Retailers making deliveries into Minnesota will have one more fee to contend with starting July 1, 2024.
The new Minnesota Retail Delivery Fee (RDF) has the land of 10,000 lakes following in the footsteps of states such as Colorado by requiring retailers to collect a fee designed to help pay for the state’s roads and road maintenance.
But what does the new Minnesota retail delivery fee mean for e-commerce sellers?
How much is the Minnesota retail delivery fee (RDF)?
The Minnesota retail delivery fee is $0.50 (fifty cents) on every transaction that equals or exceeds a threshold amount of $100.
For example, a delivery of a single book priced at $20 would not be subject to the retail delivery fee. But a delivery of 5 books priced at $150 would be subject to the fee.
In most cases, items have to be taxable to count toward the $100 threshold before the fee is applied. But there are other exceptions.
Further, shipping charges count toward the threshold. So if a lamp is $95 but you charge an additional $20 for shipping, then the total of $105 exceeds the threshold and is subject to the Minnesota RDF.
The Minnesota RDF is applied once per sales transaction, regardless of how many actual shipments are made.
When do retailers have to charge the Minnesota RDF?
Retailers are required to collect the Minnesota retail delivery fee if the delivery includes taxable goods or clothing that total or exceed a price of $100.
The Minnesota bill that established this fee also provides some exceptions if the delivery contains prepared food, baby products, diapers, or sales by food and beverage service establishments.
Who is required to collect the Minnesota RDF?
Fortunately, the bill has built in exceptions for some sellers who do not transact large amounts of business in Minnesota.
Retailers who are not subject to the Minnesota retail delivery fee include:
- Retailers who made $1 million or less in sales in the state in the previous calendar year
- Marketplace providers when handling deliveries for marketplace sellers who made less than $100,000 in sales through their platform in the previous calendar year
Marketplace Seller Example:
Say you sell on Amazon. As the “marketplace facilitator,” Amazon is required, if applicable, to collect and remit the Minnesota retail delivery fee on your behalf. However, your business only does about $25k of sales to Minnesota through Amazon every calendar year. In that case, Amazon is not required to charge or remit the $0.50 Minnesota RDF when making deliveries of your goods to buyers in the state. If you ever do start making $100,000 or more in sales to Minnesota buyers through Amazon, as the marketplace facilitator, Amazon will then charge buyers the $0.50 Minnesota RDF on deliveries of your goods.
But keep in mind if your other, non-marketplace, sales equal or exceed the $1 million threshold then you are still required to collect the Minnesota RDF on those transactions.
How do you report and remit the Minnesota RDF?
The Minnesota retail delivery fee will be reported along with the seller’s sales and use tax return.
According to the Minnesota Department of Revenue, they will register existing users for the tax. However, if you are not registered, the state instructs to login to your Minnesota e-Services account and add the Retail Delivery Fee taxline
Is the Minnesota RDF a sales tax?
No. Though they share similarities, retail delivery fees are different from traditional sales tax. RDFs are “fees” rather than “taxes.”
Sales tax is a percentage of the transaction charged by the seller to the buyer, and then remitted to the state to pay for various state budget items.
A retail delivery fee is also charged by the seller to the buyer and then remitted to the state. Unlike a sales tax, it is a set amount. In Minnesota, the upcoming retail delivery fee will be $0.50. The retail delivery fee in Colorado is currently $0.28. And this fee is earmarked for a specific purpose, to the state’s Transportation Advancement Fund to help fund roads.
Stay tuned for updates about the Minnesota Retail Delivery Fee
As July 1st, 2024 draws near the state is likely to release more details about the Minnesota RDF and how taxpayers should handle it. Stay tuned here for updates as we hear more from the Minnesota Department of Revenue.
Meanwhile, if you have questions about retail delivery fees, feel free to contact HOST for a consultation.