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Last Updated: 8/7/2017

Sales, Leases, or Rentals

Off-road vehicle sales

State and local sales tax are due on dealer sales of off-road vehicles. An “off-road vehicle” is a vehicle that is not designed or licensed to be used on public streets or highways. Examples include:

  • All-terrain vehicles (ATVs)
  • Boats and personal watercraft
  • Dirt bikes
  • Dune buggies and sand-rails
  • Rock crawlers
  • Snowmobiles

Calculating the purchase price

For off-road vehicles, the purchase price is determined by subtracting any trade-in allowance from the sales price as shown below.

  Off-road vehicle sales price
-
Trade-in allowance                                                                                                                 
= Purchase price of the vehicle
x 6.875% Minnesota general sales tax rate and any local sales tax rate that applies 
= Total sales tax due

Note: Rebates can reduce the purchase price, be used as a down payment, or be refunded to the customer. A rebate must have a fixed value. If a third party entered into an agreement with a vehicle manufacturer to offer rebates, the rebate can reduce the vehicle’s sales price.

Off-road vehicle sales price

The sales price includes:

  • Price of the off-road vehicle
  • Charges for labor performed (for example, rustproofing, undercoating, dealer preparation, and transportation)
  • Charges for accessories (for example, running boards and mud flaps)

Trade-in allowance

  • A trade-in allowance reduces the purchase price when an off-road vehicle is taken in trade by the seller.
  • A trade-in allowance does not reduce the purchase price when an off-road vehicle is taken in trade by a third party. (For example, a dealer sells an off-road vehicle to a customer, but the customer sells their off-road vehicle to a third party. The proceeds received from the third party do not reduce the purchase price of the vehicle.)

What charges are not taxable

Do not charge sales tax on:

  • Registration, license, and document fees 
  • Extended warranties

Off-road vehicle leases or rentals

Leases or rentals of off-road vehicles are taxable no matter the length of the rental period or the number of payments.

Recurring lease or rental payments for off-road vehicles are taxed as follows:

  • First payment – charge tax based on where the customer first takes possession of the vehicle whether the vehicle is picked up at your location or if the vehicle is delivered elsewhere.
  • Later payments – charge tax based on the primary location of the leased item.

Note: The primary location is the address provided by the customer and is not affected by occasional use of the vehicle at different locations.

Example

A customer leases an ATV and picks up the ATV from your store in St. Paul. The customer will keep the ATV at their home in St. Cloud.

  • The first lease payment is subject to the Minnesota general rate sales tax, St. Paul local tax, and Transit Improvement tax.
  • The later lease payments are subject to the Minnesota general rate sales tax and St. Cloud Area local tax.

Local sales tax

Some cities and counties have local sales and use taxes. You must charge any local sales taxes that apply if your business is located in, or delivers to, an area that has them.

To determine the sales tax rate, use the location where the product is received by the customer, typically your business or a delivery address. You can use the Sales Tax Rate Calculator to help you determine the sales tax rate.

Note: The rate calculator does not include special local taxes.  

For more information, see:

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