be used. To clarify: Douglas County imposes local sales and use tax at the rate of 0.5% in addition to the state sales and use tax. Hermantown imposes a local sales and use tax of 1%. If you buy a blanket in Douglass County and give it to your sister who lives in Hermantown, you (or your sister) owe the 0.5% difference.

The same is true if you take a shopping excursion to neighboring Wisconsin, where the state rate is 5% and the highest combined rate is 5.6%. You might think you have no Minnesota tax obligation if you pay 5.6% Wisconsin sales tax on an item that you take home to Albert Lea, Minnesota (where the combined sales tax rate is 7.375%). But if you think that, you’re mistaken. In fact, you owe 1.775% in Minnesota use tax.

Individual taxpayers must remit use tax by April 15 of the following year. File online or remit Form UT1.  Businesses with a Minnesota tax ID number must pay remit use tax with the next sales and use tax return. Those without a Minnesota tax ID number have until April 15 of the following year. Additional information.

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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.