Minnesota has a base state sales tax rate of 6.875%, and cities and counties can impose additional local sales taxes. Statewide, there’s an average combined state and local sales tax rate of 8.04% as of 2024.

This system balances state-wide funding needs with local autonomy. The state sales tax provides funding for state services such as public safety, education, and infrastructure, while local sales taxes can fund local projects or address specific needs without over-relying on state funds.

Below, we’ll explain how clothing is taxed in Minnesota and what businesses operating in this area need to know to stay compliant.

What’s in this article?

• Is there sales tax on clothing in Minnesota?
  
• Is there sales tax on laundry services in Minnesota?
  
• Sales tax refunds in Minnesota
  
• How to automate sales tax collection in Minnesota
  

Is there sales tax on clothing in Minnesota?

In Minnesota, most clothing is exempt from sales tax. Here’s a look at which clothing items are exempt from sales tax in Minnesota (and which ones aren’t):

Exempt clothing

Exempt clothing includes all human apparel suitable for general use. This includes:

• Shirts

• Trousers

• Dresses

• Suits

• Coats

• Underwear

• Shoes and boots

• Hats

• Gloves and mittens

• Socks and stockings

• Required uniforms (for school or work)

Taxable clothing

Certain types of clothing and accessories are not exempt from sales tax. These include:

• Sports or recreational equipment: Items designed for athletic activities or recreational use that are not usually worn outside these activities, such as American football pads, baseball gloves, bicycle helmets, and skates.

• Protective equipment: Items worn for protection against injury or disease that are not appropriate for general use. Examples include hard hats, safety glasses, and protective gloves.

• Clothing accessories: Items that are typically worn as an accessory or decoration, such as handbags, jewellery, umbrellas, non-prescription sunglasses, watches, and hair accessories.

For a full list of items that are exempt or taxable, read the Department of Revenue’s fact sheet.

Is there sales tax on laundry services in Minnesota?

Laundry services are taxable under Minnesota’s sales tax laws. Here’s an overview of taxable laundry services in Minnesota:

• Washing and drying: Services provided by launderettes and commercial laundry services where clothes are washed and dried for customers. Self-service launderettes where customers use coin-operated machines are not taxable, though soaps and cleaners sold for use in these machines are subject to sales tax.

• Dry cleaning: Any dry cleaning services, where clothes or household items such as curtains are cleaned using chemical solvents rather than water.

• Pressing and ironing: Services where garments are pressed or ironed to remove wrinkles, including standalone pressing services and those provided with washing or dry cleaning.

• Dyeing of garments and fabrics: Any service that includes dyeing or altering the colour of garments or other fabrics. This can be done by commercial dyers or laundry services that offer such options.

Sales tax refunds in Minnesota

In Minnesota, sales tax refunds are available under certain conditions for taxpayers who have overpaid sales tax or paid sales tax on exempt items. Here’s an explanation of how sales tax refunds work in Minnesota:

Eligibility for sales tax refunds

• Overpayment of sales tax: If you have overpaid sales tax because of an error in calculation or remittance, you are eligible for a refund.

• Exempt purchases: Purchases that should have been exempt from sales tax but were incorrectly taxed can be refunded. Examples include certain agricultural supplies, manufacturing equipment, and resale items.

• Construction exemptions: Specific construction-related purchases are eligible for a refund, especially if the items qualify for certain exemptions after project completion.

How to apply for a refund

• Collect all documentation that supports your claim for a refund. This includes invoices, receipts, and any other proof of the transaction and tax paid. Incomplete or incorrect documentation can delay the processing of your refund or lead to denial.

• Fill in the appropriate form from the Department of Revenue. For general sales tax refunds, use Form ST11, “Sales and Use Tax Refund Request”. Businesses with a direct pay authorisation can self-assess their sales and use tax liability and might have different refund procedures.

• Submit the completed form and all supporting documentation to the Department of Revenue. This can be done online or through the post. Refund claims must be filed within 3.5 years from the date the tax was due or paid, whichever is later.

• The Department of Revenue will review your application. This process can take several weeks, depending on the complexity of your claim and the department’s workload.

• The Department of Revenue will notify you of its application decision. If it approves your refund claim, you might also be entitled to interest on the refunded amount. The interest is calculated from 90 days after the refund claim is filed until the refund is issued. In some cases, the Department of Revenue might determine that only a portion of the tax paid is eligible for a refund.

How to automate sales tax collection in Minnesota

Stripe Tax can make sales tax collection, calculation, and reporting faster and easier. It’s a highly adaptable solution for businesses operating in Minnesota (and other states). Here’s how to automate sales tax collection in Minnesota with Stripe:

Set up your Stripe account

• If you haven’t already, create a Stripe account by visiting the Stripe website.

• Provide detailed information about your business, including its legal name, address, and tax identification number (TIN).

• Link your bank account to Stripe to facilitate transactions and fund transfers.

Activate Stripe Tax

• Log in to your Stripe account, and go to the Dashboard.

• Go to the “Tax” section, and click “Get started”. Follow the prompts to activate the service.

Configure tax settings

• Enter your business address into Stripe so it can determine your tax nexus and applicable tax rates.

• Define which of your products or services are taxable in Minnesota. Stripe provides a catalogue of products and services to help classify items correctly.

Set up tax rates for Minnesota

• Stripe Tax automatically determines the correct tax rates based on the customer’s location. For Minnesota, this includes the 6.875% state rate plus any applicable local taxes.

• If needed, you can manually adjust tax rates or add rates for certain jurisdictions in Minnesota.

Integrate Stripe with your online store

• If you’re using e-commerce platforms such as Shopify, WooCommerce, or BigCommerce, integrate Stripe with your store. Most platforms have plugins or built-in settings for easy integration.

• For custom-built websites, use Stripe’s application programming interface (API) to integrate payment processing and tax calculation features. Stripe provides comprehensive documentation to assist with this process.

Enable tax collection at checkout

• Ensure your checkout process can calculate sales tax based on the customer’s shipping address.

• Make sure the calculated tax is clearly displayed to customers before they complete their purchase.

Monitor and report sales tax

• Use the Stripe Dashboard to monitor sales, tax collected, and transactions. Stripe provides detailed reports that can be filtered by date, region, and tax type.

• Regularly download the sales tax reports from Stripe, and use them to file your sales tax returns with the Minnesota Department of Revenue. Stripe Tax does not file taxes on your behalf but provides all necessary information for compliance.