New Minnesota retail delivery fee starts July 2024

Following the lead of Colorado retail delivery fee, Minnesota is imposing a fee on retail deliveries in the state. The 50-cent fee will take effect July 1, 2024. 

Minnesota lawmakers introduced a couple of versions of a retail delivery fee during the legislative session. The one that made it into law came from Minnesota HF 2887. You can read about a similar-but-different proposal here.

The 50-cent retail delivery fee applies to most retail sales of tangible personal property that are delivered in Minnesota and:

• Have a retail sale price of $100 or more 
  
• Are subject to Minnesota sales tax
  

Although most clothing is exempt from Minnesota sales tax, clothing priced $100 or more is also subject to the fee. 

“The way Minnesota talks about the fee is confusing,” says Scott Peterson, VP of Government Relations at Avalara. “It’s the invoice that drives the fee. Any invoice for tangible personal property delivered in the state is subject to the fee except products that are specifically exempt.”

The Minnesota retail delivery fee does not apply to retail deliveries of:

• Accessories and supplies required for the effective use of durable medical equipment for home use (see 297A.67, subdivision 7a)
  
• Adult and child diapers, both cloth and disposable
  
• Baby products (baby bottles and nipples, baby swings, baby wipes, breast pumps, bottle sterilizers, car seats and car seat bases, changing pads and tables, cribs and bassinets, crib and bassinet mattresses and sheets, infant eating utensils, infant syringes, pacifiers, strollers, teething rings)
  
• Drugs and medical devices (see 297A.67, subdivision 7)
  
• Food, food ingredients, or prepared food (see 297A.67, subdivision 2)
  
• Tangible personal property with a retail sale price of less than $100
  

Additionally, the fee does not apply to retail deliveries:

• Made to a purchaser who is exempt from Minnesota sales tax
  
• Made via a motor vehicle for which a permit issued by the commissioner of transportation or a road authority is required under Chapter 169 or Chapter 221, provided the retailer has proof that the delivery was made by a qualifying vehicle
  
• Resulting from a retail sale by a food and beverage service establishment (e.g., a restaurant), regardless of whether the delivery is made by the retailer or a third-party delivery service
  

Small businesses are exempt from the Minnesota retail delivery fee. For the purposes of the fee, a small business is a retailer that made less than $1 million in retail sales during the previous calendar year.

A marketplace facilitator (aka, a marketplace provider) that made less than $1 million in retail sales through the platform is also exempt from the Minnesota retail delivery fee.

The bill doesn’t specify whether the $1 million is total sales or Minnesota sales. 

What happens if you cross the $1 million threshold?

A retailer or marketplace provider must start collecting and remitting (or simply remitting) the retail delivery fee on the first day of the calendar month occurring no later than 60 days after exceeding the $1 million threshold.

Read our Minnesota retail delivery FAQ for more details.

No. Retailers may collect the retail delivery fee from customers, but they’re not required to. They can pay the fee themselves.

If the retailer collects the retail delivery fee from their customer, they must:

• Charge the fee in addition to any other delivery fee
  
• Separately state the fee on the bill of sale, invoice, receipt, etc.
  

However, if the retailer pays the retail delivery fee themself and does not collect it from the consumer, they do not need to separately state the fee on the invoice.

It depends.

If the retail delivery fee is separately stated on the invoice, bill of sale, or similar document, the fee is not subject to sales tax.

However, if the retailer includes the delivery fee in the sale price (i.e., does not separately state it), the fee is subject to sales tax.

“It should go without saying that anything built into the price is subject to sales tax,” observes Scott Peterson. “Yet how Minnesota is implementing the fee is confusing: The retail delivery fee doesn’t apply to some taxable sales but does apply to exempt sales of clothing.”

The retail delivery fee is imposed once per qualifying transaction, no matter how many deliveries result from that transaction. 

The retail delivery fee is nonrefundable if the purchaser returns the items to the retailer or if the retailer provides a credit or refund equal to or less than the purchase price.

However, if the purchaser, retailer, or delivery provider cancels the retail delivery before it occurs, the retail delivery fee must be refunded to the purchaser.

Retailers must report the retail delivery fee on a return “prescribed by the commissioner” and submit the payment with the return. The commissioner has yet to provide more details.

Colorado has a separate Colorado retail delivery fee return.

Minnesota’s retail delivery fee only applies to deliveries made by motor vehicle in the state. It doesn’t apply to buy-online-pickup-in-store (BOPIS) transactions or curbside delivery.

The retail delivery fee applies to out-of-state retailers as well as retailers maintaining a place of business in the state, provided the out-of-state seller has an obligation to collect and remit Minnesota sales tax.

Retail delivery fees such as the one currently in effect in Colorado and soon to be in effect in Minnesota can be an added compliance burden for affected businesses. In fact, Colorado’s retail delivery fee was recently amended because it was so difficult for businesses to collect and remit it as required. Avalara can help you collect and remit retail delivery fees.