‘Doorstep taxes’ rising as cash-low government targets delivery apps

In some states, your Amazon toilet paper order or DoorDashed fried rice might cost a little more. And we hope you don’t notice it. While consumers are used to companies charging sneaky fees, the latest generation of bill increases often come from government taxes at the local or state level.

For example, in recent years Minnesota and Colorado have imposed fees on all deliveries. In Colorado the fee is 28 cents, and in Minnesota it is 50 cents on orders over $100. Some derisively call these fees “doorstep taxes.”

Other states, some solid red, others deep blue, are trying to do the same.

These states include Nebraska, Ohio, Hawaii, Maryland, Mississippi, Nevada, New York and Washington, which are considering proposals that would impose fees ranging from 25 to 75 cents per transaction. Having survived repeal attempts, Colorado’s fee is expected to generate $5 billion in revenue over the next decade.

Covert service, security, “convenience” and other accusations are becoming more common and will become more common, according to Mariano Torras, professor of finance and president of Adelphi University’s Robert B. Willumstad School of Business. This, he argues, occurs “as our once productive economy turns into a rent economy where monopolistic corporations extract money from consumers, because they can.”

But Torras said what surprised him was the move by state and local governments to do the same, which “busted the recent trend.”

“Minnesota and Colorado taking action shows that even corporate monopolists do not have a monopoly on rent extraction,” he said.

He added that the most important thing to understand from a consumer’s perspective is that a “hidden fee” is an additional, albeit disguised, tax imposed by the government.

Other tax experts were not surprised, saying it was a weak outcome for cash-strapped state budgets.

“If you’re a legislator, you’ve learned that the easiest way to fund government is through sales tax or fees,” said Mike Bernard, chief tax officer at tax technology company Vertex.

Bernard says people have consistently opposed high property taxes, and income taxes vary widely, so there’s only one primary legislative tool left: the fee or tax. But lawmakers also see the broad societal shift toward a delivery economy and see it as a legitimate tool.

“From a policy standpoint, states feel like if a person isn’t going to get in their car and drive to the store and pay sales tax on gas, if that person doesn’t do that and builds a UPS truck instead, we still need money to pay for the infrastructure,” Bernard said.

Other fees increasingly imposed by governments include recycling fees for electronic products.

“Most jurisdictions will charge you a fee because at some point you’ll try to recycle your cell phone,” Bernard said, leaving a swamp of electronics to be thrown away, “and it’s easier to collect the fee up front.”

Municipalities have the authority to collect fees and other charges under numerous state statutes that authorize them to perform certain regulatory functions or provide certain public services and improvements, such as roads, parks, or emergency services such as 911.

‘Neighborhood fees’ at airports are also increasing

Port authorities are also increasingly charging more for items purchased at the airport. Airport discounts have long been subject to sticker shock, so the newest fees are an extension of that.

“When you go to Starbucks at the airport, you may find that airport officials charge an extra quarter,” Bernard said, adding that this is known in industry parlance as a “quarter fee.”

“You’re in their neighborhood, so they’ll charge extra,” Bernard says.

For example, Philadelphia International Airport began adding a 3% surcharge to all concessions last year.

By 2019, when Bernard started at Vertex, which tracks such fees, 400 such fees were being imposed by various organizations across the United States. Today, this number is 1,400, and the company expects this number to continue to increase.

“People aren’t going to back down, and the states know that,” says Bernard, noting that the average person wants their stuff fast and fussing about the extra fee isn’t worth it, and in many cases people don’t even realize it unless they review their receipts.

But some experts see these infrastructure potions as bad financial medicine.

“Hidden taxes like retail delivery fees are a short-term patch, not a long-term solution,” said Arjun Mahadevan, CEO of tax preparation company Doola. “While they may help states close budget shortfalls, they also increase friction and erode consumer confidence.”

Especially for entrepreneurs and small businesses, these hidden fees create uncertainty in pricing and customer experience.

“States can continue down this path as consumers adjust to wages in other industries, but this risks disproportionately impacting the businesses that drive innovation and growth,” Mahadevan said.

Big tech is stepping back

Amazon, Door Indicator, AlphabetGrubhub and Instacart It is among 34 corporate partners of the Chamber for Progress, a tech industry policy coalition that opposes a doorstep tax. Hope Ledford, the chamber’s director of civic innovation policy, says taxes are regressive and states have other ways to raise revenue.

“When we first saw delivery taxes, it was clear who was hurting the most: Families living paycheck to paycheck. Many families rely on delivery, and these families are already operating on thin margins,” Ledford said. “We see that these taxes make life more expensive… We see this as an essential service.”

He said many elderly or sick residents rely on delivery services for medicine or food if they live in a food desert.

Despite these concerns, research shows that higher income consumers and younger consumers are more likely to shop onlineI do it for convenience. Research from Capital One It shows that households earning $50,000 or less make up the smallest share of online shoppers.

But a spokesperson for the tech trade group made another point: “Delivery taxes are not a real solution and are ineffective, a Band-Aid on the state’s wounded budget. They do not come close to solving the problems they are trying to solve,” he said.

But lawmakers see the fees as a hedge against a steady shift to electric vehicles and declines in gas taxes that help fund major projects, and as a way to tame the ever-expanding delivery ecosystem.

Robert Carroll, a New York state assemblyman who represents Brooklyn, said $3 wouldn’t break the bank and such a fee could be a boon to the state’s infrastructure budget, given research showing wealthier consumers are more likely to shop online. It has been advocating for several years a $3 delivery fee for most items delivered to New York City residents, with exemptions for food, medicine and baby formula.

“We wanted this to be a high enough fee to change behavior. We’re trying to get people to be more thoughtful consumers and get packages delivered together,” Carroll said.

With more than two million packages delivered a day in New York, the fee would be a boon and would largely bypass the city’s poorest residents, Carroll said.

“Unlimited, unregulated online deliveries and fulfillment centers that lead to 24-hour truck traffic and waste are not sustainable. We want to be sustainable,” Carroll said.

He first proposed the idea in 2019 but hopes now is the time to take charge.

New York City’s leading mayoral candidate, Zohran Mamdani, has proposed making bus transportation free; That could be funded through this tax, Carroll said.

“This will cost $600 million a year. Our bill will cover that,” Carroll said, but he also emphasized that there have been no formal discussions with the Mamdani campaign team about his proposal.

The Mamdani campaign did not respond to a request for comment by press time.