Understanding Minnesota's New Retail Delivery Fee [PODCAST]

While Minnesota is not the first state to institute a fee for products delivered across its border—and most likely won’t be the last—the continuing trend of states searching for additional revenue is beginning to catch steam since the South Dakota vs. Wayfair court case was settled just a handful of years ago.

So, what is the retail delivery fee and what does it mean for companies (collecting, remitting, and administering) and consumers in the state of Minnesota?

Teri Grahn, Sales and Use Tax Practice Lead at Redpath and Company, joined Mind the GAAP podcast host Sean Sullivan, to discuss the new fee (don’t call it a “tax!”) and how states are looking for new ways to boost revenue.

LISTEN TO THE PODCAST:

How Did This All Start?

In June of 2018, the U.S. Supreme Court case South Dakota vs. Wayfair saw the high court rule in favor of South Dakota which required a company with no physical presence to collect their sales tax if they exceed certain economic thresholds. Since this ruling, all states that collect a sales tax have passed similar economic nexus laws.

Wayfair Was About Sales Tax Collection. So, What’s Up With All These New Fees?

While the retail delivery fee is not considered a tax in states that have implemented them, the fees collected and the reason for doing are very analogous. The reasons for states implementing these new fees include funding construction and infrastructure projects that are in jeopardy due to declining gas tax revenue (in the wake of more efficient gas engines and electric vehicles). Or in the case of Colorado, their retail delivery fee statute includes language about the environment and sustainability.

Specifics About Minnesota’s Retail Delivery Fee

Is effective in 2024. The fee is effective July 1, 2024 and adds $.50 on to retail deliveries into Minnesota for all transactions greater than $100.

More clarity and guidance may be needed. There are some nuances to Minnesota’s fee that will need to be clarified over the coming months. One of which is the potential assessment of the fee on clothing delivered into Minnesota (clothing is currently not taxable in the state). Another is being clear about what constitutes a retail delivery into the state. Currently Minnesota law does not define how the delivery gets into the state, unlike Colorado’s law that states the fee assessment is subject to deliveries made by motor vehicle only. So, the question remains about how digital products or software delivered electronically may be treated.

Exemptions to collecting the fee (including, but may not be limited to):

1. A retail delivery to a purchaser who is exempt from sales and use tax.
2. A retail delivery of a qualified motor vehicle.
3. A retail delivery resulting from a retail sale of food and food ingredients or prepared food.
4. A retail delivery resulting from the retail sale of other specifically named products in the statute.

Small seller exemption. There is a small seller exemption for retailers with total annual sales under a specific threshold and also marketplace providers that facilitate sales on behalf of a retailer with sales under a certain threshold.

Compliance and Reporting. There are particular rules about how the fee is stated on invoices, how it is separated on the invoice, and who is responsible for covering the cost of the fee (hint: it doesn’t have to be the consumer). In addition, there is specific language in the statute regarding the number of times the fee can be assessed, what happens in the event of a returned product, and when the fee must be reported and remitted.

Teri also discusses some new state and local taxes that are going into effect within the state of Minnesota and in certain local jurisdictions in 2024.