Taxing Amazon, DoorDash, Uber deliveries gains steam

Following the lead of Colorado, state lawmakers are increasingly eyeing fees and taxes on door-to-door delivery services as a new source of transportation revenue amid eroding gas tax revenues.

In Minnesota, a proposal to impose a 75-cent fee on deliveries has been included in the House transportation budget.

“Some New York City apartments would fit in the size of our potholes,” Rep. Erin Koegel (D), sponsor of the delivery fee bill, said in an interview with Pluribus News. “With gas tax revenue declining, I saw this as an opportunity.”

Koegel has estimated the fee would cost her own household about $200 a year. Deliveries of sales-tax-free items such as groceries and medicine would be exempt from the charge.

A separate 2%-per-ride fee on Uber and Lyft rides has also been floated this year in Minnesota.

In New York, Sen. Andrew Gounardes (D) proposed a 25-cent fee on deliveries to addresses in New York City from e-commerce sites such as Amazon, with the goal of generating revenue for the Brooklyn Queens Expressway and other transportation projects.

“Our streets are clogged, our highways are weakened and our neighborhoods are polluted because of the volume of online deliveries made each day in New York City,” Gounardes said in a statement announcing his proposal.

New Yorkers receive an average of 2.3 million online sales packages each day, according to Gounardes who estimated his proposal could raise $1 billion a year.

Colorado paved the way for delivery-based fees in 2021 when state lawmakers approved a 27-cent charge on food and goods deliveries as part of a transportation funding package. The charge kicked in last year and is expected to bring in more than $1 billion over the first 10 years, presuming it survives a court challenge.

This year, in a course correction, the Colorado Senate passed legislation to retroactively exempt from the fee businesses that earn $500,000 a year or less in retail sales.

“Small businesses bring valuable goods and services to our communities, create good jobs across the state, and contribute to Colorado’s strong economy,” Senate President Steve Fenberg (D) said in a statement. “[This bill] is a win-win for small businesses and consumers alike.”

The growing focus on delivery-based taxes — which are sometimes referred to as “doorstep taxes” — comes as states cast about for fresh sources of transportation funding to replace the gas tax as cars become more efficient or drivers go electric.

E-commerce, food delivery and ride-share networks are all low-hanging fruit as door-to-door delivery services become a firmly rooted feature of the modern economy, especially since the Covid-19 pandemic.

Predictably, the taxes and fees have attracted fierce industry opposition. In Minnesota, a coalition of business groups joined forces to fight the 75-cent delivery fee saying it “will negatively impact all families, as well as place an undue burden on businesses.”

A DoorDash spokesperson said in a statement that it would affect driver earnings and pile on to the effects of inflation. “With families and businesses facing rising costs and record inflation, now is not the time to implement a regressive tax that will hit working people the hardest,” the spokesperson said.

Kouri Marshall, director of state and local government relations with center-left tech industry association Chamber of Progress, also called the delivery fee “regressive” in a letter to Minnesota lawmakers.

“Many families working long hours, students, elderly people, the disabled community, and those living in rural and remote localities depend on affordable and accessible delivery services for prescriptions and other essentials,” the letter said. “Minnesotans cannot afford an extra tax on deliveries during these times of rising inflation, crippled supply chains, and economic uncertainty.”

The Chamber of Progress letter said that the fee would put more cars on the road and drive-up carbon emissions.

“I don’t buy that,” said Koegel, the bill’s sponsor, countering that the fee might actually help cut carbon emissions. “I will bundle my orders more and not be so spontaneous when it comes to my purchases.”

Koegel also said she plans to amend her bill to exempt small businesses, similar to what Colorado lawmakers are doing. 

Under the proposed amendment, food-based businesses such as restaurants would not be subject to the charge unless they exceeded $100,000 in delivery-based sales in a year. For tangible goods retailers the threshold would be $1 million. 

With those changes, the delivery fee is estimated to bring in $177 million a year by 2027. The bulk of the money would flow to state transportation coffers and local governments, but 1% of the proceeds would be dedicated to a food assistance account for homebound individuals.

While Democrats are leading the charge for delivery fees, the issue can also split lawmakers from the same side of the aisle. In a recent tweet, New York Assemblymember Daniel Rosenthal (D) panned his Senate colleague’s proposal.

“New Yorkers rely on delivery services on a daily basis,” Rosenthal wrote. “A regressive tax like this will do more harm than good. This cannot be allowed to gain a foothold. 25 cents may seem insignificant but Albany has a habit of using new taxes such as this as a starting point not a finish line.”

That concern about delivery fees is shared by industry groups that see Colorado, Minnesota and New York as harbingers of an emerging trend that is likely to catch on in additional states in the coming years. 

Sophie Quinton contributed to this report.