Starting a Local Sales Tax

General local sales and use taxes may be used to fund any approved local area project. It applies to all retail sales in the local area.

The Minnesota Department of Revenue administers all general local sales and use taxes.

To impose a general local sales and use tax, the local government must receive authorization through the Minnesota Legislature. To receive this authorization, you must complete the following steps:

1. The governing body must pass a resolution that states the following:
   • Proposed tax rate
   • Intended use of the revenue
   • Amount of revenue to be raised
   • Anticipated expiration date
2. The proposed tax must be passed by a majority vote at a general election:
   • The election must be held at least 90 days after the resolution was passed
   • The political subdivision cannot spend money to advertise or promote the proposed tax, although it may disseminate information included in the resolution
3. The proposed tax must pass through legislation as a special law that authorizes the imposition of the tax.

Special local sales and use taxes may be used to fund any approved local area project. They apply to the specific product or service designated by the tax (food and beverage, lodging, entertainment).

Political subdivisions may administer special local taxes or have the Minnesota Department of Revenue administer the taxes.

These are general guidelines to follow unless your tax was authorized under Minnesota Statutes 469.190 or some other special law indicates otherwise.

Special local sales and use taxes include food and beverage, lodging, and entertainment.

To impose a special local sales and use tax, the political subdivision must receive authorization through the Minnesota Legislature. To receive this authorization, you must complete the following steps:

1. The governing body must pass a resolution that states the following:
   • Proposed tax rate
   • Intended use of the revenue
   • Amount of revenue to be raised
   • Anticipated expiration date
2. The proposed tax must be passed by a majority vote of the political subdivision in a general election:
   • The election must be held at least 90 days after the resolution was passed.
   • The political subdivision cannot spend money to advertise or promote the proposed tax although it may disseminate information included in the resolution.
3. The proposed tax must pass through legislation as a special law that authorizes the imposition of the tax

The local transportation sales and use tax can be used to fund county transportation or transit projects. The tax applies to all retail sales within the local area.

The Minnesota Department of Revenue administers all local transportation sales and use taxes.

Any county outside the Metropolitan Transportation Area may impose a local sales and use tax of up to 0.5% and a $20 excise tax on commercial sales of motor vehicles to fund a transportation or transit project. These funds can also be used to fund transit operating costs and safe routes to school programs.

The governing body must pass a resolution that states the following:

• Proposed tax rate
• Intended use of the revenue

Note: We administer the Metropolitan Transportation Area tax, and it's authorized under Minnesota Statutes 297A.992.

Note: This information only applies to local taxes administered by the Minnesota Department of Revenue.

The political subdivision must meet the following statutory requirements for a new tax to begin:

• Pass an ordinance imposing the tax
• File a certificate of approval and a copy of the ordinance with the Minnesota Secretary of State
• Notify the Minnesota Department of Revenue in writing at least 90 days before the anticipated begin date
  • The tax must begin on the first day of a calendar quarter

Once we receive your notification, we will work with you to make sure everything is ready for your new tax to begin.

We'll need the following information from you:

• Your resolution, if you are starting a transportation sales and use tax
• Your ordinance, if you are starting a general local sales and use tax or a special sales and use tax
• Proof that you filed your certificate with the secretary of state
• ZIP code information for your area
• A list of the vendors who will be responsible for collecting the local tax (if you have this information)
• The local government’s financial information so we can transfer revenue from the taxes we collect

We'll notify the public of the new tax at least 60 days before the tax begins.

If you have any questions, contact the Local Government Services Unit.

Email:  localgovernmentservices.mdor@state.mn.us

Phone:  651-556-6117