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To claim the exemption up front, provide your supplier with the Certificate of Exemption Form ST3, and check “Capital Equipment” for the exemption reason code.

Tax strategies

Minnesota Capital Equipment Is Exempt From Up-Front Sales Tax

  • 6/15/2015

Effective July 1, 2015, Minnesota will allow an up-front sales tax exemption on sales or leases of qualifying capital equipment used in the manufacturing process. Purchasers no longer need to go through the capital equipment refund claim process and can instead simply purchase the equipment exempt from Minnesota sales tax. Businesses should consider whether it makes sense to delay transactions until after June 30 to take advantage of the exemption and avoid the refund process.

Qualifying capital equipment is machinery and equipment used in Minnesota primarily for manufacturing, fabricating, mining, or refining tangible personal property to be sold at retail. Machinery used to electronically deliver results data to a customer online also qualifies.

Equipment items that may qualify include:

  • Manufacturing
  • Production control machinery
  • Research and development
  • Environmental control
  • Repair and replacement parts
  • Materials used for foundation to support equipment
  • Ready-mixed concrete trucks

To claim the exemption up front, taxpayers should provide their supplier with the Certificate of Exemption Form ST3 and check “Capital Equipment” for the exemption reason code.

How we can help

CLA can help you determine which purchases or lease transactions qualify for this exemption. Also, if you’ve paid Minnesota sales or use taxes on purchases or leases of qualifying items, you may request a refund of the tax paid up to three and a half years prior. Reviewing the invoice trail to determine whether your purchases qualify for a refund or an exemption can be cumbersome. We can help you determine your exemption qualifications by conducting a reverse sales tax audit. This will help you recover any inadvertent sales tax on equipment that would otherwise qualify for the exemption.