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Last Updated: 12/27/2016

Motor Carrier Direct Pay (MCDP) Authorization

If you’re eligible, Motor Carrier Direct Pay (MCDP) authorization allows you to pay a prorated tax directly to the Minnesota Department of Revenue on qualifying purchases, instead of paying sales tax to the seller at the time of purchase.
 

You are eligible for the MCDP authorization if any of the following apply to your business:

  • You have a certificate or permit from the U.S. Department of Transportation (formerly the Interstate Commerce Commission)
  • You lease to a carrier that holds a certificate or permit from the U.S. Department of Transportation
  • You transport your own goods in interstate commerce and have a Minnesota prorate account
  • You transport exempt commodities (under Interstate Commerce Laws)

Note: You must have a Minnesota Tax ID Number before you can apply for MCDP. To register for a number, go to Business Registration, or call us at 651-282-5225 or 1-800-657-3605 (toll-free).

How do I apply for MCDP Authorization

Complete and send in Form MCDP-AP, Motor Carrier Direct Pay Application.

If you qualify, we will send you an MCDP authorization letter. You can use Form ST3, Certificate of Exemption to purchase qualifying items exempt from sales tax and then pay a prorated tax amount directly to the Minnesota Department of Revenue (for details, see MCDP Purchases).

MCDP Purchases

Vehicle purchases

If you have a Motor Carrier Direct Pay (MCDP) authorization and you buy a tractor or trailer, you pay the prorated Motor Vehicle Sales Tax directly to the Motor Vehicle Registrar Office at the time of registration.

For more information, contact the Minnesota Department of Public Safety at 651-201-7000 or visit its website at www.dps.mn.gov.

Equipment that qualifies for MCDP

Use your MCDP authorization when you:

  • Lease trucks, tractors, and trailers used in interstate transportation
  • Purchase repair parts and accessories that are attached to mobile transportation equipment. For example:
    • batteries

    • communication equipment
    • padlocks
    • refrigeration equipment
    • repair parts
    • tires

Equipment that doesn’t qualify for MCDP

You must pay sales tax to the seller when you buy the following items which do not qualify for MCDP:

  • antifreeze
  • dollies
  • flares
  • flashlights
  • furniture pads
  • grease
  • tractors and trailers (purchased, not leased)
  • ​hand or forklift trucks
  • packing containers
  • pallets
  • snowplows
  • truck washes, towing
  • warehouse, office, and plant equipment
  • anything else that is not, or will not be, attached to interstate transport vehicles

Calculating the tax due with MCDP

When you use MCDP, your sales tax is prorated based on the percentage of miles driven in Minnesota. To calculate the tax due:

1.  Add all purchases of qualifying repair parts and accessories, and leases of mobile transportation equipment where you did not pay tax to the seller. Enter this amount as MCDP Purchases when you file your sales and use tax return.Add all purchases of qualifying repair parts and accessories, and leases of mobile transportation equipment where you did not pay tax to the seller. Enter this amount as MCDP Purchases when you file your sales and use tax return.

2.  Multiply the total from Step 1 by:Multiply the total from Step 1 by:

  • If you’re not leased to a carrier: Your Minnesota prorate mileage percentage (shown on your company’s prorate registration).
  • If you’re leased to a carrier: That company’s prorate percentage.

3.  Multiply the result of Step 2 by the general state sales tax rate (6.875 percent). Enter this amount as tax when you file your sales and use tax return.

Note: Local taxes do not apply to qualifying items purchased with the MCDP authorization.

Example

You paid $4,500 for repair parts ($4,000), antifreeze ($100), and packing containers ($400) for a vehicle that qualifies for MCDP. Your Minnesota prorate mileage percentage is 5 percent. Calculate the tax as follows.

1.  Only the repair parts ($4,000) qualify for MCDP

2.  $4,000 x 5% = $200

3.  $200 x 6.875% = $13.75

Report $4,000 as the MCDP purchases and $14 ($13.75 rounded to the nearest number) as the tax amount.

Requesting a refund of tax

If you paid the full amount of sales tax on MCDP-qualified equipment, you may request a prorated refund. Complete and submit Form ST11, Sales and Use Tax Refund Request.

For more information on refunds of tax paid on tractors or trailers, contact the Minnesota Department of Public Safety at 651-201-7000 or visit its website at www.dps.mn.gov.

Cancelling your MCDP authorization

If you no longer want to report your tax directly to the state of Minnesota, start paying tax directly to your vendors. Inform your vendors that the Form ST3, Certificate of Exemption you gave them is no longer valid.

Legal status change

If you change your business’s legal status you must get a new Minnesota Tax ID number and a new MCDP authorization (if your business still qualifies).

Example

You change your transportation business from a sole proprietor to a corporation, or from a partnership to a sole proprietor. You must apply for both a new Minnesota Tax ID number and a new MCDP authorization.

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