What taxes apply to a new small business?

Taxes Applicable to a New Small Business in Minnesota

Starting a small business in Minnesota involves understanding and managing several types of taxes. Proper tax planning supports compliance and smooth operations.

Key Taxes for Minnesota Small Businesses

• State Income Tax: Minnesota imposes a state income tax on business earnings. Depending on your business structure (e.g., sole proprietorship, partnership, corporation), you may file as an individual or a separate entity.
• Sales and Use Tax: If your business sells tangible goods or certain services, you must collect Minnesota sales tax from customers and remit it to the state. Use tax applies to goods purchased out-of-state for use in Minnesota.
• Employer Payroll Taxes: When hiring employees, you are responsible for withholding Minnesota income tax from wages and paying state unemployment insurance taxes. Proper payroll setup and recordkeeping are essential.
• Corporate Franchise Tax: Corporations registered in Minnesota pay a corporate franchise tax based on net income. This applies if you incorporate your business.
• Property Tax: If your business owns real estate or certain business personal property, you may owe local property taxes. Keep track of local tax assessment and payment schedules.

Operational Considerations

• Registration: Register your business with the Minnesota Department of Revenue to obtain necessary tax identification numbers.
• Filing and Reporting: Stay current with filing deadlines for income tax returns, sales tax returns, and payroll tax reports to avoid penalties.
• Automation: Use accounting and payroll software to automate tax calculations and filings, reducing errors and administrative burden.
• Recordkeeping: Maintain organized records of all sales, payroll, and expenses to support tax filings and potential audits.
• Consultation: Consider working with a tax professional familiar with Minnesota’s tax environment to optimize your tax strategy and compliance.

As of 2026, tax rates and specific requirements may change, so regularly check the Minnesota Department of Revenue website for updates relevant to your business.