Minnesota Sales Tax Guide
Chapter 3: Getting registered to collect Minnesota sales tax
The first step toward proper management of Minnesota sales tax involves getting registered with the Minnesota Department of Revenue. We get a lot of questions regarding this and recognize it may be the most difficult hurdle for small businesses to overcome. Registering to collect sales tax in Minnesota means you've acknowledged your legal responsibility to collect and consequently file and remit sales tax to the state.When do I need to register to collect sales tax in Minnesota?
There are two ways to think about this question. The first involves a topic called "nexus". Nexus, in the tax world refers to a company's connection to a state. While this connection is typically that of a physical nature (warehouse in the Minnesota, inventory in Minnesota, etc.), nexus is not limited to a physical presence. There are many nexus triggers we won't delve into here and, more importantly, nexus is often determined by a combination of events rather than a single event.
If it is determined you have nexus in Minnesota, the Minnesota Department of Revenue has the legal right to require you to collect, file, and pay sales tax.
If you've determined you have nexus in Minnesota, the second question involves a topic we call "materiality". In short, you'll want to ask yourself whether the amount of sales tax you are required to collect and remit to the Minnesota Department of Revenue is enough to put you at an unacceptable level of penalty and interest risk. As everyone's level of risk tolerance is different, this is a question that can only be answered by you, the business owner.
Prior to selling taxable goods or offering taxable services in Minnesota, a business that has established nexus within the state is required to register for an Tax ID.What triggers nexus in Minnesota?
Nexus is a complex topic that, depending on your situation, may require the in-depth knowledge of a qualified tax professional. That being said, there are a few common business events and situations that are known to trigger nexus in Minnesota. The most common include the following:
- Opening an office in Minnesota
- Storing inventory in a warehouse in Minnesota
- Having remote employees located in Minnesota
Businesses may register for an Minnesota Tax ID online by visiting the Minnesota Department of Revenue and following the instructions provided.
It is also possible to get registered for a Tax ID by completing and mailing in a Application for Business Registration (ABR), but this approach is not recommended. Form based registration is being phased out in favor of online registration. It’s fast, free, and more reliable than mailing in a completed paper form.What information is required to register for a Minnesota Tax ID ?
When applying for a Minnesota Tax ID, there are a number of pieces of information that may be required. These include, but are likely not limited to:
- Business name
- Business entity type
- Description of business activities
- Date business activities began or will begin
- Business address and mailing address
- Business contact information
- The North American Industry Classification System (NAICS) code that best matches your business
- Federal Employer Identification Number (FEIN)
- Your name, Social Security Number (SSN), driver license number, personal address, and personal contact information of owner/sole proprietor
- List of business officers, partners, managing members, and/or trustees
- Employment information (date of hire, number of employees, payroll amounts, payroll agent’s PTIN, if applicable)
The cost to register for a Minnesota Tax ID is currently $0.Do I need a Federal EIN in order to register in Minnesota?
The Minnesota Department of Revenue requires businesses requesting a new Tax ID to supply a valid Federal EIN number during the initial registration process. You can apply for an EIN number online by visiting the IRS website.Which Minnesota governement agencies do I need to register with in order to get a new Tax ID?
We recommend you contact the Minnesota Department of Revenue to verify which government agencies you will be required to register with. Potential agencies include the following:
- Minnesota Department of Revenue
- Minnesota State Employment Agency
- Minnesota State Department of Labor
- Minnesota Local Tax Jurisdictions
Yes! Minnesota Tax ID registration is unique to the state of a business. The Minnesota Department of Revenue requires all registered businesses to have current business owner name and contact information on file.