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Sales Tax Gap Study

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The Minnesota Sales Tax Gap study revealed a $451 million gap between the amount of sales and use tax paid to Minnesota by businesses and individuals in 2000 and the amount that should have been paid.

The study also shows that the gap will grow rapidly. Estimates show the 2002 gap to be more than $500 million, costing each Minnesota resident about $100. Projections for the 2007 sales tax gap are nearly $700 million.

The study, based on sales and use tax figures from 2000, indicates that the sales tax gap is attributed to:

  • Underreporting by businesses that currently collect and pay Minnesota sales and use tax
  • Minnesota businesses that have not filed sales and use tax returns
  • Minnesota households that owe use tax on out-of-state purchases – including Internet and catalog sales – when the seller does not collect sales tax on the ite
In 2000, about 28 percent of the sales tax gap was attributed to the out-of-state, Internet and catalog purchases of businesses and households. Because Internet and catalog sales are estimated to grow two to three times faster than the underreported tax figure, this portion of the gap will grow rapidly and become nearly half of the gap by 2007.
 
The Minnesota Sales Tax Gap Study was commissioned in 2002 by the Minnesota Department of Revenue and conducted by American Economics Group, Inc. It is the most recent comprehensive study conducted by a state and the first of its kind in Minnesota.
 
To download the study and view the results, choose one of the links below:

Note: You will need Adobe Acrobat Reader to view and print out the files.

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