Fees Add Up…to More Indirect Tax Compliance Complexity

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If you’ve worked on an indirect tax team in the past few years, chances are you’re familiar with environmental “green” fees. Utilized on an expanding collection of products, – including plastic shopping bags, batteries (both single-use and rechargeable), mattresses and box springs and a range of packaging materials – these fees are appearing with greater frequency. So, too, are other types of fees, including those on retail deliveries.  
While these fees are not sales and use taxes per se, they pose similar challenges and complexities to indirect tax teams.  
Minnesota recently initiated a new retail delivery fee that will take effect July 2024. Under the requirement, retailers and marketplace providers (those located in Minnesota as well as any other state) making deliveries of tangible personal property to Minnesota customers, will be subject to a $0.50 fee on each transaction that amounts to $100 or more. The new rule exempts certain types of retail deliveries (e.g., those resulting from the sale of prepared food, prescription drugs, medical devises and more) and certain small businesses and smaller marketplace providers from being subject to the fee.  
That being said, Minnesota’s new retail delivery fee requires a closer look and consideration. According to EY’s rundown of the new fee, “retailers and marketplace providers making deliveries of tangible personal property to customers located in Minnesota will need to evaluate whether to directly pay the fee or to collect it from purchasers. While the law allows retailers to simply pay the fee, the fact remains that the option will either become a new cost of doing business or require retailers to raise their prices to offset the fee.” 
Minnesota is not alone in this situation. Last July, the state of Colorado imposed a retail delivery fee on all deliveries by a motor vehicle to a location within the state with at least one item of tangible personal property subject to state sales or use tax. This July, new Colorado legislation takes effect that will exempt certain retailers — those whose retail sales of tangible personal property, services or commodities in the previous year have totaled $500,000 or less. Take a look at the seven types of retail delivery fees – each with its own rate – on the Colorado Department of Revenue’s site to get a feel for the additional consideration and time these types of fee requirements create for tax groups. 
These fees add complexity for tax groups who are already contending with the higher-than-normal volume of sales and use tax rate changes (and new taxes) that have come online through the first half of 2023. To read more about this, visit my earlier post on Vertex’s Mid-Year Rates and Rules Report.  

Blog Author

Michael J. Bernard, Chief Tax Officer – Transaction Tax at Vertex Inc. Vertex's Chief Tax Office (CTO) provides insight regarding the impact of tax regulations, policy, enforcement, and emerging technology trends on global tax department operations.

Michael J. Bernard

Vice President of Tax Content and Chief Tax Officer

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Michael Bernard is the Chief Tax Officer of Transaction Tax. In his role, he provides insight and thought leadership around tax department operations, U.S. indirect tax, tax risk management, and tax policy, as well as emerging tax trends. He is an executive-level tax attorney with a diverse portfolio of experience in corporate tax, administration, and finance, including a substantive knowledge of U.S. and international tax laws.

Prior to joining Vertex, Michael was in various tax leadership roles at Microsoft Corporation for 28 years, the most recent being Senior Director – Tax Counsel. Michael led teams in the following functional areas: direct and indirect tax controversy, sales and use, business license, property, tax IT, SOX, and telecommunications. He also co-led a corporate taxpayer advocacy group with the Washington Department of Revenue and was a Director on the Board of the Washington Research Council. Michael has also testified before administrative and lawmakers at both the federal and state level.

Michael earned both a J.D. and a Bachelor of Science in Business Administration from Creighton University. He is a part-time lecturer of Law in the LLM program at the University of Washington School of Law. Michael also served on the board of directors, executive committee, and chaired committees for The Tax Executives Institute (TEI) for nearly 25 years.

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