Change is a constant in all of life, but especially when it comes to sales tax. All too frequently when I hear of a state making changes, I fear for the taxpayers, because the changes frequently increase the cost of compliance. However this time I think Minnesota got it right.
Effective July 1, 2015 the state is implementing an upfront sales tax exemption for “Capital Equipment.” Capital Equipment is defined as machinery and equipment, purchased or leased and used in Minnesota primarily for manufacturing, mining, fabricating or refining of tangible personal property. Capital Equipment also includes equipment used to electronically transmit results retrieved by a customer of an on-line computerized data retrieval system.
Prior to July 1 2015, a purchaser had to pay the sales tax to the seller and then had 3.5 years to request a refund from the state. There were some additional limitations and the process could be burdensome and time consuming. Many refund opportunities went unrealized.
However, now all a purchaser has to do is provide the seller with a completed certificate of exemption, form ST3, including the term “Capital Equipment” as the exempt reason. When this is provided at the point of sale the purchaser may purchase the equipment tax free. This is a much simpler and easier process for the purchaser.
It does add some complexity for the seller as they now have to worry about collecting a new certificate and making sure it’s completed correctly and on the right form. But all in all, we believe Minnesota got it right.
BTW – If you have any questions or comments please feel free to submit below – or reach out to me directly.
Other recent “Exemption Certificate Mgmt.” posts by Michael J. Fleming:
- Drop Shipping Exemption Certificates For AL, AR, AZ, CO and GA.
- Drop Shipping Exemption Certificates For IL, NY, PA, & TX
- Drop Ship Exemption Certificates: Four More Restrictive States
- Minnesota Simplifies Exemption Process - and Gets It Right!
- Dropship Exemption Certificates: The 6 "Most Restrictive" States