Minnesota Sales Tax on Services

Minnesota now taxes certain services.

Minnesota now taxes certain services.

On July 1, 2013, Minnesota began collecting sales tax on certain services. Recently, the Minnesota Department of Revenue updated several fact sheets to reflect these changes to the tax law.

Labor – Repair for Businesses

A cheerful yellow box announces:

“Starting July 1, 2013, the repair and maintenance of certain equipment for businesses will be subject to Minnesota sales and use tax. This includes electronic and precision equipment, and commercial and industrial machinery and equipment.”

Labor – Repair for Individuals

Another cheerful yellow box announces:

“Starting July 1, 2013, the repair and maintenance of certain equipment and machinery for business will be subject to Minnesota sales and use tax.”

The trend to extend sales tax to services is not unique to Minnesota. States seeking more revenue are finding that services account for a growing part of the business sector. Applying sales tax to those services seems an obvious step to some. According to a 2012 article by the Tax Foundation, a hard but important “reform to make to the sales tax is to include all services in the sales tax base.”

Not everyone agrees, of course. An article in the Minnesota StarTribune argues that applying sales tax to business-to-business services creates “perverse business incentives….” It is, the author states, “bad for Minnesota.”

Bad for business or a hard but important choice, taxing services may well be in the cards for many states.

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photo credit: 401(K) 2013 via photopin cc

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