This blog was last updated on September 24, 2024
If you are fulfilling a Minnesota Retail Delivery Fee, you should be double checking that you are considering all possible jurisdictionally-imposed fees due on the transaction. Depending on where you are delivering, you may need to collect a fee just for making the retail delivery itself!
Retail deliveries are nothing new, but as our world changes, states are getting creative by exploring the option of imposing a fee for retail deliveries made within their borders. The logic behind retail delivery fees provides various motivations, ranging from encouraging fewer deliveries to lower environmental impact, to raising funds to support infrastructure affected by vehicle deliveries such as the roads used.
In 2022, Colorado became the first state to impose a retail delivery fee. This was a fee on deliveries by motor vehicle to a location in Colorado with at least one item of tangible personal property subject to state sales or use tax. Minnesota is now the second state to impose a retail delivery fee, adding its own twist to the concept.
What is the Minnesota Retail Delivery Fee?
Pursuant to Minn. Stat. §168E, Minnesota imposed a retail delivery fee of $0.50, applicable to certain transactions involving retail deliveries within the state as of July 1, 2024. Unlike the Colorado retail delivery fee, the products subject to the fee are not distinguished solely by whether they are taxable tangible personal property.
Minnesota has additional unique inclusions and exclusions to the retail delivery fee. For example, retail deliveries of clothing are also subject to Minnesota’s retail delivery fee, despite the sale of clothing being exempt from sales and use tax. This fee is applied once per transaction, regardless of the number of shipments made.
Who is subject to the fee?
This retail delivery fee is imposed on retailers, who for the previous calendar year, had Minnesota retail sales totaling $1,000,000 or more. Additionally, marketplace providers are liable to collect the fee when they facilitate a sale for a retailer, who during the previous calendar year, made Minnesota retail sales through the marketplace that totaled $100,000 or more. It is important to note that when calculating whether a retailer has met the retailer exclusion threshold, both taxable and nontaxable retail sales should be included in the calculation.
The retailer may, but is not required to, collect the fee from the purchaser. However, if the retailer does collect the fee from the purchaser, it must be charged in addition to any shipping and handling charge. The retailer must show the total of the retail delivery fee and other delivery fees as separate items and distinct from the sales price and any other taxes or fees imposed on the retail delivery on the purchaser’s receipt, invoice, or other bill of sale. The receipt, invoice, or other bill of sale must state the retail delivery fee as “road improvement and food delivery fee.”
What items are subject to the Minnesota Retail Delivery Fee, and which are not?
The Minnesota Retail Delivery Fee generally applies to each transaction where charges for the following items equal or exceed $100:
- Taxable tangible personal property; and
- Clothing (excluding cloth and disposable child and adult diapers).
However, there are several products that are specifically excluded from the fee (even if they would otherwise be subject to sales tax!):
- Drugs, medical devices, accessories, and supplies;
- Food, food ingredients, or prepared food;
- Food and beverages sold by a food and beverage service establishment, regardless of whether the retail delivery is made by a third party other than the food and beverage service establishment;
- Items that are delivered electronically (no physical delivery takes place); and
- Certain baby products.
The Minnesota sales tax definition of exempt “baby products” is not as expansive as the retail delivery fee’s definition. Minn. Stat. §168E.01 specifically defines the term to include breast pumps, baby bottles and nipples, pacifiers, teething rings, infant syringes, baby wipes, cribs and bassinets, crib and bassinet mattresses, crib and bassinet sheets, changing tables, changing pads, strollers, car seats and car seat bases, baby swings, bottle sterilizers, and infant eating utensils.
To provide an example of this complexity, both baby swings and baby bottles are excluded from the fee. However, only baby bottles are exempt from sales tax.
Is the Minnesota Retail Delivery Fee Taxable?
If the Minnesota Retail Delivery Fee is separately stated on the invoice or similar form of documentation provided to the purchaser, the fee itself is not subject to sales tax.
Is the Minnesota Retail Delivery Fee Refundable?
The fee is nonrefundable even if any or all items purchased are returned to a retailer or if the retailer provides a refund or credit in the amount equal to or less than the purchase price. The fee must be refunded to the purchaser if the retail delivery is canceled by the purchaser, retailer, or delivery provider.
Final Thoughts
Minnesota is now the second state to implement a retail delivery fee in the United States. Time will tell whether additional states will choose to follow this potential new trend. Other states are weighing the possibility of instituting their own retail delivery fees. If they do, it will be interesting to see whether they take a more direct route of application like Colorado or opt for state-centric complexities like Minnesota. To be sure, Sovos is keeping a close eye on any legislative activity regarding such fees.
For more information on the Minnesota Retail Delivery Fee and how to report it, the Minnesota Department of Revenue has provided guidance which can be found here.
