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Capital Equipment, Replacement Capital Equipment Sales Tax Fact Sheet 103 - Minnesota Department Of Revenue Page 8

Research and development

Example 1. A manufacturer hires a company to develop

Quality control, testing, design and research and devel-

a treatment to extend the shelf life of a product. The

opment activities are part of the production process.

equipment used by the company in its research and de-

Equipment used by a manufacturer, fabricator, miner, or

velopment activities qualifies for the capital equipment or

refiner for research, development and design activities,

replacement capital equipment refund if it is used 50 per-

regardless of whether a product is actually produced and

cent or more of its operating time to develop products

sold at retail qualifies as capital equipment.

intended to be sold at ultimately at retail.

Equipment used primarily by a research and develop-

Example 2. A retailer buys computer equipment to be

ment company, consulting company, or similar organi-

used exclusively to design packaging for a shirt sold at

retail. The retailer contracts with a manufacturer to pro-

zation qualifies as capital equipment if:

duce the packaging and the shirts. Since the package

1. The equipment is used to develop a specific

design is a part of the integrated production process, the

retailer’s computer equipment qualifies for the capital

product at the request of a manufacturer, fabri-

equipment or replacement capital equipment refund.

cator, miner, or refiner, and

2. The equipment is used primarily for the re-

search, development, and design of the specific

product.

Local sales and use taxes

The Minnesota Department of Revenue administers

If local sales or use tax was paid on capital equipment

local sales and use taxes on behalf of the local govern-

and a full refund is allowed, the local tax will also be

ments listed below. All local taxes are in addition to the

refunded.

state sales and use tax.

Duluth administers its own sales and use tax. To re-

quest a refund of the Duluth sales or use tax, you must

City/County

Rate

contact the city of Duluth directly.

Cook County

1.0%

Hermantown

0.5%

Duluth Sales Tax

Mankato

0.5%

105 City Hall

Minneapolis

0.5%

Duluth, MN 55802

Proctor*

0.5%

Phone: 218-723-3271

Rochester

0.5%

St. Paul

0.5%

Two Harbors

0.5%

Willmar

0.5%

Winona

0.5%

*Proctor sales and use tax begins April 1, 2000.

This fact sheet is an information bulletin to help you become more familiar with Minnesota tax laws and your rights and re-

sponsibilities. Nothing in this fact sheet supersedes, alters, or otherwise changes any provisions of the Minnesota tax laws,

administrative rules, court decisions, or revenue notices.

Capital Equipment, Replacement Capital Equipment Sales Tax Fact Sheet 103 - Minnesota Department Of Revenue Page 8

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