Politics and Government

Minnesota’s new delivery fee riles retailers

Person holds package by mailbox
Rep. Erin Koegel, DFL-Spring Lake Park, says a delivery surcharge for road maintenance makes sense as she stands outside her Spring Lake Park home on May 31.
Mark Zdechlik | MPR News

Rep. Erin Koegel often shops without leaving her home in Spring Lake Park.

“I order a lot of deliveries,” she said, noting that her latest Amazon purchase had arrived in her mailbox just that morning. “I had to get some shorts for the summer.”

A year from now, some of her deliveries will cost a little more, and she’s OK with that.

Koegel is the DFL House author of a new Minnesota law that will impose a 50-cent fee on most delivery purchases over $100 starting July 1, 2024.

The fee is expected to raise more than $60 million a year, which will go directly to local governments to help pay for road maintenance.

“We're changing the way we're using our roads. We're changing the way that we're purchasing products,” said Koegel.  “And so, we just really have a system that's in dire need of some TLC.”

The delivery fee would help compensate for the loss of gas tax revenue, said Koegel, as more motorists switch from gas-powered vehicles to electric cars and trucks. And it would help pay for the extra wear and tear on roads she said is caused by a surge in delivery traffic as consumers order more goods delivered directly to their doorsteps.

“As we we're sitting here, I saw a big delivery truck go by. And being on a fairly busy road, I see at least three or four Amazon trucks go by my house every day,” she said.

There are numerous exceptions to the fee. It will not apply to medical supplies, food or merchandise for infants. Businesses with less than $1 million in annual sales will also be exempt.

Initial proposals had few exemptions and cost more per delivery. But the legislation was scaled back making it similar to a fee that Colorado residents began paying last summer that averages around 30 cents per delivery.

The state’s new fee is unpopular with many businesses, said Bruce Nustad, president of the Minnesota Retailers Association, and it may have the unintended effect of increasing road traffic. He predicts consumers will change their shopping habits when they realize that buying items separately could save them money.

“If you want to avoid the fee, instead of buying two $75 pairs of shoes, you're going to place two separate orders for $75," he said.

Person in suit looks off to the side
Bruce Nustad, president of the Minnesota Retailers Association says businesses small and large oppose Minnesota's new delivery fee, and he predicts it will not sit well with consumers either.
Mark Zdechlik | MPR News

Amazon declined comment on Minnesota's delivery fee and referred MPR News to an organization called the “Chamber of Progress.” Amazon helps fund the group, which has worked to fight off similar proposals in other states.

Chamber of Progress CEO Adam Kovacevich said delivery surcharges are bad policy because they disproportionately hurt low-income people.

“They are regressive, and really hurt people who depend on delivery of goods and services to their doorstep,” Kovacevich said. “Delivery is not a luxury. It's a necessity for many people.”

Advocates say the delivery fee will save everyone money in the long run.

“I'm a big believer in you get what you pay for,” said Koegel, pointing to car repairs that some motorists face as the result of poorly maintained roads. “If we make wise investments now, we'll be paying less in the future.”

While she is happy lawmakers approved the delivery fee, Koegel doesn’t agree with everything in the new law and thinks it should be improved.

She supports a lower fee that everyone pays without exemptions for some goods and services. The approach would generate more money overall for road maintenance, she said, and it would create an incentive to bundle purchases — reducing traffic, greenhouse gas emissions and wear and tear on Minnesota roads.