Minnesota Clarified Rules for Non-Profit Sales Tax Exemptions

In Notice 21-04, the Minnesota Department of Revenue added six requirements for non-profits to meet in order to be exempt from sales tax in the state:

“1. The organization is exempt under section 501(c)(3) of the Internal Revenue Code, as provided under Minnesota Rules 8130.6200, subpart 5.

2. The organization is “charitable” as described in the first two sentences of Minnesota Rules 8130.6200, subpart 2.
3. The organization provides a substantial portion of its goods and services for free or considerably reduced rates under Minnesota Rules 8130.6200, subpart 2, Item C.
4. Dividends, in form or substance, or assets must not be available to private interests upon dissolution of the organization under Minnesota Rules 8130.6200, subpart 2, Item F.
5. The organization satisfies at least one of the four factors provided under Minnesota Rules 8130.6200, subpart 2, Items A, B, D, and E.
6. The organization satisfies the organizational and operational tests provided under Minnesota Rules 8130.6200, subpart 5.”

These requirements were put in place to ensure the “non-profit” services are for free or at low cost and may not benefit private parties upon their dissolution. (Minnesota Department of Revenue, Notice 21-04, effective immediately)