Capital Equipment Purchases Switch to Upfront Sales Tax Exemption

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Capital Equipment Purchases Switch to Upfront Sales Tax Exemption

June 24, 2015

On July 1, 2015 Minnesota will switch from a refundable sales tax on capital equipment purchases to an upfront sales tax exemption on these purchases. 

“Capital equipment” means machinery and equipment used by the purchaser for manufacturing, fabricating, mining, or refining tangible property to be sold at retail, if the machinery/equipment is essential to the production process.  For example, the lines and poles used by a municipal utility to transport energy to its customers qualifies for the exemption, as does the equipment and materials used to install the poles.

After July 1, purchasers can receive an upfront sales tax exemption by providing suppliers with a Form ST3, with the exemption code “capital equipment.”  To get a refund for purchases made before July 1, 2015, you may continue to submit the Form ST11 for reimbursement.

Please note:  as defined by the MN Department of Revenue, capital equipment DOES NOT include machinery or equipment used in the transportation, transmission, or distribution of petroleum, natural gas, steam or water through pipes, lines, tanks, or mains.  Capital equipment also DOES NOT include telecommunications equipment and wire, cable, fiber, poles, or conduit used to provide telecommunications services.

Please see the Department of Revenue fact sheet on the Capital Equipment Sales Tax Exemption for more details.