On July 1, 2015, Minnesota will change to an up-front sales tax exemption on eligible capital equipment purchases. For purchases beginning July 1, 2015, you will not have to pay sales tax on any qualifying equipment.
To claim the exemption on eligible purchases, businesses must give the supplier a completed Form ST3, Certificate of Exemption. That form can be found here: http://bit.ly/1BOHRpw (use exemption reason code for “Capital equipment”).
Until July 1, businesses are required to pay the sales tax when purchasing eligible capital equipment, and then file a refund request with the Department of Revenue.
The Minnesota Department of Revenue has specific and detailed qualifications for “capital equipment.” In general, it applies to any equipment, purchased or leased, that is used to produce goods that will be sold at retail. The key phrase here is “used to produce goods;” any equipment that is not directly involved in production does not qualify for this exemption. To illustrate, here is one example provided by the Department:
A bakery installs a washing system to clean and sterilize baking pans and production equipment. They also purchase pressure washers used to clean the floors and walls. The washing system to clean and sterilize baking pans and production equipment qualifies as capital equipment because it affects the quality of the baked product. The pressure washers do not qualify since they are used in sup-port operations for general plant maintenance and cleaning.
More explanation on “capital equipment” can be found on Minnesota’s “Fact Sheet 103, Capital Equipment” at http://bit.ly/1KGIJli
Note: If you pay sales tax on purchases after June 30, 2015, you may still file a refund request for tax paid in error. ____ Photo credit: By Elkman (Own work) [CC BY-SA 3.0
(http://creativecommons.org/licenses/by-sa/3.0) via Wikimedia Commons
Great Article. Thanks for the info. Does anyone know where I can find a ST3 form?
You can go online to the Minnesota Department of Revenue and do a search for the form number. It will pop up and you print out a copy.