Recipe For Sales Tax On Food In Minnesota - Too Complex!

Our tax laws are generally more complex than necessary. Most of this complexity is due to special rules where we try to give some types of taxpayer or activities special treatment. While there might be good reasons for the tax exception, there usually are simpler alternatives.

A recent news update from the Department of Minnesota included a Prepared Food Flow Chart. The first question is whether the seller heated the food or mixed or combined two or more food ingredients into a single item. That alone doesn’t sound too complex but likely results in “yes” to most prepared food including cooking an egg in a pan that has butter in it. But there is more. Despite combining food, if the item is a bakery item but no utensils are provided or needed (and if needed not made available), then the bakery item is not subject to sales tax. Also see the DOR’s Fact Sheet 102D on prepared food.
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Sales And Use Tax - Mississippi, Minnesota, Michigan

Michigan State Sales And Use Tax

The state of Michigan levies a 6% state sales tax on the retail sale, lease or rental of most goods and some services. There are no local sales taxes in the state of Michigan.

Use tax is also collected on the consumption, use or storage of goods in Michigan if sales tax was not paid on the purchase of the goods. The use tax rate is the same as the sales tax rate. Returns are to be filed on or before the 20th day of the month following the month in which the purchases were made. For example, purchases made in the month of January should be reported to the state of Michigan on or before February 20th.

Michigan Department of Treasury
Michigan Sales Tax Legislation
Michigan Sales tax Legislation

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One of the big red flags with the IRS these days happens when you have independent contractors or subcontractors.

If you do not properly prepare Form 1099s for them, the IRS may deny the deduction for amounts you pay them. They may even decide they should be employees instead of independent contractors (ICs).  Note: Most businesses do not prepare 1099s properly. Read More

In 2015, Minnesota sales & use tax law changed to provide taxpayers with an upfront sales tax exemption on eligible capital equipment purchases. To claim this Minnesota sales tax exemption at the time of purchase, taxpayers should present a fully executed Minnesota sales tax exemption certificate.  If Minnesota sales tax is paid at the time of purchase, taxpayers may still submit subsequent refund requests. Note that purchases of qualifying capital equipment made before July 1, 2015 are eligible for Minnesota sales tax refunds as well as long as they are within the 42-month open statute of limitations allowed under Minnesota’s sales & use tax law. Read More