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Last Updated: 9/22/2017

Nontaxable Transactions

Motor Vehicle Tax Exemptions

Some transactions are exempt from Motor Vehicle tax depending on who purchases the vehicle, as listed in the table below. For these sales, you must keep on file Form PS2000, Application to Title/Register a Vehicle, showing the exemption code.

​Who is the customer?

​They can buy the following vehicles exempt from Motor Vehicle Tax

​Ambulance service

Ambulances sold or leased to an ambulance service (public or private) licensed under Minnesota Statutes 144E.10, Ambulance service licensing

Note: Exemption includes accessory items used to initially equip ambulances and repair and replacement parts for ambulances

Disabled veterans

​Any vehicle

Note: Purchaser must have grant assistance under U.S. Code, title 38, section 3902

​Federal government and its agencies

All vehicles (purchased, leased, or rented)  

​Federally Qualified Health Center

​Vehicles used only as mobile medical units for providing medical and dental services by a federal qualified health center. Leases of these vehicles is taxable.

​Job opportunity building zone (JOBZ)

Vehicles primarily garaged, used as part of, or in direct support of, the buyer’s operations carried on in a JOBZ zone. To claim exemption, the business must provide a written statement indicating they:

  • are a qualified JOBZ business

  • have a Business Subsidy Agreement

​Library

​Vehicles used as bookmobile or delivery vehicle

Metropolitan Transit Council

Buses (purchased or leased)

​Municipal fire department

​Fire trucks, pumper trucks, hook and ladder trucks, and clearly marked trailers

Note: Exemption includes items used to assemble or initially equip these vehicles or items that are permanently attached to the qualified vehicle

​Nonprofit group

Trucks, buses, or automobiles primarily designed to carry at least 10 people.

Note: Limited to groups organized for charitable, religious, or educational purposes to transport goods and people, but not employees. State or local government organizations, schools, or private bus companies do not qualify for this exemption.

​Police department

​Marked police patrol vehicles

Note: Exemption includes accessory items used to initially equip the vehicle

​Private non-profit or public school

​Vehicles used as instructional aids in a vehicle body and mechanical repair course 

Note: This exemption does not include vehicles used in driver education programs

​Public or private transit operations

​Vehicle used for transit services

Vehicles used to provide transportation services for the elderly or disabled may also qualify. To qualify, the provider must receive financial assistance or reimbursement under Minnesota Statute 174.24 or 473.384, or operate under Minnesota Statute 174.29, 473.388, or 473.405.

​Ready-mix producer

​Ready-mix concrete trucks

​Township

Snow plows, dump trucks, and other motor vehicles used only for road maintenance

Note: This exemption does not include automobiles, vans, or pickup trucks. This exemption does not apply to purchases by other local governments.

​Volunteer fire department

Fire trucks, pumper trucks, hook and ladder trucks, trailers, or components used to assemble these vehicles

Note: Exemption includes components to assemble these vehicles and accessories, replacement parts, and repair parts.

For more information, see:

Nontaxable Motor Vehicle Transfers

The following title transfers are not taxable:

  • By inheritance, including transferring a motor vehicle inherited upon death

  • From joint tenancy to one of the joint tenants for no monetary consideration

  • From an individual into the individual’s revocable trust

  • Between husband and wife in a divorce proceeding

  • By gift between:

    • Spouses

    • Parents and a child

    • Grandparents and a grandchild

No affidavit is required when a gifted motor vehicle is transferred between these relatives.

  • Between related companies as defined in Internal Revenue Code sections 118, 331, 332, 336, 337, 351, 355, 721, 731, 1031, 1033, or 1563(a). For more information, see Fact Sheet 132, Isolated and Occasional Sales.

  • A gift to a 501(c)(3) nonprofit organization when the motor vehicle is used exclusively for religious, charitable, or educational purposes.

  • A gift from a limited used vehicle dealer licensed (nonprofit charitable organization) to an individual – if there is no monetary or other consideration, or the expectation of consideration. The transferring parties must sign an affidavit when transferring the title.

Motor vehicles purchased in another state and used in Minnesota

If you bought and titled your vehicle under your name for at least 60 days in the other state, tax is not due when you register the vehicle in Minnesota.

If a Minnesota resident registered and paid sales tax to another state, Minnesota allows credit for tax paid to the other state. If the other state’s tax rate is lower, then tax is due on the difference in rates to Minnesota.

Buying for resale

If a buyer has a dealer’s or lessor’s license and is in the business of selling or leasing vehicles, the purchase for resale is not taxable. Without a dealer’s license, individuals cannot purchase a motor vehicle exempt for resale.

The type of dealer’s license the buyer has restricts what vehicles they can buy for resale. For example, a person licensed as a used car dealer cannot buy a new car exempt for resale. For more information, contact the Dealer’s Unit of the Department of Public Safety at 651-201-7800.

Dealer plates

Motor vehicle dealers must place dealer plates on any vehicle they buy for resale and use for demonstration purposes, which include use by:

  • the dealer, dealer's spouse, or any full-time employee of the dealership
  • a part-time employee for business purposes of the dealer
  • prospective buyers

It is illegal to use dealer plates on vehicles that are used for other purposes such as loaner vehicles, tow trucks, service trucks, or parts vehicles.

Interstate motor carriers

Interstate truckers may have a Motor Carrier Direct Pay authorization that allows them to pay a prorated tax on their vehicle when it is registered with the Department of Public Safety.

For more information, see the Transportation Service Providers Industry Guide.

Vehicles that don’t require registration

If vehicles are not registered for road use, they are not subject to the Motor Vehicle sales tax. Examples include:

  • All-terrain vehicles

  • Certain trailers

  • Mini-bikes

  • Off-road motorcycles

  • Off-road vehicles

Note: These vehicles are subject to the Minnesota general sales tax rate and any local sales tax rate that applies.

For more information, see the Off-Road Vehicle Industry Guide. Off-road vehicles may be required to be registered with the Minnesota Department of Natural Resources. For more information, see the DNR website.

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