Overview of Minnesota Department of Revenue Guidelines
The Minnesota Department of Revenue has updated its Contractors and Other Property Installers Industry Guide. The guide provides clarifications on several key areas related to Minnesota sales tax and construction labor.
Leased Items and Real Property
- Leased items are not considered real property because they are not intended to be permanent.
- A transaction is not a lease if the security agreement or deferred payment plan contracts require the transfer of title upon completion of the required payments.
Tax Status of Construction Labor
- Construction labor is not taxable.
- Non-taxable labor includes work that permanently incorporates tangible personal property into real property.
- It also covers the construction of a structure intended to be permanent.
Guidance for Contractor-Retailers
The updated guide provides new tax guidelines specifically for contractor-retailers or businesses that:
- Contract to improve real property.
- Make retail sales of building materials, supplies, equipment, and other tangible items.
Use Tax on Untaxed Purchases
The guide offers specific examples highlighting situations where use tax may be due on taxable purchases if no Minnesota sales tax is charged.
Note: These updates aim to help businesses properly determine their tax obligations under Minnesota law.
Frequently Asked Questions
What is the Minnesota Department of Revenue’s position on leased items and real property?
Leased items are not treated as real property because they are not intended to be permanent. Additionally, if a contract requires the transfer of ownership at the end of payment terms, the transaction is not considered a lease.
Is construction labor taxable in Minnesota?
No, construction labor is generally not taxable in Minnesota. This includes work that permanently incorporates materials into real property or involves building structures intended to be permanent.
Who are considered contractor-retailers under Minnesota tax law?
Contractor-retailers are businesses that both improve real property and sell building materials, supplies, or equipment at retail. The updated guidelines help clarify their tax responsibilities.
When is use tax due on purchases?
Use tax is due when a business makes a taxable purchase and Minnesota sales tax was not charged at the time of the transaction. The guide includes examples to help identify such situations.
Why were the updates to the industry guide made?
The updates aim to provide clearer guidance for businesses on determining their Minnesota sales and use tax obligations, especially in the construction and contracting industries.