Minnesota sits in the far north of the United States, right on the Canadian border. The North Star State covers 225,000 km². More than half of its 5.5 million residents live in the Minneapolis-Saint Paul metro area, which is also home to the largest shopping center in the USA, the Mall of America. The state capital is Saint Paul.
Minnesota is home to 18 Fortune 500 companies, ninth in the nation. The Twin Cities, Minneapolis and Saint Paul, rank among the nation's 30 largest metro areas and come first in the USA for Fortune 500 companies per million residents.
Six of the largest private companies on the Forbes list are based in Minnesota, putting the state eleventh nationwide. On the Standard & Poor's index, Minnesota ranks a solid twelfth for the total number of companies, and sixth for S&P companies per million residents. Minnesota-based Cargill, with revenue of almost $114.6 billion, is the second-largest private company in the country.
The state's strong economy is backed by a modern transportation network, with excellent options by water, land (road and rail) and air. Its digital infrastructure is just as good. Overall, Minnesota ranks ninth in the nation for infrastructure (CNBC, 2019).
Startups thrive in Minnesota
According to Bureau of Labor Statistics data, Minnesota ranks first in the nation for five-year business survival (2015-2020). The 2019 Kauffman Report on Early-Stage Entrepreneurship ranks Minnesota third nationwide for early startup survival and tenth on its index of early-stage entrepreneurship (KESE).
In the 2019 U.S. News and World Report rankings, Minnesota is the third-best state in the country. The factors considered were the state's economy, transportation infrastructure, internet, public safety and the fiscal stability of the state government. The state also ranks seventh in CNBC's America's Top States for Business (2019).
Minnesota's total effective business tax rate (TEBTR) for state and local taxes is 4.4 percent, ranking 15th nationwide, against a national average of 4.7 percent. Measured as business taxes as a share of private-sector gross product, Minnesota sits in the middle of the pack, according to a 2019 report by Ernst & Young and the Council on State Taxation.
A hard-working population
In 2019, WalletHub named the North Star State the best state for women, based on 24 indicators including median income. The same year, Minnesota ranked seventh for working mothers.
Minnesota was also named the second-best state for jobs (Zippia, 2019), thanks to excellent earnings, low unemployment and a relatively low cost of living.
At just over 70 percent, Minnesota has the fourth-highest labor force participation rate of any US state, a reflection of how hard-working its people are. The national average is 63 percent (Bureau of Labor Statistics, 2019).
Here you can find out which states are most popular with foreign investors, and why.
Income tax in Minnesota
Minnesota levies income tax of 5.35 to 9.85%, depending on income. On top of that, federal income tax applies.
Corporate tax in Minnesota
Minnesota levies corporate tax of 9.8%. On top of that, federal corporate tax applies.
Sales tax in Minnesota
The USA has no VAT on the European model. Instead, states, counties and municipalities levy a local sales tax on the sale of goods (but not services).
Sales tax rate in Minnesota
Minnesota's state sales tax is 6,875%. Cities and counties add an average of 0.58%, for a combined average of 7.46%.
Minnesota nexus laws & sales tax
Learn more about economic nexus laws and sales tax.
Effective date
October 1, 2018, amended effective October 1, 2019
Included transactions:
Applies to retail sales made into the state from outside it. Taxable services (excluding sales for resale) count toward the threshold.
Treatment of exempt sales:
Exempt sales and sales to exempt organizations count toward the threshold, but sales for resale do not. Exempt services do not count either.
Trigger:
Sales or transactions
Sales/transaction threshold:
Before October 1, 2019: 10 or more sales totaling $100,000 or 100 retail sales
From October 1, 2019: $100,000 or 200 or more retail sales
Evaluation period:
The threshold applies to the preceding 12-month period
Additional information:
- Registration requirements: Minnesota requires a remote seller to register and collect and remit Minnesota sales tax starting with the first taxable retail sale into Minnesota made no later than 60 days after crossing the threshold. For more information, see Remote Sellers FAQ.
- HF5
Minnesota marketplace sellers & sales tax
Learn more about registration requirements for marketplace sellers
Effective date for marketplace facilitators:
October 1, 2018; amended effective October 1, 2019
Economic nexus threshold:
More than $100,000 in sales or 200 retail sales transactions in the state over any period of 12 consecutive months. When calculating the threshold:
- Remote sellers should include sales made through a collecting marketplace
- Marketplace facilitators include all sales made through the marketplace
Registration requirements:
- Remote multichannel sellers: Once you cross the economic nexus threshold, you must register with the Minnesota Department of Revenue (DOR) and collect Minnesota sales tax on sales not taxed by a marketplace facilitator.
- Remote marketplace sellers: You do not need to register and collect Minnesota sales tax, even if you cross the economic nexus threshold.
- In-state multichannel sellers: You must register with the Minnesota DOR and collect tax on sales not taxed by a marketplace facilitator.
- In-state marketplace sellers: You must register. Contact the Minnesota DOR for more information.
- Learn more here.
See how Minnesota stacks up against the other 49 states in our overview of US states, and get the basics in our introduction to the US tax system.
How we help with Minnesota:
Got plans in Minnesota? We form your US company in one of the six states we cover. You'll find the options and fees under US Company Formation, and we'll answer your questions in a consultation.