The fee, which goes into effect on July 1, 2024, will apply to sales of taxable tangible personal property, including clothing. The bill did list a handful of exemptions:
- Sales to an exempt purchaser,
- Deliveries made using a qualified motor vehicle,
- Sales by a food and beverage service establishment (whether or not delivered by a third-party provider), and
- Retail sale of drugs, medical devices, accessories and supplies, or baby products, including adult and children’s diapers.
The bill also includes an exclusion for small businesses in that the fee does not apply to deliveries by a retailer with sales of under $1M in the prior calendar year; this includes a marketplace facilitator delivering on behalf of such a retailer. When a retailer does hit the $1M sales threshold, they must begin complying with the fee at the beginning of a calendar month within 60 days of exceeding the threshold.
If the retailer chooses to collect the fee from the purchaser, though not required, the retail delivery fee must be in addition to any other delivery fee, and it must be shown as a separate and distinct item from the sales price and any other taxes or fees. The invoice must identify the retail delivery fee as a “road improvement and food delivery fee”. If collected from the purchaser and separately stated, the fee is considered to be excluded from the sales price and, therefore, is not part of the sales tax base. The fee is nonrefundable if the items are returned. However, if the sale is cancelled, the fee is to be reversed as well.
The fee is to be remitted to the Minnesota Department of Revenue on a return prescribed by the Commissioner that will follow the same cycle as sales and use tax reporting.
We will continue to follow this topic for emerging clarification or guidance; check back here for updates. As with many other state tax changes, without skilled guidance from sales and use tax professionals, there are many areas for potential missteps and noncompliance in the Minnesota law. Advance understanding and preparation are essential, in addition to ongoing compliance after July 1, 2024. Please reach out to anyone on the Synexus team for help on Minnesota or other state tax issues.
