Withholding Requirements
If you employ anyone who works in
Even though you are not required to
Withhold From Income
Minnesota or is a Minnesota resident and
withhold income tax for the reciprocity
Assignable to Minnesota
you are required to withhold federal income
state, you are encouraged to do so as a
courtesy to your employee. If the employee
tax from the employee’s wages, in most
Minnesota Residents.
You may be required
requests that you withhold tax for their
cases you are also required to withhold
to withhold Minnesota income tax from
state of residence, contact the Michigan
Minnesota income tax.
wages paid to a Minnesota resident regard-
or North Dakota revenue department for
less of where the work is performed, even
If you are not required to withhold federal
information.
if the work is performed outside the United
income tax from the employee’s wages, in
States. See information on page 5 to deter-
For details, see Fact Sheet 20.
most cases you are not required to withhold
mine Minnesota tax to withhold.
Minnesota income tax.
Interstate Carrier Companies.
If you
Residents of Another State.
If you are
operate an interstate carrier company and
The rules for determining if you are
required to withhold federal income tax
have employees such as truck drivers, bus
required to withhold federal taxes are in
from a nonresident employee’s wages for
drivers, or railroad workers who regularly
federal Circular E, IRS Publication 15
work performed in Minnesota, in most
perform assigned duties in more than one
( ).
cases, you are also required to withhold
state, withhold income tax for the employ-
Minnesota income tax.
If you pay an employee—including your
ee’s state of residence only.
spouse, children, other family members,
Exception: You are not required to with-
Interstate Air Carrier Companies.
If you
friends, students, or agricultural help—
hold Minnesota tax if:
operate an interstate air carrier company
to perform services for your business,
and have employees who perform regularly
• the employee is a resident of Michigan or
withholding is required. A worker is an
assigned duties on aircraft in more than one
North Dakota and meets the reciprocity
employee if you control what will be done
state, withholding is required for the state of
agreement provisions (see “Reciprocity
and how it will be done.
residence as well as any state in which more
for Residents of Michigan or North
Any officer performing services for a cor-
than 50 percent of their compensation is
Dakota” on this page), or
earned. An employee is considered to have
poration is an employee and their wages are
• the amount you expect to pay the
earned more than 50 percent of his or her
subject to withholding.
employee is less than the minimum
compensation in any state in which sched-
For details, see Fact Sheet 6.
income requirement for a nonresident to
uled flight time in that state is more than 50
file a Minnesota individual income tax
percent of total scheduled flight time for the
You must withhold Minnesota income tax
return, which is $10,350.
calendar year.
from the wages you pay employees and then
Note: Wages earned while a taxpayer was a
remit the amount withheld to the depart-
Nonresident Entertainer Tax.
Minnesota resident, but received when the
ment. You must withhold tax even if you
Compensation paid to nonresident enter-
taxpayer was a nonresident, are assignable
pay employees in cash or give them other
tainers for performances is not subject to
to Minnesota and are subject to Minnesota
goods or services in exchange for working
regular Minnesota income tax. Instead,
withholding tax. Wages include all income
for you. Goods and services are subject to
there is a 2 percent (.02) nonresident
for services performed in Minnesota, such
Minnesota withholding tax to the same
entertainer tax on the gross compensation
as severance pay, equity based awards, and
extent they are subject to federal with-
the entertainer or entertainment entity
other non-statutory deferred compensation.
holding tax.
receives for performances in Minnesota.
(Nonresident entertainer tax does not
For details, see “Form W-2 Wage
For details, see Fact Sheets 9 and 10.
apply to residents of Michigan or North
Allocation” on page 12 and Fact Sheet 19.
Employee or Independent Contractor.
Dakota due to reciprocity agreements; see
Reciprocity for Residents of Michigan or
The proper classification is a matter of law,
“Reciprocity for Residents of Michigan or
North Dakota.
Minnesota has income tax
not choice. The factors considered when
North Dakota” on this page.)
reciprocity agreements with Michigan and
evaluating worker classification fall into
The term entertainers includes, but is not
North Dakota. Under the agreements, you
three main categories: the relationship of
limited to, musicians, singers, dancers,
are not required to withhold Minnesota
the parties, behavioral control, and financial
comedians, actors, athletes, and public
income tax from the wages of an employee
control.
speakers.
who is a resident of Michigan or North
An employer who misclassifies an employee
Dakota and works in Minnesota, if the
The law defines an entertainment entity as:
as an independent contractor is subject to
employee gives you a properly completed
• an entertainer who is paid for providing
a tax equal to 3 percent (.03) of the wages
Form MWR, Reciprocity Exemption/
entertainment as an independent con-
paid to the employee. The employee may
Affidavit of Residency, for the year. Each
tractor;
not claim the tax as a credit (withholding)
year, you must send us copies of the forms
on their Minnesota individual income tax
• a partnership that is paid for entertain-
you received from your employees.
ment provided by entertainers who are
return.
partners; or
For details see Fact Sheet 8.
• a corporation that is paid for entertain-
ment provided by entertainers who are
shareholders of the corporation.
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