Free guide for contractors
Do contractors charge sales tax in Minnesota?
General information, not tax advice. Tax rules change and depend on the details of each job. Confirm how they apply to your business with your accountant or the state's revenue department before relying on them.
MN Minnesota
Usually no tax on the invoiceNo, for construction contracts. Minnesota contractors pay tax on materials when buying them, but retail sales and some services are taxed.
In Minnesota, materials are taxable to the contractor at the time of purchase, and the contractor does not charge sales tax on construction contracts. A kitchen remodel, for example, is an improvement to real property, and no sales tax is charged to the customer.
A contractor does charge tax when it makes a retail sale, such as a freestanding appliance or materials sold without installation. Repair labor on tangible personal property, such as equipment repair, is not taxed when it is separately stated; labor to install an item that stays tangible personal property is taxed.
Building cleaning and maintenance, interior and exterior, residential and commercial, is taxable, and so is pest control. Lawn services are taxable, even under maintenance contracts, unless they are part of an initial landscaping project; a landscape construction contract is not taxable.
The state rate is 6.875%, plus local taxes.
It turns on: whether the job is an improvement to real property or a retail sale; whether the work is a taxable service such as cleaning, pest control or lawn care.
Watch out for
- Contracts with exempt organizations are treated like any other contract, and the invoice does not include tax either way (MN DOR, Sales and Use Tax for Contractors course).
“Do not charge sales tax on construction contracts.”MN DOR, General Contractors and Subcontractors