Cannabis Tax is 10% of gross receipts from retail sales of taxable cannabis products. These products are also subject to both:

• 6.875% state general rate sales tax
• Any applicable local sales taxes based on where the transaction takes place

You can use our Sales Tax Rate Calculator to help you determine the sales tax rate to charge.

Sales Subject to Cannabis Tax

Retail sales of the following products are subject to the Cannabis Tax:

• Cannabis-derived products
  • Flower – harvested flower, bud, leaves, and stems of the cannabis plant
  • Concentrate and products containing cannabis concentrate
  • Products infused with cannabinoids, including THC
• Hemp-derived products
  • Items intended for human or animal consumption that contain either:
    • Hemp plant parts
    • Hemp concentrate or artificially derived cannabinoids in combination with other ingredients
  • Lower-potency hemp edibles – THC products intended to be eaten or consumed as a beverage by humans, containing hemp concentrate or artificially derived cannabinoids
• Vaping solution products that contain cannabis or hemp-derived products
• Substantially similar products
  • Any product that is substantially similar to vaping solution products, cannabis-derived products, and hemp-derived products is also subject to Cannabis Tax

Note: Delivery charges for cannabis products are also subject to the Cannabis Tax.

Sales Subject to Sales Tax

Minnesota taxes most sales of tangible personal property (goods) and some services.

All sales subject to the Cannabis Tax are also subject to the state general rate sales tax and all applicable local sales taxes.

Sales of some cannabis-related products are subject to the general rate sales tax but are not subject to the additional Cannabis Tax.

This table shows how tax applies to some cannabis-related products and charges:

For more details, visit Taxable Sales in our Sales and Use Tax Business Guide. 

Local Sales Tax

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 and use tax. For more information, see Local Sales and Use Tax Guide.

To determine the local sales tax rate, use the location where the product is received by the customer, which is typically your business address or the customer’s delivery address. You can use our Sales Tax Rate Map or Sales Tax Rate Calculator to help determine the sales tax rate.

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

For more information, see:

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

Bundled Transactions

A bundled transaction is when a retailer sells a combination package consisting of at least two separate items sold together for one price. Bundled transactions are subject to Cannabis Tax if they contain at least one product subject to Cannabis Tax.

Items you purchase to operate your business may be exempt from sales tax depending on your business activity. The following types of purchases are exempt.

Agricultural Production

Agricultural production is a series of activities that result in a product that will ultimately be sold at retail. There are several exemptions that apply to items used in the agricultural production process.

Note: Individuals who grow cannabis for personal use do not qualify for the agricultural production exemptions.

The agricultural production process begins when you prepare the soil for planting crops and ends when you place the crops (packaged or unpackaged) into finished goods inventory or when it is sellable or at a stage that can be commingled. If a product is not placed into finished goods inventory, the process ends when the last step before loading the product for shipment is complete.

For additional information, see our Agricultural and Farming Guide.

Materials Consumed in Agricultural Production

Materials used or consumed in the production process are exempt from sales tax, even if they do not become part of the product being produced.

To purchase these items exempt, you must give your supplier a completed Form ST3, Certificate of Exemption. Select the Agricultural production exemption.

Examples of materials used in cannabis and hemp agricultural production include:

• Budding and blooming nutrients
• Cannabis plants and seeds
• Chemicals, materials, and supplies used in treating waste generated as a result of agricultural 
  production
• Cloning gels or powders
• pH balancer
• Plant flushing solutions
• Utilities for heating, cooling, drying, or lighting used in the agricultural growing process

Machinery and Equipment

Farm machinery used in cannabis and hemp agricultural production is exempt from sales tax.

To qualify for the exemption, the machinery must meet the definition of farm machinery outlined in Minnesota Statute 297A.61, subdivision 12.

It must be used directly in agricultural production and its operating time must be 50% or more in agricultural production.

To purchase these items exempt, you must give your supplier a completed Form ST3, Certificate of Exemption. Select the Farm machinery exemption.

Examples of farm machinery used in cannabis and hemp agricultural production include:

• Bucking machines
• Drying systems
• Grow lights
• Harvesters
• Irrigation equipment
  • Capillary water mats
  • Water wands
• Machinery for the preparation, seeding, or cultivation of soil for growing cannabis
  • Cultivators
  • Flat and pot fillers
  • Rototillers
  • Soil mixers
  • Tractors

Manufacturing

There are several exemptions for items used in the manufacturing process.

Materials Consumed in Manufacturing

Materials used or consumed in manufacturing goods for sale are exempt from sales tax, even if they do not become part of the product being produced.

• Fuel and electricity used or consumed in the manufacturing process
• This does not include fuel or electricity used outside of the manufacturing process
• Ingredients or components that become part of the final product
• Lubricants for production equipment
• Packaging materials
  • Nonreturnable packaging
  • Product identification labels
  • Product packaging
• Waste treatment consumables
  • Materials, chemicals, fuels, and electricity purchased by manufacturers to treat waste generated as a result of the manufacturing process

To purchase these items exempt, you must give your supplier a completed Form ST3, Certificate of Exemption. Select the Industrial production/manufacturing exemption.

Equipment Used in Manufacturing

Capital Equipment

Capital equipment is machinery and equipment that is purchased or leased, and used in Minnesota by the purchaser or lessee primarily for manufacturing products to be sold ultimately at retail. The machinery and equipment must be essential to the manufacturing process to qualify for the exemption.

Examples of capital equipment used in cannabis and hemp manufacturing include:

• Equipment used to maintain conditions of finished goods
  • Freezers
  • Refrigerators
• Homogenizers
• Packaging equipment
• Research and development equipment
• Quality control equipment
  • Soil analyzers
  • Spectrometers
  • Spectrophotometers
• Shelving to store work-in-progress
• Ultrasonic washers

To purchase these items exempt, you must give your supplier a completed Form ST3, Certificate of Exemption. Select the Qualifying capital equipment exemption.

For more information on the manufacturing process, see Capital Equipment and Industrial Production.

Special Tooling

Tools, dies, jigs, patterns, gauges, and other special tools that have value and use only for the buyer and use for which they are made, are exempt from tax.

To purchase these items exempt, you must give your supplier a completed Form ST3, Certificate of Exemption. Select the Other exemption and write in “297A.68, subd. 6”.

For more information, see the Special Tooling section in Industrial Production.

Retailers and Wholesalers

A retailer sells goods or services to the end user or final customer.

A wholesaler sells or leases goods that will be resold by the purchaser.

Retailers and wholesalers may purchase inventory and packaging materials exempt from tax.

To purchase these items exempt, you must give your supplier a completed Form ST3, Certificate of Exemption. Select the Resale exemption.

Inventory

Items that you purchase for resale are not subject to tax.

To purchase these items exempt, you must give your supplier a completed Form ST3, Certificate of Exemption. Select the Resale exemption.

Tax Paid in Error

If you paid sales tax in error, you can request a refund of sales tax using Form ST11, Sales and Use Tax Refund Request. For example, you paid sales tax on capital equipment or on items used or consumed in the industrial production process.

You may request a sales tax refund if you meet the following conditions:

• You are registered for a Sales and Use Tax account
• You are requesting a sales tax refund of more than $500

You may only file two refund requests per calendar year. For more information, see Refund Requests for Sales and Use Tax.
 

Items you purchase to operate your business are taxable unless an exemption applies. The following types of purchases are taxable.

Agricultural Production Purchases

Many items used in the agricultural production of cannabis and hemp products are taxable.

Examples include but are not limited to:

• Hand tools
  • Pitch forks
  • Pruning shears
  • Shovels and spades
  • Trimming scissors
• Mandated wastewater treatment that is not essential to the production process
• Mandatory inventory tracking equipment and materials
  • State law requires certain cannabis license holders to use a system to track cannabis from “seed to sale.” Even though the tracking system is required by law, it is subject to sales tax.
• Odor control products

For more information, see Taxable Items Used in Agricultural Production.

Manufacturing Purchases

Many purchases related to the manufacturing process are taxable.

Examples include but are not limited to:

• Chemicals and cleaning agents to clean production tools, including edibles production equipment
  • Taxable cannabis products, medical cannabis flower, and medical cannabinoid products are specifically excluded from the definition of “food and food ingredients” under Minnesota Statute 297A.67, subdivision 2. These products do not qualify for the exemption on consumables for cleaning food processing machinery and equipment.
• Equipment used to manage raw materials
• Mandatory inventory tracking equipment and materials
  • State law requires certain cannabis license holders to use a system to track cannabis from “seed to sale.” Even though this tracking system is required by law, it is subject to sales tax.
• Shelving to store raw or finished goods inventory
• Waste treatment equipment and machinery

Returnable Packaging

Returnable packaging products are taxable.  

Examples include but are not limited to:

• Barrels and drums
• Pallets and skids

For more information, see the Packaging Materials section of our Industrial Production fact sheet.

General Taxable Purchases

The following purchases are subject to sales or use tax.

For additional information, see the Purchases and Use Tax section of Retailers and Wholesalers Guide.

Testing

Purchases used and consumed to perform mandated testing are taxable.

Use Tax

You may owe use tax if a vendor did not collect sales tax on a taxable purchase or if you take an item out of inventory for use in your business.

Here are examples:

• You take some cannabis out of inventory to provide as a free sample. You owe state general rate use tax, Cannabis Tax, and any applicable local use tax on the cost of that item.
• You take some cannabis out of inventory to submit for a mandated test. You owe state general rate use tax, Cannabis Tax, and any applicable local use tax on the cost of that item.

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

When filing your return, you must report all sales tax collected and use tax you owe. If you do not file your return, we may:

• File a return for you based on information available and may include interest and penalties.
• Start collection action if we determine additional tax, interest, and penalty is due.
• Revoke your business or professional license or block its renewal.
• Put you on the Cannabis Posting.

Filing Returns

When filing your return, you must report all tax collected, including sales tax, Cannabis Tax, and any applicable local taxes, on your Sales and Use Tax return.

You must be registered for Sales and Use Tax to collect and report taxes. If you are not registered for Sales and Use Tax, you must call Business Registration at the Minnesota Department of Revenue at 651-282-5225 or 1-800-657-3605 (toll-free).

Filing Frequency

Your filing frequency depends on your monthly Sales and Use Tax liability. See Filing Information.

Due Dates

You may not receive a notice to file your return or pay your tax so it’s important to remember the return due date. For a list of due dates, see Sales Tax Return Filing Due Dates.

Recordkeeping

It is important to keep good records to determine the correct amount of state and local tax you owe.
Your records should include:

• Bills, receipts, invoices, cash register tapes, and any other documents that support the entries in your books
• Exemption certificates
• Shipping documents
• Worksheets used to prepare your tax returns

Penalties and Interest

If you do not file or pay your taxes on time, you may owe penalties and interest. See Penalties and Interest for Businesses.

Sales Suppression Devices

A sales suppression device, zapper, phantom-ware, or similar device is a software program that falsifies electronic records of cash registers or creates a second set of transaction records.

If you knowingly use a suppression device, you may be subject to:

• Felony criminal penalties, including imprisonment for up to 5 years, a fine up to $10,000, or both
• Forfeiture of the sales suppression device, which is considered contraband
   

Cannabis businesses must pay their taxes electronically. The department will not accept cash payments from any cannabis business.

If you are unable to open a bank account, please visit our Cannabis Tax Payments page for assistance.

For additional information on making tax payments, visit our Make a Payment page.

The legal references and resources related to the cannabis industry are listed. 

Minnesota Office of Cannabis Management

• Office of Cannabis Management (OCM) website
• OCM Complaint Form

Minnesota Statutes

• 168E, Retail delivery fee
• 270C.726, Posting of tax delinquency; sale of cannabis
• 289A.11, Filing requirements for sales and use tax returns
• 289A.14, Use of automated sales suppression devices; definitions
• 289A.18, Due dates for filing of returns
• 289A.20, Due dates for making payments of tax
• 289A.33, Filing requirements and due dates; special rules
• 289A.50, Claims for refunds
• 289A.60, Civil penalties
• 289A.63, Criminal penalties
• 295.81, Cannabis gross receipts tax
• 297A.61, Definitions
  • subd. 3(n), Sale and purchase
  • subd. 7, Sales price
  • subd. 12, Farm machinery
  • subd. 38, Bundled transaction
• 297A.668, Sourcing of sale; situs in this state
• 297A.67, General Exemptions
  • subd. 2, Food and food ingredients
  • subd. 7, Drugs; medical devices
  • subd. 39, Reservation sales of taxable cannabis products
• 297A.68, Business Exemptions
  • subd. 2, Materials consumed in industrial production
  • subd. 5, Capital equipment
  • subd. 6, Special tooling
• 297A.69, Agricultural Exemptions
  • subd. 2, Materials consumed in agricultural production
  • subd. 4, Machinery, equipment, and fencing
• 297A.70, Exemptions for governments and nonprofit groups
  • subd. 2, Sales to government
  • subd. 4, Sales to nonprofit group
  • subd. 18, Nursing homes and boarding care homes
• 297A.72, Exemption certificates
• 297A.77, Collection of sales and use taxes
• 297A.85, Cancellation of permits

Minnesota Rules

• 8130.0600, Consideration
• 8130.1900, Retailer and seller
• 8130.3200, Nonexempt use of purchase obtained with exemption certificate
• 8130.3800, Imposition of use tax
• 8130.5500, Agricultural and industrial production
• 8130.5500, Special tooling
• 8130.7501, Returns and records
• 8130.8100, Claim for refund

Publications

• Agricultural and Farming Guide
• Capital Equipment
• Coupons, Discounts, Rewards, Rebates, and Other Forms of Payment
• Industrial Production
• Local Sales and Use Taxes
• Minneapolis Special Local Taxes
• Retailers and Wholesalers Guide
• Sales Tax Business Guide
• Special Local Taxes
• Use Tax For Businesses

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