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Colorado and Minnesota are taxing Amazon deliveries to fund road maintenance as gas tax revenues plunge due to the proliferation of electric and fuel-efficient vehicles.

Public policy experts say other states could follow suit as policymakers seek new ways to replenish funds.

Minnesota’s retail delivery fee of 50 cents for purchases over $100 took effect July 1. Proponents expect it to raise $59 million in fiscal 2025, $64.8 million in fiscal 2026 and $65.3 million in fiscal 2027.



“With the emergence of EV’s we will likely see a decline in the amount of revenue generated from the gasoline tax,” said state Rep. Erin Koegel, a Democrat who sponsored the bill. “The uptick in online orders means more wear and tear on the roads and provided us with an opportunity to generate revenue that will help keep our roads safe.”

The fee exempts small businesses and affects only companies that have more than $1 million in total sales or $100,000 in online sales. Ms. Koegel said it supplements rather than replaces Minnesota’s gas tax and sales tax, which the state already charges Amazon and other retailers to benefit the state’s general fund. 

“We do not see the gas tax disappearing or becoming a non-factor in the near future,” she added in an email. “However, with our goals of reaching carbon neutrality and the emergence of EV’s, it is important that we think of new ways to generate revenue to help keep our roads safe.”

Colorado enacted the first retail delivery fee in 2022, imposing a charge on all motor vehicle deliveries and requiring consumers to pay directly. That fee, now 29 cents per delivery, has brought in more than $160 million for projects such as bridge repair, EV charging stations and air pollution reduction.

Legislation to implement similar fees is pending in New York, Illinois and Maryland. 

On the West Coast, an analysis that Washington state lawmakers commissioned last month found that a retail delivery fee could net between $45 million and $112 million in 2026, depending on the companies they include. 

State Sen. Marko Liias, a Democrat who chairs the Transportation Committee, said his support for imposing a fee depends “on the details of the plan.”

“Whenever we look at tax reform, one of the key considerations is ensuring there isn’t an overburden on the entity paying that tax,” Mr. Liias said in an email. “Amazon cleared $30 billion in profit last year, so they certainly pass that test. They also use Washington’s roads, highways and bridges as much if not more than any other business in our state.”

Critics say the fees create a “double tax” on working-class consumers who already are struggling with higher sales and gas taxes and who rely heavily on online shopping to save a few dollars in commuting costs. 

“Consumers don’t want an additional tax on online goods, especially in this inflationary economy,” said Chris MacKenzie, senior director of communications for the Chamber of Progress, a center-left tech industry advocacy group that opposes the bills. “Even with sellers paying it in Minnesota, the tax will get passed down to working-class and low-income families as businesses raise prices to adjust.”

Targeting retail

Although the fees affect a range of online retailers from Target to Best Buy, Amazon is by far the largest company impacted: It controlled an industry-high 37.6% of e-commerce sales as of May. The retail giant has made no public statement on the delivery fees. 

“Amazon complies with all tax laws and regulations,” Amazon spokesperson Julia Lawless said in an email.

Mr. MacKenzie, a former spokesperson for federal lawmakers in the Democratic Party’s conservative wing, pointed to a $5 fee Seattle imposed in January on Doordash and Uber Eats deliveries. He noted that the companies raised their prices in response, prompting frustrated customers to delete the apps.

In the case of Amazon, which advertises the same prices in every state, delivery fees can be added during checkout on top of the sales tax that shoppers already pay for many orders, he said.

According to outside analysts, the revenues raised from retail delivery fees will cover just a fraction of the $87 billion in transportation revenues that states are estimated to lose by 2050 as more drivers go green and emerging car models use less gasoline.

”The reason is that the tax base is simply too small,” said Adam Hoffer, director of excise tax policy at the Tax Foundation. “The revenues from these delivery fees aren’t insignificant, but there are far better policy tools available to address the funding needs for roads.”

Taxes and fees

To date, states have enacted a patchwork of policies to address the transportation revenue crisis. They include:

• The National Conference of State Legislatures reports that 33 states and the District of Columbia have enacted fixed gas tax hikes or indexed rates to surging road construction costs since 2013.

California, Virginia, Colorado, Missouri, New Jersey, Minnesota and Utah have made these changes since COVID-19 broke out in 2020.

• In Virginia, which raised its gas tax to 26.2 cents a gallon last year, lawmakers enacted a Highway Use Fee and Mileage Choice program in 2020. It allows owners of fuel-efficient and electric cars who drive fewer than 11,600 miles per year to pay less than those who drive more.

• Several states have levied special registration fees on EV owners. Consumer Reports, which has criticized those fees, estimates that existing and proposed EV taxes will raise just 0.3% of state highway funding next year if EV ownership swells to 11% of the new car market, as expected. 

“As a general rule, those that use the transportation system should pay for it, and the amount paid should be proportional both to their ability to pay and the impact that they have on the system and others,” said Chris Harto, senior energy policy analyst at Consumer Reports, which has flagged Amazon’s warehouses for hurting low-income minority neighborhoods. 

Fuel taxes made up 38.4% of state transportation budgets in 2022, down from 41.1% in 2018, according to the National Association of State Budget Officers. Other sources included highway tolls, vehicle registration fees and transfers from general funds.

The U.S. Energy Information Administration reported in January that state gas taxes averaged 32.44 cents per gallon while the federal gas tax, which has not changed since 1993, remained fixed at 18.4 cents.

A study from the libertarian Reason Foundation estimates that state gas tax revenues will fall between 30% and 50% by 2050, depending on EV sales.

”Road funding gimmicks such as the Amazon tax burn political capital needed to address the long-term fiscal stability of our highway network,” said Marc Scribner, a senior transportation policy analyst at the libertarian Reason Foundation. “The revenue they generate is unpredictable, as consumers may adjust their shopping preferences based on any additional tax they may face.”

Alternative ideas

Reason is one of several libertarian and conservative groups that have advocated replacing existing gas taxes, EV fees and delivery charges with per-mileage road use fees.

According to an analysis by the Tax Foundation, a road charge of about 6 cents per mile driven could replace all existing gas taxes, registration fees and tolls. Heavier vehicles that do more damage to roads, including trucks and EVs, would pay higher rates.

Conservatives have argued that raising gas taxes forces the drivers of gas-powered cars to subsidize the Biden administration’s push for EVs, which they blame for adding to highway repair costs.

The Biden administration has allocated billions of dollars to finance EV production and charging stations as part of a climate-friendly push to reduce the nation’s reliance on fossil fuels.

Bonner Cohen, a senior fellow at the right-leaning National Center for Public Policy Research, said recent rule changes proposed by the Biden administration would force Amazon delivery trucks to go electric, increasing wear and tear on roadways.

“Battery-powered trucks are heavier and carry less freight than their diesel-powered counterparts,” Mr. Cohen said. “Retail delivery fees cannot be assessed in isolation; they are part of the larger matrix of government-driven transition to ‘clean energy,’ which is turning out to be far messier than its proponents realized.”   

Nick Stark of the American Legislative Exchange Council, a network of conservative state lawmakers and investors, said a proliferation of state retail delivery fees could create a similar mess.

”As businesses factor these tax increases into their expenses, they are often forced to raise prices, and it becomes more difficult to hire new employees or raise wages,” Mr. Stark said. “At the end of the day, businesses don’t pay taxes, people pay taxes.”

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