BUSINESSES OPERATING INSIDE AND OUTSIDE OF MINNESOTA Businesses that operate both within and outside Minnesota must determine what portion of their income is subject to Minnesota tax using apportionment , typically based on the share of sales in Minnesota versus total sales. Minnesota does not use a “throwback rule.” Instead, sales are sourced to the destination: • If the destination of the sale is in Minnesota, it is an in‑state sale for apportionment. • If the destination is another state, the sale is not treated as a Minnesota sale for apportionment purposes. BUSINESS ACTIVITY REPORT (FORM M4R) In general, any business with property or personnel in Minnesota or income from Minnesota sources must file Form M4R, Minnesota Business Activity Report, unless it: • Files a timely Minnesota corporate income tax return (Form M4 or Form M8), • Has a certificate of authority to do business in Minnesota, or • Falls within another exemption. A business that is required to file Form M4R, Minnesota Business Activity Report but does not do so loses the right to bring suit under Minnesota law for contracts and causes of action arising before the accounting period for which the report was not filed. The Commissioner of Revenue may tell litigants whether a party has filed the report. ESTIMATED TAX Individuals (sole proprietors, partners, S corporation shareholders, LLC members) Individuals generally must make federal and Minnesota estimated tax payments if they expect their income tax (and, federally, self‑employment tax) to exceed what is covered by withholding and credits by a certain amount. The tax is based on income from all sources, not just the business. Federal estimates are usually computed on Form 1040‑ES and paid via EFTPS or other IRS payment methods. Rules are governed by the IRS Estimated Tax guidelines. See Estimated tax. Minnesota Threshold: You must pay if you expect to owe $500 or more in Minnesota tax. Estimated payments can be made electronically (preferred) or by check with a payment voucher generated through the Department of Revenue’s online systems.
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