2013-08-01



Schools—Sales and Purchases

This fact sheet explains how sales tax applies to sales and purchases made by schools and school districts.

Types of schools

School districts are public school entities and districts, organized under the laws of the state of Minnesota and administered by the Department of Education.

Public schools include primary and secondary schools, colleges and universities, academies, charter schools, the Minnesota Center for Arts Education, early childhood development classes (pre-kindergarten), alternative schooling (specialty classes) and community education classes.

Private nonprofit schools include primary and secondary schools, home schools, colleges and universities, academies and professional, trade, and career schools. To qualify for exemption, the private nonprofit school must provide education equivalent to that furnished at public schools.

Private for-profit schools include primary and secondary schools, colleges and universities that provide education equivalent to that furnished at public schools. For-profit schools must pay sales or use tax on purchases of taxable goods and services.

The exemptions described in this fact sheet do not apply to for-profit schools unless specifically indicated.

Private for-profit career schools, such as business schools, licensed under M. S. Chapter 141, must pay sales or use tax on purchases of taxable goods and services.

The exemptions described in this fact sheet do not apply to for-profit schools unless specifically indicated.

Purchases by schools

Goods, services and equipment purchased by public and private nonprofit schools and used by schools are exempt from sales tax.

The exemption does not apply to the following:

prepared food, soft drinks and candy, including catered food—see Meals at schools on page 2 for exceptions

lodging

employee purchases—see How to make exempt purchases on page 2

sales tax on most motor vehicles—see Motor vehicles on page 2 for exceptions

6.2% car rental tax and 5% car rental fee

Schools must also pay tax on waste collection and disposal services (this is a special tax, not a sales tax).

Recreational and athletic equipment, such as basket- ball hoops or fold-up bleachers, that are freestanding, are exempt when purchased by schools.

Contracts to improve real property. Some items, such as backstops, playground equipment, and tennis courts are permanently affixed to real property by contrac tors. When a school hires a contractor to build, repair, or improve real property or to permanently affix items to real property, a school’s exemption may not be used to buy materials exempt for use in a lump-sum con- tract covering both labor and materials. Contractors do not charge sales tax to their customers on construction contracts. However, a contractor must pay sales or use tax on the cost of all materials, supplies, and equip- ment to complete the construction contract unless the school authorizes the contractor to act as its purchasing agent.

For more information on construction contracts and details on the steps that must be followed to appoint a contractor as a purchasing agent, see Fact Sheet 128, Contractors, and Revenue Notice 95-05, Construction Contracts—Purchasing Agent Exemption.

How to make exempt purchases

Public schools must give their suppliers a fully completed Certificate of Exemption, Form ST3, or a purchase order or payment voucher that clearly shows that the school is a government entity.

Private nonprofit schools must give their suppliers a fully completed Form ST3, Certificate of Exemption, including their Minnesota tax identification number or exempt status number assigned to them, if they have one. To apply for an exempt status number, complete Form ST16, Application for Nonprofit Exempt Status.

Individual purchases. Purchases made for a school by an employee who is later reimbursed by the school are taxable. Purchases are exempt from sales tax only when billed to and paid for by the school. Schools should not make exempt purchases for employees who will reimburse the school.

Special school exemptions

Meals at schools

Prepared food, drinks, and catering services are exempt if they are furnished, served or delivered on school premises. School premises means the school building or grounds of any public or private (nonprofit or for-profit) school, grades pre-kindergarten through 12th grade.

Pre-kindergarten is a program designed to prepare pupils to enter kindergarten the following school year.

This exemption does not apply to meals at colleges, universities and private career schools, unless they are part of a board contract. A “board contract” means a prepaid contract or a lump sum charge for a set term of time with students at a college, university, or private career school. The exemption applies whether the meals are provided by the school or by a third party. The exemption applies to purchases with debit cards, “flex money,” “bonus bucks,” or any other method of purchase authorized by the educational institution under a board contract. Sales of meals and drinks to students who don’t have a board contract, to faculty, employees, and all others are taxable.

Food and drinks

Food and drinks sold from vending machines at all schools are taxable.

Administrative offices located off the school premises are not considered part of the school and therefore meals served at those offices are taxable.

Example 1.

A concession stand is located near a senior high school football field (on school premises) where hot dogs, beverages, etc., are sold during games. No sales tax should be charged because the concession stand is on school premises.

Example 2.

A cafeteria at a university serves meals to students who have board contracts. These meals are not taxable because they are part of a board contract. However, meals to students who do not have board contracts, and to all others, are taxable.

Example 3.

A wedding reception is held in an elementary school cafeteria and food is furnished by a caterer. The caterer should not charge sales tax on the meal because it is served on school premises.

Instructional materials

Instructional materials (other than textbooks) required to be used directly in the completion of a course of study by students at post-secondary schools, colleges, universities or private career schools, including for-profit schools, are exempt if sold to a student who is regularly enrolled at one of these institutions. Examples of qualifying instructional materials are interactive CDs, tapes, and computer software. General reference works or items incidental to the instruction process such as pens, pencils, paper, folders, or computers do not qualify for exemption. To purchase instructional materials exempt, the student must give the seller a fully completed Form ST3, Certificate of Exemption.

Textbook exemption

Textbooks prescribed for use in a course of study at a school as described on page one, including for-profit schools, home schools and private career schools, are not taxable when sold to regularly enrolled students.

Beginning July 1, 2013, the exemption for textbooks also includes “digital” textbooks delivered electronically. See Fact Sheet 177, Digital Products for more information.

To purchase exempt, the student must give the seller a fully completed Form ST3, Certificate of Exemption.

Motor vehicles

Vehicles purchased or used by a private nonprofit or public school for use as an instructional aid in a vehicle body and mechanical repair course are not taxable. This exemption does not include vehicles used in driver education programs.

Vehicles purchased or leased by private nonprofit schools, or other nonprofit groups organized exclusively for charitable, religious or educational purposes, that are used primarily to transport goods or people, other than employees, as part of the group’s nonprofit activities are exempt. To qualify, the vehicle must be a truck, bus or automobile designed to carry at least ten people. This exemption does not apply to governmental schools, school districts or organizations, or to private bus companies.

Sales made by schools

Generally, sales tax applies to sales of taxable items because the exemption for school purchases does not apply to sales made by a school. Many schools sell taxable items in school stores, bookstores or directly to students. Some school organizations, such as band, the science club, or the Spanish club, also make sales. However, there are fundraising exemptions that may apply.

When sales receipts must be deposited with the district treasurer, the criteria of the fundraising exemptions do not apply. Tax must be collected on sales of taxable items. The school or school district must have a Minnesota tax identification number and be registered for sales tax.

Note A separate exemption applies to sales of candy and gum when sold for fundraising purposes by school groups – these sales are exempt even when the receipts are deposited with the district treasurer.

If sales are made and the receipts are deposited into a student activity account or other account, the sales are exempt if they meet the criteria of the fundraising exemptions. If the receipts must be deposited with the district treasurer, the sales are taxable.

Some organizations, such as PTA’s, PTO’s, booster clubs, and prom committees, are organized separately from the school. These organizations must have their own Minnesota tax identification number and be regis- tered for sales tax and must collect and remit sales tax on taxable sales unless they qualify for the fundraising exemptions.

Personal computers and related software

Personal computers and related software sold by a school, college, university or private career school are not taxable if:

the school sells or leases the computer and software to its enrolled students,

it is prescribed for use in a course of study at the school, and

it is required as a condition of enrollment.

Sales, leases, rentals, or fees to use computers are tax- able if they do not meet the above requirements.

School tickets or admissions

Pre-kindergarten through grade 12. Sales of tickets or admissions to regular season school games, events, and activities (e.g., concerts and plays) are exempt. This exemption applies to public, nonprofit, or for profit schools with grades pre-kindergarten through grade 12 and to vocational center/career schools.

Sales of admissions to tournaments, post-season games and other non-regular season games, events and activities are taxable. Also taxable are admissions to swimming pools, ice skating rinks, tennis courts, handball courts and athletic fields.

Admissions and tickets to games, events, and activities sponsored by the Minnesota State High School League are exempt for sales made after June 30, 2006 and before July 1, 2015.

University of Minnesota

Sales of admissions to artistic events sponsored by the University of Minnesota are exempt from both state and local sales taxes if the events are held at university-owned facilities.

Private nonprofit colleges, universities or career schools. An exemption applies to tickets or admissions if the sales are made by an organization that qualifies as a nonprofit organization under 501(c)(3) of the Internal Revenue Code and that meets specific voluntary contribution criteria. See Revenue Notice 03-14, Non- profit Admission Ticket and Fund-raising Sales, for information and guidelines regarding the admission ticket exemption.

Other sales by schools

Examples of taxable sales by schools

amusement device receipts such as from jukebox- es, billiard or pool tables, shuffleboard, foosball or ping pong tables, electronic games, fortune telling machines, crane pick-up machines, batting cages, rides, photo booths

rental of recreation areas and athletic facilities

art supplies

books (other than textbooks), encyclopedias, dic- tionaries, and other general reference materials

class rings

graduation announcements

houses—made by shop class (not attached to land) sold to a buyer who will move the house to another location

lodging furnished for a period of less than 30 days, or a longer period when there is no written enforce- able lease agreement that requires the lessor and lessee to give prior notice of their intention to termi- nate

magazines and periodicals sold over the counter

parking fees – see Fact Sheet 166, Parking Ser- vices

pictures

school supplies such as pencils, paper, notebooks

shop supplies

swimming pool admissions

towel fees

vending machine sales

yearbooks

Examples of exempt sales by schools

graduation cap and gown rentals

laundry washers and dryers (coin operated) both on and off school premises

lodging furnished for a period of 30 days or more if there is a written enforceable lease agreement that requires the lessee to give prior notice of intention to terminate

membership or club dues (general) to school organ- izations are exempt from sales tax; however, if such membership or dues provide access to athletic or amusement facilities, they are taxable

tuition

References

Minnesota Statute section 120A.22, Subd. 4, School Defined

Minnesota Statute section 120A.05, Education Code, Definitions

Minnesota Statute section 141, Private Career Schools

Minnesota Statute section 297A.67

Subd. 5, Exempt meals at schools

Subd. 13, Textbooks

Subd. 13a, Instructional materials

Subd. 14, Personal computers prescribed for use by school

Minnesota Statute section 297A.70

Subd. 2, Sales to government

Subd. 4, Sales to nonprofit groups

Subd. 10, Nonprofit tickets or admissions

Subd. 11, School tickets or admissions

Minnesota Statute section 297B.03 Exemptions for Sales Tax on Motor Vehicles

MN Rule 8130.6200 Charitable, religious, and educational organizations

MN Rule 8130.6700, Textbooks

Revenue Notice 95-05 Construction Contracts – Purchasing

Agent Exemption

Revenue Notice 02-11, School Meals – Board Contracts at

Colleges, Universities, or Private Career Schools

Revenue Notice 03-14, Nonprofit Admission Ticket and

Fund-raising Sales Other Fact Sheets you may need:

Contractors, #128

Digital Products, #177

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