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A Minnesota surprise for single-member LLCs

October 09, 2008

Tax Analysts reports ($link) that Minnesota proposes to impose sales tax on transactions between single-member limited liability companies and their owners. A Minnesota administrative law judge has just given their Department of Revenue the go-ahead to adopt the rule.

This would be a classic trap for the unwary. For income tax purposes, single member LLCs are treated at non-entities, with thier income and expenses reported on their owners returns. Imposing a sales tax on transactions that the income tax treats as non-events is an awful idea.

Link: Report of Administrative Law Judge

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