Common Carrier Services

Common carriers are hired to transport goods. Fees charged to provide these services are not taxable. Common carriers often transport goods by:

• air
• ship
• tractor-trailer
• train
• truck

Note: Delivery of aggregate materials may be taxable. For more information, see the Delivery (hauling) of aggregate materials section.

Passenger Transportation Services

Passenger transportation services transport people to places. Fees charged to transport passengers are not taxable. Examples of passenger transportation include:

• aircraft
• bus
• ferry
• light rail
• limousine
• taxicab and ride share services
• train

When parking and transportation services are sold together for one fee, the entire sale is taxable even though transportation by itself is a nontaxable service. (When sold together, the transportation service is taxable because it is necessary to complete the sale of the parking service.)

For the transportation service to be nontaxable, the vendor must give customers the option of not taking the transportation service and separately state the charges on the invoice.

Stating that the charge is for 50 percent parking and 50 percent transportation on the invoice or a sign is not sufficient to relieve the seller of its responsibility to charge and remit tax on the total price.

For more information, see Revenue Notice 00-04, Sales Price – Mixed Transactions.

Delivery (hauling) of aggregate materials and concrete block is taxable, except as noted below or if an exemption applies. Delivery charges for aggregate are taxable regardless of:

• Who delivers it (the seller or a third-party hauler).
• Whether it will be used to improve real property.
• How it is deposited at the delivery site.

Nontaxable Delivery of Aggregate

Delivery (hauling) of aggregate is not taxable when the charges are:

• To move customer-owned aggregate or concrete block from one location to another.
• For delivery of aggregate by third-party haulers, if the aggregate will be used in road construction as defined in Minnesota Statutes 297A.61, subd. 3.
• To deliver aggregate material and concrete block outside of Minnesota.

For more information, see Delivery Charges.

If you sell taxable items at retail in Minnesota – such as packaging materials or prepared food – you must collect state and local sales tax. The table below lists some examples of taxable sales.

The following purchases are subject to sales or use tax.

Shipping containers are taxable. Shipping containers, also known as intermodal containers, are used to transport freight on ships, tractor-trailers, and railways.

If you give away items while providing a nontaxable service, you must pay sales or use tax on any taxable items given away.

Example

If an airline serves free snacks or soda during a flight, it owes use tax on the taxable items given away (unless it paid sales tax when the items were purchased).

Leases of motor vehicles are taxable. However, if you are involved in interstate commerce, you may qualify to pay a prorated tax on your lease. See Motor Carrier Direct Pay authorization.

For more information, see Motor Vehicle.

Repair parts, accessories, and attached equipment are taxable. However, if you are involved in interstate commerce, you may qualify to pay a prorated tax on these purchases. See Motor Carrier Direct Pay authorization.

Lubricants used for interstate and intrastate commerce are taxable.

For more information, see Motor Vehicle.

Complete and send in Form MCDP-AP, Motor Carrier Direct Pay Application.

If you qualify, we will send you an MCDP authorization letter. You can use Form ST3, Certificate of Exemption to purchase qualifying items exempt from sales tax and then pay a prorated tax amount directly to the Minnesota Department of Revenue. For details, see MCDP Purchases section below.
 

Vehicle Purchases

If you have a Motor Carrier Direct Pay (MCDP) authorization and you buy a tractor or trailer, you pay the prorated Motor Vehicle Sales Tax directly to the Motor Vehicle Registrar Office at the time of registration.

For more information, contact the Minnesota Department of Public Safety at 651-201-7000 or visit its website at www.dps.mn.gov/.

Equipment That Qualifies for MCDP

Use your MCDP authorization when you:

• Lease trucks, tractors, and trailers used in interstate transportation
• Purchase repair parts and accessories that are attached to mobile transportation equipment. For example:
  • batteries
  • communication equipment
  • padlocks
  • refrigeration equipment
  • repair parts
  • tires

Equipment That Does Not Qualify for MCDP

You must pay sales tax to the seller when you buy the following items which do not qualify for MCDP:

• antifreeze
• dollies
• flares
• flashlights
• furniture pads
• grease
• tractors and trailers (purchased, not leased)
• hand or forklift trucks
• packing containers
• pallets
• snowplows
• truck washes, towing
• warehouse, office, and plant equipment
• anything else that is not, or will not be, attached to interstate transport vehicles

When you use MCDP, your sales tax is prorated based on the percentage of miles driven in Minnesota. To calculate the tax due:

1. Add all purchases of qualifying repair parts and accessories, and leases of mobile transportation equipment where you did not pay tax to the seller. Enter this amount as MCDP Purchases when you file your sales and use tax return.
2. Multiply the total from Step 1 by:

• If you’re not leased to a carrier: Your Minnesota prorate mileage percentage (shown on your company’s prorate registration).
• If you’re leased to a carrier: That company’s prorate percentage.

1. Multiply the result of Step 2 by the general state sales tax rate (6.875 percent). Enter this amount as tax when you file your sales and use tax return.

Note: Local taxes do not apply to qualifying items purchased with the MCDP authorization.

Example

You paid $4,500 for repair parts ($4,000), antifreeze ($100), and packing containers ($400) for a vehicle that qualifies for MCDP. Your Minnesota prorate mileage percentage is 5 percent. Calculate the tax as follows.

1. Only the repair parts ($4,000) qualify for MCDP
2. $4,000 x 5% = $200
3. $200 x 6.875% = $13.75

Report $4,000 as the MCDP purchases and $14 ($13.75 rounded to the nearest number) as the tax amount.

If you paid the full amount of sales tax on MCDP-qualified equipment, you may request a prorated refund. Complete and submit Form ST11, Sales and Use Tax Refund Request.

For more information on refunds of tax paid on tractors or trailers, contact the Minnesota Department of Public Safety at 651-201-7000 or visit its website at www.dps.mn.gov/.

If you no longer want to report your tax directly to the state of Minnesota, start paying tax directly to your vendors. Inform your vendors that the Form ST3, Certificate of Exemption you gave them is no longer valid.

If you change your business’s legal status you must get a new Minnesota Tax ID number and a new MCDP authorization (if your business still qualifies).

Example

You change your transportation business from a sole proprietor to a corporation, or from a partnership to a sole proprietor. You must apply for both a new Minnesota Tax ID Number and a new MCDP authorization.

Purchases that are used primarily for interstate or foreign commerce – doing business across state or national borders – qualify for an exemption and are not taxable.

To claim this exemption, give your vendor a completed Form ST3, Certificate of Exemption. Specify the ship repair or replacement parts and lubricants exemption.

Purchases that are used primarily for intrastate commerce – doing business within Minnesota – are taxable.

Exception: Purchases of ships or vessels with a gross registered tonnage of  at least 3,000 tons are exempt from tax.