Surety Deposits for Non-Minnesota Construction Contractors

Minnesota entities contracting for construction work with an out-of-state contractor must "deduct and withhold eight percent of payments made to the contractor if the value of the contract exceeds $50,000." Amounts withheld are deposited with the Minnesota Commissioner of Revenue who uses them as a "surety to guarantee that the contractor fulfilled the requirements for Minnesota withholding, sales and use, franchise, and income taxes.”

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 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 found on the Minnesota Department of Revenue website.

Date this Avoiding Pitfall was most recently published: 04/14/2023