Minnesota Wage and Payroll Tax Facts

Miscellaneous Minnesota Tax Information

Reciprocal Agreement(s)

Reciprocal agreements are when workers who live and work in different states are only required to pay taxes to the state where they live. Minnesota currently has reciprocal agreements with the following states:

• Michigan
• North Dakota

Residents of these states need to submit Form MW-R to qualify for exemption from Minnesota SIT. 

Additionally, the state doesn't provide unemployment wage base credits to employers when an employee moves to Minnesota from another state. In other words, if an existing employee moves to Minnesota at any point in the calendar year, their employer can't claim the employee's wages from before the move against Minnesota's SUI tax calculations.

For example, if Employee A transferred to a worksite in Minnesota after working at a different site in Wisconsin for the prior 6 months, their employer can't claim the wages earned in Wisconsin against Minnesota's SUI wage base limit. Even if Employee A's wages for the calendar year already met Wisconsin's wage base limit, any future wages earned after the transfer will still be subject to Minnesota's wage base limit.

Paid Sick Leave (PSL) Taxes

The state of Minnesota doesn't require employers to collect PSL taxes, but it does have a program providing such leave to eligible employees:

Minnesota ESSL Details*
Covered Employees	Any who the employer anticipates will perform work within the state for at least 80 hours
Covered Employers	Any with 1 or more employees
Accrual Method(s)	1 hour per 30 hours worked
Annual Accrual Cap	48 hours
Carryover Allowed	Yes, but employers can cap total accrual at 80 hours
Frontloading Allowed	Yes
FAQs	Earned Sick and Safe Time FAQs

*Effective May 24, 2024, the state's ESST provisions were amended in several areas, such as acceptable uses and the definition of "family member." For more information, refer to our tax alert. 

Paid Family and Medical Leave (PFML) Taxes

Like SDI, Minnesota's PFML program is funded via mandatory payroll deductions and employer contributions. The program will begin collecting contributions on January 1, 2026, and eligible employees can begin filing claims at that same time.

Minnesota PFML Details
Covered Employees	Most Minnesota employees will become eligible after they've earned more than approximately $3,500 in wages within the state over a period of a year
Covered Employers	All
Tax Rate	0.70% of an employee's wages (split evenly between employers and employees, though employers can pay a greater portion if they want)
Maximum Leave Available	12 weeks for a single event, but up to 20 weeks for multiple events within the same year
Wage Replacement	90% of wages that don't exceed 50% of the state’s average weekly wage 66% of wages that exceed 50% of the state's average weekly wage but are less than 100% of the state’s average weekly wage 55% of wages that exceed 100% of the state’s average weekly wage
FAQs	Minnesota Paid Leave FAQs