Colorado and Minnesota Impose Retail Delivery Fee
AAFCPAs’ State & Local Tax (SALT) practice would like to make clients aware that the state of Colorado and Minnesota have enacted a retail delivery fee.
Colorado Updates Rule
The state of Colorado originally imposed a fee of $0.27 on all retail sales delivered by motor vehicle to Colorado customers effective July 2, 2022. This charge applied to all retail sales in the state and required that charge be stated separately and applied to each invoice where goods were delivered by motor vehicle. In 2022, all retailers with sales tax registrations were automatically registered for this fee.
The rule has since been updated as of July 1, 2023 to apply exclusively to retailers with Colorado state sales of $500,000 or more. This update follows the introduction of State Senate Bill 23-143, which sought to simplify tax administration by offering exemptions for small businesses. While the original rule required that retailers charge the fee to the customer and state it separately, implementation was challenging for many businesses. This update gives sellers the right to remit the fee without listing a separate line item on the sales invoice. In addition, the seller may opt to absorb the cost rather than pass that along to the customer. The state has performed an administrative closure of any accounts where the retail fee no longer applied based on reported sales volume on a company’s sales tax return. This fee was indexed and has since increased to $0.28.
Minnesota Follows Lead
Following Colorado’s lead, Minnesota became the second state to impose a retail delivery fee. Effective July 1, 2024, a fee of $0.50 shall be charged per sale exceeding $100.00 delivered in Minnesota by motor vehicle. This fee applies to in-state sellers, out of state sellers, and marketplace facilitators. Merchants have the option to absorb the fee or state it separately in a charge to their customer. One fee shall be imposed per transaction regardless of the number of deliveries required.
Minnesota has also provided an exception for small businesses. Specifically, a retail delivery fee will not apply to retailers making sales of less than $1M in the previous calendar year. It also does not apply to marketplace providers when facilitating a retailer that made less than $100,000 in sales through the marketplace provider during the prior calendar year.
Other states have been considering similar legislation and may follow suit by enacting their own retail delivery fees going forward.
If you have questions, please contact Brian O’Hearn, CPA, MSA, Manager at 774.512.4121 or firstname.lastname@example.org, Kelly Zack, MST, Director, State & Local Tax at 774.512.4001 or email@example.com—or your AAFCPAs Partner.