New 50-cent fee on some package deliveries takes effect July 1 in Minnesota
MINNEAPOLIS — Starting Monday, Minnesotans will pay more for some large package deliveries thanks to a recent law change designed to raise more money to support road repairs.
The new 50-cent fee will apply to purchases of $100 or more with some exceptions, like pharmaceutical drugs, medical devices, food and certain baby products. Clothing, though exempt from state sales tax, is subject to the new delivery surcharge.
"With the advancement of [electric vehicles], our gas tax revenue is going to decrease. But our road usage probably won't — we'll just have different vehicles on the road," said Rep. Erin Koegel, DFL-Spring Lake Park, the author of the legislation. "We need to start thinking about how we're going to fund our transportation system in the future."
The gas tax revenue is dedicated to road maintenance across the state and serves as the primary funding source for that infrastructure. Koegel believes the legislation meets the moment as more people make big purchases online for delivery.
She told WCCO she introduced the initial plan — which had a fee applied to all packages, regardless of the value, before it was scaled back in the final version—because she saw her own buying habits shift dramatically. She said she would find herself getting multiple Amazon or other retail packages delivered several times per week.
"I call this my 'Anti-Hero' bill because it was me. I was the problem," Koegel joked, nodding to the song by Taylor Swift.
She hoped the fee would not only raise revenue but serve as an incentive for people to bundle packages and cut down on the amount of orders so it would be better for the environment. Ultimately lawmakers struck a compromise setting the threshold at $100 and excluded take-out from restaurants.
"This is a growing source of revenue that's getting funding — dedicated, predictable funding — to small cities, to county state aid highways, to town roads," she said.
Bruce Nustad, president of the Minnesota Retailers Association, which lobbied against the proposal at the legislature last year, said the fee is complex since it doesn't apply to all sales and that can be confusing as businesses navigate the new rules.
They're on the hook to make sure the fee is properly applied and paid to the state, and some may just absorb the cost, he explained.
"We're always worried about a consumer being incented to buy outside the state," Nustad told WCCO. "If you look at the delivery fee and look at increased sales taxes, we're just concerned that consumers might say, 'Hey, you know what? I think I'll just drive to Wisconsin or South Dakota, or a neighboring state to make a purchase.'"
The new 50-cent fee applies only once per transaction, even if an order splits and arrives in different boxes. But any delivery less than $100 won't see the surcharge at all.
Nustad believes the law is fair in that it applies to all retailers selling to consumers in Minnesota, not just those businesses with a physical presence here. But he questioned if enforcement will be even across the board.
The fee comes a year after a new 1% sales tax increase in the seven-county Twin Cities metropolitan area took effect. Revenues are split to fund affordable housing and transit.
The boost means Minneapolis has a sales tax rate of 9.025% and nearly 10% in St. Paul with its additional hike to support infrastructure.
