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Taxes for Canadian Businesses in the USA – Minnesota

February 16, 2021


What state taxes does a Canadian business pay in Minnesota?


Sales Tax

The Minnesota state sales tax rate is currently 6.875%. Depending on local municipalities, the total tax rate can be as high as 8.875%.

Use Tax

The Minnesota state use tax rate is currently 6.875%.

Unemployment Insurance (Payroll Tax)

If you have employees working in Minnesota, you must pay unemployment taxes on their gross wages up to the taxable wage base ($35,000 as of 2020). The tax rate varies from 0.10% to 8.90% depending on your experience rating.

Withholding (Payroll Tax)

If you have an employee earning an income while in Minnesota, you must withhold a certain percentage of their income from each payroll. The amount of tax you withhold from an employee depends on the length of your pay period, the employee’s gross pay and the number of withholding allowances/exemptions claimed on their W-4MN.

Corporation Franchise Tax (Income Tax)

Minnesota has a flat corporate income tax rate of 9.800% of gross income.


If you remain under certain thresholds in this state, you are not responsible for taxes.

Sales$100,000 or 200 separate transactions

Availability of Treaty Benefits

Use taxes are often treated as income taxes by the Canadian government when calculating income in Canada and applying for foreign tax credits. Meaning, if you pay use tax in the USA but have no net profit, you will not benefit from a tax credit theoretically. The actual application is a bit more complex.

Income taxes in the USA are almost always treated as income taxes by the Canadian government. Thus, in the majority of cases, if you pay tax in the state, you don’t pay tax again in Canada unless the Canadian rate is higher.

If you would like more information on this topic, please contact a member of the Empire CPA team by filling out the contact form below.

Canadian and foreign tax laws are complex and have a tendency to change on a frequent basis. As such, the content published above is believed to be accurate as of the date of this post. Before implementing any tax planning, please seek professional advice from a qualified tax professional. Empire, Chartered Professional Accountants will not accept any liability for any tax ramifications that may result from acting based on the information contained above.

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