Minnesota's sales tax rate and what it covers

Minnesota charges a 6.875% state sales tax on most retail purchases. This is the base rate that applies statewide. Some cities and counties add their own local sales tax on top of the state rate, which means your total tax can range from 6.875% to as high as 8.125% depending on where you shop. The rate you pay is determined by the location of the store, not where you live.

Not everything sold in Minnesota is taxed at the same rate. Groceries and prescription medications are taxed at a lower rate of 0% — they are exempt from sales tax entirely. Clothing and shoes under $100 per item are also exempt. However, prepared food, restaurant meals, and hot food items are taxed at the full rate, even if you buy them at a grocery store.

Services are generally not subject to sales tax in Minnesota, with some exceptions. Haircuts, repairs, and professional services do not have sales tax added. Digital goods like e-books, streaming subscriptions, and downloaded software are also not taxed, though this can vary depending on how the transaction is classified.

Key Takeaways

  • Minnesota's base state sales tax is 6.875%, but your actual rate depends on local taxes in your city or county, which can push it as high as 8.125%.
  • Groceries, prescription medications, and clothing under $100 per item are not subject to sales tax in Minnesota.
  • Prepared and hot food, restaurant meals, and alcohol are taxed at the full rate.
  • Services like haircuts and repairs are generally not taxed, and digital goods like streaming subscriptions and e-books are exempt.

Local sales tax variations by city and county

While the state rate is uniform, Minnesota cities and counties can impose additional local sales taxes. These local rates typically range from 0.5% to 1.25% on top of the state rate. For example, if you shop in Minneapolis, you pay the state rate plus Minneapolis's local rate. If you shop in a neighboring suburb, the local rate may be different.

The combined rate you see on your receipt reflects both the state and local taxes for that specific location. A purchase in one city may have a different total tax rate than the same purchase in another city just a few miles away. You can find your local rate by entering your address on the Minnesota Department of Revenue website or by asking a cashier at checkout.

What is and is not taxed in Minnesota

Understanding what gets taxed helps you predict what you will pay. Taxed items include clothing over $100, restaurant meals, prepared foods, alcohol, tobacco, gasoline, and most retail goods. Clothing under $100 per item is not taxed, but if you buy a coat for $150, the full amount is subject to tax.

Exempt items include groceries (uncooked food you prepare at home), prescription medications, over-the-counter medications, medical devices, and certain agricultural products. Prepared foods sold at grocery stores — rotisserie chicken, deli sandwiches, hot pizza — are taxed even though they are sold in a grocery store. The distinction is whether the food is ready to eat or requires preparation at home.

Alcohol is taxed at the full sales tax rate, and beer, wine, and liquor also have additional excise taxes that are separate from sales tax. Gasoline has its own fuel tax in addition to sales tax. These are not included in the sales tax rate but are added separately at the pump.

How sales tax is calculated on your purchase

Sales tax is calculated on the subtotal of taxable items before any discounts or coupons are applied. If you buy $50 in groceries (not taxed) and $50 in clothing under $100 (not taxed), your total is $100 with no sales tax. If you buy $50 in groceries and $50 in a restaurant meal, only the $50 meal is taxed.

Coupons and discounts reduce the amount that sales tax is calculated on. If you have a $10 coupon on a $50 item, sales tax is applied to the $40 remaining amount, not the original $50. Some stores apply tax before the discount, so the final amount may vary slightly depending on the retailer's system.

Online purchases from out-of-state retailers have changed in recent years. If an out-of-state retailer has a physical presence in Minnesota or meets certain sales thresholds, they must collect Minnesota sales tax. If they do not, you may owe use tax on the purchase when you file your state income tax return, though most individuals do not report this.

Who collects and where the money goes

Retailers collect sales tax at the point of sale and send it to the Minnesota Department of Revenue. The state then distributes the revenue to state programs and returns a portion to cities and counties based on where the tax was collected. This is why local governments have an interest in sales tax rates — the revenue supports local services.

Sales tax revenue funds state and local government operations, including schools, roads, public safety, and social services. The amount each city or county receives depends on the local tax rate they set and the total sales in that area. Higher-traffic retail areas generate more sales tax revenue for their local governments.

Frequently Asked Questions

Do I have to pay sales tax on groceries in Minnesota?

No. Groceries — uncooked food you prepare at home — are not subject to sales tax in Minnesota. This includes fruits, vegetables, meat, dairy, bread, and pantry staples. However, prepared foods like rotisserie chicken, deli sandwiches, and hot pizza are taxed at the full rate, even if you buy them at a grocery store.

What is the difference between sales tax and use tax?

Sales tax is collected by the retailer when you buy something. Use tax is a tax you owe on purchases where sales tax was not collected — typically out-of-state online purchases. You are supposed to report use tax on your state income tax return, but most individuals do not. If a retailer has a physical presence in Minnesota or meets sales thresholds, they must collect sales tax instead.

Why is my receipt total different from what I calculated?

Your local sales tax rate may be different from the state rate, or you may have purchased a mix of taxed and non-taxed items. Clothing under $100 is not taxed, but clothing over $100 is. Groceries are not taxed, but prepared foods are. Check your receipt to see which items were taxed and which were not.

Do I pay sales tax on clothing in Minnesota?

Clothing and shoes under $100 per item are not taxed. If you buy a shirt for $75, there is no sales tax. If you buy a coat for $150, the full amount is subject to sales tax. The $100 threshold applies per item, not per transaction, so you could buy multiple items under $100 each and pay no tax on any of them.

How do I find out what the sales tax rate is in my area?

You can enter your address on the Minnesota Department of Revenue website to see your combined state and local sales tax rate. You can also call your city or county assessor's office, or simply ask a cashier at checkout. The rate is printed on your receipt after each purchase.