Sales Tax Exemption Update: The Exemption and City Vendors

The Department of Revenue released an opinion memo outlining the procedures for interaction with city vendors.
(Published Jan 21, 2014)

The Minnesota Department of Revenue (DOR) on Jan. 16 released an opinion letter on using the sales tax exemption certificate, the ST-3 form, with vendors that a local unit of government frequently uses for city purchases. The opinion impacts local units of government and vendors.

According to the letter, when a city or county has a reoccurring business relationship with its vendor for purchases of both taxable items and items that qualify for the local government sales tax exemption, the city or county should provide the vendor with a fully completed blanket exemption certificate.

The vendor should then make a change in its system to exempt all sales made to that city or county. According to the DOR, the vendor is relieved of the sales tax liability related to the city or county purchases. The vendor should keep the city or county exemption certificate in the vendor’s files.

The city or county does not need to provide additional exemption certificates to that same vendor on subsequent purchases. The city or county also does not need to provide any additional documentation to the vendor showing which items qualify for the exemption and which do not. The city or county would then be responsible for accruing use tax on purchases that do not qualify for the exemption and report the use tax on its next sales and use tax return.

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