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Last Updated: 8/8/2017

Short-Term Rentals

Short-term motor vehicle rentals are leases of vehicles under an agreement for 28 days or less. Short-term rentals for certain motor vehicles are subject to the following:

  • Minnesota general sales tax rate
  • Any local taxes that apply
  • 9.2 percent Motor Vehicle Rental Tax
  • 5 percent Motor Vehicle Rental Fee, if applicable

Individuals, institutions, businesses, nonprofit organizations, and Minnesota state and local government agencies must pay the rental tax and fee, in addition to the general state sales tax and any applicable local sales tax.

The Motor Vehicle Rental Tax and Fee are due on all rental agreements that meet the following requirements:

  • The vehicle is a passenger automobile (designed to carry up to 15 passengers including the driver) including:
    • Passenger car
    • Passenger van with a carrying capacity of 3/4 ton or less (rated by the manufacturer)
    • Pickup truck with a carrying capacity of 3/4 ton or less (rated by the manufacturer)
  • The period of the agreement is 28 days or less
  • The customer takes possession of the vehicle in Minnesota

Note: The Motor Vehicle Rental Tax and Fee apply to short-term rentals –such as daily or weekly – even if the customer keeps the vehicle for more than 28 days. (Because the agreement is for 28 days or less, even if the customer keeps the vehicle for more than 28 days.)

Rentals not subject to Motor Vehicle Rental Tax and Fee

The 9.2 percent rental tax and 5 percent rental fee do not apply to rentals of:

  • Ambulances rented to ambulance services
  • Box trucks and trailers
  • Buses, school buses, or specially licensed commuter vans
  • Buses converted to provide temporary living quarters
  • Conversion vans equipped with at least four of the following:
    • Liquid propane gas cooking stove
    • Heating or air-conditioning unit separate from the vehicle engine
    • Refrigerator
    • Self-contained or externally connected toilet
    • Separate electrical power supply
    • Water supply system including a sink with a faucet
  • Limousines that include the services of a driver
  • Limousines used in a burial or funeral services
  • Motorcycles and motor scooters
  • Motor homes
  • Passenger vehicles used to provide licensed taxi services
  • Vans designed or adapted primarily for transporting property (with or without a barrier between the operator and the cargo areas)  
  • Vehicles rented to federal government agencies
  • Vehicles that have a camper mounted on the chassis of the vehicle

Note: The 9.2 percent rental tax and 5 percent rental fee do not apply to short-term rentals if the vehicle is either:

  • exempt from Minnesota general sales tax and local taxes
  • not a passenger vehicle, pickup truck, or van as defined in this section

Rentals not subject to the Motor Vehicle Rental Fee

The 5 percent rental fee does not apply to rentals by certain nonprofit car-sharing entities whose members pay the organization for the use of a motor vehicle (passenger vehicles, pickup trucks, vans). The fee does not apply if the organization:

  • Owns or leases a fleet of vehicles that are available to individual or group members to use for intervals of one hour or less
  • Parks its vehicles at unstaffed, self-service locations that are accessible any time of day
  • Provides maintenance, insurance, and fuel for the vehicle
  • Does not provide discounts or lower rates for increased use

Note: Member fees are subject to the state general sales tax, the 9.2 percent rental tax, and any local taxes that apply.

Motor vehicle lessor exemption

A lessor may choose to be exempt from collecting the 5 percent rental fee if, in the prior calendar year, the lessor had either:

  • No more than 20 motor vehicles available for rent
  • $50,000 or less in gross receipts subject to the rental fee

Reporting the 9.2 percent rental tax

Calculate the 9.2 percent rental tax on the same amount that you use to figure the general state sales tax. Report the calculated tax on the “Car Rentals” line of your sales tax return. Make sure you also report the general sales tax and any applicable local sales taxes on the return.

Reporting the 5 percent rental fee

Calculate the 5 percent rental fee on the same amount that you use to figure the general state sales tax. You report the fee once a year on your sales tax return.

If your filing cycle is

Report the 5 percent fee on your

Monthly

December return

Quarterly

October through December return

Annual

Annual return (February 5)

Report the amount of 5 percent rental fees collected and registration taxes paid on your December sales and use tax return as follows:

  1. Enter the total amount of the fees collected during the calendar year in the “Amount” column on the “Car Rental Fee (December)”
  2. Enter the difference by subtracting the registration taxes paid from the fees collected in the “Tax Due” on the “Car Rental Fee (December)” If the difference is less than zero, enter “0” as Tax.
  3. Enter the total amount of Minnesota registration taxes paid during the calendar year on the vehicle that you hold for rental purchases in the “Amount” column on the “Registration Taxes Paid” line.

If the fees you collected for the year are more than the amount you paid in Minnesota registration taxes on the rental vehicles, you must pay the excess fees with your December sales tax return. You cannot take credit or claim a refund for excess registration taxes paid.

Third party leases

If you are leasing a vehicle that will be leased or rented to a third party, you are not required to pay the 9.2 percent rental tax or the 5 percent rental fee. Give the vendor a completed Form ST3, Certificate of Exemption. Specify the Resale exemption.

However, you must collect both the 9.2 percent rental tax and the 5 percent rental fee from the third party.

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