Sales During Transitional Periods (Transitional Sales)

When the sales tax rate increases, the new rate applies to the first billing period that starts on or after the effective date of the change.

A rate increase also includes when a sales tax exemption expires or a new law makes a service taxable.

Note: When the bill or invoice separately lists the service dates, you may apply the sales tax rate based on the dates of each service.

When the sales tax rate decreases, the new rate applies only to bills issued on or after the effective date of the change. It does not matter when the services took place.

A rate decrease also includes when a new tax exemption takes effect.

Note: When the bill or invoice separately lists the service dates, you may apply the sales tax rate based on the specific dates of each service.

Tangible personal property or services purchased in relation to a preexisting bid or contract are exempt from the tax or a tax rate increase for six months from the effective date of the law change. The exemption is for the change in tax on items or services if purchased during the transitional period.

Note: This does not apply when an exemption ends.

To qualify for this exemption the preexisting bids and contracts must meet certain criteria.

For construction contracts

1. The construction contract must have documentation of a bona fide written lump-sum or fixed price construction contract in force from before the effective date of the tax change.
2. The contract must not provide allocation of future taxes.
3. For each contract, the contractor must give the seller documentation of the contract for which an exemption is claimed.

For construction bids

1. The building materials or services must be used pursuant to an obligation of a bid or bids, the bid or bids must be submitted and accepted before the effective date of the tax change.
2. The bid or bids must not be able to be withdrawn, modified, or changed without forfeiting a bond.
3. For each qualifying bid, the contractor must give the seller documentation of the bid for which an exemption is claimed.

All deliveries must be made before the 6-month exemption period expires.

Contractors must provide sellers with a completed Form ST3, Certificate of Exemption, when they have a qualifying pre-existing bid or contract affected by a change in the tax rate.

• Tax rate changes, Minnesota Statute 297A.62, subd. 5
• Construction contracts, Minnesota Statute 297A.68, subd. 39