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Minnesota entities contracting for construction work with an out-of-state contractor must “deduct and withhold eight percent of cumulative calendar year payments to the contractor which exceed $50,000.” Amounts withheld are deposited with the Minnesota Commissioner of Revenue as a “surety to guarantee payment of income, franchise, withholding, and sales and use taxes of the contractor.”

This requirement may be waived by the Commissioner of Revenue. In order to obtain an exemption, the out-of-state contractor must obtain Department of Revenue approval by filing Form SDE, Exemption from Surety Deposits for Non-Minnesota Contractors. The form explains when an exemption may be approved. The form is available for downloading from the Department of Revenue’s website at

http://www.revenue.state.mn.us/Forms_and_Instructions/sde.pdf

The relevant statute is Minn. Stat. §290.9705. For more information, see Withholding Fact Sheet 12, Surety Deposits for Out-of-State Construction Contractors, which can be downloaded from the Minnesota Department of Revenue website at:

http://www.revenue.state.mn.us/businesses/withholding/factsheets/FactSheet12.pdf.


Date this Avoiding Pitfall was most recently published: 11/10/2017

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