ST. PAUL, Minn. -- A coalition of mostly business organizations on Friday raised alarm about a proposed, calling it a regressive tax that is harmful to businesses and consumers.
The 75-cent hike would be on most all deliveries – from a pizza to an Amazon package – except for items like clothing, groceries and prescription drugs exempt from state sales taxes. But opponents warn the surcharge will still apply if a large order has a mix of taxable and nontaxable items.
At a news conference, Hospitality Minnesota, the Minnesota Retailers Association, and others joined forces with the mayor of Brooklyn Park and a local pastor urging state lawmakers to reject the proposal, which is currently part of end-of-session budget negotiations. The provision is included in the transportation spending package from House Democrats as a way to have a sustainable funding mechanism for ailing roads and bridges.
It's not included in the Senate's plan, but lawmakers are meeting in the final weeks to sort out differences.
"We support customers across the Twin Cities with food deliveries each and every day. We also serve many customers who rely on delivery due to their disabilities, illnesses and simply because of their schedule," said David Benowitz, owner of Craft & Crew Hospitality which operates six restaurants in the Twin Cities metro. "How is it equitable that that $30 food delivery is charged the same as a $3,000 piece of furniture?"
Supporters of the proposal say there hasn't been a significant boost to transportation funding since the 35-W bridge collapsed in Minneapolis 15 years ago, so a new approach to revenues is critical at a time when current funding streams
Minnesota has dedicated funding through a gas tax and other motor vehicle fees for transportation, separate from the state's general fund that supports education and other programs.
"This is the future. The gas tax is a declining source of revenue. The delivery fee is an expanding source of revenue," Rep. Frank Hornstein, DFL-Minneapolis,. "This is a huge business that is only going to grow into the future. So this is a transportation bill that really looks ahead, not behind."
The groups on Friday acknowledged the need for more robust funding for transportation, but believe the proposal is misguided.
"[Hornstein] sees this as a creative and innovative way to do it, and we see it as an unpopular and untested way to do it," said Bruce Nustad, president of the Minnesota Retailers Association.
Business owners also said the change will drive up administrative costs for their organization to make sure all fees properly remitted the state at a time when they are still trying to bounce back from the pandemic. Restaurants said deliveries were a lifeline when their storefronts were forced to close.
"I'm here to give a service and when we're adding more and more to the small business owners' plates, it's so much harder to do that," said Mari Harries, owner of River City Eatery in Windom. "I continue to have to pay for more accounting services and administration just to make sure my taxes are being paid right now."
Small businesses that made less than $1 million in the previous calendar would be exempt under the bill.
Hornstein pushed back on the characterization that the fee is regressive that will impact lower-income Minnesotans more acutely than high earners. He also said people are already paying fees for deliveries, pointing to the $9.95 feed to get groceries delivered from Hy-vee.
"When you have to pay $100 to have to repair a flat tire. $150 for front-end alignment, that's regressive. If you're a transit rider waiting for a bus in the cold that doesn't show up because there's been cuts to the transit system, that's regressive," he said.
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