Minnesota discusses various withholding responsibilities

The Minnesota Department of Revenue has issued fact sheets updating guidance regarding Minnesota personal income tax withholding responsibilities as they relate to fair and special event vendors, nonresident entertainers, new employees, and corporate officers.

Fairs and special events. A vendor who pays anyone, including the vendor’s spouse, children, other family members, friends, or students, to work at a fair or event must withhold Minnesota personal income tax from any compensation given, including cash, goods, or services provided in exchange for working in Minnesota. The fact sheet covers items specific to residents of Michigan and/or North Dakota; information for corporate officers; registering for withholding tax; withholding tax from wages; filing and paying electronically; and responsibilities for other taxes, including backup withholding, nonresident entertainer tax, sales tax, and annual business taxes.

Surety deposits for non-Minnesota construction contractors. An employer who hires or contracts with a non-Minnesota contractor to perform construction work in Minnesota must withhold 8 percent (.08) of their compensation as a Minnesota surety deposit. Payments are subject to 8 percent withholding only if the work was performed in Minnesota and the value of the contract exceeds $50,000. The fact sheet also covers exemptions, how to pay the surety deposit, and other requirements.

Nonresident entertainer tax. Compensation received by a nonresident entertainer or entertainment entity for performances in Minnesota is subject to a 2 (.02) percent nonresident entertainer tax. The nonresident entertainer tax replaces the regular Minnesota income tax. An agent is a representative of an entertainment entity. Payments made to an agent rather than the nonresident entertainment entity for performances in Minnesota are subject to the nonresident entertainer tax. The fact sheet also discusses compensation subject to the withholding tax, backup withholding, electronic deposits, and exceptions.

New employers. Generally, Minnesota employers must register for a federal employer tax ID number (FEIN), Minnesota tax ID number and a Minnesota unemployment insurance employer account number. The fact sheet also discusses state and federal requirements for new employees, including verifying work eligibility and social security numbers, new hire reporting, worker compensation insurance, and state unemployment tax.

Definition of wages. The fact sheet explains Minnesota income tax withholding responsibilities as they relate to classification of wages, employees and exceptions. Minnesota follows the federal provisions for determining taxable wages. Wages subject to federal and Minnesota income tax withholding include all pay given to an employee for services performed. The pay may be in cash or in other forms, and it does not matter how the payments are measured or made. The fact sheet also addresses who is an employee and other types of withholding.

Corporate officers. Corporate officers who provide services for a corporation are considered employees of the corporation and should be paid a reasonable wage for services performed. Minnesota income tax must be withheld from any compensation given to officers, including cash, goods, or services, in exchange for working. Taxpayers are required to pay electronically if they withheld more than $10,000 during the last 12-month period ending June 30, if they are required to electronically pay any other Minnesota business tax; or if they use a payroll service company. All withholding tax returns, including past-due and amended returns, must be filed electronically using e-Services or by phone. (Withholding Tax Fact Sheet No. 4; Withholding Tax Fact Sheet No. 12; Withholding Tax Fact Sheet No. 11; Withholding Tax Fact Sheet No. 10; Withholding Tax Fact Sheet No. 9; Minnesota Department of Revenue, November 2014.)

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