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
- 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.
