Tuesday, November 2, 2010

Paying Sales Tax

The U is exempt from paying sales tax on many, but not all, items.  
When making purchases, please keep in mind that the University is required to pay sales tax on certain items, for example, alcohol, prepared food, candy, soft drinks, and lodging.  This brief "article" from the University Tax Office provides information that anyone with a p-card or who procures goods through other channels must be mindful of for us to be in compliance with tax law.  DJP


Making Purchases Exempt from Sales Tax


This article first appeared in the Winter 2007 edition of "Dollars and Sense,"
newsletter of the Purchasing Services Department. The article was
authored by Heather Broneak of the University Tax Management Office. It
appears here in a constantly updated and edited format, reflecting any
changes to current tax law.

Questions or comments on this article can be directed to: TaxHelp@umn.edu

Purchases Exempt from Sales Tax

The University of Minnesota has a very broad sales tax exemption
covering most purchases with the exception of prepared food, candy,
soft drinks, lodging, motor vehicles and solid waste disposal services.
If the University is directly paying for the purchase, no sales tax
should be charged.

Retailers generally require documentation that the purchaser is
exempt from sales tax. Sometimes retailers ask for a Minnesota ST3
exemption certificate as evidence that the purchase is exempt from
Minnesota sales tax. As long as the University is directly paying for
the purchase, the ST3 may be provided to the retailer. Other retailers
review the ST3 once and issue an exempt number rather than reviewing
the ST3 for every sale; this streamlines the checkout process. The
exempt number may be used at their stores for any purchases made by the
University. Some stores require that you get an exempt number from
them before making exempt purchases.

It is essential that the P-Card be used when making the exempt
purchases. If an individual uses a personal credit card, or writes a
check for a purchase, and is then reimbursed by the University, it is
not considered a University purchase for sales tax purposes. The sale
is subject to tax.
Additionally, many University Departments do not
reimburse sales tax unless the purchase is of an emergency nature.

Not all retailers consistently enforce these procedures. They may not
charge tax when an individual writes a personal check and presents an

If an individual pays for a purchase personally and presents the ST3,
the individual is considered as using the exemption certificate for
purposes other than the claimed exemption. The penalty provisions of
the sales tax laws suggest that the individual could be subject to a
penalty of $100 for each transaction.
The potential for this penalty
coupled with the fact that an individual may not be reimbursed for sales
tax paid make it imperative that the P-Card be used for all
University purchases that are exempt from sales tax.

The University currently has retailer exemption/account numbers with
several common retailers. If you print out the ST3 from the Forms Library,
the retailer exemption account numbers will print out as a second
page following the ST3, and a list will also be available on our website

If you need exempt numbers for other retailers, please contact the Tax Department at 4-1053 or at taxhelp@umn.edu One number for the entire University may be applied for and added to these lists.