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Last Updated: 10/31/2018

Withholding on Mining and Exploration Royalties

Minnesota requires income tax withholding on mining and exploration royalty payments for use of Minnesota lands. If you pay these royalties, you must withhold 6.25 percent as Minnesota income tax.

Do not withhold Minnesota income tax on royalties paid to any of the following:

  • Partnerships
  • S corporations
  • C corporations
  • Simple trusts, if they distribute all royalty income to their beneficiaries
  • The State of Minnesota, if you pay royalties on state-managed mineral lands.

A simple trust may still elect to have you withhold tax, but they must notify you of their choice.

What is a mining and exploration royalty?

A royalty is an amount (in money or value of property) received by any person having a right to, title in, or interest in any Minnesota land for permission to explore, mine, take out, or remove ore. Ores subject to withholding include:

  • Iron
  • Taconite
  • Minerals (copper, nickel, gold, etc.) subject to the net proceeds tax. 

Royalties may also include rents, bonus payments, and nonrecoverable lease payments.

How do I report royalty withholding?

You can report royalty withholding with your regular wage income tax withholding or under a separate Minnesota Tax ID Number. If you would like a separate Minnesota ID number for royalty withholding, you can register for one online or by phone.

You must give each royalty recipient a federal Form 1099 by January 31 each year. You must also send all 1099 information reporting Minnesota withholding to the Minnesota Department of Revenue by January 31 each year. For more information, see Forms W-2/1099

For information on reporting requirements for individuals, see Royalty Recipients.