Estimated reading time: 5 minutes
As of July 1, 2024, a new $.50 Retail Delivery Fee has been imposed on retail deliveries in Minnesota.
The fee is part of the state’s efforts to increase revenue, following the lead of Colorado, which has already implemented a similar fee.
This article covers what you need to know:
- What is the Minnesota Retail Delivery Fee?
- What you need to know about the fee
- How does the fee work?
- Which retailers are liable for this fee?
- Are there any exemptions to the Minnesota Retail Delivery Fee?
- How does the Minnesota Retail Delivery Fee compare to the Colorado Retail Delivery Fee?
- How to get help managing this fee, as well as sales tax for ecommerce sellers
We’ve also made a video on this topic, if you prefer to learn that way.
What is the Minnesota Retail Delivery Fee?
As of July 1, 2024, the Minnesota Retail Delivery Fee is a new charge that applies to deliveries made within the state.
The fee is part of the state’s efforts to increase revenue to cover the wear and tear on infrastructure from all those delivery trucks hitting the roads.
By labeling it a fee instead of a tax, the legislature can put it in place without having it be put to a vote by the general populous.
If this sounds familiar, it’s because Colorado already has a similar fee.
What You Need to Know About the Minnesota Retail Delivery Fee
You might be thinking, ‘not another tax,’ but this fee might not even apply to you. Ask yourself if your business meets these criteria. If not, then you don’t need to worry about it.
- The fee is only required from sellers who are selling $1M or more into the state of Minnesota each year, as determined by the previous year’s sales.
- The fee applies to most retail sales of tangible personal property that are:
- Delivered in Minnesota
- Subject to Minnesota sales tax
- Have a retail price of $100 or more before state and local sales and use tax has been applied
- It is a flat rate of $0.50 per transaction on retail sales over $100, regardless of the number of shipments made.
How Does the Minnesota Retail Delivery Fee Work?
The Retail Delivery Fee applies to all retail deliveries of tangible personal property with a retail price of $100 or more.
Also, the Retail Delivery Fee:
- Applies once per transaction, regardless of the number of shipments made.
- Should be shown as a separate line item on the receipt as “Road Improvement and Food Delivery Fee.”
- Is not subject to sales tax if stated separately on the invoice or receipt.
Please note: Most clothing is exempt from Minnesota sales tax, but clothing items priced at $100 or more will be subject to this fee.
Other types of products are exempt, so keep reading to find out what they are.
Which Retailers are Liable for the Minnesota Retail Delivery Fee?
If you are a retailer or marketplace facilitator, you are liable for this fee if you meet both of these qualifications:
- You have nexus in Minnesota. This means that you’ve either got a physical presence in Minnesota and/or you have passed the economic nexus threshold of $100K in gross sales OR 200 transactions into the state in the past calendar year.
AND
- You sold $1M or more into Minnesota the previous year.
Note: The small business exemption threshold for the Retail Delivery Fee is far higher than the economic threshold for sales tax ($100K). Don’t get them confused.
(Want to avoid all kinds of sales tax woes for your business? Get the 10 steps you need to take to protect your business and be sales tax compliant with our free guide: 10 Steps to Ensure Sales Tax Doesn’t Burn Down Your Ecommerce Business guide. It also has a chart with all of the economic thresholds by state, along with other pertinent registration information.)
Another thing to note is that you can choose to pay the fee yourself instead of adding it to the checkout process. This has been an issue with the Colorado Retail Delivery Fee because the software that retailers use often does not allow an extra line item to be added.
Are There Any Exemptions to the Minnesota Retail Delivery Fee?
Yes. Certain items are exempt, even if the transactions meets or exceeds the $100 threshold:
- Drugs, medical devices, accessories, and supplies
- Certain baby products (breast pumps, baby bottles and nipples, baby swings, baby wipes, bottle sterilizers, car seats and bases, changing tables and pads, cribs and bassinets, infant eating utensils, infant syringes, pacifiers, strollers, teething rings)
- Food, food ingredients, or prepared food
- Items delivered electronically
- Utilities delivered through wires or pipes
- Items purchased for resale
There are also some other types of transactions. The fee does not apply to:
- Deliveries to a sales tax-exempt purchaser
- Deliveries from food and beverage establishments
How Does the Minnesota Retail Delivery Fee Compare to the Colorado Retail Delivery Fee?
There are a couple of key differences:
- Minnesota’s RDF is $.50 while Colorado’s is $.29 (for now).
- Minnesota’s is on retail transactions over $100 while Colorado’s applies to any retail transaction with at least 1 item of taxable, tangible personal property.
- Minnesota’s sales threshold for sellers is $1M in a calendar year, while Colorado’s is $500K.
If you want more information about Colorado’s Retail Delivery Fee, click here.
How to Get Help Managing This Fee and Sales Tax for Ecommerce Sellers
The Minnesota Retail Delivery Fee is just one example of a new tax law that you have to wrap your head around. Frustrating, right?
If you’re tired of trying to figure it out on your own, here’s how we can help:
1. Consultation: If you have a bunch of questions, a consultation with one of our sales tax experts may be your best choice. We can answer them, walk through processes with you, and even help you fill out forms correctly.
2. Training Courses: If you want to understand the ins and outs of sales tax so you can do it yourself, we have several courses to choose from. They are specifically built to help online sellers understand and manage their sales tax compliance correctly from beginning to end.
3. Managed for You: If you’d rather just have someone take care of the whole thing for you so you can focus on growing your business, consider LedgerGurus. We have a team of sale tax experts who do this every day. We will be happy to handle it for you. Click here to get in touch with us.
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