COVID-19 Penalty Relief: You may ask us to cancel or reduce filing or payment penalties if you have a reasonable cause or are negatively affected by the COVID-19 pandemic. For more information, updates, and resources, see Our Response to COVID-19.
Materials delivered to contractors in Minnesota for use in an out-of-state contract are subject to Minnesota sales tax.
If the materials are not subject to sales tax in the state or county where the contract work will be done, they are not subject to Minnesota sales tax. You must give your vendor a completed Form ST3, Certificate of Exemption.
If a vendor delivers materials directly to a construction site outside Minnesota, the materials are not subject to Minnesota sales tax.
State agencies or local governments cannot make final payments to a contractor or subcontractor until the Minnesota Department of Revenue has verified they complied with Minnesota Withholding Tax law. To do this the contractor and subcontractor must submit a Contractor Affidavit (IC134) to Minnesota Revenue to apply for a Certificate of Compliance.
If you hire or contract with a non-Minnesota contractor to perform construction work in Minnesota, you must withhold 8% (.08) of their compensation as a Minnesota surety deposit.
Payments are subject to 8% withholding only if the work was performed in Minnesota and the value of the contract exceeds $50,000.
The cash surety is deposited with the Minnesota Department of Revenue. It is used as a guarantee that the contractor has fulfilled the requirements for withholding, sales and use, franchise, and income taxes.