What is sales tax? What is use tax? Private party sales

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Gabriel Gilbert
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1 This infrmatin will help determine if yu need t cllect use tax frm an individual registering a snwmbile, all-terrain vehicle (ATV), r watercraft. We will refer t these as DNR vehicles r vehicles in this dcument. When an individual paid the applicable Minnesta Sales r Use Taxes, yu d nt need t cllect tax frm them. What is sales tax? Sales tax applies t sales f tangible persnal prperty, taxable services, and digital prducts in Minnesta. Businesses cllect the sales tax due and remit the sales tax cllected when they file their Sales and Use Tax return. What is use tax? When a business r individual buys taxable gds r services and the seller des nt charge Minnesta sales tax, they we use tax n the cst f the item. When an individual registers a snwmbile, ATV, r watercraft and did nt pay sales tax at the time f the purchase, they we use tax when they register the vehicle. We have addressed sme f the cmmn situatins where use tax may r may nt be due n a DNR vehicle. When the individual des nt prvide dcumentatin shwing they paid Minnesta Sales Tax and the vehicle is taxable, yu must cllect use tax frm them t register the vehicle. (Minnesta Statute 297A.825, subd. 1) Private party sales Was the vehicle purchased frm a private party (an individual)? A. Yes. The purchase is nt taxable. B. N. The DNR vehicle was purchased frm a business. The purchase may be taxable. When the vehicle was purchased frm a dealer r a cmpany in the business f selling DNR vehicles, the purchase is taxable. When the vehicle was purchased frm a cmpany that is nt in the business f selling DNR vehicles, it may be taxable. See the Vehicle purchased frm a business (nn-dealer) sectin. Nte: The Department f Public Safety s rules cver street legal Off Highway Mtrcycles (OHMs) and Off-Rad Vehicles (ORVs). On initial registratin f OHMs and ORVs, the DNR des nt have a statute requiring prf f sales tax payment. Minnesta Statute 297A.67, subd. 23 Minnesta Rule Sales Tax Fact Sheet 132, Islated and Occasinal Sales

2 Vehicle purchased frm a business (nn dealer) Was the vehicle primarily used by the seller in their nrmal curse f business? A. N. The purchase is nt taxable. B. Yes. The purchase is taxable unless any f the fllwing apply: The vehicle was a sale f mst r all f the seller s business assets The seller s sales f business prperty during the mnth f the sale, plus the prceeding 11 mnths, did nt exceed $1,000 The sale qualified and was reprted as a transactin under ne f the fllwing Internal Revenue Cde sectins: 118, 331, 332, 336, 337, 338, 351, 355, 368, 721, 731, 1031, 1033, r 1563(a). The custmer shuld knw their purchase is cvered by ne f these sectins and prvide the necessary dcumentatin. Minnesta Statute 297A.68, subd. 25 Minnesta Statute 297A.67, subd. 23 Minnesta Rule Sales Tax Fact Sheet 132, Islated and Occasinal Sales Tribal Gvernments Are DNR vehicles purchased by tribal gvernments and their members taxable? A. DNR vehicles purchased ff the reservatin by an individual tribal member are taxable. B. DNR vehicles purchased by an individual tribal member r nn-member n ne f the fllwing nine reservatins are taxable: Bis Frte Chippewa Reservatin, Nett Lake Fnd du Lac Chippewa Reservatin, Clquet Grand Prtage Chippewa Reservatin, Grand Prtage Leech Lake Chippewa Reservatin, Cass Lake Lwer Siux Reservatin, Mrtn Mille Lacs Chippewa Reservatin, Vineland Shakpee Mdewakantn Siux Reservatin, Prir Lake Upper Siux Reservatin, Granite Falls White Earth Chippewa Reservatin, White Earth

3 Nte: DNR vehicles purchased r leased n r ff f a reservatin by a tribal gvernment (listed abve) r by businesses wned by the tribal gvernment are exempt. This includes the fllwing tribal gvernments and any businesses they wn: Red Lake Band f Chippewa Indians. This agreement specifies that n sales tax is cllected n sales ccurring n the reservatin r delivered by the seller t the Red Lake Reservatin. Prairie Island Siux Reservatin in Welch. Sales ccurring n this reservatin, r delivered by the seller nt this reservatin, t Prairie Island members wh live n the reservatin are nt subject t Minnesta Sales Tax. Sales t tribal gvernments T make purchases exempt, the tribal gvernment must prvide a purchase rder, payment vucher, r wrk rder shwing that the tribal gvernment is the purchaser. They may als prvide an exemptin letter issued t the tribal gvernment by the Minnesta Department f Revenue. Minnesta Statute 270C.19, subd. 1 and 2 Sales Tax Fact Sheet 160, Tribal Gvernments and Members Raffles Des the registrant r vehicle wner we tax n a vehicle wn thrugh a raffle? A. The persn r rganizatin that purchased the vehicle t dnate it t the raffle wes sales r use tax n the vehicle. B. The winner f the raffle des nt we sales r use tax, but they must prvide ne f the fllwing during registratin: Dcumentatin that the DNR vehicle was wn at a raffle Dcumentatin that the vehicle dnr paid sales r use tax n the vehicle. Minnesta Statute 297A.63, subd. 1 Minnesta Rule Sales Tax Fact Sheet 146, Use Tax fr Businesses Gifting When a persn r rganizatin is given a DNR vehicle, they d nt we sales r use tax. The persn r rganizatin wh gave the vehicle is respnsible fr paying the sales r use tax n the DNR vehicle. DNR vehicles that a cmpany takes ut f inventry and gives away inside r utside Minnesta are subject t sales r use tax, unless an exemptin applies.

4 Minnesta Statute 297A.63, subd. 1 (a) Minnesta Statute 297A.61, subd. 6 (a) Gvernment Agencies Gvernment agency purchases A. Was the DNR vehicle purchased by a gvernment agency? B. Yes. Use the fllwing criteria if the purchase by the gvernment is taxable: Federal gvernment Purchases by the federal gvernment are nt taxable. T be exempt frm tax, purchases must be billed t and paid fr directly by the federal gvernment. They must prvide Frm ST3, Certificate f Exemptin r prf f direct billing and payment. Examples f acceptable prf are a purchase rder, payment vucher, r wrk rder. Purchases made by emplyees and reimbursed by the federal gvernment are taxable. Minnesta state agencies are nt exempt frm paying sales and use tax. Hwever, they use a Direct Pay Permit t purchase things exempt and pay use tax directly t the Department f Revenue. T purchase items exempt, state agencies must prvide their vendr with an exemptin certificate r purchase rder cntaining the equivalent infrmatin. Lcal gvernments are generally exempt frm paying sales and use tax. Lcal gvernments must prvide a cmpleted Frm ST3, Certificate f Exemptin certificate t the seller. Tribal Gvernments. See Tribal Gvernments. Gvernment agency sales A. Gds r services sld by the federal gvernment are taxable tax, unless an exemptin applies. B. Lcal gvernments and state agencies generally prvide nntaxable services t the public. Hwever, they must charge sales tax when they sell gds r services, unless an exemptin applies. Minnesta Statute 297A.70, subd. 2 Minnesta Statute 297A.89 Minnesta Rule Gvernment Federal and Freign Diplmats Industry Guide Gvernment Lcal Gvernments Industry Guide Gvernment State Agencies Industry Guide

5 Sales by trusts Did the custmer purchase the DNR vehicle frm an estate r a trust? A. The sale f a DNR vehicle frm an estate r an individual trust is nt taxable. B. The sale f a DNR vehicle frm a business trust is taxable when the vehicle was either: a sale f business inventry the sale f a business asset principally used in the curse f business. See the Vehicle purchased frm a business (nn-dealer) sectin. Minnesta Statute 297A.61, subd. 2(b) Minnesta Statute 297A.67, subd. 23 Minnesta Rule Sales Tax Fact Sheet 132, Islated and Occasinal Sales Purchased fr Lease r Rental Was the vehicle purchased t lease r rent? A. Yes. The purchase is nt taxable. The purchaser is respnsible fr cllecting sales tax n the lease r rental f the vehicle. The business must shw their Minnesta Tax ID Number r ST3 Certificate f Exemptin frm t cmplete the registratin. B. N. The purchase is taxable. Minnesta Statute 297A.61, subd. 4 (a) (1) Nnresidents Did a nn-resident purchase a DNR vehicle while in Minnesta? A. Yes. The vehicle purchase is taxable. B. When a nn-resident purchases a vehicle utside f Minnesta, it is nt taxable. The nn-resident shuld have a cpy f registratin r prf f residency in anther state. Minnesta Statute 297A.62, subd. 1

6 Minnesta Statute 297A.665 (a) Minnesta Rule , subp. 1 Sales t Minnesta residents by ut-f-state dealers Sales t Minnesta residents, in-state and ut f state, are subject t Minnesta s general rate sales tax plus any applicable lcal taxes. A. Lk at the tp f the manufacturer s statement f rigin (MSO) fr an ut-f-state address. These are mre likely t nt have Minnesta sales tax included. Minnesta Statute, Sectin 297A.80 Minnesta Rule, Part Sales Tax Fact Sheet 156, Use Tax fr Individuals Auctin sales The taxable purchase price is the entire cst f the package (bat, mtr, fish finder, etc.) minus the cst f the trailer. Minnesta allws credit fr sales tax paid in anther state, up t the ttal state and lcal tax due in Minnesta. When the sales tax paid in anther state is less than the tax due in Minnesta, the difference is due as Minnesta Use Tax. Which type f seller hired the auctin service? A. When the seller is a private party, the sale is nt taxable. B. When the seller is a dealer, banker, r insurance cmpany, the sales is taxable. Ask t see the itemized purchase agreement frm the auctin. Minnesta Statute 297A.67, subd. 23 Minnesta Rule Sales Tax Fact Sheet 132, Islated and Occasinal Sales Brkered sales Des the title and the mney pass directly between the buyer and seller in the brkered sale? A. Yes. The brkered sale is nt taxable, unless the seller is selling business inventry r assets principally used in the business. B. N. The brkered sale is taxable (see the Financial Institutins and Insurance Cmpanies sectin fr further details).

7 Fr this exemptin t apply, bth f the fllwing cnditins must be true: the mney (except brkerage fee) cannt pass thrugh the brker s accunts the brker must nt appear in the dcumentatin f wnership Sales Tax Fact Sheet 132, Islated and Occasinal Sales Financial institutins and insurance cmpanies (r their auctin services) Sales f DNR vehicles by these rganizatins are taxable. Items held fr resale by these rganizatins are cnsidered exempt fr resale and are nt taxable. Minnesta Statute 297A.61, subd. 4 (1) Sales Tax Fact Sheet 132, Islated and Occasinal Sales Internet r mail rder purchases f DNR vehicles The purchase is taxable, unless dcumentatin is prvided t shw the sale was between individuals. See Private party sales. Minnesta Statute 297A.61, subd. 4 (a) (1) Minnesta Statute 297A.67, subd. 23 Minnesta Rule Sales Tax Fact Sheet 156, Use Tax fr Individuals Public r nn-prfit private schls Purchases f DNR vehicles by a public r nnprfit private schl is nt taxable. Minnesta Statute 297A.70, subd. 2 (a) (2) Minnesta Rule , subp. 1 Sales Tax Fact Sheet 111, Schls Sales and Purchases

8 All-Terrain vehicles (ATVs) fr agricultural prductin When an ATV is purchased fr use in agricultural prductin, the purchase is nt taxable. The DNR may issue a Private/Agricultural and/r Public Use registratin at any time if the custmer meets the exemptin requirements. Minnesta Statute 297A.69, subd. 4 (1) Sales Tax Fact Sheet 100, Agricultural Prductin Sales Tax Fact Sheet 106, Farm Machinery Plice and fire departments nt perated by a lcal gvernment Purchases f DNR vehicles by plice and fire departments are taxable unless they are perated by a lcal gvernment. Fr mre infrmatin, see the Gvernment Agencies Lcal Gvernments sectin. Sales Tax Fact Sheet 135, Fire Fighting, Plicy, and Emergency Equipment Hmemade DNR vehicles A hmemade DNR vehicle that was purchased as a kit is taxable unless sales tax was paid t the vendr. A hmemade DNR vehicle purchased as parts is taxable unless the purchaser paid sales tax n all f the individual parts. Minnesta Statute 297A.61, subd. 4 (a) (1)

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