Direct Pay Authorization

To qualify for Direct Pay, a business must be both:

• Registered as a monthly filer for sales and use tax
• Purchase large amounts of tangible personal property and not know if the items are for a taxable or exempt purpose. For example, chemicals, component parts, fuels, and inventory.

Note: Generally, only large manufacturers meet these requirements.

Would I need Direct Pay authorization if my business makes recurring purchases of taxable and nontaxable items from the same vendor?

No. You do not need Direct Pay authorization if you have a recurring relationship with a vendor. Instead, give your vendor a completed Form ST3, Certificate of Exemption. Accrue use tax on taxable purchases and remit the tax on your sales and use tax return. You must keep records that identify how you calculated use tax.

You cannot transfer or assign your Direct Pay authorization to another person or business to make purchases.

You cannot use the authorization to purchase the following exempt from sales tax:

• Taxable food or beverages
• Admissions to places of amusement or athletic events, or charges to use an amusement device
• Building cleaning and maintenance, laundry and dry cleaning, lawn care, detective, or security services 
• Lodging and related services
• Motor vehicles
• Parking services, motor vehicle cleaning, rustproofing, undercoating or towing

Your business must meet the record-keeping requirements listed below. You are subject to regular audits by the Minnesota Department of Revenue to verify you are paying the correct amount of sales and use tax.

Record-Keeping

You must keep a list of all vendors and submit it to the department upon request. You must use one of the following methods to make and track purchases:

• Method 1: Purchase all items, from all vendors, exempt from sales tax. Accrue and report use tax for all taxable purchases on your sales and use tax return.
• Method 2: Keep detailed records summarizing the amount of sales tax paid to each vendor for each purchase you make. All purchases from each vendor must be either taxable or exempt. You cannot ask a vendor to charge sales tax on only certain items or purchases.

To apply, send us the following:

• Your business’s legal name, d.b.a. name, address, and Minnesota Tax ID Number.
• A detailed description of your business.
• Explain in detail:
  • The volume of tangible personal property your business purchases and how it’s difficult or impractical to know at the time of purchase if the item is taxable or exempt.
  • Your accounting system and how it will clearly reflect the amount of tax due.
  • How Direct Pay authorization would reduce the administrative work of collecting sales and use tax from your business.
  • How it’s in the states interest to grant your business Direct Pay authorization.

Send your responses by:

• Email: salesuse.tech@state.mn.us
• Mail:  Minnesota Revenue
            Mail Station 6330
            600 N. Robert St.         
            St. Paul, MN 55146-6330

We will notify you of our decision as soon as possible. In some cases, we may ask for more information to process your request.

If you are approved, we will send you a letter authorizing your Direct Pay status.

To make purchases using your Direct Pay authorization, give your vendor a completed Form ST3, Certificate of Exemption. Specify the Direct Pay exemption. 

Note: We no longer issue Direct Pay permits or Direct Pay numbers.