Instructions For Sales Tax For Direct Selling Companies (Page 4 of 4) in pdf

items purchased with credits, regardless of the amount of

Shipping charges that occur before the sale to the final

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cash paid for the merchandise.

consumer are taxable as part of the sale of taxable goods.

--Shipping charges from the direct selling company to a

Example: A hostess earns $45 in merchandise credits for re-

direct seller are taxable because the sale to the final con-

ceiving orders of $250 from guests. The hostess selects

sumer has not yet occurred.

taxable items totaling $52 and pays the $7 difference. The

hostess owes sales tax on her entire $52 order. Although

--Separately stated shipping charges from the direct

the hostess paid only $7 in cash, the $45 credit is part of the

selling company to the hostess or from the direct seller to

selling price and is ta xable.

the hostess are not taxable.

Discounts: When a host is offered items at half price (or

--Separately stated shipping charges from any of the

other reduced price) for party bookings or for reaching

above to the party guests are not taxable because the

certain sales levels, tax is due on the total amount paid

items are being delivered to the final consumer.

for the item.

Sales to governments

Example: For obtaining two bookings from his guests, a host is

All sales to the federal government and its agencies are

able to purchase one item at half price. He selects a $50

exempt. The State of Minnesota uses a Direct Pay Per-

taxable item, and pays $25 for it. He owes sales tax on $25.

mit, which means that state agencies do not pay tax to the

Food, supplements, and beverages

seller on most purchases (they pay the Department of

Most food items are not taxable, unless they are prepared

Revenue directly). Most sales to local governments (cit-

or served. Nontaxable food substitutes include granola

ies, counties, etc.) are taxable. Request Fact Sheet 142,

bars, breakfast bars, diet bars (unless they are considered

Sales to Governments, for more information on how

candy, which is taxable), soup mixes and powder or

sales tax applies to governments.

crystal drink mixes that are meal replacements. Ensure,

Sales to nonprofit organizations

Boost and Slim-Fast are examples of nontaxable meal

Qualifying nonprofit organizations must give you either

replacements.

a Certificate of Exempt Status, Form ST-17, or a Certifi-

Food supplements, diet supplements, natural supplements,

cate of Exemption, Form ST-3, to claim exemption on

vitamins, minerals, appetite suppressants or stimulants,

purchases. You must keep exemption certificates in your

and nonprescription health products are taxable, whether

records; do not send them to our office.

in liquid, capsule, tablet or powder form. This includes

References

dehydrated fruit or vegetable juices sold in capsules. They

are not included in the exemption for food products.

M.S. 297A.21, Subd. 6(b), Registration to Collect Use

Tax

Soft drinks and other ready-to-drink beverages sold in

Rule 8130.4000, Collection of Tax at Time of Sale

liquid form are taxable, except beverages containing

vegetable juice, milk products or 15 percent or more fruit

Sales and use tax recodification. A bill was passed to

juice, and noneffervescent bottled water sold in contain-

recodify the sales and use tax law effective July 1,

ers of one-half gallon or more.

2001. This restructures and clarifies the law, but does

not change the meaning of the law. For more informa-

Request Fact Sheet 102, Food Products, Candy, and

tion, call our office or go on line to:

Beverages, for more information.

house.leg.state.mn.us/comm/taxes/taxeshome.htm

Shipping and handling charges

Internet access!

Shipping, handling, transportation, delivery, or similar

Sales tax fact sheets and most tax forms are available to

charges are not taxable when the item purchased is not

on our website. Internet address:

taxable.

taxes.state.mn.us

When the item purchased is taxable, or when both

taxable and nontaxable items are purchased on the same

invoice, the following rules apply:

This fact sheet is a tax information bulletin intended to help you be-

come more familiar with Minnesota tax laws and your rights and re-

Handling charges are always taxable because they rep-

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sponsibilities under the tax laws. Nothing contained in this fact sheet

resent an expense in the packaging of the product be-

supersedes, alters, or otherwise changes any provisions of the Minne-

fore shipping.

sota tax laws, administrative rules, court decisions, or rev enue notices.

“Shipping and handling” charged as a lump sum

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amount is always taxable.

Shipping charges to deliver goods to the customer are

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not taxable if they are separately stated from taxable

charges.

Instructions For Sales Tax For Direct Selling Companies Page 4

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