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To help fund roads, Washington lawmakers charge delivery fee for online purchases • Idaho Capital Sun

Posted on by darion

The delivery fee charged on many retail and online purchases can generate millions of dollars annually to maintain Washington’s city and county roads.

State lawmakers must now decide whether it’s worth pursuing that option as they and local government leaders grapple with rising transportation costs and declining gas tax collections – the main source of money for road work.

“Without a doubt, our cities, counties and our state face transportation challenges with too many potholes and too much traffic,” Sen. Marko Liias, D-Edmonds, said after Tuesday’s meeting of the Joint Committee on Transportation, a bipartisan, bicameral panel. chaired by .

“This is one of many things we are looking at to ensure we have the resources to make the necessary investments,” said Liias, who is also chairman of the Senate Transportation Committee.

Lawmakers reviewed details of a city-funded analysis of the benefits and challenges of imposing a fee on the delivery of taxable retail goods by motor vehicle. A “retail delivery fee” may apply to packages shipped by Amazon or consumer goods shipped by shippers such as UPS.

The report, prepared by consulting and engineering firm CDM Smith, analyzes the potential impact on consumers and businesses and provides estimates of the amount of money that could be generated under various scenarios. It also looked at what happened in Colorado and Minnesota, the only two states that charge a retail delivery fee.

The study is not a policy proposal and is intended only to provide lawmakers with background information, said Andrew McLean of CDM Smith, who presented the findings.

How would a retail delivery fee be charged?

As shown in the study, this is a fairly simple process. The consumer makes a retail purchase online and has it delivered by vehicle. Sellers collect a fee as part of the purchase and pass it on to the state. It is up to parliamentarians what this money will be spent on.

graphic providing an overview of how retail delivery fees work
This graphic from CDM Smith’s June 2024 report provides an overview of how retail delivery fees work. (Courtesy of the Joint Committee on Transportation in Washington)

Colorado, which introduced its fee in 2022, charges 28 cents on each delivery regardless of its value. It generated $75.9 million in its first year for local and state goals and clean transportation priorities, McLean said. Businesses with sales of $500,000 or less are exempt.

Minnesota adopted its fee in 2023, and it will be levied starting in July of this year. The state will only charge a 50-cent fee for deliveries worth $100 or more. Cities and towns will receive an estimated $59 million under this measure. The state exempts companies with annual sales of $1 million or less.

For Washington, consultants created a way to assess potential revenue from fees ranging from a quarter to 75 cents. On Tuesday, McLean shared four that included a 30-cent fee and continued growth in e-commerce spending, which has trended upward in recent years.

If levied on any order of taxable goods and with no exemptions for retailers, it would generate as much as $112 million in 2026 and $160 million by 2030. If the levy is imposed only on deliveries of purchases over $75 and to retailers worth less than $1 million dollars in sales are exempt, potential revenues drop to $49 million in 2026 and $70 million in 2030.

Lawmakers had questions about the administration and collection of the fee. They also made clear that they did not want to be charged for the supply of non-taxable goods such as food and medical products.

Regressive tax?

Rep. Jim Walsh, R-Aberdeen, expressed concern that it would have a disproportionate impact on lower-income people.

“I’m afraid this falls into the category of regressive,” he said. “Has the study considered how to mitigate the regressive nature of a sales tax that will act like a sales tax in many respects?”

McLean said that was not part of the analysis.

A coalition of opponents – including the Association of Washington Business and the Washington Retail Association – raises the issue in comments attached to the report.

“The doorstep tax is a double tax on top of one of the most regressive and highest sales taxes in the country,” they wrote. “While we recognize the need for innovative solutions to address environmental and fiscal challenges, taxing supplies is not the solution.”

Liias said it was “too early to determine” whether the idea would continue in the 2025 legislative session.

“This is the beginning of a conversation,” he said Tuesday. “This is not a done deal.”

The Washington State Standard, like the Idaho Capital Sun, is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. The Washington State Standard maintains editorial independence. If you have any questions, please contact editor Bill Lucia: (email protected). Follow the Washington State Standard on Facebook and X.