Ok, after reading up on the link provided above, I think I understand it a bit.
In my case, because I'm in Duluth, the only city I need to charge tax is Duluth itself. Then, just for Minnesota if its a Minnesota order.
Outside of that, no taxes.
SO, I would need to make a new category, call it "city", with two options, Duluth, and "Other". If Duluth is picked, then they would be charged the 7.875% rate, but if "other" is chosen, and the state is Minnesota, then their only charged the 6.875% rate.
Does that sound like it would work? It's a bit fuzzy in my head.