Minnesota Accelerates Sales Tax Payments / May Delay Refunds!

Minnesota's recent budget bill (HF 3834) made some changes to the timing of sales tax payments. In other words, it accelerated them for some taxpayers.

For a vendor with a sales tax liability of $120,000 or more during a fiscal year ending June 30, 2009 and fiscal years thereafter, the taxes are due and payable on a monthly basis as follows:

1. On or before the 14th day of the month following the month in which the taxable event occurred, the vendor must remit 90% of the estimated liability.
2. On or before the 20th day of the month in which the taxable event occurs, the vendor must remit a prepayment for the month in which the taxable event occurs equal to 67% of the liability for the previous month.
3. On or before the 20th day of the month following the month in which the taxable event occurred, the vendor must pay any additional amount of tax not previously remitted under either (1 or 2 above) or, if the payment made under 1 or 2 above was greater than the vendor's liability for the month in which the taxable event occurred, the vendor may take a credit against the next month's liability.
4. Once the vendor first pays under 1 or 2 above, the vendor is required to continue to make payments in the same manner, as long as the vendor continues having a liability of $120,000 or more during the most recent fiscal year ending June 30.
5. If vendor fails to make payments in the first month that vendor is required to make a payment under either 1 or 2 above, then the vendor is deemed to have elected to pay under 2 above and must make subsequent monthly payments in the manner provided in item 2 above.
6. For vendors making an accelerated payment under item 2 above, for the first month that the vendor is required to make the accelerated payment, on the 20th of that month, the vendor will pay 100% of the liability for the previous month and a prepayment for the first month equal to 67% of the liability for the previous month.

Other Changes:

1. A vendor having a liability of $10,000 or more, but less than $120,000 during a fiscal year ending June 30, 2009, and fiscal years thereafter, must remit by electronic means all liabilities on returns for periods beginning in the subsequent calendar year on or before the 20th day of the month following the month in which the taxable event occurred.
2. Vendors with a liability of $120,000 or more are required to remit by electronic means all liabilities, except for 90% of the estimated June liability which is due two business days before June 30. The remaining amount of the June liability is due on August 20.
3. Penalties apply for not making accelerated payments as required.
4. Commissioner may delay payment of refunds of overpayments of corporate franchise tax and sales tax until the following fiscal year so that $152,000,000 less in refunds is paid in fiscal year 2011 than otherwise would have been paid. This amount is in addition to any amount that is delayed in connection with the unallotment announced in June 2009.

NOTE: All of the above changes are effective for taxes due and payable after September 1, 2010!

If you need assistance in complying with these new rules, please contact me at brian.strahle@bakertilly.com. Also, please consult the budget bill for more details.