Business Climate: Successful Companies Get Started and Thrive Here
How Minnesota Ranks
- Minnesota ranks third nationwide in five-year business survival rate (2013-2018), according to data by the Bureau of Labor Statistics.
- Minnesota is the third best state in the country, according to 2019 rankings by the U.S. News and World Report. Metrics take into account states’ economies, transportation infrastructure, internet, public safety, and fiscal stability of state government.
- The 2019 Kauffman Report on Early State Entrepreneurship ranks Minnesota third nationwide in startup early survival rate and 10th in early-state entrepreneurship (KESE) index.
- Minnesota ranks sixth in CNBC America’s Top States for Business, 2018. The North Star State’s best categories are Quality of Life, Technology, Education and Infrastructure.
- Minnesota was ranked as the seventh best state for businesses by 24/7 Wall St, 2018. The source reviewed nearly 50 measures of doing business.
Minnesota's Business Taxes are Competitive
Considering business taxes as a share of private sector gross state product, Minnesota typically ranks in the middle of the pack, according to a 2018 report by Ernst & Young and the Council on State Taxation. Minnesota’s total effective business tax rate (TEBTR) for state and local taxes is 4.4 percent, ranking 20th and lower than the national average (4.5 percent).
Corporate Income Tax
Minnesota only considers sales in-state when it apportions corporate income, meaning lower taxes for businesses whose property and payroll in the state is higher than the share of total sales in-state.
- Corporate Income Tax Rate: 9.8 percent.
- Apportionment Formula (sales/property/payroll): 100 percent sales.
- R & D Credit: 10 percent of first $2 million of qualified expenses and 2.5 percent for expenses above $2 million.
Minnesota exempts capital equipment (machinery and equipment) used in the manufacturing process from the sales tax. There are several other major exemptions for businesses.
- Minnesota’s sales and use tax rate is 6.875 percent.
- Minnesota exempts personal property like machinery, inventory and intangibles from the property tax, resulting in a lower effective tax rate for real and personal property.
- Other major exemptions for business include manufacturing fuel and utilities.