If you pay anyone, including your spouse, children, other family members, friends, or students, to work for you at a fair or event, they are your employee. You must withhold Minnesota income tax from any compensation you provide them, including cash, goods, or services in exchange for working.

Examples of goods include novelty items, clothing, items from your inventory, or tuition deductions for educational institutions. Examples of services include accounting, cleaning, remodeling, or repair work.

Withhold tax from anyone who works in Minnesota. Do not withhold Minnesota tax from nonresidents who will earn less in Minnesota wages than the minimum income required to file a Minnesota Individual Income Tax return. The minimum filing requirement changes each year. For tax year 2024, this amount is $14,575.

Corporate Officers
Corporate officers who provide services for a corporation (whether an S corporation or C corporation) are considered employees of the corporation. As with any other employee, the officer should receive a reasonable wage for the services performed.

A reasonable wage is the amount you would expect to pay someone else to provide services similar to what the officer provides. You must withhold Minnesota income tax from any compensation given to officers, including cash, goods, or services in exchange for working.

Employees Who are Residents of Michigan or North Dakota
Minnesota has income tax reciprocity agreements with Michigan and North Dakota. Generally, under these agreements, only the home state will tax personal service income the resident earned while working in a reciprocity state.

If an employee who is a resident of a reciprocity state gives you a completed Form MWR, Reciprocity Exemption/Affidavit of Residency, you are not required to withhold Minnesota income tax from their wages. Submit the completed Form MWR to the Minnesota Department of Revenue.

Before you start withholding Minnesota income tax from your employees’ wages, you must have a Minnesota Tax ID Number and be registered for withholding tax. We can assess a $100 penalty if you fail to do so.

If you are a new employer, see Withholding Fact Sheet 10, New Employer Guide, for important information. If you do not have a Minnesota ID number, apply online or call us at 651-282-5225 or 1-800-657-3605.

If you already have a Minnesota ID number for other taxes for the same business, you can use the same number for withholding tax. To update your account, log in to e-Services.

Minnesota Withholding Allowances. You must have all new employees complete Form W-4MN, Minnesota Employee Withholding Allowance/Exemption Certificate when they begin employment to determine the number of withholding allowances they may claim. If a new employee does not give you a complete Form W-4MN before the first wage payment, withhold Minnesota tax as if they are single with zero withholding allowances.

If an employee completed a federal Form W-4 from 2019 or prior years, you may continue to use the allowances determined on that form. If the employee completes a new Form W-4, they must complete a new Form W-4MN for Minnesota withholding allowances.

For more information, see Withholding Fact Sheet 9, Definition of Wages and Withholding Fact Sheet 10, New Employer Guide.

For payment options, see our Make a Payment page for businesses.

You’re required to pay electronically if any of these apply:

• You withheld more than $10,000 during the last 12-month period ending June 30
• You are required to electronically pay any other Minnesota business tax
• You use a payroll service company

If you’re required to pay business taxes electronically for one year, you must do so for all future years.

You must electronically file all Minnesota withholding tax returns, including past-due and amended returns. To file electronically, log in to e-Services.

Backup Withholding
Minnesota follows the federal provisions for backup withholding on payments for personal services only. Personal services include any work performed for your business by anyone who is not your employee.

Nonresident Entertainer Tax
Self-employed nonresident entertainers who receive compensation for performances in Minnesota are not subject to the regular Minnesota income tax provisions. Instead, there is a 2% nonresident entertainer tax on the gross compensation the entertainment entity receives for performances in Minnesota.

Entertainers include musicians, singers, dancers, comedians, actors, athletes, and public speakers. Entertainers can be individuals, corporations, or partnerships. The person responsible for paying the entertainer or entertainment entity must deduct the tax and send it to the department.

For details, see Withholding Fact Sheet 11, Nonresident Entertainer Tax.

Sales Tax
If you make taxable sales at a flea market, collectors’ show, craft show, antique show, county fair, trade show, or similar event, you must be registered to collect the Minnesota sales tax before the event begins.

For details, see the Sales Tax publications Arts and Crafts and Selling Event Exhibitors and Operators.

If you have any sales or use tax questions, email us at SalesUse.Tax@state.mn.us or call 651-296-6181 or 1-800-657-3777.

Annual Business Taxes
You may also be required to file other tax returns such as corporation franchise, partnership, or individual income tax. For details, visit our website, email Business.Registration@state.mn.us, or call 651-282-5225 or 1-800-657-3605.