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Last Updated: 9/5/2018


You must pay sales tax directly to the vendor and cannot use your Direct Pay Authorization to purchase these items:
  • Admissions to places of amusement or athletic events, or charges to use an amusement device

  • Building cleaning and maintenance

  • Detective or security services

  • Laundry and dry cleaning

  • Lawn care

  • Lodging and related services

  • Motor vehicles

  • Motor vehicle cleaning, rustproofing, undercoating, or towing

  • Parking services

  • Taxable food or beverages  

Taxable services

You must pay sales tax directly to the vendor and cannot use your Direct Pay Authorization to purchase taxable services.

For more information on taxable services, see below.

Direct Pay Authorization

Direct Pay Authorization lets state agencies remit tax directly to the Minnesota Department of Revenue instead of paying sales tax to the seller at the time of purchase. State agencies owe tax on most purchases of taxable items.

For more information, see Direct Pay Authorization.

State agencies must provide their vendor one of the following to purchase items exempt from sales tax:

  • A completed Form ST3, Certificate of Exemption, specifying the Direct Pay Authorization exemption
  • A purchase order containing the equivalent information

Motor vehicle purchases

State agencies must pay the 6.5 percent Motor Vehicle Sales Tax on motor vehicle purchases. In addition, the $20 transit excise tax may apply.

For more information, see the Motor Vehicle Industry Guide.

Digital products

Digital products are products you access or obtain through electronic methods (downloading, streaming, email). You may purchase taxable digital products with your Direct Pay Authorization.

Taxable digital products include:

  • Digital audio works
  • Digital audiovisual works
  • Digital books
  • Digital codes

Nontaxable digital products include:

  • Access to digital news articles
  • Charts and graphs
  • Digital photos and drawings
  • Logos and designs

For more information, see Fact Sheet 177, Digital Products.

Optional maintenance contracts for equipment

Optional maintenance contracts for equipment usually include repair labor, replacement parts, cleaning, inspection, or other general services. Optional maintenance contracts are taxable if they include any taxable items, unless the cost of those items is insignificant.

Optional extended warranty contracts for equipment

Optional extended warranty contracts that cover unexpected repair costs are not taxable. However, separate charges for repair parts are taxable if the charge is in addition to the warranty contract and is separately stated on the customer’s bill.

For more information, see Revenue Notice 16-03, Sales and Use Tax - Optional Warranty and Maintenance Contracts on Equipment.


There are four types of labor. Whether the labor is taxable depends on the type of work performed.

Labor type

Is it taxable?


Fabrication labor


  • Custom sawing
  • Bending sheet metal
  • Making furniture

Installation labor


  • Installing canned computer software
  • Configuring computer equipment
  • Installing modular furniture

Construction labor


  • Remodeling a building
  • Roof repairs
  • Paving a parking lot
  • Installing a parking meter into the ground

Repair and maintenance labor


  • Oil change
  • Inspecting and calibrating machinery and equipment
  • Sharpening tools

Real property 

Real property is land and structures that are attached to the land or building. Construction contracts for real property improvements are not taxable. However, contractors pay sales tax on all inputs that go into the construction. Examples include:

  • Building materials
  • Electrical wiring materials
  • Flooring materials
  • Paint

For more information, see Fact Sheet 128, Contractors.

Use tax

Use tax applies when you buy, lease, or rent taxable items or services without paying sales tax to the vendor. Use tax is due on the cost of an item.

You may owe use tax if you bring taxable items into Minnesota or take items out of inventory for taxable use, such as an interagency transfer.

Local use tax

If you are located in an area with local taxes, local use tax may also apply. Local use tax is based on where the items are used.

For example, you purchase $1,000 of office supplies. The supplies are delivered to St. Paul and then distributed to different offices. The distributions are:

  • 60 percent to St. Paul
  • 15 percent to Bloomington
  • 25 percent to Duluth.

You would report the purchase amount in each of the local use tax lines as follows:

  • St. Paul tax line, $600
  • Hennepin County tax line, $150
  • Duluth tax line, $250
  • Transit Improvement tax line, $750 (both St Paul and Bloomington are in the Transit Improvement taxing jurisdiction) 

For more information, see Fact Sheet 164, Local Sales and Use Taxes.

Out of state purchases

If you purchased and picked up items in another state and paid that state’s sales tax, you may still owe Minnesota use tax if the other state’s sales tax rate is less than Minnesota’s. No additional tax is due if the other state’s rate is more than the Minnesota rate.  No refund is allowed if the other state’s rate is more than the Minnesota rate.

To calculate the variable rate, subtract the other state’s tax rate from the Minnesota tax rate as shown.

​Minnesota sales tax rate ​6.875%
​Tax rate paid to another state - 5.500%
Variable rate​ ​1.375%

Report the difference in tax on the variable rate use tax line of your sales and use tax return. For more information, see Fact Sheet 164, Local Sales and Use Taxes

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