Do You Need to Get a Sales Tax Permit in Minnesota?
Quick Answer: You need to get a sales tax permit in Minnesota if you meet economic, physical presence, affiliate or click-through nexus requirements as determined by the state. Read on for more detailed information.
What is Sales Tax Nexus Anyway?
Your business owes sales tax in any state where it has “sales tax nexus”. In short, if you have sales tax nexus you need to collect and remit sales tax. If you don’t have sales tax nexus, you generally don’t need to get a permit.
Sales tax nexus is a legal term that means you have crossed a threshold and now have a sales tax collection responsibility in the state. Nexus can be created by having a physical presence, economic presence, or by other factors. Nexus rules vary by state and retailers have specific nexus rules based on where they have people, property or inventory.
What Should You Do Once You Determine You Have Sales Tax Nexus?
Once you determine that you have sales tax nexus in Minnesota, your next step is to register for a sales tax permit in the state. Check out our blog post on getting a sales tax permit in Minnesota for more information about that process.
Common Ways to Have Sales Tax Nexus in Minnesota
1. Economic nexus in Minnesota
If you had $100,000 or more retail sales in Minnesota over the prior 12-month period OR had 200 or more separate transactions, then you are required to register for, collect, and pay sales tax to the state. If you meet this threshold, it does not matter if you have a physical presence in Minnesota. Nexus has been created based on your volume of sales.
For more information, please see the Minnesota Department of Revenue: What is the Small Seller Exemption?
If you need help determining which states you have crossed economic nexus thresholds, check out our Sales Tax Starter Kit service.
2. Physical presence nexus in Minnesota
If you meet any of the following conditions in Minnesota, you have physical nexus and are required to collect and remit sales tax:
- An office, place of distribution, sales or sample room or place, warehouse, or other place of business in Minnesota either directly or by a subsidiary;
- A representative, agent, salesperson, canvasser, solicitor, or other third party (either permanent or temporary), who operates under the authority of the retailer or marketplace provider or its subsidiary in Minnesota for any purpose, including repairing, selling, delivering, installing, or soliciting orders for the retailer’s goods or services or a retailer’s goods or services (in the case of a marketplace provider);
- Leases tangible personal property located in Minnesota; or
- Delivery of tangible personal property into Minnesota in their own vehicles.
For more information, see Revenue Notice #19.03.
If you need help determining which states you have a physical presence in, check out our Sales Tax Starter Kit service.
Free State Audit Risk Guide
See which states pose the greatest risk to your business.
State-by-State Audit Risk Percentages
Uncommon Ways to Have Sales Tax Nexus in Minnesota
1. Affiliate Nexus in Minnesota
What exactly is affiliate nexus? Affiliate nexus can exist when a business has sufficient contact with a state through a separate business. If your out-of-state business has a relationship with an in-state business, then you may have affiliate nexus.
Please keep in mind that an “affiliated business” does not necessarily mean that it is a marketing “affiliate” in the typical sense of the word. Instead, “affiliate nexus” refers to the relationship between two businesses.
You may have affiliate nexus if your business has ties to a business in Minnesota that engages in any of the following:
- Uses its facilities or employees in the state to advertise, promote, or facilitate the establishment or maintenance of a market for sale of items by the retailer.
- Has the same or a similar business name to the retailer and sells, from a location or locations in the state, tangible personal property, digital goods, or services, that are similar to that sold by the retailer.
- Maintains an office, distribution facility, salesroom, warehouse, storage place, or other similar place of business in the state.
- Maintains a place of business in the state and uses trademarks, service marks, or trade names in the state that are the same or substantially similar to those used by the retailer.
- Delivers, installs, or assembles tangible personal property in the state, or performs maintenance or repair services on tangible personal property in the state, for tangible personal property sold by the retailer;
- Facilitates the delivery of tangible personal property to customers of the retailer by allowing the customers to pick up tangible personal property sold by the retailer at a place of business the entity maintains in the state; or
- Shares management, business systems, business practices, or employees with the retailer, or engages in inter-company transactions with the retailer related to the activities that establish or maintain the market in the state of the retailer.
For more information about affiliate nexus, see 2019 Minnesota Statutes 297A.66, Subd. 4.
2. Click-through Nexus
What is click-through nexus? Referrals from in-state entities may trigger nexus for an out-of-state company. Click-through nexus may be established in Minnesota if all of the following conditions are met:
- Enter into an agreement with a resident for commission or other substantially similar consideration; and
- The resident representative directly or indirectly solicits business from Minnesota customers to the retailer, whether by link on an Internet website or otherwise; and
- The out of state retailer’s gross receipts over 12-months (preceding four quarterly periods) is at least $10,000.
For more information about click-through nexus, see 2019 Minnesota Statute 297A.66, Subd. 4(b).
Do You Need a Sales Tax Permit in Minnesota If You Only Sell on Marketplaces?
If you ONLY make sales through an approved marketplace (Amazon, eBay, etc), the marketplace is responsible for collecting and remitting the sales tax on your behalf. You do not need a sales tax permit in Minnesota.
For more information, see Sales Tax FAQs for Remote Sellers.
If you are an e-commerce seller who is unsure of where you need to get a sales tax permit, check out our Sales Tax Starter Kit service.
Disclaimer: Our attorney wanted you to know that no financial, tax, legal advice or opinion is given through this post. All information provided is general in nature and may not apply to your specific situation and is intended for informational and educational purposes only. Information is provided “as is” and without warranty.