Article
Prepare for proposed changes to Minnesota sales tax legislation
March 31, 2025 · Authored by Rebecca Paulsen
In Minnesota, Governor Tim Walz proposed a 2026-2027 budget that includes a first-ever sales tax cut — 6.875% to 6.8% — but also expands the sales tax base to include certain professional services.
The proposed changes represent a significant shift towards a taxation system that reflects the state’s service-oriented economy. While the proposal will be evaluated when it comes before the Minnesota House and Senate Tax committees in the form of a bill, its application could have a significant effect on taxpayers and businesses that transact in Minnesota.
Learn more about the proposed changes, who may be affected and actionable next steps with the following insights.
Background on the tax
Minnesota's current sales tax rate is 6.875%, which has remained unchanged for several years. The state’s tax code primarily focuses on taxing goods, which Minnesota lawmakers contend doesn’t reflect an economy that has shifted significantly towards services.
Minnesota Revenue Commissioner, Paul Marquart, highlighted that in 1967, approximately 60% of the economy was goods-based, while today, services account for roughly 60% of economic activity. Walz’s administration has explained that this shift necessitates a reevaluation of the sales tax structure to ensure fairness and sustainability in revenue generation.
Who’s affected
If passed, the proposed changes to Minnesota's sales tax legislation will impact a wide range of stakeholders within Minnesota, including:
- Consumers. Individuals using legal, accounting, brokerage, and certain banking services will see new sales taxes applied to these services.
- Service Providers. Businesses offering services in the aforementioned sectors will need to adjust their systems and pricing structures to account for the new tax implications.
- Taxpayers. All Minnesota taxpayers may experience changes in their overall tax burden due to the proposed tax rate reduction and base expansion.
New changes created by the tax’s imposition
The proposed legislation includes several key changes:
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