Bill in Minnesota Legislature would repeal new 50-cent retail delivery fee on packages of $100 or more
Minnesotans are paying 50 cents more on large package deliveries thanks to a law change that took effect last summer — designed to raise more funding to support road and bridge repairs.
But a bill that would ditch that delivery fee, less than one year after implementation, advanced in the state legislature this week.
Rep. Erin Koegel, DFL-Spring Lake Park, introduced the fee two years ago because she noticed her own shopping habits change and wanted to be creative to ensure the state would be able to sustain transportation infrastructure projects into the future.
The main sources of revenue come from the gas tax and other user fees, like car tabs.
"We know with more of an adoption of electric vehicles, that we're going to lose gas tax revenue. And so we need to find ways to kind of look towards the future and figure out how we're going to fund our transportation system so we don't end up with a huge budget shortfall," she said.
Rep. Jim Joy, R-Hawley, introduced legislation this session to repeal the law and also undo some gas tax increases. He believes it's necessary to help Minnesotans struggling with the high cost of living.
"This is the first time in Minnesota we've had a tax on clothing because of the delivery fee. This is making Minnesota more affordable," Joy said.
The 50-cent fee applies to packages valued at $100 or more, but there are exemptions like groceries and prescription drugs when calculating that threshold — items for which customers also don't pay sales tax. Clothing is not exempt from the delivery fee, though a sales tax isn't applied.
Bruce Nustad, president of the Minnesota Retailers Association, told the House Transportation Committee on Monday that these caveats can be burdensome for businesses as they try to determine what they owe.
"Businesses small and large have had to build entirely new compliance systems to track, collect and remit the fee," he said.
The original retail fee proposal two years ago was a 75-cent fee on most deliveries and an estimate projected it would bring in $210 million annually, according to MinnPost. The compromise in the end was the 50-cent fee with the $100 purchase floor.
In the first six months since implementation, revenues have been about $12 million, according to data from the Minnesota Department of Revenue.
That's short of the initial estimates under the first proposal, but Koegel believes having a new dedicated funding stream — no matter how much — is better than not having one at all.
"We know that our small cities and townships were desperate for any kind of source of revenue, and so this was a foot in the door," Koegel said. "I would really love to come back and see the threshold or the rate lowered, and then have it applied to more deliveries and maybe just set it at all sales taxable items."
Joy's bill to outright repeal the fee is unlikely to pass in a divided legislature where Republicans and Democrats will have to find compromise on the next two-year budget.
But there could be room for tweaks to the law, like Koegel suggested.
Joy's bill did advance out of its first committee on Monday, though he acknowledged the legislation likely would change. Nustad, who represents retailers, testified removing the $100 threshold would simplify the process for businesses.
