Minnesota enacts retail delivery fee, effective July 1, 2024

In detail

Retail delivery fee

The legislation imposes a fee of 50 cents on each transaction equal to or exceeding a threshold amount involving retail delivery in Minnesota, effective July 1, 2024. A “retail delivery” is a delivery to a person located in Minnesota of the following items as part of a retail sale: (1) taxable tangible personal property and (2) clothing (except cloth and disposable child and adult diapers). The "threshold amount" is $100, before application of state and local sales and use taxes and excluding items exempt from the retail delivery fee imposition.

Observation: Unlike in Colorado, the Minnesota legislation does not require delivery via a motor vehicle. As a result, certain “tangible personal property” delivered electronically or using other alternative delivery methods might be deemed taxable, although it is not clear whether this was the intent of the legislation. The legislation references the existing definition of “tangible personal property,” which includes “prewritten computer software.” Notably, tangible personal property does not include specified digital products or other digital products that are transferred electronically.

The fee will be imposed on each retailer, including marketplace facilitators, for each transaction involving retail delivery. The fee applies regardless of the number of shipments necessary to deliver the items of tangible personal property purchased or the number of items of tangible personal property purchased. The fee does not apply to pickups at the retailer’s place of business, including curbside delivery.

The retailer will be allowed, but not required, to collect the fee from the purchaser. If the retailer elects to collect the fee from the purchaser, (1) the fee must be charged in addition to any other delivery fee and (2) the retailer must show the total of the fee and other delivery fees on the receipt, invoice, or other bill of sale as separate items, distinct from the sales price and any other taxes or fees imposed on the retail delivery. The fee is nonrefundable in the case of returned merchandise, although the fee must be refunded to the purchaser if the retail delivery is canceled.

A “small business” exemption will apply to (1) a retailer that made retail sales totaling less than $1 million in the previous calendar year and (2) a marketplace provider when facilitating the sale of a retailer that made retail sales totaling less than $100,000 in the previous calendar year through the marketplace provider. A retailer or marketplace provider must begin collecting and remitting the delivery fee on the first day of a calendar month occurring no later than 60 days after the retailer or marketplace provider exceeds the above sales thresholds.

In addition, the following constitute exempt retail deliveries:

(1)   a retail delivery to a purchaser that is exempt from sales and use tax

(2)   a retail delivery resulting from a retail sale of food and food ingredients or prepared food

(3)   a retail delivery resulting from a retail sale by a food and beverage service establishment, regardless of whether the retail delivery is made by a third party other than the food and beverage service establishment

(4)   a retail delivery resulting from a retail sale of drugs and medical devices, accessories, and supplies, or baby products

(5)  a retail delivery on a motor vehicle for which a permit issued by the commissioner of transportation or a road authority is required under chapter 169 or 221, and the retailer has maintained books and records through reasonable and verifiable standards that the retail delivery was on a qualifying vehicle.

Gas tax adjustments for inflation

The Minnesota legislation requires the commissioner annually on August 1 to determine the applicable inflation-adjusted gasoline excise tax and special fuel excise tax rates for the upcoming calendar year, with the first adjustments applicable in 2024.