Here we explain Minnesota state tax laws for businesses, in a condensed, simplified way. For further details, visit the Minnesota gov’t website for businesses.
Corporate Franchise Tax (Corporation Income Tax)
Your business is required to file this, a Partnership, or S Corp. tax return for any year you have nexus (taxable activity in the state, which includes online sales). If you’re unsure whether your business needs to do this, fill out this business activity questionnaire and send it to the address provided, or peruse this FAQ page if you have general questions.
Minnesota corporation franchise tax instructions
There is also a “minimum fee” tax for corporations, S corps, LLCs, and partnerships, based on the value of your property, payroll, and sales combined. The following is a table showing the fees due based on the value of your business:
|
<$970,000 |
$0 minimum fee |
|
$970,000 – $1,939,999 |
$200 min. |
|
$1,940,000 – $9,689,999 |
$580 min. |
|
$9,690,000 – $19,379,999 |
$1940 min. |
|
$19,380,000 – $38,769,999 |
$3880 min. |
|
$38.77 million + |
$9690 min. |
Energy Production Tax
If you’re producing energy with a solar system, you must file the solar energy production return, unless the system is tax-exempt. This return is due each year by January 15th. There is also a form for wind energy production for any system installed after January 1, 1991 (again unless tax exempt) and this is due each year on February 1st.
Minnesota Estate Tax
Minnesota does charge an estate tax between 10-16% for estates sized larger than $1 million, and this exemption amount increases each year (2016 is $1,600,000). Calculate your loved one’s estate tax using the Minnesota Dept. of Revenue tools.
MinnesotaCare Tax
For health care goods and services providers, Minnesota charges gross revenue taxes which pay for the MinnesotaCare program that provides state-subsidized health care coverage for low-income individuals. This form must be filed by March 15th each year electronically.
Minnesota Property Tax
There are a variety of property taxes for different businesses such as airlines (passenger or freight); contamination; general property (tax rate determined by each county, approximately 1-1.3%) railroad; and utility (including electric light, power, gas, water, and transportation pipeline).
The general sales tax rate is 6.875%. Use tax applies when you buy a taxable item without paying sales tax, and at that time you would owe use tax, which is the same rate as sales tax. There are also many local taxes in place which are often applied to the same items as the state tax law. Register with any locality you’re doing business in. The same rules apply when taking online sales orders.
Your business must register for a Minnesota tax ID number to collect sales tax if you’re making taxable retail sales. Use the updated sales tax booklet at the link provided above for more details about who needs to register, where to file changes about your business, etc.
As a business owner, you are often required to withhold state income tax and file a return if you employ a Minnesota resident or someone who works in the state, and if you’re required to withhold federal income tax from their wages.
If your tax ID number is registered for Withholding Tax, a return must be filed each quarter no matter what, on:
- April 30
- July 31
- October 31
- January 31
To see details about particular industries and situations, refer to the Tax Fact Sheets.
Tax Extensions
Corporation tax returns are due on the same date as your federal tax return (the 15th day of the third month after the close of your tax year).
S Corps and Partnerships receive an automatic six month extension to file (no extra form required) and if the IRS grants an extension that is longer than the six months, your state due date is extended to the federal date. There is no payment extension. Be informed about late payment penalties and how to avoid them.
For more help with understanding your corporate taxes, or if you’re looking for a tax preparation service or business accounting services, contact D&M Accounting and we will be glad to answer any questions you have!
