Exempt Organizations and Sales & Use Tax

Elizabeth Wilcox

“What do you mean I have to charge sales tax on my sales?  I’m a tax exempt organization!”  That is a common mistake in the tax exempt community.  In Minnesota, an organization can apply for a formal tax exempt status from the Minnesota Department of Revenue. Form ST16 is used for this purpose. This exemption is good only for purchases; it does not allow the organization to sell items without collecting sales tax with a few exceptions.

Nonprofit organizations that qualify for federal tax exemption are not automatically exempt from Minnesota sales tax.  Organizations that are eligible for sales tax exemption include 501(c) tax exempt organizations organized for religious, charitable and educational purposes.  Also senior citizens groups that are organized for pleasure, recreation and other non-profit purpose (but not including housing) and are exempt under 501(c).

These organizations should complete a Form ST3, Certificate of Exemption, and provide a copy to the vendor they are purchasing from.  The exemption is good for purchases used in the performance of the exempt purpose.  It does not apply to the following: prepared food, candy, soft drinks, alcoholic beverages or catered food, lodging, gambling equipment and supplies, motor vehicles or car rental tax.


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