Starting a Local Sales Tax

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. Pass a resolution that includes the following:

• Proposed tax rate
• Detailed description of up to five capital projects to be funded with the tax
• Documentation of how each project will provide an economic benefit to residents, businesses, and visitors from outside the jurisdiction
• Amount of revenue to be raised for each project and the estimated time needed to raise funds
• Total amount of revenue to be raised for all projects
• Estimated length of time the tax will be in effect if all proposed projects are approved

2. Submit the approved resolution and supporting documents the senate and house tax committee chairs by January 31.

3. Once legislative approval is given, revise and reaffirm your resolution. The resolution must be passed at least 90 days before a general election.

4. Pass a referendum to impose the tax:

• Hold a vote at a general election within two years of legislative approval.
  • Each project must be have a separate question for approval.
  • Voters must approve by a majority vote. If a project is not approved by the voters, the revenue and expiration date must be adjusted.
• The local government cannot spend money to advertise or promote the proposed tax although it may publicize information included in the resolution.

5. Create and pass an ordinance imposing the tax.

6. File a certificate of approval and a copy of the ordinance with the Minnesota Secretary of State (Minnesota Statute 645.021, subd. 3).

You must notify the Minnesota Department of Revenue, in writing, at least 90 days before the anticipated begin date.

The letter needs to include the following:

• Authorizing session law or Minnesota Statute
• Date you plan to begin the tax (must begin on the first day of a calendar quarter)
• Approved tax rate
• Formal request for the Minnesota Department of Revenue to administer the new tax

We need the following information from you:            

• Your resolution imposing the local tax
• Board meeting minutes approving the resolution
• Your ordinance for sales and use tax regulations
• Copy of the certificate of approval and copy of the ordinance sent to the Minnesota Secretary of State
• Referendum question and results
• Documentation of public informational meetings held prior to the referendum (if held)
• Meeting minutes approving the project plan or capital improvement designated for the use of revenues collected. Minnesota Statute 297A.99 requires the use of funds be designated 90 days before the referendum.

Send the letter and supporting documentation to:

Cynthia Bauerly
Commissioner of Revenue
Minnesota Department of Revenue
Mail Station 6350
St. Paul, MN 55146

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.

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

To impose a special local tax, the political subdivision must complete the following steps:

1. The governing body must pass a resolution at least 90 days before the general election. The resolution must state the following:

• Proposed tax rate
• Intended use of the revenue (project plan)
• Amount of revenue to be raised
• Anticipated expiration date

2. The proposed tax must be passed by a majority vote of the local government in a general election:

• The local government cannot spend money to advertise or promote the proposed tax although it may publicize information included in the resolution.

3. If the proposal receives a majority vote, submit a certificate of approval and a copy of the ordinance to the Minnesota Secretary of State (Minnesota Statute 645.021, subd. 3).

4. The Minnesota Legislature must pass a special law authorizing the imposition of the tax.

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

You must notify the Minnesota Department of Revenue, in writing, at least 90 days before the anticipated begin date.  

The letter needs to include the following:

• Authorizing session law or Minnesota Statute
• Date you plan to begin the tax (must begin on the first day of a calendar quarter)
• Approved tax rate
• Formal request for the Minnesota Department of Revenue to administer the new tax

We need the following information from you:

• Your resolution imposing the local tax
• Board meeting minutes approving the resolution
• Copy of the certificate of approval and copy of the resolution sent to the Minnesota Secretary of State
• Your ordinance for sales and use tax regulations
• Referendum questions and results
• Documentation of public informational meetings held prior to the referendum (if held)
• Meeting minutes approving the project plan or capital improvement designated for use of revenues collected. Minnesota Statute 297A.99 requires the use of funds be designated 90 days before the referendum. 

Send the letter and supporting documents to:

Cynthia Bauerly
Commissioner of Revenue
Minnesota Department of Revenue
Mail Station 6350
St. Paul, MN 55146

Any county may impose a local sales and use tax of up to 0.5 % and a $20 vehicle 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.

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

To impose a local transportation tax, the political subdivision must complete the following steps:

1. Publish advanced notification of a public hearing to discuss potential transportation projects. Note: A vote on the proposed tax by county residents in a general election is not required.

2. Pass a resolution that includes the following:

• Reference to authorizing statute
• Proposed tax rate (up to 0.5%)
• $20 vehicle excise tax (if applicable)
• Intended use of the revenue (project plan)
• Amount of revenue to be raised
• Anticipated expiration date
• Intent to have the Minnesota Department of Revenue administer the new tax
• Reference to governing statute (Minnesota Statute 297A.99. subd. 4, and 6 – 13)

You must notify the Minnesota Department of Revenue, in writing, at least 90 days before the anticipated begin date.

The letter needs to include the following:

• Authorizing session law or Minnesota Statute
• Date you plan to begin the tax (must begin on the first day of a calendar quarter)
• Approved tax rate and the $20 vehicle excise tax if included in your resolution
• Formal request for the Minnesota Department of Revenue to administer the new tax

We need the following information from you:

• Resolution imposing the local tax
• Transportation project plan that includes:
  • Proposed tax rate (up to 0.5%)
  • $20 vehicle excise tax (if applicable)
  • Intended use of the revenue
  • Amount of revenue to be raised
  • Anticipated expiration date
• Board meeting minutes approving the resolution
• Documentation of public informational meetings held before passing the resolution

Send the letter and supporting documentation to:

Cynthia Bauerly
Commissioner of Revenue
Minnesota Department of Revenue
Mail Station 6350
St. Paul, MN 55146

The local government must notify the public 60 days before the local tax starts. You must:

• Provide a notice on the local government’s web page of the new local tax and the effective date
• Post information on the local government’s web page including:
  • The tax rate
  • The local tax notice
  • A link to the Minnesota Department of Revenue’s website
• If the local government provides and bills for sewer, water, garbage collection, or any other public utility services, the billing statement must include - at least annually - that residents and businesses may owe use tax on purchases made outside of the local area limits. You need to provide information on how the taxpayer may get information for calculating and paying the tax.

Note: You must leave this information on your website to inform new businesses of the local tax.

Minnesota Department of Revenue’s Responsibilities

We’ll notify the public of the new local tax at least 60 days before the tax begins and do the following:

• Register businesses located in the taxing jurisdiction for the new local tax
• Post a general notice on our website
• Update Fact Sheet 164, Local Sales and Use Taxes, with the new local taxes
• Send an email notice to all subscribers of our Sales and Use Tax email updates

Local governments with a local option sales and use tax administered by the Minnesota Department of Revenue must complete disclosure training annually. The training provides data privacy information before local government representatives have access to non-public taxpayer data. Go to the Annual Disclosure Training.

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

Email: localgovernmentservices.mdor@state.mn.us

Phone: 651-556-6117