New Minnesota retail delivery fee starts July 2024

Following the lead of Colorado, Minnesota is imposing a fee on retail deliveries in the state. The 50-cent fee will take effect July 1, 2024. 

The 50-cent retail delivery fee applies to most retail sales of tangible personal property that are 1) delivered in Minnesota, 2) subject to Minnesota sales tax, and 3) have a retail price of $100 or more before the application of state and local sales and use taxes.

Although most clothing is exempt from Minnesota sales tax, clothing priced $100 or more is also subject to the fee. 

The Minnesota retail delivery fee does not apply to retail deliveries of:

• Accessories and supplies required for the effective use of durable medical equipment for home use (see 297A.67, subdivision 7a)
  
• Adult and child diapers, both cloth and disposable
  
• Baby products (baby bottles and nipples, baby swings, baby wipes, breast pumps, bottle sterilizers, car seats and car seat bases, changing pads and tables, cribs and bassinets, crib and bassinet mattresses and sheets, infant eating utensils, infant syringes, pacifiers, strollers, teething rings)
  
• Drugs and medical devices (see 297A.67, subdivision 7)
  
• Food, food ingredients, or prepared food (see 297A.67, subdivision 2)
  
• Tangible personal property with a retail price of less than $100
  

Additionally, the fee does not apply to retail deliveries:

• Made to a purchaser who is exempt from Minnesota sales tax
  
• Made via a motor vehicle for which a permit issued by the commissioner of transportation or a road authority is required under Chapter 169 or Chapter 221, provided the retailer has proof that the delivery was made by a qualifying vehicle
  
• Resulting from a retail sale by a food and beverage service establishment (e.g., a restaurant), regardless of whether the delivery is made by the retailer or a third-party delivery service
  

“The way Minnesota talks about the fee is confusing,” says Scott Peterson, VP of Government Relations at Avalara. “It’s the invoice that drives the fee. Any invoice for tangible personal property delivered in the state is subject to the fee except products that are specifically exempt.”

The retail delivery fee also doesn’t apply to sellers whose retail sales in the state are beneath a certain threshold. There are two different thresholds. 

According to guidance published by the Minnesota Department of Revenue, “you are not liable for the Retail Delivery Fee if you are one of the following:

• A retailer, who for the previous calendar year, had Minnesota retail sales that totaled less than $1,000,000

• A marketplace provider facilitating a sale for a retailer, who during the previous calendar year, made Minnesota retail sales through the marketplace that totaled less than $100,000”

When calculating the $1 million threshold for the retailer exclusion, include all taxable and nontaxable Minnesota retail sales but do not include sales where the purchaser is buying for resale. Per the Minnesota Department of Revenue guidance, “The purchaser must give you an exemption certificate.”

According to the statute, the retail delivery fee doesn’t apply to “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.”

The Department of Revenue has clarified this by email: “The $1 million threshold would apply to a marketplace provider making their own sales. A seller whose sales are facilitated by a marketplace provider are subject to the exclusion if their facilitated sales totaled less than $100,000 during the previous calendar year.”

“Marketplace facilitators that make direct sales in addition to third-party sales will likely need to separately account for their direct sales in order to determine whether they’ve met the $1 million direct sales threshold,” says Diane Yetter, founder of the Sales Tax Institute. 

What happens if you cross the $1 million threshold?

A retailer or marketplace provider must start collecting and remitting (or simply remitting) the retail delivery fee on the first day of the calendar month occurring no later than 60 days after exceeding the $1 million threshold.

Read our Minnesota retail delivery FAQ for more details.

No. Retailers may collect the retail delivery fee from customers, but they’re not required to. They can pay the fee themselves.

The retail delivery fee is imposed once per qualifying transaction, no matter how many deliveries result from that transaction.

If the retailer collects the retail delivery fee from their customer, they must:

• Charge the fee in addition to any other delivery fee
  
• Separately state the fee on the bill of sale, invoice, receipt, or similar document
  

However, if the retailer pays the retail delivery fee themself and does not collect it from the consumer, the fee does not need to be separately stated on the invoice.

It depends.

If the retail delivery fee is separately stated on the invoice, bill of sale, or similar document, the fee is not subject to sales tax.

However, if the retailer includes the delivery fee in the sale price (i.e., does not separately state it), the fee is subject to sales tax.

“It should go without saying that anything built into the price is subject to sales tax,” observes Scott Peterson. “Yet how Minnesota is implementing the fee is confusing: The retail delivery fee doesn’t apply to some taxable sales but does apply to exempt sales of clothing.”

As shipping charges are considered part of the sales price in Minnesota, they count toward the $100 threshold. This is true even if the shipping charge is separately stated.

The retail delivery fee is nonrefundable if the purchaser returns the items to the retailer or if the retailer provides a credit or refund equal to or less than the purchase price.

However, if the purchaser, retailer, or delivery provider cancels the retail delivery before it occurs, the retail delivery fee must be refunded to the purchaser.

According to the Minnesota Department of Revenue, sellers should “follow the sales price definition to determine how to handle discounts and coupons when calculating the $100 threshold.”

The sales price is the “total of all charges that are part of the sale,” including but not limited to the retail price of a good or service, delivery charges, installation labor, service charges, surcharges, and taxes and fees that are the seller’s responsibility but are passed on to the customer (e.g., credit card processing fees and environmental fees).

The sales price does not include cash discounts, coupons (unless reimbursed by a third party), credit allowed for trade-in, finance charges from an extension of credit by the lender, interest charges, term discounts, or taxes and fees legally imposed directly on the customer.

“We will register retailers for the Retail Delivery Fee taxline,” explains the Minnesota Department of Revenue. “If you are not registered for the taxline, you must log in to your e-Services account and add the Retail Delivery Fee taxline.” Retailers are directed to read Add Local Tax and Other Taxes to a Sales and Use Tax Return for more detailed instructions.

Retailers must report the retail delivery fee on the Minnesota sales and use tax return’s new Retail Delivery Fee taxline. 

“You may report the total collected or amount due for the Retail Delivery Fee on one return for all business locations,” explains the department. “If you do not file or pay this fee on time, you may owe penalties and interest.”

Fun fact: Colorado has a separate Colorado retail delivery fee return.

Minnesota’s retail delivery fee only applies to deliveries made by motor vehicle in the state. It doesn’t apply to buy-online-pickup-in-store (BOPIS) transactions or curbside delivery.

The retail delivery fee applies to out-of-state retailers as well as retailers maintaining a place of business in the state, provided the out-of-state seller has an obligation to collect and remit Minnesota sales tax and the fee.

Retail delivery fees such as the one currently in effect in Colorado and soon to be in effect in Minnesota can be an added compliance burden for affected businesses. In fact, Colorado’s retail delivery fee was amended because it was so difficult for businesses to collect and remit it as required. Avalara can help you collect and remit retail delivery fees. 

Minnesota lawmakers introduced a couple of versions of a retail delivery fee during the legislative session. The one that made it into law came from Minnesota HF 2887. You can read about a similar-but-different proposal here.

The post has been updated. It was originally published on June 2, 2023.