Last month, the United States Supreme Court handed down the landmark ruling in South Dakota v. Wayfair, which allowed states to pass statutes requiring online retailers to collect and remit sales tax on transactions within their borders. This decision triggered provisions under Minnesota’s statute requiring remote sellers to collect and remit sales tax. (Minn. Stat. §297A.66)
Guidance from MN Department of Revenue
The Minnesota Department of Revenue released guidance on July 25, 2018 providing affected remote sellers guidance on how the state’s law would be rolled out and timelines for compliance. Remote sellers have until October 1, 2018 to register with the State and begin collecting and remitting sales tax.
Not all remote sellers are required to register with the state. Like the South Dakota statute in Wayfair, Minnesota provides a Small Seller Exception which sets the threshold at which remote sellers are required to collect sales tax. If, during a period of 12 consecutive months total, a remote seller either ships 100 or more retail sales to Minnesota or ships 10 or more retail sales to Minnesota totaling more than $100,000, then the remote seller will be required to collect and remit sales tax.
Of particular note is the requirement for certain Marketplace Providers to collect and remit Minnesota sales tax on all retail sales made into Minnesota facilitated by the marketplace. If a remote seller is using a marketplace like Amazon to sell and ship her or its items into Minnesota, then Amazon is responsible for collecting and remitting the sales tax on behalf of the remote seller. Remote sellers utilizing marketplaces should be sure to review their user agreements to make sure the marketplace is doing this.
Sales and Use Tax
Sales Tax. Minnesota law provides that a sales tax of 6.875% be imposed on the gross receipts from retail sales made in the state or to a destination in the state by a person who is required to have or voluntarily obtains a permit. (Minn. Stat. §2979A.62) Some local jurisdictions also have local taxes. The Minnesota Department of Revenue provides a helpful Sales and Use Tax Rate Calculator for sellers to use to calculate their tax liability manually.
Since Minnesota is among the twenty-four states that have adopted simplification measures for sales and use tax collection and remission through the Streamlined Sales and Use Tax Agreement, remote sellers can register to collect and remit sales tax in all Streamlined full member states through the Streamlined Sales Tax Registration System or through a Certified Service Provider. Remote sellers may choose to use a Certified Service Provider to provide them with the option of outsourcing most sales tax administration responsibilities including collection of for both state and local sales tax, preparation and filing of the required sales tax returns and remitting the tax. Remote sellers who utilize the Streamlined Sales Tax Registration system will be responsible for filing returns and making payments directly.
Use Tax. Use tax is the counterpart of sales tax at the same rate plus any local taxes that apply. Consumers are responsible to remit use tax if they purchase a taxable item for use in Minnesota and the seller does not collect sales tax on the purchase. The Minnesota Department of Revenue provides fact sheets for both businesses and individuals to help identify their use tax liability.
Remote sellers should begin evaluating the states in which they conduct business and work with experienced tax counsel to determine tax liability in those states. Remote sellers who are selling products should begin the process of registering with the state of Minnesota to collect and remit sales tax, so they are in compliance with the state’s law by October 1, 2018.
This content of this article should not be construed as, and should not be relied upon for, legal or tax advice. Individuals and businesses should consult a tax professional or experienced tax counsel for assistance with tax needs.
For almost 20 years Kim Lowe has lawyered from the trenches. Kim lawyers from experience, using her knowledge of the law and understanding of how both for-profit and nonprofit business enterprises operate.
Rachell Henning is a third-year student at Mitchell-Hamline School of Law's innovative Hybrid program. Rachell is an Avisen Fellow alum who enjoys spending time with her husband and two young daughters when she is not working or studying.