Wholesale Drug Distributor Tax

You must file a Wholesale Drug Distributor Tax Return if you are a wholesale drug distributor that has taxable presence, or nexus, in Minnesota and sells or distributes legend drugs in the state.

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

• You are a business located in Minnesota that sells legend drugs at wholesale in the state 
• You are an out-of-state business that sells legend drugs at wholesale into Minnesota
• You are a business that sells or distributes legend drugs to a related corporate entity in Minnesota

Note: You are not required to file a return if you only sell or distribute legend drugs to these entities:

• Other wholesale drug distributors selling exclusively at wholesale
• Veterinarians
• Veterinary bulk purchasing organizations

Filing Change for Out-of-State Pharmacies

Out-of-state pharmacies selling legend drugs to consumers in Minnesota can no longer report these sales on a Wholesale Drug Distributor Tax Return. You must now report these sales on a Legend Drug Use Tax Return. Go to Legend Drug Use Tax to learn how to register for a Legend Drug Use Tax account and prepare your 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 or distribute legend drugs at wholesale into Minnesota must file a Wholesale Drug Distributor 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 gross revenue from the sale, delivery, or distribution of legend drugs into 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.

Under MinnesotaCare tax law, a wholesale drug distributor is a business that sells or distributes legend drugs at wholesale into Minnesota. This includes distributors, manufacturers, repackagers, and other businesses that sell or distribute legend drugs at wholesale.

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 Wholesale Drug Distributor 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 Wholesale Drug Distributor 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 Wholesale Drug Distributor 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 Wholesale Drug Distributor 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.

Wholesale drug distributors may transfer and recover the cost of MinnesotaCare tax, or the “tax expense,” by passing it through to buyers of the legend drugs.

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

2023 Wholesale Drug Distributor Tax Instructions

2024 Wholesale Drug Distributor Estimated Tax Instructions

Prior Year Wholesale Drug Distributor Tax Instructions

Report the total amount you received during the year from the wholesale sale or distribution of legend drugs in Minnesota.

Some common examples of wholesale sales or distributions include those to:

• Health care providers, hospitals, surgical centers, and pharmacies in Minnesota who use the drugs in treating patients
• Buyers in Minnesota who sell the drugs at retail
• Buyers in Minnesota who sell some of the drugs at wholesale and some of the drugs at retail

Report in gross receipts any amounts received as charges associated with the sale or distribution of the legend drugs, including:

• MinnesotaCare tax expense charges
• Rental charges
• Shipping or handling charges
• Up charges

Do not report in gross receipts:

• Amounts received from the sale or distribution of legend drugs in Minnesota to a wholesale drug distributor who sells or distributes legend drugs exclusively at wholesale
• Amounts received from the wholesale distribution of COVID-19 vaccines to entities in Minnesota while the COVID-19 federal public health emergency remains in effect
• Refunds paid to buyers in Minnesota for legend drugs returned to you during the year

Sales or Distributions to Related Entities 

If you sell or distribute legend drugs to a related corporate entity in Minnesota (such as to pharmacies you own in Minnesota), report the total price you paid for the legend drugs.

Of your gross receipts, report the amount received from the wholesale sale or distribution of legend drugs to veterinarians or veterinary bulk purchasing organizations.