Ely, Minnesota Sales Tax Rate: 8.875% Breakdown and Exemptions

The sales tax rate in Ely, Minnesota is 8.875% on most retail purchases within city limits. That figure combines a 6.875% state tax, a 0.5% St. Louis County transportation tax, and a 1.5% city tax.¹ Visitors staying overnight should also budget for a separate 3% city lodging tax, which brings the total on a hotel or resort stay to 11.875%.

How the 8.875% Breaks Down

Minnesota’s statewide sales tax has two pieces. The base rate is 6.5%, and a constitutionally required addition of 0.375% brings the state-level total to 6.875%.¹ That constitutional surcharge, approved by voters in 2008, funds parks, trails, clean water, and arts programs and is set to expire in 2034.

St. Louis County adds a 0.5% transportation sales tax authorized under Minnesota Statutes section 297A.993, earmarked for regional road and transit projects.² The city of Ely layers on its own 1.5% local sales tax to fund municipal infrastructure. Add the three, and you get the 8.875% you see on a receipt.

Even though three governments share the revenue, businesses file a single return. The Minnesota Department of Revenue collects all three components and distributes each government’s share.³

What Gets Taxed

The default rule in Minnesota is simple. If you’re buying a physical item at retail and it doesn’t fall under a specific exemption, it’s taxed at the full 8.875%. Electronics, furniture, sporting gear, household supplies, and building materials all carry the full rate in Ely.

Services are different. Minnesota taxes a defined list of them rather than services broadly. The taxable categories in Minnesota Statutes section 297A.61 include:⁴

Lodging: hotel, motel, resort, and campground stays shorter than 30 continuous days, including telecommunications access furnished to guests.
Admissions and recreation: tickets to events, amusement parks, health clubs, tanning facilities, and athletic facilities.
Laundry and dry cleaning: cleaning, pressing, alterations, linen supply, and carpet or upholstery cleaning. Coin-operated laundromats where you do the work yourself are excluded.
Motor vehicle washing, including coin-operated car washes.
Nonresidential parking: hourly or contract parking, but not parking meters.

Services not on the statutory list, like haircuts or accounting, generally aren’t subject to sales tax.

Digital products are also taxed. Downloaded music, audiobooks, streamed movies, and similar digital audio and audiovisual works fall within the state’s definitions, as does prewritten software delivered on physical media or by download. Custom software developed specifically for one buyer generally isn’t taxable. Streaming subscriptions used in Ely carry the full 8.875%.⁵

What’s Exempt

Minnesota carves out several broad exemptions that meaningfully reduce what most households actually pay.

Clothing. All clothing designed for general wear is exempt, with no spending cap or seasonal limit. That covers winter jackets, shoes, and children’s clothing.⁶

Groceries. Food and food ingredients sold for home preparation are exempt. The statute defines these as substances sold for human ingestion or chewing and consumed for taste or nutritional value. The exemption explicitly excludes candy, soft drinks, dietary supplements, prepared food, and alcoholic beverages.⁶

Drugs and medical devices. All drugs for human use are exempt, including over-the-counter medications, as long as the product carries a “Drug Facts” label as required by federal regulations. Medical devices and their repair parts, accessories, and supplies also qualify. Grooming and hygiene products like shampoo, toothpaste, soap, and sunscreen don’t count as over-the-counter drugs, even when sold in a pharmacy aisle.⁶

Groceries vs. Prepared Food

The grocery exemption is where most confusion arises. The dividing line is preparation. A bag of flour, a carton of eggs, or a package of chicken breasts from the grocery store is tax-free. A rotisserie chicken from the deli counter, a hot slice of pizza, or a sandwich assembled for immediate consumption is taxable at the full 8.875%.

Minnesota’s statute excludes “prepared foods” from the food exemption, which generally means food sold in a heated state or food sold with eating utensils provided by the seller. Restaurant meals, food truck orders, and ready-to-eat deli items all sit on the taxable side.⁶

Lodging Tax for Visitors

Ely sits at the doorstep of the Boundary Waters Canoe Area Wilderness, so the lodging tax matters to a lot of people. Beyond the 8.875% sales tax that applies to short-term lodging, the city imposes a separate 3% lodging tax under Minnesota Statutes section 469.190.⁷ The total tax on a hotel room, cabin rental, or resort stay in Ely is 11.875%. The lodging tax applies only to stays shorter than 30 continuous days; longer-term rentals are treated differently under the statute.⁴

Online and Out-of-State Purchases

When you buy something online or from an out-of-state retailer that doesn’t collect Minnesota tax, you owe use tax at the same 8.875% rate. The obligation kicks in the moment you use, store, or consume the item in Ely.⁸

Most major online retailers now collect Minnesota tax automatically, so use tax situations have become less common for everyday purchases. They still come up with out-of-state specialty vendors, private-party vehicle purchases, and items bought while traveling. Individuals without a sales tax account can report and pay use tax on their Minnesota income tax return or by filing Form UT1 directly with the Department of Revenue.⁹

1
Minnesota Office of the Revisor of Statutes. Minnesota Code 297A.62 – Sales Tax Imposed; Rates
2
Minnesota House of Representatives. County Transportation Taxes
3
Minnesota Department of Revenue. Sales and Use Tax
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Minnesota Office of the Revisor of Statutes. Minnesota Code 297A.61 – Definitions
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Minnesota Department of Revenue. Computer Software and Digital Products
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Minnesota Office of the Revisor of Statutes. Minnesota Code 297A.67 – General Exemptions
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Minnesota House of Representatives. Local Lodging Taxes in Minnesota
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Minnesota Office of the Revisor of Statutes. Minnesota Code 297A.63 – Use Taxes Imposed; Rates
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Minnesota Department of Revenue. Use Tax