Sales-Tax Survival Guide for Minnesota Contractors
- Todd Trettel
- Jun 13
- 2 min read
What cleaning firms, remodelers, and trade subs need to know to stay compliant (and headache-free).
1. Do You Even Have to Collect Sales Tax?
Type of Work | Sales-Tax Rule | Key Takeaway |
General contractors & remodelers | Materials are taxable; labor isn’t (unless you itemize it separately as “retail labor”) | Pay sales tax when you buy materials. Build that cost into your bids. |
Specialty trade contractors (HVAC, electrical, plumbing) | Same as above—but you may owe use tax on items pulled from inventory and installed. | Track inventory withdrawals monthly. |
Cleaning services (janitorial, window washing) | Generally Taxable service in MN | You must charge sales tax on the entire cleaning invoice. |
Maintenance contracts (snow removal, lawn care) | Taxable if the agreement is for ongoing service. | Charge sales tax on each invoice unless your customer provides an exemption certificate. |
Quick Rule of Thumb• Construction = generally materials taxable.• Cleaning & maintenance = service is taxable.
2. Register Before You Invoice
You need a Minnesota Tax ID before you collect a penny of sales tax.
Go to MN e-Services → “Business Registration.”
Select “Sales and Use Tax” and add any local taxes (see below).
Keep your confirmation letter—auditors will ask for it.
3. Know Your Rates
State rate: 6.875 %
Local options: Many Minnesota cities add 0.5 %–1.5 % (Wayzata, Minnetonka, etc.).
Look up exact rates at revenue.state.mn.us/sales-use or use a tax-rate lookup API in QuickBooks.
4. Filing Frequency
Average Monthly Sales-Tax Liability | Filing Frequency |
< $100 | Annual |
$100–$500 | Quarterly |
> $500 | Monthly |
Tip: if you collect over $10,000 a month, MN may require semi-monthly prepayments.
5. Common Contractor Pitfalls (and Fixes)
Pitfall | Why It Hurts | How to Fix |
Paying tax on materials and charging customers tax on the same | Double-taxation | Pay at vendor OR exempt & charge customer—never both. |
Forgetting use tax on inventory | MN auditors love this | Do a monthly “materials pulled” worksheet and apply 6.875 % (plus local). |
Not charging tax on cleaning invoices | Penalized 10%+ interest | Set QuickBooks item as “taxable service” by default. |
Missing local option taxes | Under-collection | Use QuickBooks geolocation or MN rate lookup for each job site. |
6. Record-Keeping Checklist
Vendor invoices with tax line circled or “EXEMPT” noted
Certificates of exemption (ST3 forms) on file for every exempt customer
Job folders with labor vs. material breakdown
Sales-tax return PDFs & payment confirmations (keep 3½ years)
7. Audit-Proof in 30 Minutes a Month
Run QuickBooks “Tax Liability” report on the 1st.
Reconcile with bank deposits vs. taxable sales.
Log inventory withdrawals → post use-tax journal.
File and pay in MN e-Services before the 20th.
8. Next Steps
Need help untangling past-due filings or setting up your QuickBooks tax codes?
Book a consultation → SunriseFinanceAndConsulting.com/book-online
Your construction or cleaning business deserves clarity—and zero sales-tax surprises.
© 2025 Sunrise Finance & Consulting LLC. This article is for informational purposes and not tax/legal advice.
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