Taxable Purchases

field_block:node:guide:body

Items you purchase to operate your business are taxable unless an exemption applies. The following types of purchases are taxable.

Agricultural Production Purchases

Many items used in the agricultural production of cannabis and hemp products are taxable.

Examples include but are not limited to:

Hand tools
- Pitch forks
- Pruning shears
- Shovels and spades
- Trimming scissors
Mandated wastewater treatment that is not essential to the production process
Mandatory inventory tracking equipment and materials
- State law requires certain cannabis license holders to use a system to track cannabis from “seed to sale.” Even though the tracking system is required by law, it is subject to sales tax.
Odor control products

Many purchases related to the manufacturing process are taxable.

Examples include but are not limited to:

Chemicals and cleaning agents to clean production tools, including edibles production equipment
- Taxable cannabis products, medical cannabis flower, and medical cannabinoid products are specifically excluded from the definition of “food and food ingredients” under Minnesota Statute 297A.67, subdivision 2. These products do not qualify for the exemption on consumables for cleaning food processing machinery and equipment.
Equipment used to manage raw materials
Mandatory inventory tracking equipment and materials
- State law requires certain cannabis license holders to use a system to track cannabis from “seed to sale.” Even though this tracking system is required by law, it is subject to sales tax.
Shelving to store raw or finished goods inventory
Waste treatment equipment and machinery

Returnable packaging products are taxable.

Examples include but are not limited to:

For more information, see the Packaging Materials section of our Industrial Production fact sheet.

The following purchases are subject to sales or use tax.

TAXABLE PURCHASES	EXAMPLES
General items	Computer hardware and software Furniture and fixtures Office equipment and supplies Specialty advertising materials
Retail equipment and supplies	Cash registers and register tape Product and price lists Scanners Security tags
Safety equipment	Masks Protective equipment
Taxable services	Building cleaning and maintenance Detective and security services Lawn and garden maintenance For more information, see Taxable Services
Utilities for general purposes (not used in production)	Electricity Gas Water

For additional information, see the Purchases and Use Tax section of Retailers and Wholesalers Guide.

Purchases used and consumed to perform mandated testing are taxable.

You may owe use tax if a vendor did not collect sales tax on a taxable purchase or if you take an item out of inventory for use in your business.

Here are examples:

You take some cannabis out of inventory to provide as a free sample. You owe state general rate use tax, Cannabis Tax, and any applicable local use tax on the cost of that item.
You take some cannabis out of inventory to submit for a mandated test. You owe state general rate use tax, Cannabis Tax, and any applicable local use tax on the cost of that item.