Hiring your first employee in Minnesota

What do you have to register for before your first payroll?

Minnesota splits payroll registration across two agencies, so you register twice, not once. Income tax withholding is its own account at the Department of Revenue, while unemployment insurance and the new Paid Leave programme share one joint employer account at ui.mn.gov. The trap is assuming Paid Leave needs a separate signup: for most employers it does not, because the joint account already exists and Paid Leave premiums and wage detail reports ride the same quarterly filing as unemployment insurance. Only employers with workers who are not covered by unemployment insurance need to open a second, Paid-Leave-only account.

Does Minnesota require income tax withholding?

Yes. You register with the Minnesota Department of Revenue, before you withhold minnesota tax from your employees' wages.

Anyone paying wages for work done in Minnesota needs a Minnesota Tax ID Number with a withholding account, and Revenue can assess a $100 penalty if you withhold before you register. The number is issued in seconds online or immediately by phone, and it doubles as your Minnesota employer ID for withholding, but it is not the DEED unemployment account number, which comes from a different agency. Minnesota has income tax reciprocity with Michigan and North Dakota, so residents of those two states who give you a completed Form MWR are exempt from Minnesota withholding. Every new employee also needs a Minnesota Form W-4MN alongside the federal W-4, and there is a $50 penalty per form you fail to forward when Revenue requires it.

What unemployment insurance does Minnesota charge a new employer?

Minnesota does not publish one new employer rate, so the figure depends on your industry. Minnesota has no single new employer rate, so no figure is published here. It assigns your rate from your industry code, and for 2026 that runs from 1.00 percent for most non-construction businesses up to 8.90 percent for the highest risk construction trades, with a full table on the state's site. That assigned rate already includes the 0.40 percent base tax rate, and Minnesota then adds a 14.00 percent additional assessment on top of the tax you compute for 2026. Register only after you have actually paid covered wages, and before the first quarterly wage detail report falls due. You may not withhold any of this from employee pay.

Do you need workers compensation insurance in Minnesota?

Yes, from your first employee. Minnesota sets no headcount to reach, so there is no free window before coverage is required.

• all employers with one or more employees, including part-time, temporary and seasonal workers
• minors and workers who are not citizens

Minnesota has no headcount trigger at all. Section 176.181 requires coverage from the very first employee, and the department states plainly that an employer with only one part-time employee generally must provide it. The only alternative to buying a policy is approval to self insure from the Department of Commerce on proof of financial ability, which is out of reach for a small business. This is enforced rather than nominal: the Special Compensation Fund investigates uninsured employers and refers them for civil penalties, and limited exceptions for certain owners and closely held corporate officers are set out in the department's coverage fact sheet.

How quickly must you report a new hire in Minnesota?

Within 20 calendar days of the date of hire. Reports go to the Minnesota Department of Children, Youth, and Families (Minnesota New Hire Reporting Center).

Report every new hire and rehire within 20 calendar days of the hire date to the Minnesota New Hire Reporting Center at mn-newhire.com. Note the agency moved: the reporting duty now sits with the Department of Children, Youth, and Families, not Human Services, after the 2024 reorganisation renumbered the statute to section 142A.29. A returning worker counts as a new hire once they have been off the payroll for 60 days, and the only exemption is a job expected to last under two months that also pays under $250 a month. Penalties bite only after a certified mail notice of noncompliance, then run $25 for each intentionally unreported employee, or $500 each where employer and employee conspired to avoid reporting.

Does Minnesota have paid family leave or state disability insurance?

Minnesota Paid Leave began collecting premiums and paying benefits on January 1, 2026, and every employer participates whatever its size, including the nonprofits, religious organisations and agricultural employers that unemployment insurance exempts. The total premium for 2026 is 0.88 percent of wages up to the Social Security cap of $185,000, made up of 0.61 percent for medical leave and 0.27 percent for family leave; you may deduct at most 0.44 percent from the employee, leaving 0.44 percent as the employer share, and you may choose to cover more. Small employers pay a reduced total of 0.66 percent, which you qualify for only by employing 30 or fewer workers in every quarter and paying an average wage no higher than 150 percent of the statewide average, currently $27,745.88 a quarter; because the 0.44 percent employee deduction cap does not change, a small employer's own share falls to 0.22 percent. Premiums are paid quarterly through the unemployment insurance employer account at ui.mn.gov, the rate is capped by law at 1.1 percent and reset each July 31 for the following year, and it has already been confirmed to stay at 0.88 percent for 2027.

Do you need a sales tax permit in Minnesota?

You must hold a Minnesota Tax ID Number with a sales and use tax account before you make a single taxable sale, and registration is instant online. Minnesota does not issue a physical permit: you get a confirmation letter you are not required to display, though suppliers often ask for a copy, and the same Minnesota Tax ID is what out-of-state suppliers mean when they ask for your seller's permit or resale number. No registration fee is stated in the sales tax chapter or on Revenue's registration pages, but nothing on a primary page affirmatively says the permit is free, so no dollar figure is published here rather than guess at a zero. The real money risk is the security provision, not a fee, because Revenue can demand a deposit or bond before it issues or reinstates your account.

Security deposits. Minn. Stat. 297A.92 lets the commissioner require security from a retailer, either a deposit in a form and amount the commissioner specifies or a bond from a surety company authorised in Minnesota. A deposit is capped at twice your estimated average liability for a filing period, or $10,000, whichever is less. Revenue also requires a security deposit as a condition of reinstating a sales tax account that was cancelled or revoked.

Does a marketplace like Amazon or Etsy handle the tax for you?

Minnesota has had a marketplace provider law since the 2018 Wayfair decision, and it reaches foreign marketplaces too. A marketplace that both lists your products and processes the customer's payment must collect and remit Minnesota sales tax on the sales it facilitates, which relieves you of collecting on those particular sales. It does not relieve you of Minnesota altogether: you still count facilitated sales when testing whether you have crossed the registration threshold, and you must collect yourself on anything sold through your own website or any other channel that is not collecting for you.

If your sales drop, when can you stop collecting?

Minnesota does not let you stop collecting the month your sales fall away. Once you begin, you must keep collecting and remitting through at least the last day of the twelfth calendar month following the month you started. Even after that the obligation does not lapse by itself: you have to notify the Department of Revenue that you have stopped soliciting Minnesota customers and verify that you did not meet either threshold during those twelve months. The businesses that get assessed are the ones that quietly stopped filing after a slow year without ever telling the state.

Does Minnesota charge a tax on revenue rather than profit?

Minnesota has no general gross receipts or business activity tax of the Washington B&O or Ohio CAT kind, so there is nothing extra here for most businesses. The nearest analogue is the corporate franchise tax minimum fee, which applies to C corporations, S corporations and most partnerships and is a flat dollar amount stepped by the sum of your Minnesota property, payroll and sales rather than a rate on receipts. It is zero at the bottom of the scale and tops out in the low five figures, but the brackets and amounts are inflation adjusted every year, so use the current year's figures from Revenue rather than the table printed in the statute. A separate MinnesotaCare tax does work like a gross receipts tax, but only for health care providers, so it is not a general cost of doing business.

Do you have to register your out-of-state company in Minnesota?

These are the mail filing fees for the original Certificate of Authority. Filed online or in person the same filing costs more: $205 for a foreign LLC and $220 for a foreign corporation, so add $20 to the stored figure if you file online, which is how most people file. Afterwards the annual renewal is free for a foreign LLC but costs a foreign corporation $115 by mail or $135 online, and missing it means revocation.

An out-of-state LLC or corporation that transacts business in Minnesota files a Certificate of Authority with the Secretary of State before it starts, and a corporation must attach a certificate of existence from its home state issued within the previous 90 days. The trap is that Minnesota does not define transacting business anywhere in statute: it applies the minimum contacts standard from jurisdiction law, and the state says explicitly that neither the Secretary of State nor any other agency will make that call for you. Qualifying is only step one for an employer, because a foreign entity still needs a Minnesota Tax ID, a withholding account, an unemployment insurance account and workers compensation cover. Revenue can also order the Secretary of State to revoke your certificate of authority if you fall out of compliance with Minnesota tax law.

Where these figures come from

Every number on this page was read on Minnesota's own agency pages, its statute, or a current-year official form, and this record was last reviewed on 2026-09-08. Where a state's explainer page disagreed with its statute or its current form, we followed the statute or the form and said so in the relevant section, because a state's consumer-facing pages are often the last thing updated when a figure changes.

Anything we could not confirm on a primary source is left blank rather than estimated. A missing figure on this page means we could not verify it, not that it is zero.

This is general information, not legal or tax advice. Rules change and your circumstances matter. Confirm anything you are about to act on with the agency named beside it.