Legend Drug Use Tax

You must file a Legend Drug Use Tax Return if you have taxable presence, or nexus, in Minnesota and either of the following apply:

• You are located outside of Minnesota and you sell, deliver, or distribute legend drugs into Minnesota that are not subject to Wholesale Drug Distributor Tax
• You are located in Minnesota and you receive legend drugs from a vendor that is not subject to Wholesale Drug Distributor Tax

The following situations are common examples of when you are subject to the tax:

• You are an out-of-state pharmacy that sells legend drugs at retail to consumers in Minnesota (including by mail order)
• You are a Minnesota pharmacy that purchases legend drugs from a vendor that is not subject to Wholesale Drug Distributor Tax

To determine if a vendor is subject to tax, check your purchase invoice for a MinnesotaCare tax expense charge or contact the vendor for verification.

Note: Individuals who purchase legend drugs for personal consumption are not subject to Legend Drug Use Tax and do not need to file a return.

Remote sellers are out-of-state businesses that sell products to customers in Minnesota without having physical presence, or nexus, in the state.

Remote sellers that sell, deliver, or distribute legend drugs into Minnesota that are not subject to Wholesale Drug Distributor Tax must file a Legend Drug Use Tax Return if they meet one or both of these thresholds during a calendar year:

• 200 or more legend drug sales, deliveries, or distributions into Minnesota
• More than $100,000 in total price you paid for legend drugs sold, delivered, or distributed into Minnesota (regardless of when you purchased the drugs)

Note: A common example of a remote seller subject to Legend Drug Use Tax is an out-of-state mail-order pharmacy that sells to consumers in Minnesota.

Small Seller Exception for Remote Sellers

Remote sellers that are below both thresholds during a calendar year qualify for the Small Seller Exception and are not subject to tax for that year. For more information on remote seller requirements and the Small Seller Exception, go to Remote Sellers of Legend Drugs.

Out-of-state pharmacies that sell, deliver, or distribute compounded legend drugs into Minnesota that are not subject to Wholesale Drug Distributor Tax are subject to Legend Drug Use Tax. The tax is on the price the pharmacy paid for the legend drugs included in the final compounded product.

Minnesota pharmacies that compound legend drugs received from vendors not subject to Wholesale Drug Distributor Tax are subject to Legend Drug Use Tax. The tax is on the price the pharmacy paid for the legend drugs included in the final compounded product.

Legend drugs are drugs or gases required by federal law to be sold or dispensed in a container labeled with one of the following statements:

• “Caution: Federal law prohibits dispensing without prescription”
• “Rx only”

Legend drugs or gases must be classified by the U.S. Food and Drug Administration (FDA) as a drug and not a device.

Nutritional products, blood, and blood components are not considered legend drugs and are not subject to Legend Drug Use Tax. Blood derivatives derived from blood, plasma, or serum through a chemical manufacturing process are considered legend drugs and are taxable.

You need a Minnesota Tax ID Number and a Legend Drug Use Tax account to file returns and pay tax.

You can register for a Minnesota ID number and an account at the same time, either:

• Online through Business Tax Registration
• By phone at 651-282-5225 or 1-800-657-3605

If you already have a Minnesota ID number, you can add an account either:

• Online in our e-Services system by selecting Open a new account under I Want To…
• By phone at 651-282-5225 or 1-800-657-3605

You must file your annual return electronically using our e-Services system.

You must pay electronically if you meet certain requirements. Go to Electronic Payment for Business for information about the requirements.

If you are required to pay electronically, you can pay using our e-Services system, by Automated Clearing House (ACH) credit, or by credit or debit card. For more payment options, go to Make a Payment.

You must file your annual return and pay any tax owed by the due dates to avoid penalty and interest. If a due date falls on a weekend or holiday, your return or payment is due the next business day.

Return

Your Legend Drug Use Tax Return is due annually by March 15 for the previous calendar year. If you cannot file by the due date, you may request a 60-day filing extension.

Payments

If your total annual tax was more than $500 for the previous year and will be more than $500 for the current year, you must make quarterly estimated tax payments.

Estimated tax payments are due:

• April 15 
• July 15 
• October 15 
• January 15 of the following year

If you are not required to make quarterly estimated tax payments, you may pay your tax annually when you file your return.

You must pay all tax owed by March 15.

If you are required to make quarterly estimated tax payments, you must calculate the payments a specific way under the MinnesotaCare tax law.

Quarterly estimated tax payments must be at least either:

• 90% of one-fourth of your actual tax for the current year
• One-fourth of your actual tax for the previous year

To calculate the amount you must pay, follow the Estimated Tax Instructions for Legend Drug Use Tax.

We may assess an additional charge for underpaid estimated tax on payments that are late or less than the required amount.

Note: When you file your annual return, you may need to make an additional payment. Our e-Services system compares your total quarterly estimated tax payments to the tax you report on your return. If the tax on your return is more than your total payments, you must pay the remaining tax by March 15.

Pharmacies may transfer and recover the cost of MinnesotaCare tax, or the “tax expense,” by passing it through to insurers or pharmacy benefits managers.

You cannot transfer the tax expense in a deceptive manner or transfer it when no tax is owed.

Pharmacies must base the transferred tax expense on the wholesale price the pharmacy paid for the legend drugs and not on the retail price paid to the pharmacy.

Report the total price you paid for legend drugs delivered to consumers in Minnesota during the year (regardless of when you purchased the drugs).

Do not report the price you paid for legend drugs delivered into Minnesota that were returned to you during the year.

Report the total price you paid during the year for legend drugs you received from vendors who were not subject to Wholesale Drug Distributor Tax.

Do not report the price you paid for legend drugs:

• Returned to the vendors
• Delivered or shipped outside of Minnesota (that were not returned to you later)