Guest contributor |
State legislatures across the USA are looking for ways to strengthen their coffers without raising current tax rates, now that they aren’t experiencing the same windfalls as in the immediate impacts of the pandemic. One of those methods is to impose new taxes and charges such as retail delivery fees, which are becoming more commonplace both to produce additional revenue growth and for environmental reasons. Governments and revenue authorities have closely watched the meteoric rise of delivery services and taken steps to impose additional fees and capture funds from these new revenue channels.
In 2022, Colorado imposed a retail delivery fee on taxable tangible goods delivered by motor vehicles to consumers in the state. The fee impacts many businesses, including brick-and-mortar retailers, florists, grocery stores, restaurants, online sellers and marketplaces. A delivery fee will also come into effect in July 2024 that will apply to most retail sales that are over $100 and are subject to sales tax in Minnesota.
These fees can drive additional revenue for states, but they can also create several pain points for businesses, including requiring them to collect the retail delivery fee directly from customers and to separately state the fee on invoices. In addition, the fee is subject to local sales tax in some jurisdictions but not others.
How states and localities define their requirements will vary, like most taxes and fees implemented by government. As more states and localities enter the fray and attempt to impose delivery fees, retailers will need systems in place to ensure they can capture any applicable retail delivery fees, based on the rules and rates set by jurisdictions.
For retailers currently offering delivery services or those looking to expand their offerings, it is essential to understand existing requirements and those that may materialise in the future to ensure they not only stay compliant but also avoid disruptions to customer experience.
Scott Peterson is vice president of tax policy and government relations for Avalara
This article was originally published in the Spring 2024 issue of Technology Record. To get future issues delivered directly to your inbox, sign up for a free subscription.