Sales-Tax Survival Guide for Minnesota Contractors

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

Before collecting any sales tax, it’s crucial to have a Minnesota Tax ID. Here’s how to get started:

1. Go to MN e-Services and select “Business Registration.”

2. Choose “Sales and Use Tax,” and add any local taxes as needed.

3. It is important to keep your confirmation letter. Auditors will ask for it during inspections.

   
   

3. Know Your Rates

Understanding the sales tax rates is vital. Here’s a brief overview:

• State rate: 6.875%

• Local options: Many Minnesota cities add 0.5%–1.5% (e.g., Wayzata, Minnetonka).

• For precise rates, visit revenue.state.mn.us/sales-use or utilize a tax-rate lookup API within 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, Minnesota 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

Effective record-keeping is essential. Ensure you have the following documents:

• Vendor invoices with tax line circled or marked “EXEMPT.”

• Certificates of exemption (ST3 forms) on file for each exempt customer.

• Job folders containing a breakdown of labor versus materials.

• Sales-tax return PDFs and payment confirmations. Store these for 3½ years.

  
  

7. Audit-Proof in 30 Minutes a Month

You can simplify your audit preparation. Here’s a quick process to follow every month:

1. Run QuickBooks “Tax Liability” report on the 1st of the month.

2. Reconcile bank deposits with taxable sales.

3. Log inventory withdrawals and post a use-tax journal.

4. File and pay in MN e-Services before the 20th.

   
   

8. Next Steps

Are you struggling to resolve past-due filings or set 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.