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How to File Your Annual Return

(continued)

• “Caution: Federal law prohibits dispens-

Method 2: Legend Drugs Exemption Calculation

ing without prescription”

If you cannot determine the actual legend drug costs and exempt reimbursement

• “Rx only”

amounts, you must use the calculation below to determine the correct amount to claim

Devices and/or supplies are not considered

for your allowable exemption.

legend drugs.

Legend Drug Purchases. The total amount you paid during

To claim the exemption, a legend drug must

the year for legend drugs or gases . . . . . . . . . . . . . . . . . . . . . . .

also meet both the following requirements:

Gross Receipts. The total gross receipts you received during

• the item must be classified by the FDA as

the year (that you are reporting on your annual return) . . . . .

a drug, not as a device

Total Exemptions. The total of all other exemptions for

• the drug must be purchased from a

this year (that you are reporting on your annual return) . . . . .

wholesaler required to pay the Minneso-

taCare tax. To determine if the whole-

Subtract Step 3 from Step 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . .

saler is required to pay the tax, either

Divide Step 4 by Step 2

check your invoice (which may show the

(should be preceded by a decimal point) . . . . . . . . . . . . . . . . .

MinnesotaCare tax) or verify it with the

wholesaler

Allowable Legend Drugs Exemption.

Multiply Step 1 by Step 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Blood and blood components are not

considered legend drugs. Blood deriva-

Enter the result from Step 6 on the Legend Drugs Exemption line when you file your

tives, however, which are derived from

annual return.

blood, plasma, or serum through a chemi-

cal manufacturing process, are considered

Determining Your Tax

Payment Method. If you are required to

legend drugs.

make your tax payments electronically, a

When you file your return online through

Calculating the Exemption. There are two

5 percent penalty will be assessed if you

e-Services or by phone, your total exemp-

methods for calculating the exemption. If

pay by another method, such as paper check

tions, taxable receipts, and tax will be

you cannot use Method 1, you must use

or money order.

calculated for you based on the information

Method 2.

Interest. You must pay interest on the

you enter. The tax rate is 2 percent (0.02).

Method 1: You may claim the actual

unpaid tax and penalty from the regular due

Estimated Payments

amount paid for the legend drugs reduced

date until the total is paid. The interest rate

Any estimated payments you made during

by any reimbursements you received for the

is determined each year.

the year will be applied to your return. You

drugs that are exempt under MinnesotaCare

The interest rate for 2017 is 4 percent.

will be asked to review the payments in

tax law (such as drugs reimbursed by Medi-

e-Services when filing your return. If there

Paying the Balance Due

care). These reimbursements are included

are discrepancies between the payments in

in the other exemption amounts reported on

If you owe additional tax, you can use

e-Services and your records, please contact

your return.

e-Services to pay at the same time you file

us.

your return. Follow the prompts online

In order to use this method, you must

or on the phone system. You’ll need your

Penalties and Interest

be able to determine the portion of the

bank’s routing number and your account

amounts reported on other exemption lines

Late Payment. A late payment penalty is

number.

that are attributable to legend drug reim-

assessed on any tax not paid by March 15.

bursements, and have records verifying the

The penalty is 5 percent of the unpaid tax

If you pay electronically in e-Services,

actual drug costs and exempt reimburse-

for every 30-day period (or part of a 30-day

you’ll be able to view a record of your

ment amounts.

period) that your return payment is late, up

payments online once the payments are

to 15 percent.

processed.

If you cannot determine the actual costs

and exempt reimbursement amounts,

Late Filing. There is also a penalty for fil-

If you choose to pay electronically another

you must use Method 2.

ing your return after the due date. The late

way or if you pay by check, see the pay-

filing penalty is 5 percent of any unpaid tax.

ment options on page 3.

Method 2: If you cannot determine the

actual cost or exempt reimbursement

Extended Delinquency. If the department

amounts, you must use the calculation at

sends a written demand to file a tax return

the top of this page to determine the allow-

and the return is not filed within 30 days, an

able exemption.

extended delinquency penalty of 5 percent

of the unpaid tax or $100, whichever is

A Legend Drug Exemption Calculator is

greater, will be assessed.

also available on our website that will make

this Method 2 calculation for you. To access

This penalty is in addition to any late filing

the calculator, go to our website at www.

penalty that may be assessed and applies to

revenue.state.mn.us and type Legend

all unfiled returns, even if you paid the cor-

Drug Calculator into the Search box.

rect amount of tax on time, or do not have a

tax liability.

Provider, Hospital, And Surgical Center Taxes Instructions - Minnesota Department Of Revenue - 2017 Page 8

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