basic sales and use tax - minnesota department of revenue · 2020-01-23 · 1/23/2020 1 minnesota...
TRANSCRIPT
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Minnesota Business Tax Education January 2020
Basic Sales and Use Tax
Disclaimer
This presentation is for educational purposes only. It is meant to accompany an oral presentation and not to be used as a standalone document.
This presentation is based on the facts and circumstances being discussed, and on the laws in effect when it is presented. It does not supersede or alter any provisions of Minnesota laws, administrative rules, court cases, or revenue notices.
If you have any questions, contact us at [email protected] , 651‐296‐6181, or 1‐800‐657‐3777 (toll‐free).
Minnesota Business Tax Education ProgramProviding education opportunities about Minnesota tax laws.
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Course Objectives
After completing this course you will be able to: Apply the basic sales and use tax concepts for Minnesota and its local taxing jurisdictions to your business
Recognize the exceptions to the rule and the exemptions available Distinguish how sales and use tax law applies to different types of businesses and their business activities
Identify how to use and when to accept an exemption certificate Identify the documentation necessary for sales and use tax records and returns
List several resources that answer your sales and use tax questions
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Part 1
Sales and Use Tax Basics
Sales and Use Tax Basics
Sales and Use Tax Laws are not the same in every state.
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Sales and Use Tax Basics
Five categories of sales
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Intangible
Property
Digital
Products
Tangible Personal
Property
(TPP)
Services
Real
Property
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Sales and Use Tax Basics
What are some examples of taxable services in your business?
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Sales and Use Tax Basics
Sales tax = transaction tax
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Sales and Use Tax Basics
Trust tax
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1. Collect
2. File
3. Remit
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Sales and Use Tax Basics
What is a sale?
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Sale
Barter
Providing a service
LeaseWholesale
Retail
Rental
Sales and Use Tax Basics
What is use tax?
Complement to sales tax
Self‐assessed
Paid directly to the state
Applies to taxable purchases when sales tax was not charged
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Sales and Use Tax Basics
What is the tax rate?
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6.875%
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Sourcing determines where the sale takes place and which taxes are imposed on the sale.
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Sales and Use Tax Basics
1. Seller’s Address If the purchaser receives the product at the seller’s location
2. Delivery Address If the purchaser receives the product or service at a location other than the seller’s location
3. Billing AddressBased on the address that the seller has in their records for the customer
Minnesota Statutes 297A.668 and 297A.669
Sales and Use Tax Basics
How do I determine what taxes apply to the sale?
Sourcing rules for leases or rentals of TPP
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1st PaymentGeneral Sourcing Rules
(where transfer of property occurs)
Subsequent Payments
Primary Property Location
(address provided to
lessor by lessee)
Sales and Use Tax Basics
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SalesPrice
Fabrication labor
Taxes that are obligation of
seller
Service charges
Tips added to bill by seller
Installation labor
Delivery charges
Retail price of good or service
ALL charges that are a condition
of sale
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Sales and Use Tax Basics
Sales price does not include:
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Interest charges
Taxes legally imposed on consumer
Term discounts
Cash discounts
Finance charges from extension
of credit
Coupons, unless
reimbursed by a 3rd party
Credit allowed for trade‐in
Manufacturer’s Coupon Retailer’s Coupon
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Sales and Use Tax Basics
Light bulb
Tax on $2.50
Subtotal
Less coupon
Total Due
$ 2.50
+ .17 (6.875%)
$ 2.67
‐ .50
$ 2.17
Light bulb
Less coupon
Selling price
Tax on $2.00
Total Due
$ 2.50
‐ .50
$ 2.00
+ .14 (6.875%)
$ 2.14
Retailer’s coupon – seller reduces price by coupon before taxing Manufacturer’s coupon – apply tax before coupon is subtracted
(seller is reimbursed by the manufacturer for the amount of the coupon)
50 cents off 50 cents off
Type of Labor Examples Is it taxable?
Repair labor Car repair Equipment repair Calibrating equipment Sharpening tools
Construction labor Build an office building Kitchen remodel
Fabrication labor Custom sawing Bending sheet metal
Installation labor Computer equipment Modular furniture
Sales and Use Tax Basics
When is labor taxed?
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No (if separately stated)
Yes
Yes
No
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Sales and Use Tax Basics
When are repair and maintenance contracts taxed?
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Type of Contract Is the contract taxable?
Optional maintenance contracts
(bundled – one nonitemized price)
Optional maintenance contracts
(unbundled – separate itemized prices)
Extended warranty contracts
Yes. Tax is due when the contracted
maintenance is sold.
No. The service provider charges sales
tax to the customer on the taxable
items when the repair is performed.No. The service provider owes tax on
the parts provided under the contract.
Sales and Use Tax Basics
When are maintenance agreements for prewritten computer software programs taxed?
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Details of agreement Taxability of agreement
Required by vendor
Includes only upgrades or enhancements
Optional and includes upgrades, enhancements and support services
Optional and includes support services only
The entire charge is taxable
The entire charge is taxable
20% of the charge is taxable
Not taxable
Part 2
Who Needs to Register?
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Who needs to register?
Effective through September 30, 2019, you must register if you:
Make taxable sales into Minnesota
All businesses with a physical presence in Minnesota
Remote sellers who exceed the Small Seller Exception
100 or more retail sales shipped to Minnesota
10 or more retail sales shipped to Minnesota that total more than $100,000
Make purchases subject to use tax 22
Who needs to register?
Effective October 1, 2019, you must register if you:
Make taxable sales into Minnesota
All businesses with a physical presence in Minnesota
Remote sellers who exceed the Small Seller Exception during the last 12‐month period
200 or more retail sales shipped to Minnesota
retail sales shipped to Minnesota that total more than $100,000
Make purchases subject to use tax23
Who needs to register?
Businesses with a physical presence must register.
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Leasing or renting TPP
Tradeshowor convention
Performing services
Business location
Repairing or installing TPPNEXUS
Performing construction
work
Affiliated company
Agent or sales rep
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Who needs to register?
Remote sellers must register even if they only make sales into Minnesota through the use of:
Note: For additional information, see our Remote Sellers FAQs. 25
Telephone
Mail order
Internet
REMOTE SELLER
Who needs to register?
Does a remote seller who sells through a Marketplace Provider need to register to collect sales tax?
You only sell through a Marketplace
If the Marketplace collects on your behalf, you do not need to register.
If the Marketplace does not collect sales tax on your behalf, you must register and collect the tax unless you meet the Small Seller Exception.
You sell through a Marketplace, your own website, and through other sources
If all retail sales into Minnesota combined exceed the Small Seller Exception, you must collect and remit tax for all sales not reported by the Marketplace.
Who needs to register?
You may apply for a Minnesota Tax ID Number through the:
Minnesota Department of Revenue’s Business Center
Register online
Register by phone
Mail a completed paper registration form
Streamlined Sales Tax Registration System (SSTRS)
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Part 3
Local Taxes
Local Taxes
Local taxes are added to the state general sales tax rate to compute the total tax rate.
City tax
County tax
Special local tax(es)
Motor vehicle $20 excise tax
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Note: Some cities and counties impose a $20 excise tax on sales of motor vehicles rather than a sales tax. See Fact Sheets 164, 164M, and 164S relating to local sales and use taxes.
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Local Taxes
1. Select the Businesses tab.
2. Expand the list of Business Taxes and Fees section.
3. Select Sales and Use Tax.
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Local Taxes
Select Local Sales Tax Information.
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Local Taxes
Tools to Find Tax Rates Sales Tax Rate Calculator
Sales Tax Rate Map
Sales Tax Rate Map FAQs
Sales Tax Rate Spreadsheet
Rates and Boundaries Data
Local Sales Tax Rate Guide
Twin Cities Area Local Tax Rate Guide
Twin Cities Area Local Tax Rate Map
Select Calculate a Sales Tax Rate from the Top Tasks menu.
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Local Taxes
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Local Taxes
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ZIP + 4 Option
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Local Taxes
Address Option
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Local Taxes
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Map Option
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Local Taxes
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Local Taxes
Sales Tax Rate Spreadsheet
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Local Taxes
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Part 4
When and How to Use Exemption Certificates
There are three ways for a sale to be exempt from sales and use taxes:
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When and How to Use Exemption Certificates
1. Product‐based exemption(Do not need exemption certificate –exempt by statute)
2. Entity‐based exemption(Need exemption certificate unless exempt by statute)
3. Use‐based exemption(Always need an exemption certificate)
When and How to Use Exemption Certificates
Food (grocery items) for human consumption (F.S. 102A)
Clothing for general use (F.S. 105)
Prescription and over‐the‐counter drugs for humans (F.S. 117)
Publications sold by subscription
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Product‐based exemptions
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When and How to Use Exemption Certificates
Federal government agencies
Tribal governments
State and local governments (exceptions apply)
Exempt organizations (organized for charitable, educational, or religious purposes)
Note: The sales tax exemption for entity‐based organizations does not apply to prepared food, candy, soft drinks or alcoholic beverages; the purchases, lease or rental of most motor vehicles; lodging; or waste collection and disposal services unless purchased directly by the federal government. 43
Entity‐based exemptions
When and How to Use Exemption Certificates
Advertising materials shipped out of state
Inventory purchased for resale
Items consumed in performing a taxable service
Items used or consumed in agricultural production
Materials used or consumed in the manufacturing process
Note: See applicable fact sheets for specific details on the exemptions.
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Use‐based exemptions
When and How to Use Exemption Certificates
Businesses claiming these exemptions must complete an exemption certificate:
Direct Pay
Exempt Status (nonprofit exemption)
Motor Carrier Direct Pay
Resource Recovery Facility
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Authorization letters and permits
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When and How to Use Exemption Certificates
Authorized exemption certificates:
Certificate of Exemption, Form ST3 (Minnesota Department of Revenue form)
Certificate of Exemption, Form F0003 (Streamlined Sales Tax form)
Uniform Sales and Use Tax Certificate (Multistate Tax Commission form)
Other state’s exemption certificates (if all required elements are included)
Self‐prepared exemption certificate (if all required elements are included) 46
When and How to Use Exemption Certificates
Required elements for a complete exemption certificate: Purchaser's name and address
Purchaser's Minnesota tax ID number
Purchaser’s type of business
Reason for exemption
Purchaser's signature (if a paper certificate is used)
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48Jane Smith
The purchasing agent must retain the contract as supporting documentation.
The seller’s information is not required but it doesn’t hurt to complete these fields.
The red boxes identify the fields that are required for a complete exemption certificate.
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When and How to Use Exemption Certificates
Purchaser’s responsibilities:
Know if you qualify to claim an exemption
Complete an exemption certificate
Give it to the seller at the time of purchase
Pay any use tax, penalty, and/or interest if used incorrectly
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When and How to Use Exemption Certificates
Seller’s responsibilities
Review all exemption certificates
Keep exemption certificates as part of your business records
Do not unlawfully solicit exemption certificates
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Part 5
How Sales and Use Tax Applies to Business Activities
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How Sales and Use Tax Applies to Business Activities
Government Agencies
Collect sales tax on taxable goods and services sold
Determine taxability of purchases of taxable goods and services based on type of government
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Federal government agencies are not taxable Tribal government are not taxable State agencies are taxable (use direct pay authorization) Cities, counties, and townships are not taxable
(exceptions apply)
How Sales and Use Tax Applies to Business Activities
Government Agencies
Purchases made by government employees are taxable unless paid for directly by the government agency
Purchases of prepared food, lodging, and motor vehicles are taxable (except by federal government)
Other states or political subdivisions of other states may qualify for an exemption
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How Sales and Use Tax Applies to Business Activities
Nonprofit Organizations
Examples of nonprofit organizations are:
Charitable (Federal 501(c)(3) organizations)
Religious
Educational
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How Sales and Use Tax Applies to Business Activities
Nonprofit Organizations
Collect sales tax on taxable goods and services sold, unless the fundraising exemption applies
Do not pay sales or use tax on purchases used to further the nonprofit’s activities
Pay sales tax on the following: Lodging
Motor vehicles
Prepared food
Purchases made by employees unless paid for directly by the nonprofit55
How Sales and Use Tax Applies to Business Activities
Contractors
A contractor is someone who:
Furnishes materials and labor
Builds, alters, repairs, or improves real property
Is the end user of the materials and equipment
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How Sales and Use Tax Applies to Business Activities
Contractors
The following purchases are taxable:
Building materials and supplies, unless an exemption applies for the job*
Construction equipment and tools
Business assets and office supplies
* Contractors may purchase certain material exempt only when the material is specifically exempted by statute, or when they receive a valid Purchasing Agent. See the Contractors Fact Sheet.
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How Sales and Use Tax Applies to Business Activities
Contractors
For sales and use tax purposes, real property includes:
Land
Permanent buildings and structures
Improvements and fixtures incorporated into a building or structure given its current use
intended to be of a permanent benefit
cannot be removed without causing substantial damage to the building or structure
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How Sales and Use Tax Applies to Business Activities
Contractors
Exception: Real property does not include tools, implements, machinery, and equipment attached or installed into real property that qualify for exemption under section 297A.68.
For example, “capital equipment” used in manufacturing to produce a product ultimately sold at retail.
RN 18‐03: Sales Tax – Capital Equipment Revocation of Revenue Notice #96‐08.
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How Sales and Use Tax Applies to Business Activities
Contractors
Examples of real property include:
Commercial and residential buildings
Drywall, flooring, and roofing materials incorporated into real property
Landscaped lawns and gardens
Roads, bridges, and railroad tracks
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How Sales and Use Tax Applies to Business Activities
Retailers
Retailers sell TPP to businesses and individuals.
They must collect sales tax on goods they sell.*
Their inventory bought for resale is not taxable.*
Their purchases of business assets and office supplies are taxable.
They are responsible for paying use tax on goods taken out of inventory for their own use.
* The seller must charge tax unless the item is specifically exempt by law or they have a completed exemption certificate on file (if the sale is sourced to Minnesota and the seller is required to register here.) 61
How Sales and Use Tax Applies to Business Activities
Contractor/Retailer
Primarily a contractor ‐ at least 50 percent of your business purchases are used for construction activities
Primarily a retailer ‐ at least 50 percent of your business purchases are sold at retail
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How Sales and Use Tax Applies to Business Activities
Contractor/Retailer
If you are primarily a contractor:
Pay tax on all your purchases.
Charge sales tax on the actual sales price (including your mark‐up).
Deduct the cost of the materials on which you already paid tax when you file your sales and use tax return.
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How Sales and Use Tax Applies to Business Activities
Note: The $50 purchase amount from the contractor’s original invoice is not recorded on your return. This is an example only. Report total taxable sales on the return.
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Contractor’sPurchase Invoice
Materials $ 50.00
Tax (6.875%) $ 3.44
Total $ 53.44
Amount Reported on theSales and Use Tax Return
Gross Receipts $150
Less: Original Invoice $ 50
General Rate Sales $100
Customer’s Sales Invoice
Materials $150.00
Tax (6.875%) $ 10.31
Total $160.31
How Sales and Use Tax Applies to Business Activities
Contractor/Retailer
If you are primarily a retailer:
Buy the items exempt for resale.
Pay use tax on your cost of the materials if any of the items are later used in a construction contract.
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How Sales and Use Tax Applies to Business Activities
Nontaxable Service Providers
Examples include:
Accountants
Attorneys
Banks
Consulting firms
Counselors
Health care providers66
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How Sales and Use Tax Applies to Business Activities
Nontaxable Service Providers
The majority of services offered by these businesses are not taxable.
Sales of TPP made by a service provider are taxable.
Purchases of business assets and office supplies are taxable.
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Taxable Service Providers
The majority of sales are taxable (see fact sheets for exceptions).
Materials used or consumed in providing the service may qualify for exemption.
Short‐lived detachable tools may qualify for exemption.
Machinery and equipment used in providing the services are taxable.
How Sales and Use Tax Applies to Business Activities
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Manufacturers
The industrial production process includes:
Design, Research and Development for production of a product
Removal of raw materials from stock to begin production activities
Actual production activities that affect changes to produce the product
Testing and quality control of the product
Placement of the product in finished goods inventory
How Sales and Use Tax Applies to Business Activities
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How Sales and Use Tax Applies to Business Activities
Manufacturers
Business assets and office supplies are taxable
Returnable packaging is taxable
Product packaging and other nonreturnable packaging is not taxable*
Raw materials, chemicals and utilities used or consumed in production are not taxable*
Separate detachable tools and special tooling are not taxable*
* The purchaser must provide the seller with a completed exemption certificate for these items.
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How Sales and Use Tax Applies to Business Activities
Manufacturers
Upfront exemption for capital equipment available (effective July 1, 2015)
Machinery and equipment may qualify as capital equipment if:
used in Minnesota and
essential to the integrated production process
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How Sales and Use Tax Applies to Business Activities
Agricultural Production
Agricultural production includes:
Agriculture
Aquaculture
Floriculture
Horticulture
Silviculture
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How Sales and Use Tax Applies to Business Activities
Agricultural Production
Feed, seed, fertilizers, and herbicides are not taxable.
Fuels, electricity, gas, and steam used or consumed in agricultural production are not taxable.
Packaging materials used to package food products are not taxable.
Farm machinery is not taxable.
Returnable containers used to package non‐food items are taxable.
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How Sales and Use Tax Applies to Business Activities
Sales and Use Tax is a Transaction Tax
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How Sales and Use Tax Applies to Business Activities
Transaction Tax ‐ Seller
The seller must look at each transaction.
A general contractor rents equipment (without an operator) to a subcontractor.
A wholesaler makes a retail sale to an employee.
A farm implement dealer sells equipment to a contractor.
An accounting firm sells software to a client and installs it on the client’s computers.
A lawn care business provides snow removal services in the winter.75
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How Sales and Use Tax Applies to Business Activities
Transaction Tax ‐ Purchaser
The purchaser must look at each transaction.
A general contractor buys materials for a tax‐exempt job.
A retail electronics store buys taxable office supplies.
A manufacturer buys utilities to heat their facility.
A farmer buys tires for a tractor.
A building cleaning company buys vacuum cleaners.
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Part 6
Managing your Use Tax
Liability
Managing Your Use Tax Liability
Review your invoices
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Managing Your Use Tax Liability
What is the basis for use tax?
Use tax is based on:
your purchase price of taxable items or services.
This is true whether you buy items:
for your own business use without paying sales tax,
take them out of inventory and use them in a taxable manner, or
donate them to a charitable organization.
Note: Even if you paid Minnesota sales tax, a local use tax may still apply.79
Managing Your Use Tax Liability
What should I look for when reviewing invoices?
Review every invoice before you pay it.
Determine if items on the invoice are taxable.
Watch for taxable items purchased with an exemption certificate.
Watch vendor changes (e.g. new computer system).
Never add use tax to a vendor payment; always self‐assess the tax and remit it directly to the Department of Revenue.
Record the amount of use tax accrued on the actual invoice.
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Managing Your Use Tax Liability
What is a variable rate credit?
Minnesota allows a credit for the amount of sales tax paid to another state
Must be legally due to the other state to receive credit
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Managing Your Use Tax Liability
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1. Calculate the applicable amount of tax due (variable rate X sales price).
2. Enter the amount(s) as variable rate use tax when you file your Minnesota sales and use tax return.
Minnesota sales tax rate 6.875%
Wisconsin state and local sales tax ( 5.500%)
Variable rate tax due to Minnesota 1.375%
Managing Your Use Tax Liability
Recording your use tax liability
Record this information:
Date of purchase
Invoice number
Vendor’s name and description of item
Taxable amount
Amount of state and local use taxes paid
Keep a copy of the backup documentation.
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Part 7
Maintaining Your Records
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Maintaining Your Records
Recordkeeping Basics
Use a recordkeeping system that:
Incorporates Generally Accepted Accounting Principles
Allows you to keep track of the data you need
Does not require an excessive amount of time
Works for you and your business
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Maintaining Your Records
Recordkeeping Basics
Make sure that you:
Record each transaction the same
Do not mix personal and business transactions
Do not mix records if you have more than one business
Choose the appropriate accounting method
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Maintaining Your Records
Accounting methods
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Cash Basis
Record income when actually received
Report sales tax when actually received
Report use tax when invoice is paid
Accrual Basis
Record income when sales are made
Report sales tax when sales are made
Report use tax based on the invoice date
vs.
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Part 8
Filing and Payment
Instructions
Filing and Payment Instructions
You must do two things to avoid late filing and/or late payment penalties:
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1. File your return electronically by the due date.
(either online or by telephone)
2. Pay your sales and use tax liability electronically or by check on or before the due date.
Filing and Payment Instructions
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Filing Frequency Average Tax Liability Due Date
Monthly filers More than $500 per month (more than $6,000 per year)
20th day of the following month
Quarterly filers Less than $500 per month (less than $6,000 per year)
20th day of the month following the end of the quarter(April 20, July 20, October 20, and January 20)
Annual filers Less than $100 per month (less than $1,200 per year)
February 5 of the following year
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Filing and Payment Instructions
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Filing and Payment Instructions
Verification Code
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Filing and Payment Instructions
Verification Code
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Filing and Payment Instructions
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Filing and Payment Instructions
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Enter your gross receipts in the highlighted area.
50000
Filing and Payment Instructions
Enter your taxable amounts in the yellow highlighted areas.
If you have variable rate purchases, enter the taxable amount and the tax due.
500002000
500002000
500002000
1000 14
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Filing and Payment Instructions
Common reasons you may need to file an amended return are:
Reported too much or too little tax on your original return
Reported the tax on the wrong tax line
Charged tax incorrectly to a customer and have refunded the tax to the customer
Received a completed exemption certificate from a customer (you reported the tax in a prior period and have since refunded the tax to your customer)
Note: Do not file an amended return for tax paid to a vendor in error.97
Part 9
Communicating with the
Department of Revenue
Communicating with the Department of Revenue
Have a sales and use tax question?
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Communicating with the Department of Revenue
Sales and Use Tax General Contact Information
Minnesota Revenue website: revenue.state.mn.us
Questions relating to Sales and Use Tax Law?
Email: [email protected]
Questions relating to your Sales and Use Tax account activity?
Email: [email protected]
Prefer telephone assistance?
Phone: 651‐296‐6181 or 1‐800‐657‐3777 (toll free)100
Communicating with the Department of Revenue
General Contact Information for Other Divisions Business Income Taxes (Corporation Franchise Tax, Partnership Tax,
S Corporation Tax, Estate Tax, Fiduciary Tax)
651‐556‐3075
Email: [email protected]
Withholding Tax
651‐282‐9999 or 1‐800‐657‐3594
Email: [email protected]
Business Registration
651‐282‐5225 or 1‐800‐657‐3605
Email: [email protected] 101
Communicating with the Department of Revenue
GovDelivery
Choose the updates you want ‐ by tax type and publication type
Choose the frequency of notifications
Sign in directly or use your social media account –
Facebook, Yahoo! or Google
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Communicating with the Department of Revenue
Sales and Use Tax Videos
e‐Services Instructional Videos
Education Video Series
Inside Scoop: Streamlined Sales Tax
103youtube.com/MNRevenue
Communicating with the Department of Revenue
Social Media
Keep up with the latest news from the Minnesota Department of Revenue on Twitter, Facebook, and LinkedIn.
twitter.com/MNRevenue
facebook.com/MNRevenue
linkedin.com/company/MNRevenue
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Communicating with the Department of Revenue
Please notify us if you have changes to any of the following:
Mailing address(es)
Business location(s)
Legal organization
NAICS code
Contact information
Owners and/or officers105
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Communicating with the Department of Revenue
Did you receive a letter or a bill from us?
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Part 10
Financial Consequences
of Noncompliance
Financial Consequences of Noncompliance
Note: The maximum combined late file and late payment penalty is 20 percent. Additional civil and criminal penalties may apply.
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Days Late Late Filing Penalty Late Payment Penalty
1‐30 days 5 percent 5 percent
31‐60 days 5 percent 10 percent
60+ days 5 percent 15 percent
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Financial Consequences of Noncompliance
Interest rates used by the Department of Revenue in recent years:
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2019 – 2020 5%2017 – 2018 4%2010 – 2016 3%
Financial Consequences of Noncompliance
Collection tools available to the Department include:
Levies
License revocation
Liens
Property seizures
Revenue recapture
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Part 11
Course Review
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Course Review
During this class, we discussed …
The basic sales and use tax concepts for Minnesota and its local taxing jurisdictions.
The difference between taxable goods and services and those that are nontaxable or exempt.
The different types of users and how tax applies to different businesses.
How to use and when to accept an exemption certificate.
The documentation necessary for sales and use tax records and returns.
Where to find information to help you answer your questions. 112
Basic Sales and Use Tax Review
1. Who is responsible for paying sales or use tax on these purchases?
a. Retailer purchasing inventory for resale
b. Cleaning service buying window cleaner
c. Manufacturer buying raw materials
d. Business leasing a photocopier
e. None of the above
Basic Sales and Use Tax Review
2. Which of these are not considered part of the “sales price”?
a. Installation charges
b. Finance charges
c. Retail price of product or service
d. Service charges added to the bill by the seller
e. All of the above
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Basic Sales and Use Tax Review
3. Which of these services are not taxable in Minnesota?
a. Motor vehicle washing
b. Pet grooming
c. Accounting services
d. Detective services
e. All of the above
Basic Sales and Use Tax Review
4. Which of the following is considered tangible personal property?
a. Office supplies
b. Food (e.g. fresh or frozen fruits, vegetables and meat)
c. Machinery and equipment
d. Utilities (e.g. gas, water, electricity, fuel, etc.)
e. All of the above
Basic Sales and Use Tax Review
5. Which of these types of labor are taxable?
a. Repair labor
b. Construction labor
c. Fabrication labor
d. Installation labor (item remains TPP after installation)
e. Both c & d
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Basic Sales and Use Tax Review
6. An exempt organization cannot use their exempt status to purchase which of the following exempt from tax?
a. Toilet paper
b. Toner for their printer
c. Lunch at a restaurant for a business meeting
d. Cleaning service for the office
e. None of the above
Basic Sales and Use Tax Review
7. What is the largest percent that can be charged for combined late filing/late payment penalties?
a. 5%
b. 10%
c. 15%
d. 20%
e. All of the above
Basic Sales and Use Tax Review
8. According to contractor/retailer rules, a carpenter who builds cabinets and installs the majority of his products into real property can buy the materials used to fabricate the cabinets exempt.
TRUE FALSE
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Basic Sales and Use Tax Review
9. Taxable items taken out of inventory to be given away for a donation or as free samples are subject to use tax.
TRUE FALSE
Basic Sales and Use Tax Review
10. Out‐of‐state customers who pick up their taxable merchandise in Minnesota have to pay Minnesota sales tax and all applicable local taxes.
TRUE FALSE
Basic Sales and Use Tax Review
11. The Small Seller Exception for remote sellers is based on sales in a calendar year ‐ January through December.
TRUE FALSE
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Basic Sales and Use Tax Review
12. Nonprofits who have been granted federal nonprofit status automatically qualify for sales tax exempt status.
TRUE FALSE
Basic Sales and Use Tax Review
13. A business creates and sells custom DVDs and pays sales tax on the blank DVDs when they buy them. The business does not have to charge sales tax to their customer because tax was already paid.
TRUE FALSE
Basic Sales and Use Tax Review
14. Since cutting hair is not a taxable service in Minnesota, a beauty salon or barber shop would not need to register for a Minnesota Tax ID#.
TRUE FALSE
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Questions?
Minnesota Business Tax Education
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