Governmental Entities Sales Tax Changes

Effective January 1, 2014 cities, townships and counties are exempt from Minnesota Sales and Use Tax for purchases made to provide certain governmental services.  The three criteria purchases must meet to qualify for Minnesota Sales Tax Exempt include:

  1. Input used to provide government services
  2. Not used as inputs to provide service that is generally proided by private businesses (i.e. Liquor Store, Gas and Electric Utilities, Campgrounds, Community Centers, Waste Management)
  3. Purchase is billed and paid for directly by the local government

In General, items purchased to provide government services will be Minnesota Sales Tax Exempt.  The governmental services include housing services, sewer and water services, wastewater treatment services, ambulance services, public safety services, correctional services, road and street maintenance services and lighting.  Purchases for office supplies/equipment and telephone, machinery and equipment including accessories for public safety and streets and maintenance, and fuel and construction materials will be exempt.

Items used to provide services that are commonly provided by private business will still be Minnesota Sales Taxable.  These services include liquor stores, gas and electric utilities, golf courses, health and fitness centers, community and sports centers, campgrounds, waste management.

In addition, the government will still pay Minnesota Sales Tax on the following:

  1. Purchases of lodging, prepared food, candy, soft drinks
  2. Purchases for the City Cemetery except lawn maintenance services
  3. Solid Waste Management Tax
  4. Repair labor that is taxable starting July 1, 2013

When filling out the exemption certificate (Form ST3) select option “B” as the reason for exemption.  For additional information check the Minnesota Sales Tax Fact Sheet on Local Governments – Cities, Counties and Townships.