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Basic Business Taxes

Sales and use taxes:
The general statewide sales and use tax rate is 6.5 percent; 13 communities and one county have legislative authorization to impose an additional tax ranging from 0.5 percent to 1 percent. Capital equipment and machinery for manufacturers and special tooling are exempt.

Property tax:
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.

Sales and use exemptions:
In addition to the sales tax exemption for manufacturers' capital equipment, sales of property delivered outside the state are exempt from sales tax under certain conditions. An exemption from sales and use tax applies to commercial aircraft and flight equipment. 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. An exemption from sales and use taxation is allowed on gross receipts from the sale of equipment used for processing solid or hazardous waste.

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 is implementing a single-factor sales apportionment formula. The sales weight will increase each year and reach 100 percent in 2014. Minnesota does not have a throwback rule.