Background
In May 2023, the Minnesota Department of Revenue (MNDOR) notified retailers of a new Retail Delivery Fee (RDF) to be charged on certain transactions involving the sale of taxable tangible personal property or clothing. Effective July 1, 2024, retailers must begin collecting or self-assessing the RDF. The RDF is set at $0.50 per taxable sale.
Who Does the Retail Delivery Fee Apply To?
The RDF is imposed upon the retailer of taxable tangible personal property or clothing delivered to a location within Minnesota. It applies to transactions involving at least $100 of taxable tangible personal property or clothing and will be collected and remitted to the MNDOR by the retailer or marketplace provider who sold the property. The RDF applies regardless of whether the retailer owns or operates the motor vehicle used to deliver the goods to the customer; hence, the RDF will apply even if a retailer uses a third-party delivery service.
Minnesota’s RDF legislation includes a small business exemption. Retailers with less than $1,000,000 of Minnesota retail sales are not liable for the RDF. Additionally, marketplace providers with less than $100,000 of marketplace-facilitated sales for a retailer are not liable for the RDF. These thresholds include both taxable and nontaxable retail sales. Sales for resale are excluded; however, the purchaser must provide an exemption certificate to the retailer. Businesses that exceed the above thresholds must begin remitting the RDF in the first calendar month occurring no later than 60 days after surpassing the threshold.
How Will the Retail Delivery Fee Be Applied?
The RDF is due on deliveries of taxable tangible personal property or clothing to a location in Minnesota that exceeds the minimum $100 threshold discussed below. Consequently, the RDF will not apply to wholesale sales, sales to exempt purchasers, sales to locations outside of Minnesota, or retail sales where every item in the transaction is exempt. The RDF also does not apply to deliveries by food and beverage service establishments (whether or not made by a third-party service), deliveries made using a qualifying motor vehicle, or purchases picked up at the retailer’s location. The RDF still applies even if shipping is free to the purchaser.
Collecting and Remitting the Retail Delivery Fee
The Minnesota RDF can be collected from customers or self-assessed by the retailer. If passing the RDF on to customers, retailers must list it as a separate line item called “Road Improvement and Food Delivery Fee” on each receipt or invoice issued to the purchaser. If a customer purchases multiple items at the same time, only one RDF is due regardless of how many deliveries are actually needed to complete the sale. However, if each item is purchased at different times, the RDF is due on each sale, even if only one delivery is needed to complete the sale. The RDF is not subject to sales tax if it is separately stated on the invoice. The RDF is collected at the state level, and does not need to be separated by jurisdiction.
The $100 transaction threshold includes all charges that are part of the sale (e.g., shipping charges). However, the RDF itself is not included in the threshold. Additionally, charges for the following items are excluded from the $100 transaction threshold: drugs; medical devices, accessories, and supplies; food, food ingredients, or prepared food; certain baby products; sales for resale; utilities; and items delivered electronically (e.g., computer software).
By July 1, 2024, both in-state and out-of-state retailers with an active sales tax account will be automatically registered for the RDF. Retailers who have an existing tax account with the MNDOR but are not automatically registered under the aforementioned parameters must log in to their Minnesota e-Services account and manually add the RDF tax line.
The RDF will be reported on a new line on the retailer’s Sales and Use tax return. As such, the RDF will be reported under the same filing frequency as the retailer’s sales tax account. Retailers will only be required to file one return for all locations (sites) in Minnesota. The RDF is not refundable if any or all items purchased are returned to the retailer. However, if the retail delivery is canceled by the purchaser, retailer, or delivery provider, the RDF must be refunded to the purchaser.
GBQ will provide updates as warranted if additional guidance is provided by the MNDOR. Please contact your GBQ representative if you have questions or if you would like to discuss the foregoing in greater detail.
