As several state legislatures weigh whether to implement new delivery-related taxes, recent polling of restaurant and retail industry managers and owners found widespread concern about the potential impact of such fees.
Two states, Colorado and Minnesota, previously passed legislation regarding the collection of revenue through retail delivery fees, made effective in 2022 and 2024, respectively. Meanwhile, several cities and states opted against such delivery taxes last year, including Maryland and Boston.
States began implementing RDFs as a result of e-commerce surging in popularity — making up about 22 percent of all retail sales in the U.S. as of 2023 —, resulting in the expansion of last-mile delivery services and adding pressure to transportation infrastructure, according to information published by the Sales Tax Institute.
States currently considering RDFs include Nebraska and Illinois, according to a Feb. 24 press release from the Chamber of Progress, a tech industry policy coalition.
Colorado and Minnesota’s differing approaches to RDFs
Colorado’s delivery fees impact any retail sale of tangible personal property for delivery by a motor vehicle to a location in the state, according to information from the Colorado Department of Revenue. The state’s RDF totaled 27 cents per delivery in 2022, fluctuating slightly since then to a current rate of 28 cents. The fee applies whether delivery vehicles are owned or operated by the impacted retailer or otherwise (including third-party providers), with some exceptions.
Colorado’s RDFs do not apply to businesses with $500,000 or less in total gross retail sales for the prior year; however, orders placed through 3PDs are typically subject to the RDF, as the delivery business is responsible for collection and remittance. Businesses can opt to pad the fee on behalf of their customers, according to the Colorado Restaurant Association.
In Minnesota, an RDF of 50 cents applies to certain transactions of $100 or more concerning retail delivery in the state, according to information from the Minnesota Department of Revenue. The seller may collect the fees from customers, which must be labeled on applicable receipts as a “Road Improvement and Food Delivery Fee.”
Retailers with Minnesota retail sales totaling less than $1 million for the previous year are excluded, as are marketplace providers facilitating the sale for a retailer that made Minnesota retail sales of less than $100,000 through the marketplace, according to the MnDR.
In both states, the fees do not apply to orders exempt from sales tax, purchases picked up at the retailer’s business location, and deliveries outside the state.
RDF Polling
Polling conducted last year by Morning Consult on behalf of the Chamber of Progress found broad opposition to delivery taxes from residents of both states with present RDFs.
The Morning Consult polling data reported 53 percent of Colorado respondents and 48 percent of voters opposed delivery fees upon their initial response. After learning more about the taxes, opposition passed the majority threshold in both states, reaching 63 percent of Coloradan respondents and 57 percent of Minnesotans surveyed. Support did not exceed 30 percent for either state, both before and after learning more about the RDFs.
Additionally, 35 percent of respondents from Colorado and 29 percent from Minnesota stated the delivery fees would make them less likely to use food delivery services.
Similarly, Morning Consult data of restaurant and retail managers and owners displayed general concern about RDFs, with nearly three-quarters of participants reporting they worry about the impact of delivery fees on their business’s revenue. If delivery taxes were enacted, 63 percent of respondents said they would have little choice but to raise prices for customers, and 46 percent would scale back services or products, even if in-person sales remain steady.
“Delivery has become a permanent and essential part of how restaurants and retailers operate,” Hope Ledford, director of civic innovation policy at Chamber of Progress, said in a press release. “The people running these businesses see firsthand how delivery taxes undermine small business stability – at the expense of workers and consumers.”
