This ought to speed things up for some Minnesota businesses.
On July 1, the Minnesota Department of Revenue changes the way it exempts “capital equipment” from state and local sales taxes. The tax break pertains to equipment used to make products that eventually will go to retail markets for sale.
Businesses buying or leasing this manufacturing equipment actually have been able to claim a refund of state and local sales taxes after the purchase. To capture it, they submitted a form (ST11), which involved creating a worksheet with numerous details. In addition, they were limited to two refund requests each year, which might mean tying up sales tax refund dollars for months in some cases.
That cumbersome system changes on July 1. Businesses buying/leasing capital equipment will capture the sales tax exemption at the cash register, so to speak. They get it right away, at the time of purchase, Minnesota Revenue says.
The buyers do need to present one form, called a Certificate of Exemption (Form ST3), to the equipment seller. It looks a lot less demanding than the prior refund request.
First, does your purchase qualify as “capital equipment?” Generally, it will if the machinery is essential to make something that ultimately is sold to consumers. The exemption has a surprisingly long reach, even to the roots of production, such as research and development equipment.
It’s not only for industrial-sized manufacturers. Minnesota Revenue offers an example of a key-making machine in a hardware store as one eligible piece of “capital equipment.” Some hardware and software for online sales also might qualify, depending on the circumstance.
There also are a host of non-eligibles. For a rundown, see http://www.revenue.state.mn.us/businesses/sut/Pages/Qualifying_For_CE_Refund.aspx and Sales Tax Fact Sheet 103.
This is an area where professional interpretation of rules could help a small manufacturer or business owner. (For example, “capital equipment” is not the same thing as “capitalized assets,” Minnesota Revenue notes.) We at EricJohn Ltd. are equipped to tell you whether your business purchase qualifies for the sales tax exemption and how to capture it.