Minnesota Enacts New Retail Delivery Fee

On May 24, 2023, Minnesota Gov. Tim Walz signed legislation which establishes a retail delivery fee (RDF) for the state of Minnesota. Effective July 1, 2024, an RDF of 50 cents will be imposed on each transaction of $100 or more with retail deliveries in Minnesota. The fee applies once per transaction, regardless of how many shipments are needed to deliver the items.

The RDF is imposed on in-state retailers, out-of-state retailers, and marketplace providers. The retailer may either collect the fee from the purchaser or pay it directly. If separately stated on the invoice, bill of sale, or similar document, the RDF is excluded from the sales price for purposes of sales tax. If the retailer collects the fee from the purchaser, the RDF must be charged in addition to any other delivery fee. Additionally, the retailer must show the total of the RDF and other delivery fees as separate items and distinct from the sales price and any other taxes or fees on the receipt, invoice, or bill of sale, which must state the RDF as “road improvement and food delivery fee.”

The RDF is nonrefundable if any or all items purchased are returned to the retailer or if the retailer provides a refund or credit in the amount equal to or less than the purchase price. The RDF must be refunded to the purchaser if the retail delivery is cancelled by the purchaser, retailer, or delivery provider.

For purposes of the fee, “retail delivery” means a delivery to a person located in Minnesota of the following items as part of a retail sale:

      • Tangible personal property that is subject to tax
      • Clothing, excluding cloth and disposable child and adult diapers

The following retail deliveries are exempt from the RDF:

      • A retail delivery to a purchaser who is exempt from sales and use tax
      • A retail delivery of a qualified motor vehicle
      • A retail delivery resulting from a retail sale of food and food ingredients or prepared food
      • A retail delivery resulting from a retail sale by a food and beverage service establishment, regardless of whether the delivery is made by a third party
      • A retail delivery resulting from a retail sale of drugs and medical devices, accessories and supplies, or baby products

Retail delivery does not include pickup at the retailer’s place of business, including curbside delivery.

The legislation also contains a small business exception. The RDF does not apply to:

      • A retailer that made retail sales totaling less than $1 million in the previous calendar year
      • A marketplace provider when facilitating the sale of a retailer that made retail sales totaling less than $100,000 in the previous calendar year through the marketplace provider.

A retailer or marketplace provider must begin collecting and remitting the RDF on the first day of a calendar month occurring no later than 60 days after the retailer or marketplace provider exceeds the retail sales threshold.

The RDF must be reported on a return prescribed by the commissioner and the RDF must be remitted with the return. The return and fee must be filed and paid using the filing cycle and due dates for sales and use tax.

Retailers and marketplace providers that are subject to the RDF requirement should prepare well in advance of July 1, 2024 in order to determine if they will directly pay the RDF or collect it from purchasers and update their systems accordingly. Minnesota is the second state to enact an RDF, following the lead of Colorado.

(H.F. 2887, Laws 2023)

Posted on May 31, 2023