Minnesota – Taxability of Home Health Care Contracts

SALT Report 1422 – The Minnesota Department of Revenue issued a notice regarding the taxability of home health care services provided to clients through a combined services contract.  Minnesota Statutes, section 297A.61 sub3, (g)(6)(i) and (iii) defines “sales and purchases” as laundry services, residential cleaning services, maintenance services, and disinfecting services.  In most cases, these are taxable services, however, when a home health care service contract combines medical care, personal care, laundry, and residential cleaning services for a flat fee, the taxable services become non-taxable.

Normally, the laundry and cleaning services are taxable and considered incidental to other nontaxable home medical and personal care services.  However, when the laundry and cleaning services are combined with other non-taxable services for a flat fee, and provided to a client because of an illness, disability, or a physical condition that creates the need for this type of service in the client’s residence, they become non-taxable.
In some cases, a home health care provider may contract with a third party to provide the laundry and cleaning services for a client.  In this situation, when the home health care service provides both taxable services and nontaxable services to clients for a single charge, the home health care service provider cannot purchase the third-party services tax-free for resale unless the home health care provider’s contract separately itemizes the taxable services.
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