House committee hears bill to repeal 50¢ retail delivery fee, debate centers on transportation funding and tax shifts

House File 5, introduced by Representative Jim Joy, would repeal Minnesota’s 50¢ retail delivery fee and make several related changes to transportation funding and taxes, and the House Transportation Finance and Policy Committee voted to refer the bill to the Taxes Committee.

The bill’s author, Representative Jim Joy, told the committee, “This bill is making Minnesota affordable.” Joy said the measure would pursue a full Social Security subtraction at the state level, remove an automatic inflator on the gas tax and other indexed provisions, and repeal the retail delivery fee. He argued those changes would reduce costs for residents and improve competitiveness with neighboring states.

The proposal would also shift certain revenues and allocations within the state transportation funding architecture. Committee fiscal staff and Department of Revenue materials in the packet show the bill would move the motor vehicle rental tax into the Transportation Advancement Account (TAA), eliminate the retail delivery fee as a TAA revenue source, and change the split of some metro sales-tax receipts between the Metropolitan Council and metro counties.

Why it matters: local governments and transportation advocates rely on the TAA and related streams for street and road work; any change to the indexing or revenue sources could alter predictable funding for cities, townships and county roads. League of Minnesota Cities and Metro Cities speakers urged caution in changing revenue streams enacted in 2023 and asked for more time to see how those revenues stabilize.

Fiscal overview and revenue projections

House fiscal staff and a Department of Revenue document (MB-019) presented the bill’s effects. Fiscal materials described general fund impacts from the Social Security subtraction and interactions with tribal and casino payments, and detailed impacts across the trunk highway fund, county state-aid, municipal state-aid, township road and bridge accounts and turnbacks. The packet also showed a proposed reallocation between the Metropolitan Council and metro counties.

On the retail delivery fee specifically, committee fiscal staff summarized updated receipts versus earlier forecasts: the fee was expected at enactment to raise about $59 million in fiscal 2025 but current estimates are about $35 million; FY2026 forecasts fell from about $64.8 million to $45 million; and FY2027 estimates fell from about $65.3 million to $55 million. The Department of Revenue and fiscal analysts attributed some of those differences to taxpayer behavior and timing of receipts.

Stakeholder testimony: administrative costs and distributional concerns

Several business and local-government witnesses urged repeal, saying the fee imposes administrative burdens and harms small businesses and some consumers. Steve Bartle, director of government relations for the Minnesota Grocers Association, said the association “strongly support[s] the provisions in House File 5 that would repeal the highest consumer delivery fee in the nation,” and told the committee that updating point-of-sale systems and administering the fee can cost “thousands of dollars per location.”

Dave Wager, executive director of the Minnesota Propane Association, provided sample data from three companies: “The 3 combined companies made 48,417 deliveries and collected 2,336 retail delivery fees,” he said, totaling $1,168 submitted to the state in that sample period; Wager added that one company reported $25,100 in trackable labor costs to implement the fee. He and other witnesses said many deliveries are exempt from the fee (for example, below the $100 threshold or for tax-exempt product categories), which reduces revenue while leaving administrative costs on sellers.

Retail and small-business advocates described compliance complexity. Bruce Neustin of the Minnesota Retailers Association told the committee the fee’s product categories and exemptions do not align with existing sales-tax classifications, causing many small retailers to calculate collections by hand and, in some cases, effectively absorb the cost.

Local-government groups: stability and ‘‘held harmless’’ requests

City and township associations emphasized a need for predictable, stable funding rather than a specific revenue source. Anne Finn of the League of Minnesota Cities said the League supported creation of the Transportation Advancement Account in 2023 and “oppose[d] repealing indexing that was enacted less than 2 years ago,” urging legislators to allow the 2023 framework more time. Cap O’Rourke, executive director of the Minnesota Association of Small Cities, said small cities had been promised about $23 million across a biennium but actual receipts and the timing of payments have underdelivered, leaving small cities short of expectations.

Township testimony noted the scale of local needs: Steve Penske of the Minnesota Association of Townships said townships spend about $230 million annually on 55,000 miles of township roads—roughly $4,200 per mile per year—and that reliable state funding is important because townships have limited local revenue options.

Policy concerns raised by witnesses and members

Speakers and members raised multiple policy points: whether the delivery fee has met revenue expectations (fiscal staff showed current receipts below original projections), the regressive effects on lower-income or mobility-limited consumers who rely on delivery, compliance and merchant-processing costs that reduce net remittances, and competitive effects for retailers near lower-tax borders. Some members and witnesses also linked broader transportation-funding issues—gas tax indexing, electric vehicle impacts on fuel-tax revenues, and motor vehicle registration fees—to the need for stable revenue sources.

Committee action

Representative Jim Joy moved that House File 5 be referred to the Taxes Committee. The committee approved the referral by voice vote; no roll-call tally was taken in the transcript and no second was recorded on the record. The motion carried and the bill will proceed to the House Taxes Committee for further consideration.

What’s next

With the referral, House File 5 moves to the Taxes Committee, where members will weigh the revenue shifts and the specific mechanics of repealing the retail delivery fee alongside the bill’s other tax changes. Witnesses asked for continued stakeholder engagement and for legislators to consider hold-harmless provisions for small cities, townships and other local recipients if revenue sources are changed.

Ending note: testimony materials and fiscal tables submitted to the committee (Department of Revenue MB-019 and spreadsheets from House fiscal staff) accompany the bill record and include line-item estimates and allocation formulas referenced during the hearing.