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    2 Replies Latest reply on Jul 13, 2009 2:53 PM by ComputerJoe

    Sales Tax for Contractors in Minnesota

    ComputerJoe Newbie

      I've read the Mn Dept of Revenue FAQs and attended their class. As a contractor (sole proprietor) in MN I am required to pay sales tax when I buy materials and include the sales tax in the total price on the invoice for the materials when I install them. OK, that was easy enough. But I have to charge the sales tax for the location they are installed in, not the sales tax I paid at the location they were purchased. OK, that is a little confusing, but I think I can deal with that. But if I buy a lot of materials in bulk and keep a sizeable inventory in stock and install only small fractions of a single purchase from one location into real locations in a variety of tax locations then things get interesting. Especially if I buy many different boxes, say 20 pounds each of screws, each box a different size or type. And computer network cables in bulk. Different types (riser, plenum, cat 5e, cat 6, coax, etc.). And in each project I use a variety of materials, but never a full box of screws nor a full reel of cable.

      How do I get QuickBooks to track my inventory properly? I need to track what tax location purchased (Minneapolis AND Hennepin County or just Hennepin County, etc.) and how many screws were purchased in each of those boxes. Then I need to track how many screws from what tax location(s) were installed in what tax location(s). I don't think that MN DOR will mind if I use a first-in-first-out inventory accounting method as long as sizes and types match. Thank you very much!
        • Re: Sales Tax for Contractors in Minnesota
          Lighthouse24 Ranger

          Items purchased for resale are tax exempt. You should not be paying sales tax on the materials you buy to resell/install -- you should only be charging/collecting sales tax on them at the rate applicable for the taxing district in which they sold/installed based on the price you charge the customer on the invoice for those materials.

          Download and fill in this form, make lots of copies, and give it to your suppliers from now on so you don't pay sales tax on materials you're purchasing to resell:


          Beyond that, you just establish your retail price for each item, and add the appropriate sales tax (for the customer's location) to that price.

          Hope this helps. Best wishes.
            • Re: Sales Tax for Contractors in Minnesota
              ComputerJoe Newbie
              Thank you for your suggestion.

              I'm a "Technology Systems Contractor".
              A Technology Systems Contractor is an electrical contractor.
              The Minnesota DOR says that electricial contractors must pay the sales taxes when they purchase supplies that are installed into Real Property and then include the sales tax rate at the location of the Real Property when they bill for the materials used. The contractor must send the difference (if the tax rate at the location installed is greater than the tax rate at the location purchased) to the state.