Minnesota Law Change for Individual Construction Contractors – 2% Withholding

Update from the Minnesota Department of Revenue:

Taxes2% Withholding Repealed

After June 30, 2012, Minnesota businesses are no longer required to withhold 2 percent from payments made to individual construction contractors. This withholding requirement was repealed under 2012 Minnesota Laws, Chapter 295, Article 2, Section 13 (c).

Voluntary Withholding

While the 2 percent withholding requirement no longer applies, individual construction contractors may ask to have state income tax withheld from wages or payments they receive. The payer may agree to this withholding, but isn’t required to do so. For more information, see Voluntary Withholding.

Filing the Return

The Minnesota Withholding Tax return will be updated to reflect this law change for the third-quarter filing period (July 1 – Sept. 30, 2012). From that point on, report any withholding from payments to individual construction contractors in the “Tax Withheld” field on the return.
To file a Minnesota Withholding Tax return, log in to e-Services. For filing instructions and other information, click the “Help” or “FAQ” links on the login page.


Prior to the July 1 – Sept. 30, 2012 filing period, 2 percent individual construction contractor withholding was reported in e-Services on a quarterly basis. There is a check box on these quarterly returns to indicate the 2 percent withholding.
For more information you can go to the MN Revenue website (www.revenue.state.mn.us) and see “Law Change for Individual Construction Contractors” under the What’s New tab in Withholding Tax or click here.

Legal Disclaimer: This article is intended for informational purposes only and by no means should replace or substitute other legal documents (governmental or non-governmental) reflecting similar content or advice. If you have any questions concerning your situation or the information provided, please consult with an attorney, CPA or HR Professional.

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