Minnesota Business Taxes at a Glance
Minnesota has a graduated income tax with relatively high top rates and an additional tax on large amounts of investment income. Businesses pay a corporate franchise tax and, in many cases, a retail delivery fee. In 2026, Minnesota Paid Leave premiums began for nearly every employer in the state. BOMCAS helps Minnesota individuals and businesses manage these requirements.
Individual Income Tax
Minnesota taxes residents on all income and nonresidents on Minnesota-source income, using four graduated brackets. Minnesota starts from federal adjusted gross income with its own additions and subtractions. Social Security benefits are subtracted in full or in part, depending on income.
Since 2023, Minnesota has also imposed a 1% tax on net investment income above a high threshold, separate from the regular income tax. It applies to individuals, estates, and trusts, and it affects people selling businesses, real estate, or large investment positions. Income from the sale of farm property and certain business interests may be treated differently. We prepare Minnesota returns, model the net investment income tax before sales, and plan estimated payments.
Renters and Homeowners
Minnesota's renter's credit is now claimed on the individual income tax return, while homeowners continue to claim the property tax refund on a separate form. Both depend on household income and taxes paid. We include these in individual returns so they are not missed.
Reciprocity With North Dakota and Michigan
Minnesota has reciprocal agreements with North Dakota and Michigan for wages. Residents of those states working in Minnesota generally pay income tax only to their home state on wages, if they file the exemption form with their employer. Wisconsin residents working in Minnesota do not have reciprocity and file Minnesota nonresident returns. We prepare returns for cross-border workers and help employers withhold correctly.
Corporate Franchise Tax
Corporations doing business in Minnesota pay the corporate franchise tax on apportioned income and a minimum fee based on Minnesota property, payroll, and sales. S corporations and partnerships also pay the minimum fee. Minnesota uses combined reporting for unitary businesses. An elective entity-level tax is available to Minnesota partnerships and S corporations.
We prepare corporate and entity returns, calculate the minimum fee, and evaluate the PTE election.
Sales and Use Tax and the Retail Delivery Fee
Minnesota's sales tax combines a state rate with local taxes in many cities and counties, including Minneapolis and St. Paul. Clothing and most groceries are exempt. Some services are taxable, including certain building cleaning, lawn care, and pet grooming services.
Minnesota also charges a retail delivery fee on retail deliveries above a set value that include at least one taxable item or clothing. Small retailers below a sales threshold are exempt. We register businesses, track local rates, collect and report the delivery fee, and file returns.
Minneapolis and St. Paul Local Taxes
Minneapolis and St. Paul have their own local sales taxes, and both cities and some nearby areas add lodging taxes and taxes on restaurant food and beverages, particularly in downtown districts. Several of these are collected by the state with the state sales tax but reported by location. Restaurants, hotels, and event venues in the Twin Cities need to apply the right combination. We help set up point-of-sale rates and file by location.
Payroll: Paid Leave and Earned Sick and Safe Time
Minnesota payroll changed in 2026. Minnesota Paid Leave premiums began on January 1, 2026, based on wages paid from that date. Employers can deduct up to half of the premium from employees' wages, and the first premium payment was due April 30, 2026, for the first quarter. Small employers pay a reduced employer share, and employers can apply for an approved private plan.
Minnesota also requires Earned Sick and Safe Time, which employers must track and report on pay statements. Employers withhold state income tax and report unemployment insurance. We run payroll with the right premium calculations, track sick time, file quarterly reports, and reconcile to the books.
Estate Tax
Minnesota has its own estate tax, with an exemption amount far below the federal exemption. Estates that owe no federal tax may still owe Minnesota tax. We help executors with estate accounting and final returns, working with estate counsel.
Medical Devices, Farms, Retailers, and Manufacturers
- Health care and medical devices: research credits on federal returns and multistate apportionment
- Agriculture and food processing: farm reporting, inventory, and the investment income tax on farm sales
- Retail and distribution: sales tax, the delivery fee, and inventory
- Manufacturing: fixed assets and unitary filing
- Professional services: owner pay, the PTE election, and Paid Leave
Leaving Minnesota for Florida or Arizona
Minnesota residents who retire south often keep a home or cabin, family, doctors, and clubs in Minnesota. The Department of Revenue weighs those connections when deciding whether someone has really changed domicile. Keeping a dwelling suitable for year-round use in Minnesota and spending more than 183 days in the state can also make someone a statutory resident. We help clients document the move and prepare part-year returns in the year it happens.
Books Ready for Paid Leave and Delivery Fees
Minnesota bookkeeping should track deliveries for the retail delivery fee, taxable and exempt sales, and wages for Paid Leave premiums. Setting up accounts this way at the start saves rework when the returns are prepared.
Contact BOMCAS About Minnesota
Employers setting up Minnesota Paid Leave premiums, investors planning around the net investment income tax, and retailers collecting the delivery fee can contact BOMCAS for a remote review. Pages for individual Minnesota cities and services will follow under this section. Visit the BOMCAS home page or our United States services. This page is general information only.
Talk to BOMCAS About Your Minnesota Taxes
Have a question about your Minnesota filings, payroll or bookkeeping? Contact BOMCAS or use the contact form below, and we will get back to you as soon as possible. You can also browse all United States services.