Minnesota – Exemptions for Local Governments

SALT Report 2753 – The Minnesota Department of Revenue updated a sales tax fact sheet that discusses the sales and use tax exemption available to local governments.  Specifically, noted is that effective January 1, 2014, purchases by cities and counties will be exempt from sales and use tax so long as they are used to provide government services.

To qualify for the exemption, the purchase must:

  • Be used to provide government services,
  • Not compete with private business, and
  • Be billed to, and paid directly by, the local government. Employee purchases even if reimbursed do not qualify

Examples of what local governments can purchase exempt include:

  • Gravel, sand, salt, and salt/sand mixtures,
  • Lawn care, tree, bush, shrub, and stump removal services
  • Office supplies, office equipment, and telephone service
  • Machinery and equipment, accessories for public safety, and road and bridge maintenance, and
  • Fuel and construction materials

The new exemption for local governments only applies to purchases made by cities, counties, and townships. The exemption does not apply to special taxing districts, joint powers agreements, or joint powers entities such as Counties Transit Improvement Board or Metropolitan Council.

The fact sheet provides additional guidance regarding exemption certificates, taxable purchases, motor vehicles, real property improvement contracts, fuel, and local taxes.

For Further Information

Minnesota Department of Revenue – Sales Tax Fact Sheet #176