Minnesota Swaps Sales Tax Refund for Sales Tax Exemption on Capital Equipment, July 2015

In 1989, Minnesota instituted a sales tax refund program for capital equipment. Since then, businesses purchasing eligible capital equipment have been required to pay sales tax on the purchase and then seek a sales tax refund. It was, in theory at least, a positive for businesses. In reality, however, the sales tax refund involved reams of paperwork, hours of time, and often costly bookkeeping and accounting fees.

Businesses are therefore applauding the termination of the capital equipment refund and welcoming the up-front sales tax exemption for capital equipment.

Effective July 1, 2015, businesses are eligible for an exemption from state and local sales or use tax on capital equipment, defined as “machinery and equipment purchased or leased, and used in Minnesota by the purchaser or lessee primarily for manufacturing, fabricating, mining or refining tangible personal property to be sold ultimately at retail if the machinery and equipment are essential to the integrated production process of manufacturing, fabricating, mining or refining. Capital equipment also includes machinery and equipment used primarily to electronically transmit results retrieved by a customer of an on-line computerized data retrieval system.”

A sales tax refund may still be obtained for any sales tax paid on qualifying machinery and equipment on or after July 1, 2015. Additional information available here.