Minnesota's Corporate Income Tax
Minnesota's corporate tax rate of 9.8% is applicable to the taxable portion of corporate income. In 2014, Minnesota adopted the single sales apportionment, making Minnesota a competitive location for headquarters and businesses that routinely make capital investments. Business taxes can be reduced by tax credits such as:
- Credit for Increasing Research Activities (R&D credit). The tax credit for R&D expenditures is 10%, up to the first $2 million in eligible expenses. The credit is 2.5% for eligible expenses above $2 million. Individuals involved in partnerships, S-corporations and limited liability companies are allowed to claim the credit against their individual income taxes.
- Small Business Investment Credit (“Angel Investment Credit”). This credit provides qualified investors in certified small businesses with a refundable income tax credit equal to 25 percent of their investments up to a maximum of $125,000 ($250,000 for married joint filers). The credit was enacted to encourage investment in emerging small businesses.
- Historic Structure Rehabilitation Credit for improvement of historic structures.
Minnesota Sales & Use Tax
- Minnesota’s general sales tax rate is 6.875%.
- Rochester local sales tax is .75%.
- Rochester lodging tax is 7%.
- Olmsted County transit sales and use tax is .25%.
- Wabasha and Fillmore Counties transit sales and use tax is .5%.
A list of local sales taxes can be found at Minnesota Local Sales and Use Taxes.
Business sales tax exemptions include:
- Capital equipment (before September 1, 2014, the tax is refunded for non-manufacturers), raw materials and utilities/fuels used in the industrial production process.
- Equipment, software and electricity for qualified data center operations for 20 years.
Business services that are not taxed include:
- Advertising services
- Custom software
- Construction labor
- Installation labor for exempt capital equipment
- Repair of furniture and fixtures
- Clothing, pharmaceuticals, or food used for home consumption.
For more information on sales and use taxes visit: revenue.state.mn.us/Forms_and_Instructions/sales_tax_booklet.pdf
Commercial & Industrial Property Tax
Minnesota exempts personal property such as machinery and inventory from the property tax. Businesses with high equipment and inventory values, relative to their property value, pay a lower effective rate in Minnesota than many other states.
To estimate the property tax for a business property located in Olmsted County use property tax estimator.
Unemployment Insurance Tax
Minnesota companies unemployment insurance rate is based on the company's individual employment history.
Further information can be found at Unemployment Insurance Minnesota.
Workers’ Compensation Insurance
Minnesota employers purchased workers' compensation coverage at market rate. Minnesota's insurance industry is highly competitive, allowing for substantially reduced market-rate premiums.
Further market rate information can be found at Minnesota Workers’ Compensation Insurers Association Inc and general information can be found at Minnesota Workers Compensation.
To learn more about Minnesota state taxes, for business and individuals visit: http://www.revenue.state.mn.us/Pages/default.aspx