Lodging is the rental of a room or rooms for a temporary place to stay or live. Lodging facilities must charge sales tax on short-term lodging and certain related services if the room rental is:

• less than 30 days
• 30 days or more, with no enforceable written lease agreement.
  • An enforceable written agreement must be entered into at the time of sale (day one or before) if the stay will be 30 days or more. The enforceable written agreement must include a termination clause, date, and signature.

Lodging fees may also subject to local sales taxes and city lodging taxes. For more information, see:

• Local Sales and Use Taxes
• Special Local Taxes

Examples of lodging facilities include (but are not limited to):

• bed and breakfasts
• campgrounds
• hotels
• motels
• resorts
• rooming houses
• trailer camps
• vacation home rentals

Lodging-related services provided within a guest room are taxable.

Examples include (but are not limited to):

• cots, cribs, refrigerators, roll-away beds, and exercise equipment
• food or liquor from mini-bars and refrigerators
• in-room safes
• laundry and dry cleaning services
• pay-per-view movies and video games
• room service or room delivery, including mandatory tips and gratuities
• telephone access charges in guest rooms

Several cities have special local taxes on sales of specific items such as food, liquor, lodging, and entertainment. The Minnesota Department of Revenue administers most of these taxes.

For more information, see:

• Special Local Taxes
• Minneapolis Special Local Taxes
• Revenue Notice 05-11, Local Lodging, Restaurant and Liquor Taxes

Note: Some cities and localities administer their own lodging taxes. For more information, contact each city directly.

Facilitating the sale of lodging includes “brokering, coordinating, or in any way arranging for purchase of or the right to use accommodations by a customer.”

Facilitating the sale of lodging includes both:

• Collecting receipts from the customer of the lodging
• Transmitting the receipts to the owner of the residential property, whether the accommodations intermediary deducts or causes to be deducted any fees or other amounts from those receipts, either:
  • Directly by the accommodations intermediary or
  • Indirectly through agreements or arrangements with third parties

Facilitating the sale does not include only advertising the availability of the residential property for short-term rental, which directs the customer of the lodging to contact the owner of the property to reserve and purchase the lodging.

For all residential short-term rentals, who facilitates the sales transaction determines who is responsible for the tax. See the chart below for details.

*You must keep documentation to support who facilitated the sale and was responsible for remitting the applicable taxes on the lodging and related services.

For more information, see Revenue Notice 17-06, Lodging and Related Services – Residential Short-Term Rentals.

For sales tax, a sales tax exemption will apply to the short-term rental in Minnesota if the sale is isolated or occasional, and not made in the normal course of business of selling lodging and related services. An “isolated sale” happens once. An “occasional sale” is infrequent and does not reoccur with some degree of regularity. Normal course of business is defined as activities that demonstrate a commercial continuity or consistency of making sales or performing services for the purposes of attaining profit or producing income.

For income tax purposes, the Internal Revenue Code (IRC) provides an isolated sale exemption when you rent out for 14 days or less a year a property that you also use as your home. This is an exemption from income tax on that rental income. However, this exemption does not apply to sales tax. Unless a sales tax exemption applies, you must collect sales tax on the short-term rental of your property.

Fees and other charges by lodging facilities are taxable unless an exemption applies. See the table below for examples of taxable sales.

Voluntary Tips

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

Tips and Service Charges Added by Seller

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 records showing how you determined the tax.

Charges for the actual cost of a telephone call are not taxable if they are separately stated on the guest’s bill. (Because the charge from the phone company to the hotel includes sales tax.)

Charges for making the telephone service available to guests are taxable. For example, if a hotel charges 50 cents per local call, it is an access charge and it is taxable.

Telephone Call Accounting Systems

Many hotels use “call accounting systems” to track and determine the amount to charge guests for long distance phone calls.

If you use a call accounting system, you must:

• Charge sales tax on the total amount billed to a guest for their long distance telephone service.
• Pay sales tax to the telephone company for all telephone services.

Note: If you can distinguish between telephone calls billed to guests and your own administrative use, you may adjust the taxable amount reported on your sales tax return. To do this, subtract the actual costs of the long distance calls made by guests from your taxable sales.

Damage charges may or may not be taxable depending on what kind of property was involved.

Gift shop sales are taxable, except for food, clothing, and drugs. For examples, see the table below.

No-show charges – for when a room was held for a customer who neither arrived nor canceled the reservation – are taxable because a sale was made.

Cancellation charges are not taxable because the room was cancelled; no sale occurred and no sales tax is due.

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

Lodging is taxable when sold to schools, school districts, and nonprofit organizations, even when billed directly to the school or nonprofit organization. They cannot use Form ST3, Certificate of Exemption, to purchase lodging exempt from sales tax.

Businesses cannot use their Direct Pay authorization to buy lodging, meals, or other services exempt from tax.

Complimentary services (or items) are those given to the customer as a courtesy with no additional charge.

Examples include:

• Complimentary breakfast
• Free birthday dessert
• Free drink in response to a customer complaint
• Shampoo, conditioner, and soap

Note: A complimentary breakfast is when the customer has access to breakfast and the charge for their room stays the same whether they eat the meal or not.

Purchases for Complimentary Services

Hotels and lodging facilities that provide complimentary services must pay sales tax when they buy inputs to those services. This includes disposable items such as plates, napkins, and silverware. See the Taxable Purchases section.

Purchases of Complimentary Items

Hotels or lodging facilities that provide complimentary items must pay sales tax on the purchase of those items.

Package deals – when a group of related products or services is sold for one specified price – are taxable.  The customer pays sales tax on the entire cost of the package.

Examples include:

• A couples package that might include a room, wine, dinner for two, and chocolate
• A family package that might include a room and free meals for children

Note: Hotels and lodging facilities may purchase inputs for these deals exempt for resale. This includes disposable items because they are included in the taxable price paid by the customer. Give your vendor a completed Form ST3, Certificate of Exemption. Specify the Resale exemption.

Items you use to operate your business are taxable unless an exemption applies. Several services are also taxable. If you do not pay sales tax on a taxable purchase, then use tax is due. See the table below for specific examples.

Items for Resale

You may purchase items exempt for resale if both of these conditions apply:

• you sell the item at retail or hold the item exclusively for lease or rental to the customer
• the charges for these items are separately stated from the lodging accommodations

To purchase items exempt for resale, give your seller a completed Form ST3, Certificate of Exemption.

Examples of items for resale include:

• guest laundry services
• paper cups, napkins, etc. sold as part of a meal or drink (except for complimentary meal or drink)
• pop, candy, and other items sold at retail or in vending machines
• recreational equipment to be rented separately

Coin-Operated Entertainment and Amusement Devices

Retailers may buy these devices exempt from tax if they sell admissions to or use of the devices.

Examples of coin-operated entertainment and amusement devices include:

• fortune-telling machines
• pool tables
• batting cages
• jukeboxes
   

Note: Vending machines, lottery devices, or gaming devices do not qualify for this exemption.

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

Note: If the room rental is 30 days or more, you must keep a copy the lease agreement on file.

• 297A.61, Definitions
  • subd. 3(g)(2), Lodging
  • subd. 7. Sales price
  • subd. 34, Taxable food sold through vending machines
  • subd. 47. Accommodations intermediary
• 297A. 68, Business Exemptions
  • subd. 3a, Coin-operated entertainment and amusement devices
• 297A. 70, Exemption for governments and nonprofit groups
  • subd. 2(b)(4), Sales to government
  • subd. 4(b)(3), Sales to nonprofit groups
• 469. 190, Local lodging tax

• 17-06, Lodging and Related Services – Residential Short-Term Rentals
• 05-11, Local Lodging, Restaurant and Liquor Taxes

• Candy
• Clothing
• Computer Software
• Coupons, Discounts, and Other Forms of Payment
• Detective and Security Services
• Dietary Supplements
• Drugs
• Food and Food Ingredients
• Grooming and Hygiene Products
• Health Product Exemptions
• Isolated and Occasional Sales
• Laundry and Cleaning Services
• Lawn and Garden Maintenance, Tree and Shrub Services
• Minneapolis Special Local Taxes
• Prepared Food
• Soft Drinks and Other Beverages
• Special Local Taxes
• Tribal Governments and Members
• Use Tax for Businesses

• Admissions and Amusement Devices
• Building Cleaning and Maintenance
• Eating Establishments
• Government – Federal and Foreign Diplomats
• Government – Local Governments
• Government – State Agencies
• Local Sales and Use Taxes
• Parking Service Providers
• Vending Machines and Other Coin-Operated Devices