Local taxes apply to the same items and services as the state general rate sales tax (6.875%).

If you use a freight, delivery, or postal service to send goods to areas that have local sales taxes, you must collect those local taxes. This may require you to register, collect, and remit additional local taxes.

General Local Taxes

The Minnesota Department of Revenue is required to collect all general local sales and use taxes. For a list of all local taxes we administer, see the Local Sales and Use Tax Chart.

General local sales and use taxes include:

• City, county, or area local taxes
• Local transit sales and use taxes
• Vehicle excise taxes

Note: We do not administer all vehicle excise taxes.

Special Local Taxes

Special local taxes are imposed by local governments and apply to specific types of sales. Go to the special local taxes section to see which ones we administer.

Local use tax applies when you buy items or services in a local area without paying local sales tax to the seller.

• Use tax is similar to sales tax and the tax rates are the same.
• Use tax is based on your purchase price of the taxable item.
• Local use tax is based on where the item is used.

Here are some situations where you may owe local use tax:

• You buy taxable items or services online without paying sales tax
• You take an item from inventory to use (instead of selling it), donate, or give away
• You buy taxable items outside of Minnesota
• You buy taxable items in another Minnesota city or county with a lower or no local sales tax
• You bring taxable items from one local area to use in another local area

For more information, see Use Tax for Businesses and Use Tax for Individuals.

In these examples, the general Minnesota sales tax applies and local sales taxes apply as described.

1. A Duluth company sells and delivers items to a business in Hermantown. Since the items are delivered to the business in Hermantown, the Duluth company is required to collect the tax where the items are delivered.

The following taxes apply to the sale:

• Minnesota General Sales Tax Rate
• Hermantown Sales Tax
• St. Louis County Transit Sales Tax

2. A contractor buys and picks up materials in a city with a local sales tax. The materials are then used in a location where there is no local sales tax. The contractor must pay the local sales tax, because the materials were picked up in an area with a local sales tax. There is no credit of the local sales tax paid because the materials were brought to a different location where the tax rate is lower.

3. A contractor buys and picks up materials in a city with a local sales tax. The materials are then used in a location where the local tax rate is higher. The contractor owes the difference between the total sales tax rate where the item was picked up and total sales tax rate where the item was used.

4. A contractor buys materials in a different state and pays the other state’s sales tax. The materials are brought to and used at a construction site in Detroit Lakes.

a. If the sales tax rate paid for the materials was higher than the sales tax rate in Detroit Lakes, no additional tax is owed. The sales tax paid at the time of purchase is not refundable.

b. If the tax rate paid was lower, the contractor owes use tax on the materials as follows:

• The difference between Minnesota general rate sales tax and the other state’s total sales tax rate.  Report the difference as variable rate use tax on your Sales and Use Tax return.
• All general local use taxes for Detroit Lakes on the cost of the materials. Report the following local taxes on the appropriate local tax line when you file your Sales and Use Tax return.
  • Becker County Transit Use Tax
  • Detroit Lakes Use Tax

5. An individual sells crafts at an event in Rochester. Since customers buy the items in Rochester, the seller has established local nexus and is required to collect the Rochester local taxes.

The following taxes apply to the sale:

• Minnesota General Sales Tax Rate
• Rochester Sales Tax
• Olmsted County Transit Sales Tax

The legal references and resources related to local sales and use taxes are listed.