Registration requirements in Minnesota

All businesses in Minnesota are required to register with the Minnesota Secretary of State. Some businesses may be required to re-register annually. More information can be found on their website below. 

If you operate a business with nexus in Minnesota, you must register with the Minnesota Department of Revenue and obtain a Minnesota Tax ID. More information on obtaining a Minnesota Tax ID can be found on the Minnesota Department of Revenue website below. 

S Corporation Income Tax

While Minnesota recognizes the federal S-election, S corporations in Minnesota are subject to the “Minimum Fee”, outlined below. This minimum fee is calculated on the state’s S corporation tax return, Minnesota form M8 - S corporation Return.

Shareholders typically file a state income tax return to report and pay taxes. Qualifying nonresident shareholders may elect to have the s corporation report and pay composite income tax on their behalf.

LLC/Partnership Income Tax

Not required to pay income tax to Minnesota, but LLCs and partnerships are subject to the “Minimum Fee”, outlined below. This minimum fee is calculated on the state Partnership tax return, Minnesota form M3 - Partnership Return.  

All income from a Minnesota LLC or partnership is distributed to the LLC members or partnership partners, and then subject to Minnesota tax on their personal income tax return in the amount attributed to them. Qualifying partners may elect to have the partnership report and pay composite income tax on their behalf. 

Minimum Fee

Minnesota charges a “Minimum Fee” that applies to all business types except sole proprietors. The minimum fee is based on the combined value of a business’s inventory, payroll, and sales. If these three values together total at least $970,000, the business is required to pay the minimum fee. The exact amount of the minimum fee will vary depending on the total value of inventory, payroll, and sales, as follows:

  • total value less than $970,000 = $0 minimum fee
  • total value $970,000 to $1,959,999 = $200 minimum fee
  • total value $1,960,000 to $9,769,999 = $590 minimum fee
  • total value $9,770,000 to $19,539,999 = $1,960 minimum fee
  • total value $19,540,000 to $39,079,999 = $3,910 minimum fee
  • total value $39,080,000 or more = $9,770 minimum fee

Composite Tax

Qualified “Nonresident Partners” for both S corporations and partnerships may elect to have the business report and pay a “composite income tax” on behalf of the taxpayer. The rate for composite income tax is 9.85% minus the taxpayers share of credits. This election is found on both S corporation and partnership returns. 

Individual Income Tax

Shareholders and partners with gross income assignable to Minnesota may need to file an individual income tax return that reflects their portion of Minnesota income.
Individual income tax rates are as follows.

Due Date

For calendar year returns and payments, the due date is March 15th of the following year. 

For fiscal year returns and payments, the due date is the 15th day of the third month following your tax year. 

If the due date is on a weekend or holiday, the return and payment must be filed/postmarked by the following business day. 

Estimated Payments

S corporations and Partnerships in Minnesota must pay estimated tax payments if the sum of the estimated taxes minus any credits allowed against the tax is over $500.00.

Individuals will need to make estimated payments if you expect to owe $500 or more in Minnesota income tax.

Estimated payments are due by the 15th day of April, June, and September of the tax year as well as the first month following the end of the tax year. For fiscal year taxpayers, payments are due on the 15th day of the 4th, 6th, 9th months of the fiscal year, and the first month of the following fiscal year. 

 If the due date falls on a weekend/holiday, the following business day is considered on time.

Businesses and individuals can create and print a payment voucher at the following link.

https://www.mndor.state.mn.us/tp/paymentvoucher/_/

Filing an Extension

All S Corporations and Partnerships/LLC’s seeking an extension to file will need to pay any tax payable before the regular due date. This will result in an automatic 6-month extension to file.

Individuals do not need to file any forms to receive an extension. So long as the personal income payment is made timely, taxpayers can file until October 15th, penalty free. 

Penalties

For businesses, Minnesota assesses a 6% late payment fee on any tax that has not been paid by the due date. For returns not filed by the due date, an additional 5% penalty will be assessed on any tax not paid. In addition, there is a 5% late filing penalty for taxpayers who file after the extended due date and owe.

For individuals, late filing results in a 5% penalty. Late payment is 4% of tax not paid by April 15th. With an additional 5% for tax not paid within 180 days after filing or April 15, whichever is later. 

Additional Information

If your business was formed or is located in another state, but generates income in Minnesota, it may be subject to Minnesota taxes. The rules for taxation of multi-state businesses, including what constitutes nexus with a state for the purpose of various taxes, are complicated. 

*Minnesota farms that file as partnerships with more than 80% income from farming do not need to pay the minimum fee. 

Minnesota Secretary of State website: 

https://www.sos.state.mn.us/

Minnesota Department of Revenue website:

http://www.revenue.state.mn.us/

Minnesota Income Tax Rates/Brackets: 

http://www.revenue.state.mn.us/individuals/individ_income/Pages/Minnesota_Income_Tax_Rates_and_Brackets.aspx

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