Minnesota

Home Services Buying Guide

Navigating Home Services in the Land of 10,000 Lakes: Licensing, Sales Tax, and Verification in Minnesota

A white silhouette of the state of minnesota on a black background.

For homeowners in Minnesota considering home improvement projects, understanding contractor licensing and sales tax rules is paramount. The "North Star State" has specific requirements for residential contractors and a nuanced approach to sales tax that can affect your project's overall cost.


Licensing Requirements for Home Service Contractors in Minnesota


Minnesota's contractor licensing is primarily managed by the Minnesota Department of Labor and Industry (DLI), with specific requirements for residential projects.

  • Residential Building Contractors and Remodelers:
  • A state license is required for residential work (new construction, repair, or maintenance) valued at $15,000 or more. This includes work on existing structures (Residential Remodeler license) and building new structures (Residential Building Contractor license).
  • Exemptions: Contractors whose gross annual receipts from residential activities are less than $15,000 and who have a Certificate of Exemption from the DLI may be exempt from the licensing requirement. Additionally, subcontractors who only contract with a licensed general contractor (not directly with the homeowner) are generally exempt from the licensing requirement, though they must register with the DLI's Construction Contractor Registration Program. Homeowners doing their own work are also exempt.
  • Specialized Trades Require State Licenses: Beyond general residential building/remodeling, many specific trades are also licensed by the DLI:
  • Plumbers: Journeyman, Master, and Contractor Plumber licenses are issued.
  • Electricians: Journeyman, Master, and Contractor Electrician licenses are issued.
  • Residential Roofers: A specific license is required for residential roofing work.
  • Manufactured Home Installers: Individuals installing or repairing manufactured homes need a license.
  • Mechanical Contractors (HVACR): While general HVACR is often tied to electrical or plumbing work, specific mechanical contractor licenses exist for certain systems.
  • Key Licensing Requirements (for DLI-licensed contractors): To obtain a DLI license, contractors generally need to:
  • Designate a Qualifying Person (QP): An individual (owner, officer, managing employee) who has the relevant experience and passes the required examinations.
  • Pass Exams: The QP must pass both a Business and Law exam and a trade-specific exam (e.g., Qualifying Builder or Qualifying Remodeler).
  • Obtain Insurance: Carry general liability insurance with minimum coverage of $100,000 per occurrence, $300,000 aggregate, and $25,000 in property damage. Workers' compensation insurance is also required if the contractor has employees.
  • Register with Secretary of State: The business must be registered with the Minnesota Secretary of State.
  • Pay Fees: This includes a base license fee and an additional fee for the Contractor Recovery Fund, which helps reimburse consumers for financial losses due to a licensed contractor's misconduct.
  • Continuing Education: Licensed contractors and QPs must complete continuing education hours (e.g., 14 hours every two years for residential contractors).
  • Local Municipal Requirements: Some cities or counties may have additional local registration or permitting requirements. While many cities honor the state license, it's always a good idea to check with your local building department for any specific local rules for your project.


Hiring an unlicensed contractor for work requiring a license is risky. You may not have access to the Contractor Recovery Fund, and it could lead to issues with permits or insurance.


How Sales Tax Applies to Home Service Projects in Minnesota


Minnesota has a state sales tax rate of 6.875%, plus various local sales taxes that can increase the combined rate. The application of sales tax to home service projects is generally as follows:

  • Improvements to Real Property (Construction Contracts):
  • When a contractor performs work that results in an "improvement to real property" (e.g., new construction, additions, major remodeling, installing built-in appliances, replacing furnaces/AC units, electrical/plumbing work incorporated into the structure), the contractor is considered the consumer of the materials.
  • This means the contractor pays sales tax to their suppliers when they purchase the building materials, supplies, and equipment.
  • The contractor does not charge sales tax directly to the customer on the overall contract price (including labor and materials). The sales tax on materials is embedded within the contractor's cost.
  • The labor to install, fabricate, construct, or repair items that become part of real property is also generally not taxable.
  • Taxable Services (Certain Maintenance and Repair):
  • Minnesota does tax certain services, even if related to a home. These include:
  • Building cleaning and maintenance (interior and exterior, including carpet/drapery cleaning, but not building repairs).
  • Disinfecting, exterminating, and pest control services.
  • Lawn, garden, tree, and shrub services (e.g., mowing, landscaping maintenance, tree removal).
  • Motor vehicle washing, rustproofing, and towing.
  • If a contract combines both non-taxable real property improvement services and taxable services, and the taxable services make up more than 50% of the contract's cost, the entire contract may become taxable. Clear itemization is important.
  • Retail Sales by Contractors: If a contractor sells tangible personal property without installing it (e.g., selling a standalone refrigerator without installation), that sale is a taxable retail sale, and the contractor must collect sales tax from the customer.


As a homeowner, for most major construction or remodeling projects, you will generally not see a separate sales tax line item on your contractor's invoice, as the sales tax on materials has already been paid by the contractor. Always clarify with your contractor how sales tax is factored into their pricing.


How to Verify Licensing in Minnesota


Verifying a home service contractor's license in Minnesota is straightforward through the DLI.

  1. Minnesota Department of Labor and Industry (DLI) License Lookup: This is the primary and most reliable tool.
  • Website: Visit the DLI License Lookup system: https://secure.doli.state.mn.us/lookup/licensing.aspx
  • Search Options: You can search by license number, company name, or individual's last name. You can also filter by license type (e.g., "Residential Building Contractor," "Residential Remodeler," "Plumber," "Electrician").
  • Information Provided: The search results will indicate the license status (active, expired), license number, issue and expiration dates, and any disciplinary actions.
  1. Contact the Minnesota DLI: If you have questions or difficulty with the online search, you can contact the DLI directly.
  • Phone: 651-284-5069 or 1-800-657-3944 (press 5 for Construction Codes and Licensing).
  • Email: dli.contractor@state.mn.us
  1. Minnesota Secretary of State Business Search:
  • Website: Use the Secretary of State's business search to verify the contractor's business entity registration: https://www.sos.state.mn.us/business-services/ (Look for "Business Filings & Records Search").
  • Search: Enter the business name to confirm its registration status.
  1. Local Municipal Building Departments: For any local specific permits or registration, contact your city or county's building department.

Always verify a contractor's license through the official DLI website before signing any contracts or making payments. Hiring a licensed contractor provides access to consumer protections, including the Contractor Recovery Fund, in case of issues.

Sources