There are two new laws affecting Minnesota businesses in the residential and
commercial building construction or improvement services.

The first law requires independent contractors carrying on a trade or business as a sole proprietorship to have an Independent Contractor Exemption Certificate (ICEC).  It does not apply to:  corporations, cooperatives, limited liability companies (LLC), partnerships or other business entities created by statute.  Nor does it apply to the sale or manufacturing of construction supplies and most landscaping services.  The law becomes effective for services performed on or after January 1, 2009.  An individual covered by the law who does not have an ICEC becomes an employee of the hiring person and is no longer an independent contractor.

The hiring person will be considered the employer of the individual and, as
such, must comply with all the obligations of an employer for the purposes
of workers' compensation, unemployment compensation, OSHA, labor standards and child labor laws.  There are penalties for failure to comply with an employer's obligations under these laws, such as failure to obtain workers' compensation insurance, pay unemployment insurance tax or comply with the employment laws.  In addition, penalties of up to $ 5,000 may be assessed for each violation of Minnesota Statutes 181.723, subd. 7.  More information on this law can be found on the internet at:  www.doli.state.mn.us/ic.
 
The second law requires that beginning January 1, 2009, a construction contractor who makes payments to an individual construction contractor carrying on a trade or business as a sole proprietorship must deduct and withhold 2% (.02) of the payment(s) as Minnesota income tax withholding. Payments are subject to 2% withholding only if the work was performed in the State of Minnesota and the total payments during the year exceed $ 600. More information on this law can be found on the internet at: taxes.state.mn.us

If you have any questions, please do not hesitate to call us to make sure you are in
compliance with these new laws.