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Last Updated: 6/26/2017

Withholding on Mining and Exploration Royalties

Minnesota requires income tax withholding on mining and exploration royalty payments.  All payers of royalties are required to withhold 6.25 percent of royalties paid for use of Minnesota lands.  

Note: This does not include royalties paid to Partnerships, S corporations, C corporations, and certain trusts (see below). Royalties paid to these entities should not have income tax withheld.
 

Definition of Royalty 

A royalty is an amount (in money or value of property) received by any person having a right, title or interest in or to any tract of land in Minnesota for permission to explore, mine, take out, or remove ore. Ores subject to withholding include:
 
  • iron
  • taconite
  • minerals (copper, nickel, gold, etc.) subject to the net proceeds tax.  
Royalties may also include rents, bonus payments, and non-recoverable lease payments. 
 

Royalties Paid to Trusts 

Simple trusts that distribute all royalty income to their beneficiaries are exempt from withholding on royalties unless they elect to have tax withheld by the royalty payer. If the trust elects to have tax withheld, it must notify the royalty payer. If the trust chooses tax-exempt status, the trust becomes the “royalty payer” and is responsible for withholding tax from its beneficiaries.
 

Royalties on State-Managed Mineral Lands

Royalties paid to the state on state-managed mineral lands are not subject to withholding tax. For more information, visit the Minnesota Department of Natural Resources website.
 

Reporting Requirements

You can report royalty withholding with your regular wage income tax withholding or report it under a separate Minnesota tax ID number used only for royalty withholding. You can register for a Minnesota Tax ID number using our e-Services system.
 
You must give each royalty recipient a federal Form 1099 by January 31 each year. You must send all 1099 information reporting Minnesota withholding to the Minnesota Department of Revenue by January 31 each year. For more information, see

 

For information on reporting requirements for individuals, see Royalty Recipients