Kamala Harris’ running mate in the 2024 presidential election recently approved a funding mechanism that charges retailers a 50-cent delivery fee to help fund road improvements in Minnesota.
The per-shipment fee, included in a transportation package Minnesota Gov. Tim Walz signed into law on May 24, is applied to last-mile shipments and is separate from other taxes or charges.
Walz’s elevation to the national stage as the vice presidential nominee on the Democratic ticket could also boost the profile of the fee as a revenue generator among states for highway funding as money collected from fuel taxes for the federal Highway Trust Fund for the same purpose continues to dry up.
Minnesota’s retail delivery fee, which went into effect July 1, applies to purchases of $100 or more for delivery within the state. It exempts businesses with annual retail sales of less than $1 million from collecting the fee and gives retailers a choice of how to collect it.
It was modeled after a 27-cent retail delivery fee in Colorado that went into effect in 2022. (It was raised to 29 cents in 2024.) Lawmakers in Washington state are considering a 30-cent retail delivery fee, and Nevada, Ohio and New York have considered similar measures.
“Across the country, states are grappling with increasing construction costs and growing demands for transportation infrastructure,” according to a study required by the Washington legislature to look into the effects of implementing the fee.
“With the primary funding mechanism for transportation nationwide — fuel taxes — in decline, policymakers are challenged to identify sustainable sources of revenue to keep up with road and bridge maintenance needs.”
The Washington study pointed out that motor fuel taxes incurred by vehicle trips previously made to pick up retail items are often being replaced with home deliveries made by online retailers, or through the U.S. Postal Service and companies such as UPS and FedEx on behalf of online retailers.
“Although most deliveries are still made by gas or diesel vans subject to the motor fuel tax, delivery and logistics companies are increasingly investing in electric delivery vans, which do pay registration fees … but not fuel taxes.”
The study found that online retail sales in Washington accounted for approximately 14% of total retail sales in 2019, rising to 20% in 2023. “Online retail spending indicates that Washington surpasses the national average in terms of online adoption.”
Business pushback
Those seeking repeal of the retail delivery fee in Washington – namely retailers – refer to it as a “doorstep tax” that adds costs to the supply chain and that consumers ultimately will end up paying for.
“Small businesses, which increasingly rely on online platforms and delivery services to reach customers, would not only be disproportionately affected by a tax on deliveries, but could also be put in a position that compliance is not feasible or overly onerous depending on where and how the tax is charged,” wrote a coalition of business interests that included the Washington Trucking Associations.
“The ecommerce sector has been a significant source of job growth in recent years, creating opportunities in logistics, transportation, warehousing, and related industries. By increasing the cost of doing business in this sector, a doorstep tax could discourage investment and expansion, potentially leading to job losses and stalling economic recovery efforts in our post-pandemic economy.”