The front stoop of a brick house with packages piled in front of the green front door.

Are you ready for the Minnesota retail delivery fee?

Minnesota is implementing a retail delivery fee starting July 1, 2024. Is your business ready?

This will be the second retail delivery fee (RDF) in the country. The first, Colorado’s retail delivery fee on retail sales of taxable tangible personal property delivered by motor vehicle, took effect July 1, 2022.

If you currently collect the Colorado RDF and expect to replicate your processes in Minnesota, you could be in for a surprise. Although similar, the two retail delivery fees are not the same. 

The following charts highlight key similarities and differences.

    Who has to register for retail delivery fees?

    ColoradoMinnesota

    Retailers and marketplaces that collect Colorado sales or use tax on tangible personal property are liable for the retail delivery fee if their retail sales of commodities, services, or tangible personal property in Colorado in the previous calendar year exceed $500,000.

    A business becomes liable for the RDF on the first day of the filing period that begins at least 90 days after it meets the $500,000 threshold.

    Retailers with $1 million or more in retail sales in Minnesota during the previous calendar year are liable for the Minnesota RDF.

    For marketplace providers, the $1 million threshold applies to direct sales only, not to third-party sales.

    Businesses with $500,000 or less in retail sales of commodities, services, or tangible personal property in Colorado in the previous calendar year are exempt from the fee.

    Retailers with less than $1 million* in Minnesota retail sales during the previous calendar year are not liable for the Minnesota RDF.

     

    Marketplace sellers are excluded from the RDF if their marketplace sales in Minnesota totaled less than $100,000* during the previous calendar year. Thus, marketplace providers aren’t liable for the fee on sales facilitated for these businesses. 

     

    *When calculating the retail sales threshold for the retailer exclusion, include all taxable and nontaxable retail sales except sales for resale.

    Businesses not required to collect Colorado sales tax are not required to collect the Colorado RDF.Businesses not required to collect Minnesota sales tax are not required to collect the Minnesota RDF.

    What’s subject to retail delivery fees?

    ColoradoMinnesota

    The Colorado RDF applies to any transaction containing at least one taxable retail sale of tangible personal property for delivery by a motor vehicle to a location in Colorado.

    The Minnesota RDF applies to many but not all taxable sales of tangible personal property delivered by motor vehicle to a location in Minnesota, plus clothing, when the transaction charges equal $100† or more. 

     

    †The $100 threshold includes all charges that are part of the sale (including shipping) except for:

    • Drugs
    • Food, food ingredients, or prepared food 
    • Medical devices, accessories, and supplies
    • Most (but not all) tangible personal property not subject to sales tax
    • Products delivered electronically
    • Sales to a retailer for resale
    • Utilities
    The fee applies once per transaction even if a transaction results in multiple shipments or deliveries.

    The fee applies once per transaction even if a transaction results in multiple shipments or deliveries.

    Are any products exempt from the retail delivery fee?

    ColoradoMinnesota

    No taxable tangible personal products delivered by motor vehicle are exempt from the Colorado RDF fee. 

     

    However, deliveries to a purchaser who’s exempt from the state sales tax (e.g., a government organization) are exempt from the RDF.

    The following items are exempt from the Minnesota RDF, even if subject to sales tax and/or the transaction equals $100 or more:

    • Certain baby products
    • Drugs
    • Food, food ingredients, or prepared food
    • Medical devices, accessories, and supplies
    • Products delivered electronically
    • Sales to retailers for resale
    • Utilities 

     

    The fee also doesn’t apply to:

    • Deliveries to a purchaser who’s exempt from sales tax
    • Deliveries by a food-and-beverage service establishment (or a third-party delivery service acting on their behalf)
    • Deliveries to a location outside of Minnesota
    • Purchases picked up a retailer’s business location, including curbside delivery
    Products that are exempt from sales tax are exempt from the fee.

    Most products that are exempt from Minnesota sales tax are exempt from the fee.

     

    However, the Minnesota RDF applies to clothing priced $100 or more.

     Transactions totalling less than $100 are exempt from the fee.

    How do I register for and report the RDF?

    ColoradoMinnesota

    Retailers required to collect the Colorado RDF must register for a Retail Delivery Fee account with the Colorado Department of Revenue.

    If you’re already registered for Minnesota sales and use tax, the Minnesota Department of Revenue should automatically register you for the Retail Delivery tax line. 

     

    If you’re not registered for the Retail Delivery tax line, follow these instructions to add the Retail Delivery Fee tax line.

    Retailers liable for the Colorado RDF have two options:

    1. Collect the fee from customers, and show it on the customer invoice or receipt.
    2. Elect to pay the fee on behalf of customers without separately stating the fee on the invoice or receipt.

    Retailers liable for the Minnesota RDF have two options:

    1. Collect the fee from customers, and separately state it on the customer invoice or receipt as a Road Improvement and Food Delivery Fee.
    2. Elect to pay the fee on behalf of customers without separately stating the fee on the invoice or receipt.

    The Colorado RDF is reported on the Retail Delivery Fee Return, Form DR 1786.

     

    Only one return is required per account, for all business locations.

     

    Retailers that fail to file or pay the RDF on time as required will be subject to penalties and interest.

    The Minnesota RDF is reported on the normal sales and use tax return as the Retail Delivery Fee.

     

    Retailers may report the amount due (if paying the fee themselves) or the total collected (if passing the fee on to customers) on one return for all business locations.

     

    Late payments and returns may incur penalties and interest.

    Retail delivery fee rates

    Colorado

    Minnesota

    Colorado retail delivery fee rates:

    • July 1, 2022–June 30, 2023: 27 cents 

    • July 1, 2023–June 30, 2024: 28 cents 

    • July 1, 2024–June 30, 2025: 29 cents 

    Minnesota retail delivery fee rate:

    • July 1, 2024–June 30, 2025: 50 cents 

    Does sales tax apply to retail delivery fees?

    ColoradoMinnesota

    The retail delivery fee itself is not subject to Colorado state sales tax. Local sales tax may apply in some home-rule jurisdictions.

     

    If included in the sales price, Colorado sales tax applies to the RDF.

    The retail delivery fee itself is not subject to state or local sales tax in Minnesota if separately stated.

     

    If included in the sales price, Minnesota sales tax applies to the RDF.

    How to handle the fee with returns and order cancellations

    Colorado Minnesota 

    A retailer may not refund the Colorado RDF when the purchased tangible personal property is returned to the retailer for a full refund. 

     

    A retailer may claim a credit for previously paid RDFs for any retail sale canceled before the item was shipped if the retailer refunded to the purchaser the full purchase price, the RDF, and any applicable sales tax.

    The Minnesota RDF is not refundable when some or all items in a transaction are returned or if the retailer provides a refund or credit totaling less than the purchase price.

     

    The RDF must be refunded to the purchaser if the retail delivery fee is canceled by the customer, the delivery provider, or the retailer.

     

    Does Avalara collect and remit retail delivery fees?

    Avalara currently collects and remits the Colorado retail delivery fee on behalf of customers and will support the calculation, reporting, and remittance of the Minnesota retail delivery fee beginning July 1, 2024. Visit the following Avalara Knowledge Center articles to learn more:

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