We thought the Minnesota Legislature ran the table on tax increases but just like the Grinch who Stole Christmas, they discovered before it was too late, they had missed raising two taxes – the gas tax, and a “delivery tax.”
Without a committee hearing, the DFL-controlled Legislature enacted a gas tax that will cost every Minnesotan, rich or poor, to spend more money on essentials like groceries, driving to work, etc.
This, in the middle of a recession and from a state with a $17.5 billion dollar surplus.
But wait, there’s more!
If you decide NOT to drive to get your groceries, or place an order on Amazon – like many do practically EVERY DAY – the DFL is enacting a new tax on delivery services.
Check out this summary:
The state’s new fee is unpopular with many businesses, said Bruce Nustad, president of the Minnesota Retailers Association, and it may have the unintended effect of increasing road traffic. He predicts consumers will change their shopping habits when they realize that buying items separately could save them money.
“If you want to avoid the fee, instead of buying two $75 pairs of shoes, you’re going to place two separate orders for $75,” he said.
Amazon declined comment on Minnesota’s delivery fee and referred MPR News to an organization called the “Chamber of Progress.” Amazon helps fund the group, which has worked to fight off similar proposals in other states.
Chamber of Progress CEO Adam Kovacevich said delivery surcharges are bad policy because they disproportionately hurt low-income people.
“They are regressive, and really hurt people who depend on delivery of goods and services to their doorstep,” Kovacevich said. “Delivery is not a luxury. It’s a necessity for many people.”
In a letter to DFL lawmakers, 14 different business organizations including Hospitality Minnesota, the Minnesota Chamber of Commerce and the state License Beverage Association, Retail Association and Grocers Association raised issues it considered “insurmountable challenges.”
Their letter states:
Impact to Minnesotans: The proposed delivery fee will impact every Minnesotan, no matter the size of their budget or where they live. As we face economic uncertainty and families make decisions about their spending, under this bill, should they choose delivery Minnesotans will be penalized.
Unfortunately, what this bill does not take into account is the income of an individual or family. Nor does it contemplate the access they may or may not have to food or necessary goods; and that they are already paying sales tax on purchased goods. Furthermore, Minnesotans receiving public assistance are not accounted for in this bill. SNAP items are not taxable, but if a recipient receives an order for delivery with a blend of eligible and non- eligible items, how does that interact with the fee? The Department of Revenue estimates that the average person will have 48 deliveries annually. For some family budgets, this bill will require real decisions and consequences.
Impact to Business Operations: As it is the retailer’s responsibility to collect and remit the fee, the bill does not account for the intricacies required for a retailer to build a system to track, collect and remit the fees. As drafted, HF 580 provides compensation to the Revenue Commissioner for costs to administer the retail delivery fee. Retailers will need to substantially invest in resources to comply with the fee, yet there is no support for that administration. Some businesses use delivery as a minor component to their business model; in which it would not be economical for them to operationally implement the fee. Furthermore, there is no opportunity to allow a retailer to elect to pay the delivery fee themselves.
Transaction Implications: As drafted, the language is not clear around how certain transactions will interact. This raises many unanswered questions, including sales that are business to business or wholesale. These definitions are not explicitly addressed in the bill, nor does the bill provide direction on curbside pick-up or in-store-pick up relative to those options being considered a delivery. In addition, are volunteer delivery services (i.e. meal delivery) required to collect and remit the fee when there is a paying party such as a government grant, and what happens if a customer cancels or returns an order?
Colorado’s Challenging Experience: On July 1, 2022 Colorado was the first and only state to-date to impose a retail delivery fee. Colorado’s modest (when compared to Minnesota) 27 cent fee implementation has proven to be problematic, resulting in several proposed changes to law. According to local news outlet Denver 7, just months after the fee began and politicians heard blowback from consumers while campaigning, a restructuring of the bill is being considered including an exemption of small businesses and removal of the specific reporting line on a consumer’s receipt. In addition, a lawsuit challenging the fee is
in the courts.
Today’s Economy: The proposed fee would also come at a time when consumers and businesses can least afford it, as economists warn the U.S. is teetering on the edge of a recession. If signed into law, Minnesotans would pay the highest delivery tax in the country –far superseding Colorado–whose new delivery tax has as mentioned wreaked havoc and resulted in frustration amongst businesses and consumers alike.
