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Do You Have A Use Tax Liability?

Use tax is similar to sales tax and the rates are identical.  If you buy a taxable item and are not charged sales tax, you probably owe use tax.  An example would be if you buy something by out-of-state mail order or over the internet and the seller does not charge Minnesota sales tax on the item.  Use tax is charged to protect Minnesota businesses from unfair competition.  It protects them by charging use tax to make up the difference in price for a seller who is not required to charge sales tax, and one who is. 

For Individuals

An individual is exempt from paying use tax if the purchases were made for personal use and do not exceed $770 in a calendar year. However if a person’s purchases that are subject to use tax exceed $770 they must pay use tax on the entire cost of the purchases.  Also if the seller was a business that was required to collect Minnesota sales tax and does not, use tax must be paid.  If an individual owes use tax it must be paid annually and a use tax return must be filed by April 15 of the following year.  This return can be filed electronically by going to the Minnesota Department of Revenue Website, logging into e-file Minnesota service and selecting the Individual Use Tax option.

Businesses

Be aware that use tax is owed if you take an item out of inventory for personal use, give a donation, or give a gift of an item in which sales tax would have been due, you must pay use tax.  Also if you paid sales tax in another state you may still owe use tax for the difference in sales tax between Minnesota and the other state. These rules are applicable to taxable services as well as for goods.  You must report and pay use tax with your sales tax return.  This can be done electronically on the Minnesota Department of Revenue website by logging into e-file Minnesota.

 For a helpful worksheet in keeping track of use tax, click here: Minnesota Use Tax Worksheet.

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