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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.

Minnesota Income Tax Withholding Instruction Booklet And Tax Tables - Minnesota Department Of Revenue - 2016 Page 4

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