Minnesota Sales Tax Guide for Modular Housing

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This article examines the sales tax treatment of modular homes in the State of Minnesota and is available for use solely as a resource.

While every effort has been made to ensure the accuracy of this article, use of the information contained on this page constitutes agreement and understanding that the Modular Building Systems Association (MBSA)] is in no way responsible for any incorrect or inaccurate information contained herein and that the MBSA is not responsible for any situations that arise from reliance on the within information. This includes errors, omissions or changes to any law or regulation that are not reflected in this document.

Detailed advice on the sales tax law in all states is available to members of the MBSA as part of your membership. All other persons or corporate entities should consult a tax professional or click here to join the MBSA.

Contents

Minnesota Sales Tax Law

Sales Tax Rate

6.5% until July 1, 2009. Thereafter, 6.875%.

The current sales tax rate in the State of Minnesota is 6.5%. Beginning on July 1, 2009, however, the sales tax rate increases to 6.875%. For more information about this increase, please see the December 2008 Sales and Use Tax Newsletter, published by the Minnesota Department of Revenue.

To calculate your precise sales tax rate (including local and county rates) please use the Minnesota Sales Tax Rate Calculator.

Local/County Tax Rate

Local and county taxes are selectively imposed throughout Minnesota.

For the most up to date information on these taxes, please utilize the Minnesota Sales Tax Rate Calculator or visit the Minnesota Department of Revenue's Sales & Use Tax website.

Tax Formula

Current Law: For the sales tax, the tax base for prefabricated homes is the sale price. The tax on a new prefabricated home is 6.5% of the sales price. There are three situations for determining the tax (see Sales Tax Fact Sheet 150 and SF 530 on page 7 in appendix – SF 530 is an analysis of the state’s tax law that was prepared by the state legislature for a tax bill that was never passed).

  1. If a manufacturer of a prefabricated home contracts to install the modular units on a foundation, they are considered a construction contractor and the 6.5% tax applies only to the cost of the materials to manufacture and install the modular units.
  2. A dealer that has purchased a home from a manufacturer and contracts to install the modular unit on a foundation is considered a construction contractor but must pay the 6.5% sales or use tax on the dealer’s cost of the prefabricated home and all materials used to attach the units to the foundation.
  3. A manufacturer or dealer who does not install the prefabricated home on a foundation is making a retail sale of tangible personal property and the 6.5% sales tax is charged to the customer on the full sales price for the prefabricated home and any building materials sold.

Note: In contrast to prefabricated homes, the tax base for manufactured homes is 65% of the dealer's cost.

Additional Taxable Costs

Sales price includes the total consideration paid. Sales price includes charges for installation, delivery, shipping or freight charges billed by the seller.

Delivery charges means charges by the seller for preparation and delivery of personal property or services to a location designated by the purchaser. If the item being sold is taxable, charges by the seller to deliver it are also taxable. Delivery charges are part of the sales price of the item, even if separately stated (see Minnesota Sales Tax Fact Sheet 155 in appendix).

However, for Situation 1 (see Tax Formula above, which taxes only the cost of materials) delivery charges are not taxable.

Additionally, if an item becomes a permanent attachment to real property, “installation” labor, properly termed “construction labor” is not taxable because it is an improvement to real property (see “construction labor” in Minnesota Sales Tax Fact Sheet 152 in appendix).

Statutory “Selling Cost”, or Equivalent, Definition

A "retail sale" means any sale, lease, or rental for any purpose other than resale, sublease, or subrent.

Tax Law Status

  • Some revisions in 2002.
  • The state sales tax rate was changed in 2009.
  • Legislation is continuously being proposed and the MBSA continues to monitor the tax law status.

Party Responsible for Tax Payment

Retail sales

A manufacturer or dealer who doesn’t install the prefabricated home on the foundation is making a retail sale of tangible personal property. In this case, the dealer may purchase the prefabricated home and other building materials exempt from sales tax by giving the supplier a fully completed Certificate of Exemption, Form ST3. Charge 6.5 percent sales tax on the full selling price, including delivery charges, to the customer for the prefabricated home and any building materials sold.

A sale where the dealer or manufacturer only supervises the installation of the modular units on a foundation is a retail sale of building materials.

Construction Contracts

A manufacturer or a dealer who contracts to install the modular units on a foundation is a construction contractor. The contractor must pay the full sales or use tax (6.5% for sales before 7/1/09, thereafter, 6.875%) on the total cost of the prefabricated homes and all materials used to attach the units to the foundations. If the contractor is also the manufacturer, the tax applies only to the cost of materials used to manufacture and install the modular units. This tax expense is passed on to the customer as part of the materials cost but should not be itemized separately on the customer’s invoice. Please view Minnesota Sales Tax Fact Sheet 128, Contractors, for more information on construction contracts.

Note: See also above, Tax Formula.

Appendix

Minnesota Sales and Use Tax Rules

1360.0200 – Definitions

Please see:
  • Subpart 2. "Approved"
  • Subpart 5. "Closed construction"
  • Subpart 6. "Code"
  • Subpart 12. "Installation"
  • Subpart 14. "Local enforcement agency"
  • Subpart 14a. "Manufacturer"
  • Subpart 15. "Prefabricated building"
  • Subpart 19. "Seal"

1361.0400 – Certification

1361.0500 – Installation

Minnesota Statutes Annotated

§ 297A.62 – Sales Tax Imposed; Rates

§ 297A.61 – Definitions

Please see Subdivision 3, "Sale and purchase" & Subdivision 4, "Retail sale."

§ 297A.63 – Use Taxes Imposed; Rates

Please see Subdivision 1, "Use of tangible personal property or taxable services" & Subdivision 2, "Use of tangible personal property made from materials."

Minnesota DOR Minnesota Sales Tax Fact Sheets

Minnesota Sales Tax Fact Sheet 128: Contractors

Minnesota Sales Tax Fact Sheet 150: Manufactured Homes, Park Trailers and Prefabricated Homes

Minnesota Sales Tax Fact Sheet 152: Labor

Minnesota Sales Tax Fact Sheet 155: Delivery Charges

Minnesota DOR Minnesota Sales Tax Newsletters

December 2003 Sales and Use Tax Newsletter

December 2008 Sales and Use Tax Newsletter

Notes

References

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