# Minnesota Contractor Taxes and Licensing: Taxable Services, DLI Licenses and 2026 Rates

Minnesota doesn't tax construction labor, and contractors pay sales or use tax on all the materials they use. But several services trades businesses sell are taxable, including lawn care, landscape maintenance and building cleaning. The state rate is 6.875%, plus local taxes. Residential builders, remodelers and roofers need a Department of Labor and Industry license.

## Key takeaways

- "Construction labor is not taxable" in Minnesota; contractors pay tax on the cost of materials, supplies and equipment.
- Lawn care (mowing, aerating, stump grinding) and building cleaning are taxable services; planting sod, trees and shrubs is a nontaxable improvement.
- Contracting with a homeowner for more than one special skill requires a DLI residential building contractor or remodeler license.
- Minnesota has no minimum number of employees before workers' comp is required.
- The top 2026 individual rate is 9.85%.

## Is labor taxable in Minnesota?

Construction labor isn't, but some service labor is. The Minnesota Department of Revenue's guide for construction contractors says plainly: "Construction labor is not taxable." Installing furnaces, water heaters, central air, plumbing and electrical systems counts as improving real property, so the customer's contract isn't taxed. Where Minnesota differs from neighbors like [North Dakota](https://www.brix.so/taxes/north-dakota) and [Iowa](https://www.brix.so/taxes/iowa) is its list of taxable services that many trades companies also sell.

**Minnesota services trades businesses sell: taxable or not?**

| Service | Taxable? | What the department says |
| --- | --- | --- |
| Lawn mowing, aerating, dethatching, stump grinding | Yes | "Lawn care services are subject to tax" (Revenue Notice 08-07) |
| Planting sod, trees and shrubs | No | An improvement to real property |
| Initial seeding of lawns | No | Listed as not taxable |
| Snow shoveling or plowing | No | Listed as not taxable |
| Building cleaning and maintenance | Yes | "Building cleaning services are taxable" |
| Installing a taxable item that stays personal property | Yes | "If the item being sold is taxable, charges to install it are also taxable" |
| Construction and real property improvement labor | No | "Construction labor is not taxable" |

_From Minnesota Department of Revenue guidance, checked 2026-10-19. For services not listed, such as pest control, check with the department._

So a landscaping company that installs a patio and plants trees in spring, then mows weekly all summer, has a nontaxable improvement job and a taxable service contract with the same customer. Keep them on separate invoices or line items. For how other states split this, see [sales tax on labor vs. materials](https://www.brix.so/learn/sales-tax-on-labor-vs-materials).

## Materials and use tax for Minnesota contractors

On real property jobs, the department says "you must pay sales and use tax on the cost of all materials, supplies, and equipment." If a supplier didn't charge Minnesota tax, for example an out-of-state online order, you owe use tax on it. The state rate is 6.875%, and local and special local taxes are added on top. Use the department's sales tax rate calculator for an address, and see [use tax for contractors](https://www.brix.so/learn/use-tax-for-contractors) for the common traps.

> **Example: one landscaping customer, two invoices (illustrative)**
>
> **Spring install, $8,000:** sod, shrubs and a retaining wall. Planting and installing are improvements to real property. The contractor paid tax on the materials and charges no sales tax on the job.
>
> **Summer maintenance, $1,200:** weekly mowing and one aeration. Lawn care is taxable, so the contractor charges the combined state and local rate on the $1,200.
>
> Check the rate for the customer's address before invoicing.

## Minnesota contractor licensing

Minnesota licenses residential contractors at the state level through the Department of Labor and Industry (DLI). A license is required for anyone contracting with the owner of a one- to four-unit residence for "more than one special skill"; remodelers are limited to existing structures. Roofing has its own rule: "Residential contractors who perform roofing work must be licensed," with an exemption for gross receipts under $15,000 a year that requires an annual certificate of exemption. Commercial contractors and subcontractors register through DLI's construction contractor registration program.

**Minnesota contractor licensing by trade**

| Trade | Agency | License | Official page |
| --- | --- | --- | --- |
| Residential builder or remodeler | Minnesota DLI | Residential building contractor or residential remodeler license | [Residential contractor licensing](https://www.dli.mn.gov/business/residential-contractors/residential-contractor-licensing) |
| Roofing (residential) | Minnesota DLI | Residential roofer license; under $15,000 a year may file an exemption | [Who needs a roofer license](https://dli.mn.gov/business/residential-contractors/who-needs-roofer-license) |
| Electrical | Minnesota DLI | Electrical contractor license; electricians licensed individually | [Electrical contractors](https://www.dli.mn.gov/business/electrical-contractors) |
| Plumbing | Minnesota DLI | Plumbing contractor license, $25,000 surety bond, $188 fee | [Plumbing contractor licensing basics](https://www.dli.mn.gov/business/plumbing-contractors/plumbing-contractor-licensing-basics) |
| HVAC / mechanical | Minnesota DLI and local | Mechanical contractor bond filed with DLI; local licenses may apply | [Plumbing and mechanical contractors](https://www.dli.mn.gov/business/plumbing-and-mechanical-contractors) |

_Checked 2026-10-19 and 2026-10-20. Cities issue permits and may add requirements._

DLI says "businesses and individuals that contract to perform plumbing work in Minnesota must have a plumbing contractor license." Solar installers should note that solar PV contracts need a residential building contractor or remodeler license, and the electrical work must be done by a licensed electrical contractor. For more on licensing, see [contractor license](https://www.brix.so/learn/contractor-license).

## Minnesota income tax for 2026

Minnesota has four individual brackets, adjusted for inflation each year. The Department of Revenue's December 2025 announcement set these for tax year 2026:

**Minnesota individual income tax brackets, tax year 2026**

| Rate | Single | Married filing jointly |
| --- | --- | --- |
| 5.35% | $0 – $33,310 | $0 – $48,700 |
| 6.80% | $33,311 – $109,430 | $48,701 – $193,480 |
| 7.85% | $109,431 – $203,150 | $193,481 – $337,930 |
| 9.85% | $203,151 and over | $337,931 and over |

_Source: Minnesota Department of Revenue press release, 2025-12-16, checked 2026-10-19._

Minnesota also charges certain businesses a minimum fee, which for 2026 is $0 below $1,280,000 of Minnesota property, payroll and sales and rises to $12,830 at $51.28 million or more. Ask your CPA whether it applies to your entity. Owners with no withholding make quarterly estimated payments; see [quarterly estimated taxes for contractors](https://www.brix.so/learn/quarterly-estimated-taxes-for-contractors) and the [quarterly estimated tax calculator](https://www.brix.so/tools/quarterly-estimated-tax-calculator).

## Workers' comp in Minnesota

Minnesota requires coverage from the first employee. DLI says Minn. Stat. 176.181 "requires all employers to either purchase workers' compensation insurance" or self-insure, and "there is no minimum number of employees an employer must have before insurance is required." DLI's plumbing contractor license also asks for proof of workers' comp. Background: [workers' compensation](https://www.brix.so/learn/workers-compensation).

## Local taxes in Minnesota

Cities and counties add local and special local sales taxes on top of 6.875%, which matters both for what you pay on materials and for what you charge on taxable services like lawn care and building cleaning. The department publishes updated local rates, so recheck them regularly.

> **General information, not tax advice**
>
> If you sell both improvements and taxable services, have a CPA who knows Minnesota sales tax review how you invoice. The Minnesota Department of Revenue also answers written questions about specific services.

BRIX lets you set tax per line item on quotes and invoices and syncs them with QuickBooks, so taxable maintenance and nontaxable install work can sit on the same customer record without mixing up. BRIX doesn't decide taxability or file returns.

- [Invoicing and payments](https://www.brix.so/features/invoicing-payments): Turns finished jobs into invoices and politely chases unpaid ones until the money is in your account.
- [Quotes and estimates](https://www.brix.so/features/quotes-estimates): Builds accurate quotes on site and follows up on every open estimate.
- [QuickBooks sync](https://www.brix.so/integrations/quickbooks): Syncs customers, invoices and payments with QuickBooks so the books match the jobs.

### Neighboring state guides

- [Wisconsin](https://www.brix.so/taxes/wisconsin): Lawn maintenance also taxable
- [North Dakota](https://www.brix.so/taxes/north-dakota): $4,000 contractor license rule
- [South Dakota](https://www.brix.so/taxes/south-dakota): 2% excise tax, no income tax
- [Iowa](https://www.brix.so/taxes/iowa): Repair labor taxable

## Frequently asked questions

### Is labor taxable in Minnesota?

Construction labor is not taxable in Minnesota. Charges to install a taxable item that stays personal property are taxable, and some services, like lawn care and building cleaning, are taxable. Installing furnaces, water heaters and plumbing counts as a real property improvement.

### Is lawn care taxable in Minnesota?

Yes. Minnesota taxes lawn care services such as mowing, aerating, dethatching and stump grinding. Planting sod, trees and shrubs is a nontaxable improvement to real property, and snow plowing and initial lawn seeding aren't taxable.

### Do Minnesota contractors pay sales tax on materials?

Yes. On real property jobs, contractors must pay sales or use tax on the cost of all materials, supplies and equipment. They don't charge the customer sales tax on the construction contract.

### Who needs a residential contractor license in Minnesota?

Anyone who contracts with the owner of a one- to four-unit residence to do more than one special skill needs a residential building contractor or remodeler license from DLI. Residential roofers need a license unless they qualify for the under-$15,000 exemption.

### Do I need workers' comp in Minnesota with one employee?

Yes. Minnesota requires all employers to carry workers' compensation insurance or self-insure, and DLI says there's no minimum number of employees before coverage is required.

### What is the Minnesota sales tax rate?

The state rate is 6.875%. Local and special local taxes are added on top, so check the combined rate for each address with the Department of Revenue's rate calculator.

### What are Minnesota's 2026 income tax brackets?

For 2026, single filers pay 5.35% up to $33,310, 6.80% up to $109,430, 7.85% up to $203,150 and 9.85% above. Joint filers' brackets start higher, with 9.85% applying above $337,930.

## Related

- [Do Contractors Charge Sales Tax on Labor or Materials?](https://www.brix.so/learn/sales-tax-on-labor-vs-materials)
- [What Is Use Tax for Contractors?](https://www.brix.so/learn/use-tax-for-contractors)
- [What Is a Contractor License?](https://www.brix.so/learn/contractor-license)
- [What Is Workers' Compensation Insurance?](https://www.brix.so/learn/workers-compensation)
- [Quarterly Estimated Taxes for Contractors: How They Work in 2026](https://www.brix.so/learn/quarterly-estimated-taxes-for-contractors)
- [Quarterly Estimated Tax Calculator for Self-Employed Contractors (2026)](https://www.brix.so/tools/quarterly-estimated-tax-calculator)
- [Wisconsin Contractor Taxes and Licensing: Real Property Work, Lawn Care and DSPS Credentials](https://www.brix.so/taxes/wisconsin)
- [North Dakota Contractor Taxes and Licensing: Materials, the $4,000 Rule and WSI](https://www.brix.so/taxes/north-dakota)
- [South Dakota Contractor Taxes: Excise Tax, Taxed Services and No Income Tax](https://www.brix.so/taxes/south-dakota)
- [Self-Employment Tax Calculator (2026)](https://www.brix.so/tools/self-employment-tax-calculator)

## Sources

- [Minnesota Department of Revenue — Construction contractors (sales tax guide)](https://www.revenue.state.mn.us/book/export/html/14856) (checked 2026-10-19)
- [Minnesota Department of Revenue — Taxable services](https://www.revenue.state.mn.us/taxable-services-minnesota) (checked 2026-10-19)
- [Minnesota Department of Revenue — Building cleaning](https://www.revenue.state.mn.us/guide/building-cleaning) (checked 2026-10-19)
- [Minnesota Department of Revenue — Revenue Notice 08-07, lawn and tree services](https://www.revenue.state.mn.us/revenue-notice/08-07-sales-and-use-tax-lawn-and-tree-services-revocation-revenue-notice-04-05) (checked 2026-10-19)
- [Minnesota Department of Revenue — Taxes and rates](https://www.revenue.state.mn.us/guide/taxes-and-rates) (checked 2026-10-19)
- [Minnesota Department of Revenue — 2026 income tax brackets](https://www.revenue.state.mn.us/press-release/2025-12-16/minnesota-income-tax-brackets-standard-deduction-and-dependent-exemption) (checked 2026-10-19)
- [Minnesota Department of Revenue — Minimum fee](https://www.revenue.state.mn.us/minimum-fee) (checked 2026-10-19)
- [Minnesota DLI — Residential contractor licensing](https://www.dli.mn.gov/business/residential-contractors/residential-contractor-licensing) (checked 2026-10-19)
- [Minnesota DLI — Who needs a roofer license](https://dli.mn.gov/business/residential-contractors/who-needs-roofer-license) (checked 2026-10-19)
- [Minnesota DLI — Plumbing contractor licensing basics](https://www.dli.mn.gov/business/plumbing-contractors/plumbing-contractor-licensing-basics) (checked 2026-10-20)
- [Minnesota DLI — Who needs workers' compensation coverage](https://www.dli.mn.gov/business/workers-compensation/work-comp-who-needs-workers-compensation-coverage) (checked 2026-10-19)

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Written by BRIX Editorial Team. Last updated 2026-10-19. General information, not tax, legal or financial advice.
Canonical: https://www.brix.so/taxes/minnesota