MN Care Tax: Gross Revenues, Exemptions, and Filing Deadlines

The MinnesotaCare tax is a 1.8% tax on the gross revenues of healthcare providers, hospitals, surgical centers, and wholesale drug distributors doing business in Minnesota.¹ Revenue funds the Health Care Access Fund, which pays for the MinnesotaCare program covering residents who earn too much for Medical Assistance but can’t afford private coverage.² If you’re on the paying end, the details that matter most are how the base is measured, what’s exempt, and when your return is due.

Who Owes the Tax

Four main categories of taxpayer owe the 1.8% at the same rate:¹

Hospitals operating in Minnesota, on gross revenues from patient services.
Freestanding surgical centers, taxed separately from hospitals.
Licensed healthcare providers, including physicians, dentists, chiropractors, and others, on revenue from patient services delivered in Minnesota.
Wholesale drug distributors, on gross revenues from legend drugs delivered in Minnesota. A legend drug is any drug federal law requires to carry the label “Caution: Federal law prohibits dispensing without prescription” or “Rx only,” excluding nutritional products and blood components.³

Staff model health plan companies, which employ their own providers, are a fifth category taxed on gross premiums, co-payments, deductibles, coinsurance, and patient service fees rather than traditional fee-for-service revenue.³ A parallel 1.8% use tax applies when someone receives legend drugs for resale or use in Minnesota from a source that hasn’t already paid the tax.¹

How Gross Revenues Are Measured

The statute taxes gross revenues, not gross receipts, and the difference is real. Gross revenues means total amounts actually received in money or otherwise for patient services or legend drug sales.³ This is a cash-basis measure. If you bill $500 and collect $300 after insurance adjustments, the 1.8% applies to the $300 you actually received.

Every dollar coming in the door counts, including co-payments and deductibles paid directly by patients. Non-cash compensation is swept in by the phrase “received in money or otherwise.”

What’s Exempt or Excluded

Section 295.53 splits relief into two buckets: exclusions (revenues kept out of the base entirely) and exemptions (specific payment types that don’t count toward taxable gross revenues). The tax effect is the same, but the categories differ.⁴

Exclusions From Gross Revenues

Payments for services provided outside Minnesota.
Government payments received by the Direct Care and Treatment executive board.
Tuition, student fees, government appropriations, and donations received by educational institutions. Fee-for-service payments to those institutions remain taxable.

Exempt Payment Categories

Medicare payments are exempt, and the exemption is broad. It covers the enrollee’s deductibles, co-insurance, and co-payments, along with Medicare supplemental coverage payments and Medicaid crossover payments. Payments for services that Medicare doesn’t cover remain taxable.
TRICARE payments are exempt, but here the enrollee’s deductibles, co-insurance, and co-payments stay taxable. This is where providers most often trip up: the TRICARE rule is not the Medicare rule.
Home health care payments are fully exempt.
Payments received from a hospital, surgical center, or provider that has already paid the tax on those revenues are exempt, which prevents double taxation.
Payments from the behavioral health fund under Chapter 254B are exempt.
Charitable donations not designated for specific patient care are exempt.

When you claim an exemption, your records need to show the payment falls into one of these categories. Misclassifying taxable revenue as exempt triggers penalties.

When to File and Pay

Filing frequency depends on your entity type and your total tax liability.

Hospitals and Surgical Centers

Hospitals and surgical centers make estimated monthly payments, due within 15 days after the end of each month.⁵ If total tax for the current or prior calendar year is $500 or less, estimated payments aren’t required.

Providers and Other Taxpayers

Providers, wholesale drug distributors, and other taxpayers file quarterly estimated payments on four fixed dates: April 15, July 15, October 15, and January 15 of the following year.⁵ The same $500 threshold applies. If your total tax for the current or prior calendar year is $500 or less, you skip estimated payments and file an annual return due March 15 of the following year.

Electronic Payment Threshold

The electronic payment mandate applies once a taxpayer’s aggregate tax liability reaches $10,000 or more in a fiscal year ending June 30. After that, all future payments must be remitted electronically.⁵ Smaller filers can still use the Department of Revenue’s e-Services system by choice.

What Late Payment Costs

The penalty is 5% of any tax not paid by the due date, plus an additional 5% for each 30-day period (or fraction) the tax remains unpaid, capped at 15%.⁶ Interest accrues at 7% for 2026.

A provider who owes $10,000 and pays 60 days late would face a $1,500 penalty at the 15% cap, plus interest. The Department of Revenue has no general discretion to waive penalties simply because a taxpayer forgot or misread the schedule.

Passing the Tax Through to Insurers and Patients

Minnesota law lets hospitals, surgical centers, pharmacies, and other providers transfer the cost of the 1.8% tax to third-party purchasers of health care services, including insurers and pharmacy benefits managers.⁷ That’s the line item you sometimes see labeled “MinnesotaCare provider tax” on a bill.

The transferred amount cannot exceed 1.8% multiplied by the gross revenues received under the third-party contract plus patient co-payments and deductibles. You cannot pass through tax on revenues that are exempt or excluded under section 295.53. Stating the tax on a bill in a deceptive or misleading way is prohibited, and providers may not separately state the tax on bills for services or goods that aren’t actually subject to it.⁴ Third-party purchasers are legally required to pay the transferred amount on top of existing contract amounts, whether the purchaser is for-profit, nonprofit, or not-for-profit.

Records to Keep

Keep receipts, invoices, payment ledgers, and documentation for every exempt payment source behind the numbers on each return. Minnesota’s standard statute of limitations for claiming a refund is three and a half years from the original due date of the return,⁸ so retaining records for at least that long protects you against audit and preserves your ability to claim an overpayment.

The Department of Revenue uses separate forms for each taxpayer category: a Provider Tax form, a Hospital and Surgical Center Tax form, and a Wholesale Drug Distributor Tax form.⁹ Each requires a line-by-line breakdown of total gross revenues and the specific exemptions or exclusions claimed, with a Federal Employer Identification Number (or Social Security Number for sole practitioners) as the identifier.

1
Minnesota Office of the Revisor of Statutes. Minnesota Code 295.52 – Taxes Imposed
2
Minnesota Senate Office of Counsel, Research & Fiscal Analysis. Health Care Access Fund Revenue and Expenditures 1992–2023
3
Minnesota Office of the Revisor of Statutes. Minnesota Code 295.50 – Definitions
4
Minnesota Office of the Revisor of Statutes. Minnesota Code 295.53 – Exclusions and Exemptions
5
Minnesota Office of the Revisor of Statutes. Minnesota Code 295.55 – Payment of Tax
6
Minnesota Department of Revenue. Penalties and Interest for Businesses
7
Minnesota Office of the Revisor of Statutes. Minnesota Code 295.582 – Pass-Through Fee
8
Minnesota Department of Revenue. Statute of Limitations
9
Minnesota Department of Revenue. MinnesotaCare Taxes