Corporate income tax:
The corporate rate is 9.8 percent of net taxable income in the state. Income is apportioned with sales weighted at 96 percent, and property and payroll weighted at 2 percent each for 2013. Income will be apportioned with sales weighted at 100% beginning in 2014.
Sales and use taxes:
The general statewide sales and use tax rate is 6.875 percent. Minnesota currently refunds sales tax paid on capital equipment (machinery and equipment) used in the manufacturing process. Beginning September 1, 2014, there will be an upfront exemption on these taxes. Other major exemptions for businesses include fees for equipment installation and many other services. Utilities, chemicals, and gases used in industrial production are exempt.
For qualified data centers, the following purchases are exempt: Enterprise information technology equipment, electricity used in the operation of the center, and computer software (refund). A qualified data center is a facility in Minnesota that consists of at least 25,000 square feet and an investment of at least $30 Million to include construction or refurbishment, investment in information technology equipment, and software within a 48 month period.
Local governments tax all real property not specifically exempted. Most commercial and industrial property is assessed at 1.5 percent of the first $150,000 of market value and 2 percent of the remainder. Varying tax rates are set by localities. Personal property is generally exempt from the property tax. Local property tax abatements are available for eligible economic development projects.
Research and development:
Businesses that paid certain research and development (R&D) expenses in Minnesota may qualify for the Increasing research Activities or “R&D Credit.” Beginning with tax year 2010, businesses may claim an R&D credit on their Minnesota income tax return. The amount of the credit is equal to 10 percent of qualifying expenses up to $2 Million and 2.5 percent thereafter. Qualifying expenses include R&D expenses that occurred in Minnesota and that qualify for the federal R&D credit and contributions to nonprofit organizations that make grants to technically innovative companies in Minnesota during their development stage.
Sales and use exemptions:
In addition to the sales tax refund (straight exemption beginning in August 2014) for manufacturers' capital equipment, sales of property delivered outside the state are exempt from sales tax under certain conditions. Materials used or consumed in agricultural, industrial, or services production for retail sale and petroleum products subject to other excise taxes are exempt from sales and use taxes.
Property tax exemptions:
Personal property, such as inventories, stocks of merchandise, and most machinery and equipment installed for business purposes, is exempt from property taxation. Tax increment financing is common and tax abatements are available on a limited basis. Certain property used for pollution control purposes is exempt from property taxation.
Minnesota State Contact:
John Shoffner, CPA, MBA
Director of Business Development
Minnesota Department of Employment and Economic Development
Business and Community Development Division
First National Bank Building
332 Minnesota Street
St. Paul, MN 55101
(800) 657-3858 or (651) 259-7445
Incentive and tax information is provided to Area Development by each state's economic development or commerce agency for information purposes only and is subject to revision at any time by the state government. Please contact the state agency directly for full requirements and offerings.