Short-Term Rentals

Short-term motor vehicle rentals are leases of vehicles under an agreement for 28 days or less. Short-term rentals for certain motor vehicles are subject to the following:

• Minnesota general sales tax rate
• Any local taxes that apply
• 9.2% Motor Vehicle Rental Tax
• 5% Motor Vehicle Rental Fee, if applicable

The Motor Vehicle Rental Tax and Fee are due on all rental agreements that meet the following requirements:

• The vehicle is a passenger automobile designed to carry up to 15 passengers including the driver, including:
  • Passenger car
  • Passenger van with a carrying capacity of 3/4 ton or less (rated by the manufacturer)
  • Pickup truck with a carrying capacity of 3/4 ton or less (rated by the manufacturer)
• The agreement period is 28 days or less
• The customer takes possession of the vehicle in Minnesota

Note: The Motor Vehicle Rental Tax and Fee apply to short-term rentals –such as daily or weekly – even if the customer keeps the vehicle for more than 28 days. Because the agreement is for 28 days or less, even if the customer keeps the vehicle for more than 28 days.

Rentals Not Subject to Motor Vehicle Rental Tax and Fee

The 9.2% rental tax and 5% rental fee do not apply to rentals of:

• Ambulances rented to ambulance services
• Box trucks and trailers
• Buses, school buses, or specially licensed commuter vans
• Buses converted to provide temporary living quarters
• Conversion vans equipped with at least four of the following:
  • Liquid propane gas cooking stove
  • Heating or air-conditioning unit separate from the vehicle engine
  • Refrigerator
  • Self-contained or externally connected toilet
  • Separate electrical power supply
  • Water supply system including a sink with a faucet
• Limousines that include the services of a driver
• Limousines used in a burial or funeral services
• Motorcycles and motor scooters
• Motor homes
• Passenger vehicles used to provide licensed taxi services
• Vans designed or adapted primarily for transporting property (with or without a barrier between the operator and the cargo areas)  
• Vehicles rented to federal government agencies
• Vehicles that have a camper mounted on the chassis of the vehicle

Note: The 9.2% rental tax and 5% rental fee do not apply to short-term rentals if the vehicle is either:

• exempt from Minnesota general sales tax and local taxes
• not a passenger vehicle, pickup truck, or van as defined in this section

Car Sharing Exemption

Starting July 1, 2023, the 9.2% fee does not apply to vehicles of a nonprofit corporation or similar entity consisting of individual or group members who pay the organization for the use of a motor vehicle. The fee does not apply if the organization:

• Owns, leases, or operates a fleet of vehicles that are available to its members for use on the basis of intervals of one hour or less
• Parks its vehicles in the public right-of-way or at unstaffed, self-service locations that are accessible at any time of the day
• maintains its vehicles, insures its vehicles on behalf of its members, and purchases fuel for its fleet.

Rentals Not Subject to the Motor Vehicle Rental Fee

The 5% rental fee does not apply to rentals by certain nonprofit car-sharing entities whose members pay the organization for the use of a motor vehicle (passenger vehicles, pickup trucks, vans). The fee does not apply if the organization:

• Owns or leases a fleet of vehicles that are available to individual or group members to use for intervals of one hour or less
• Parks its vehicles in the public right-of-way or at unstaffed, self-service locations that are accessible any time of day
• Provides maintenance, insurance, and fuel for the vehicle

Note: Member fees are subject to the state general sales tax, the 9.2% rental tax, and any local taxes that apply.

Motor Vehicle Lessor Exemption

A lessor may choose to be exempt from collecting the 5% rental fee if, in the prior calendar year, the lessor had either:

• No more than 20 motor vehicles available for rent
• $50,000 or less in gross receipts subject to the rental fee

Reporting the 9.2% Rental Tax

Calculate the 9.2% rental tax on the same amount that you use to figure the general state sales tax. Report the calculated tax on the “Car Rentals” line of your sales tax return. Make sure you also report the general sales tax and any applicable local sales taxes on the return.

Reporting the 5% Rental Fee

Calculate the 5% rental fee on the same amount that you use to figure the general state sales tax.  You report the fee once a year on your sales tax return.

Report the amount of 5% rental fees collected and registration taxes paid on your December Sales and Use Tax return as follows:

1. Enter the total amount of the fees collected during the calendar year in the Amount column on the Car Rental Fee (December)

2. Enter the difference by subtracting the registration taxes paid from the fees collected in the Tax Due on the Car Rental Fee (December).

a. If the difference is less than zero, enter 0 as Tax.

3. Enter the total amount of Minnesota registration taxes paid during the calendar year on the vehicle that you hold for rental purchases in the Amount column on the Registration Taxes Paid line.

If the fees you collected for the year are more than the amount you paid in Minnesota registration taxes on the rental vehicles, you must pay the excess fees with your December Sales Tax return. You cannot take credit or claim a refund for excess registration taxes paid.  

Third Party Leases

If you are leasing a vehicle to lease or rent to a third party, you are not required to pay the 9.2% rental tax or the 5% rental fee. Give the vendor a completed Form ST3, Certificate of Exemption. Specify the Resale exemption.

You must charge both the 9.2% rental tax and the 5% rental fee to the third party.

Loaner Vehicles

You must charge sales tax or accrue use tax on loaner vehicle rental fees depending on who pays for use of the vehicle.

If you get the loaner vehicle from a third party, do not pay sales tax or rental fees. Give your vendor a completed Form ST3, Certificate of Exemption. Specify the Resale exemption.