Starting a Business in Minnesota
Minnesota is an all-around good place to run a business. From a common sense regulatory environment (only necessary business licenses) to a fair and balanced tax system, it is no wonder why many entrepreneurs call Minnesota home. Minnesota businesses can benefit from a variety of incentive programs that provide opportunity for growth. The most common are incentives that are given through tax credits, exemptions, grant/loan programs, and benefits to companies who reside inside a Minnesota Enterprise Zone.
STEPS TO STARTING A BUSINESS IN MINNESOTAStarting a business in Minnesota can come with some necessary steps. Most of these will be administrative in nature and will be vital to remain as a compliant business. Some of these tasks are securing a Federal Tax ID Number, trying to pay Minnesota sales tax by filing a state return, filing a form ABR, and researching Minnesota sales tax rates. Getting the correct Business Licenses can be of great importance as this will allow your business to operate legally. The Minnesota Department of Revenue and the Minnesota Secretary of State oversee many of these compliance requirements. Once you have chosen a business name from completing a business name search with the Minnesota Secretary of State, you can move on to create a company. You will need to collect sales tax so you have to register for a Minnesota Sales Tax Permit (Seller’s Permit). Many store front locations in Minnesota have become more technologically driven and have extended their online presence. It has given them the resources to reach customers outside of their state, but also added the burdensome compliance of multi-jurisdictional sales tax collection and remittance. If your business falls in this situation you may be classified as a remote seller. If so, you can obtain an SST streamlined sales tax certificate for Minnesota. After you have finished all other administrative obligations, you can research the following incentives that Minnesota businesses can leverage:
- Minnesota offers an exemption program to companies that have a qualified data center. A qualified data center is any company that invests a minimum of $30,000,000 in the first 4 years and opens a new data center that is at least 25,000 square feet. Sales Tax Exemptions are given to any data center equipment and other energy related equipment that is used in daily operations.
- The Greater Minnesota Job Expansion Program gives a Sales Tax refund to businesses that can create new jobs and meet eligibility requirements. A company must hire at least two full time employees in a three year period and pay a minimum yearly wage of $31,000. Certain industries do not qualify for the program such as gambling or hospitality. In order to receive the refund, a sales tax permit would be required.
- The Minnesota Border Cities Enterprise Zone Program provides various benefits to incentivize businesses to relocate to economically distressed zones. It provides tax credits for new or existing workers, loan financing credits for building new facilities, and credits taken against property taxes. The objective is to lower taxes for businesses, stimulate investment, and bring growth to these border areas.
- Minnesota offers a tax credit to certain businesses that have eligible R & D activities within the state. The R & D tax credit which is equivalent to 10% of qualified R & D expenses up to $2 million and 2.5% of qualified R & D expenses that exceed that amount. Qualifying expenses include (but not limited to) R & D related equipment or supplies and R & D related wages.
- Minnesota Sales Tax Exemptions are given to any manufacturing company for equipment or machinery that is used in operations. A tax exemption is given to qualified agricultural and service companies for the materials they use to make products available for sale at the retail level. The agricultural exemption applies to Minnesota sales tax as well as some local taxes at the current sales tax rate.