Minnesota Basic Business Taxes 2011
Minnesota's economic development, finance and tax organizations provide a range of incentive programs to initiate new business and commercial investment. Specific programs include research and development tax credits, sales and use exemptions, and property tax exemptions.
Area Development Research Desk (March 2011)
Corporate income tax:
Corporations pay a tax rate of 9.8 percent of net taxable income in the state. Income is apportioned with sales weighted at 87 percent, and property and payroll weighted at 6.5 percent each for 2010 (sales factor increasing to 100 percent in 2014).
Sales and use taxes:
The general statewide sales and use tax rate is 6.875 percent. Nineteen communities and six counties have legislative authorization to impose an additional tax ranging from 0.15-1 percent. Capital equipment and machinery for manufacturers is refundable, and special tooling is exempt.
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. Property tax abatements can be granted for eligible economic development projects.
Research and development:
A deduction against gross income is allowed for research and development expenses. A credit against the tax is allowed for a percentage of qualified expenditures made within Minnesota. Credits in excess of tax liability are refundable. In 2010, the amount of the credit was increased and credit eligibility was expanded.
Sales and use exemptions:
In addition to the sales tax refund 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:
Minnesota Department of Employment and Economic Development
Office of Business Development
First National Bank Building
332 Minnesota Street
St. Paul, MN 55101
(800) 657-3858 or (651) 259-7432
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.