Use tax complements sales tax and is similar to the sales tax. Use tax applies when you buy, lease, or rent taxable items or services used in your business without paying sales tax to the seller. The use tax is based on the cost of your taxable purchases.
Use tax may be due when you bring items into Minnesota or when you take them out of inventory for a taxable use. Use tax is also due if a seller does not charge Minnesota sales tax on taxable items.
Some examples of when use tax is due are:
- You buy taxable items online, by mail order or from a shopping channel when the seller doesn’t collect Minnesota sales tax from you.
- You buy a taxable item from a Minnesota business and the seller doesn’t collect sales tax from you.
- You buy an item that is taxable in Minnesota from a business in another state or country and the seller doesn’t collect sales tax from you.
- You buy a taxable item without paying sales tax because you intend to resell it through your business, but instead you take it out of your inventory for your own business or personal use.
Local Use Taxes
You may also owe local use tax. Several cities and counties have local sales and use taxes. If you buy taxable items for use in these localities and aren’t charged local sales tax, then you owe local use tax. For more information and a list of these taxes, view Local Sales and Use Taxes (Sales Tax Fact Sheet 164)
Tax Paid to Another State
Minnesota allows a credit for state or local sales tax legally required to be paid to another state or locality. When you buy items outside Minnesota, the supplier may be required to charge you that state’s state and local sales tax if you pick up the items there.
However, you still owe use tax to Minnesota if the other state’s sales tax rate is less than Minnesota’s general sales tax rate. You pay the difference in rates to Minnesota as variable rate use tax.
Minnesota does not allow credit for customs duty charges or tax paid to other countries.
The due date for your use tax return and payment varies depending on:
- whether your business has a Minnesota tax ID number; and
- the amount of your purchases subject to use tax for the year or filing period.
Businesses with no Minnesota tax ID numbers
If your business-related purchases were $18,500 or less for the year, file an annual Use Tax return by April 15 of the following year.
If your purchases subject to use tax exceed $18,500 for the year, you must file and pay by the 20th day of the month after your purchases exceeded $18,500.
Businesses with Minnesota tax ID numbers
Report and pay any state, local or “variable-rate” use tax you owe when you electronically file your regular Sales and Use Tax return. The due date and how often you must file depend on your average monthly tax reported in the previous year, as summarized in the table below.
||Less than $100 per month
||Feb. 5 of the following year|
||Less than $500 per month
||20th day of the month after the end of the quarter|
||More than $500 per month
||20th day of the month after the end of the month|