The Minnesota State Income Tax system is a progressive tax structure with three income tax rate brackets: 5.35%, 7.05%, and 7.85%. For state and local taxes per capita, Minnesota was ranked 12th place nationally, as of 2008. The US average for percent income paid in state and local taxes was 9.7% as of 2008, and comparatively, Minnesota taxpayers paid 10.2% of their income.
The Minnesota State Sales tax is at 6.875%. This tax is split into two parts, with 6.5% going to the state general fund, and 0.375% going to fund arts and environmental projects. The 0.375% tax was approved by a statewide referendum in November, 2008, and on July 1, 2009 it went into effect. The state sales tax does not apply to prescription drug medications, clothing, soda, candy, certain services, and food made for home consumption.
There are local sales taxes and special local taxes in Minnesota municipalities, but they must first be approved by the state legislature before going into effect. An example of this is the 0.5% supplemental sales tax in Minneapolis.
The local counties can also apply a sales tax to certain items, again only with legislative approval. There’s a lodging tax in effect in several counties and cities, including Duluth, Minneapolis and Rochester. In Duluth, there are also additional food and beverage taxes.
Alcohol, tobacco and motor fuel are all subject to excise taxes. Alcohol is taxed by a 2.5% gross receipts tax rate, in addition to the state sales tax of 6.875%, for a total rate of 9.375%. There is also a use tax in Minnesota that applies to items purchased outside of state, but used within state. There is also a property tax for taxpayers who own real property in Minnesota, which is paid to the county, municipality, school district and special taxing districts.
If you are ready to file your return then the easiest way will be to e-file your return. Check out our e-filing page to guide your through the process.