Any food prepared by the seller or sold with eating utensils provided by the seller is taxable. For more information, see Prepared Food.

Catering services are taxable, including:

• Charges for delivery, preparation, or services
• Drinks
• Food
• Rentals of chairs, tables, tablecloths, and tableware

Charges for a personal chef to prepare food, when the customer provides the food and food ingredients, is not taxable.

Gift certificates and gift cards are not taxable when sold. When a gift certificate or gift card is redeemed, charge sales tax on any taxable portion of the purchase. Apply the amount of the gift certificate or card as a cash payment.

If you sell liquor, beer, or wine and are 10 or more days late in filing or paying your taxes, we will place you on the public Tax Delinquency (Liquor Posting) list. Tax types included are: sales, withholding, S corporation, corporate income, and certain partnership. (See Minnesota Statutes, Section 270C.725.)

We notify you at least 10 days before you are posted.

Once you are on the list, no wholesaler, manufacturer, or brewer can sell or deliver any product to you. You cannot purchase retail liquor, beer, or wine for resale. We may revoke your license or prevent you from transferring, renewing, or obtaining a license.

To avoid being posted to, or to be removed from, the list, you must pay your tax liability in full with secured funds. Secured funds are guaranteed by the financial institution who issued them. Examples include cash, cashier’s check, money order, bank wire transfer, or a credit card payment we enter.

Payment Agreements

You cannot have a payment agreement unless you surrender your liquor license. For more information, call us at 651-556-3003 or 1-800-657-3909 (toll-free).

Tips that a customer voluntarily leaves or adds to a credit card receipt are not taxable.

Tips or service charges a seller adds to the bill are taxable, even if the tip amount is given to employees. The table below shows which taxes apply.

Note: If you can divide the tip or service charge to show what portion is for food versus liquor, do not collect the 2.5% liquor tax on the food portion. You must keep documentation showing how you determined the tax.

Service and rental charges or fees may be taxable. The table below lists specific examples.

Starting July 1, 2017, the only taxable food sold through vending machines is prepared food, soft drinks, candy, and dietary supplements. Previously, all food sold through vending machines was taxable.

For more information, see:

• Candy
• Dietary Supplements
• Food and Food Ingredients
• Prepared Food
• Soft Drinks and Other Beverages

The use of all entertainment and amusement devices is taxable. Examples include:

• Batting cages
• Cranes
• Foosball and pool tables
• Fortune telling machines
• Jukeboxes
• Photo or video booths
• Rides
• Video and pinball games

For more information, see Vending Machines and Other Coin-Operated Devices.

If you include sales tax in the price, you must notify your customers in writing. You can do this by posting a sign or placing a statement on your menu that “all prices include sales tax.”

When prepared food and drinks are sold in a restaurant, show the sales tax as a separate item on the total bill.

When drinks are sold in the bar area of a restaurant, you may include sales tax in the price of the drink. This makes paying for drinks easier. You must notify customers that sales tax is included in the price.

When sales tax is included in the price of drinks in the bar area of a restaurant, you must track bar sales separately (on a separate register) from restaurant sales. Handle sales tax the same for all bar sales.

Some cities and counties have local sales and use taxes. If you are located in or make sales into an area with a local tax, you may owe local sales or use tax. For more information, see Local Sales and Use Taxes.

To determine the sales tax rate, use the location where the product is received by the customer, typically your business or a delivery address. You can use the Sales Tax Rate Map or Sales Tax Rate Calculator.

Note: The map and rate calculator do not include special local taxes.  

For more information, see:

• Local  Sales Tax Information
• Minneapolis Special Local Taxes
• Special Local Taxes

Generally, customers buy discount vouchers and group coupons online and then bring them to the retailer for the discount. The purchase of a discount voucher is not taxable. If the item (or service) is taxable, charge sales tax when the voucher or coupon is redeemed.

Note: Your records must support the tax calculation.

For more information, see Coupons, Discounts, Rewards, Rebates, and Other Forms of Payment. 

If employees receive a discount on meals, charge tax on the price an employee pays for a meal. For example: Your employees get a 15 percent meal discount. The menu price (before tax) is $10.00. The $8.50 discounted price is taxable.

If employees receive free meals, you owe use tax on the cost of any taxable items used in the meal. For more information, see Free meals and drinks below.

Free meals and drinks are given away with no purchase necessary, which does not include two for one meals, free child meals (with adult purchase), or coupon meals.

You must pay use tax on taxable items provided or included with a free drink or meal. For example:

• disposable cups
• napkins
• prepared food
• soft drinks in cans or bottles
• straws

If you serve free drinks, you must pay use tax on the cost of liquor used in the free drinks. Use tax includes the state general use tax rate, the liquor gross receipts use tax, and any applicable local taxes.

Note: Use tax is not due on the cost of nontaxable food.

Meals and drinks are considered complimentary when they are included in the price of a room, and the room charge is the same whether or not the customer consumes the meal or drink.

Examples include:

• appetizers
• beverages (alcoholic and nonalcoholic)
• continental or hot breakfast
• cookies and snacks
• evening dinner

Note: Tax is due on any taxable items used to provide complimentary meals or drinks.

Prepared food and drinks are not taxable when billed to and paid for by the federal government and its agencies.  

Prepared food and drinks may not be taxable when sold to foreign consular officials, depending on the type of exemption card used and what is purchased.

For more information, see Government – Federal Government.

Prepared food and drinks are taxable when sold to state and local government agencies. Local governments do not pay local sales taxes but must pay special local taxes (lodging, restaurant, entertainment, liquor).

Prepared food and drinks are not taxable when sold to tribal governments, no matter where the food and drink are consumed.

Note: This exemption does not apply to the Prairie Island Mdewakanton Community.

For more information, see Tribal Governments and Members.

Prepared food and drinks are taxable when sold to nonprofit organizations; the nonprofit exemption does not apply.

The only exception is if a nonprofit organization buys prepared food and drink from a distributor for resale. In that case, the purchase is exempt. The organization must give you a completed Form ST3, Certificate of Exemption.

Note: You cannot sell alcoholic beverages to a nonprofit organization for resale. Only liquor distributors are allowed to sell liquor for resale.

Prepared food and drinks are taxable when sold to businesses with Direct Pay authorization; the direct pay exemption does not apply.

All food and drinks served at pre-kindergarten through 12^th grade schools are not taxable. This exemption also applies to non-school events (such as a wedding or party).

Sales by a concession stand on school premises are not taxable.

Prepared food and drink sales in administrative offices located off the school premises are taxable. (The offices are not part of the school.)

Meals served to students at colleges, universities, and private career schools are taxable. For more information, see Schools – Sales and Purchases.

Starting July 1, 2017, the only taxable food sold through vending machines at a school is prepared food, soft drinks, candy, and dietary supplements. Previously, all food sold through a vending machine was taxable. For more information, see Sales – Vending Machines and Amusement Devices.

Licensed vehicles and trailers are subject to the 6.5% Motor Vehicle Sales Tax (not the state general sales tax).

Installing equipment and utilities to convert a vehicle or trailer to serve food is taxable.

For more information, see Motor Vehicle.

If you buy equipment, supplies, or other taxable items for your business and the seller does not charge Minnesota sales tax, you owe use tax on the cost of the items. If your business is located in an area with a local tax, you may also owe local use tax.

Some common situations where you may owe use tax include:

• You buy taxable items or services online without paying sales tax
• You withdraw an item from inventory to use (instead of selling it), donate, or give away
• You buy taxable items outside of Minnesota
• You buy taxable items in another Minnesota city or county with a lower (or no) local sales tax

For more information, see Use Tax for Businesses and Local Sales and Use Taxes.

A retail sale is:

• The sale, lease, or rental of tangible personal property
• The sale of tangible personal property used in conducting lawful gambling under chapter 349 or State Lottery under chapter 349A and is not considered a sale of property for resale

The table below explains when sales tax applies to the sale of gambling devices and equipment.

If you have any questions, email us at salesuse.tech@state.mn.us.

If you have a license to sell liquor and owe past due taxes, your business will be placed on the department’s Tax Delinquency (Liquor Posting) list.

Once you are on the list, no wholesaler, manufacturer, or brewer can sell or deliver any product to you.

You must pay the past due taxes in full before we can remove your name from the Liquor Posting list. You cannot have a payment agreement unless you surrender your liquor license. For more information, see Liquor Posting or call 651-556-3003.

• 157, Food, Beverage, and Lodging Establishments
• 297A.61 Definitions
  • Subd. 3 Sales and purchases
• 297A.67 General Exemptions
  • Subd. 2 Food and food ingredients
  • Subd. 4 Exemption meals at residential facilities
• 340A. 101 Liquor Definitions

• 02-11, School Meals – Board Contracts at Colleges, Universities, or Private Career Schools

• Candy
• Capital Equipment
• Clothing
• Coupons, Discounts and Other Forms of Payment
• Detective and Security Services
• Dietary Supplements
• Food and Food Ingredients
• Hospital and Nursing Home Meals
• Industrial Production
• Isolated and Occasional Sales
• Lawn and Garden Maintenance, Tree and Shrub Services
• Local Sales and Use Taxes
• Minneapolis Special Local Taxes
• Prepared Food
• Sales to Governments
• Schools – Sales and Purchases
• Soft Drinks and Other Beverages
• Special Local Taxes
• Tribal Governments and Members
• Use Tax for Businesses

• Admissions and Amusement Devices
• Building Cleaning and Maintenance
• Government – Federal and Foreign Diplomats
• Government – Local Governments
• Hotels and Other Lodging Establishments
• Motor Vehicle
• Parking Service Providers
• Vending Machines and Other Coin-Operated Devices