Aug. 8, 2024
For decades, states have relied on gas taxes to provide much of the money to maintain roads and bridges. But as cars become more fuel efficient, and some Americans switch to electric vehicles, state leaders say the gas tax won't pay the bills for much longer.
At the same time, many cities have seen their streets crowded with delivery trucks from Amazon and other companies, as consumers increasingly opt to have products delivered to their homes. Some state lawmakers think fees on those deliveries could be part of their road-funding solution.
"If you're going to be creating wear and tear on our roads, you should help pay to maintain them," says Colorado state representative Cathy Kipp, who chairs the Energy and Environment Committee.
In July 2022, Colorado became the first state with a retail delivery fee, a charge on all vehicle deliveries to consumers within the state. The fee, which currently stands at 29 cents per delivery, provides funding for highways, bridges, tunnels, electric vehicle charging stations, and projects to reduce air pollution and to electrify vehicle fleets and transit systems. It has brought in more than $160 million.
Colorado leaders have had to simplify the law to help businesses comply with it, but they say it's largely been a success story.
Filling the gas tax shortfall
State law in Colorado limits the ways in which lawmakers can expand taxes. With gas tax revenues dwindling, legislators didn't have an obvious solution to pay for roads. They eventually settled on the retail delivery fee, which is not characterized as a tax.
Initially, the program was a struggle for many businesses, due to a requirement that they detail the fee separately on each receipt. Kipp joined a bipartisan group of lawmakers to amend the program. They rescinded the requirement that businesses itemize the fee on each receipt and allowed companies to cover the fee themselves rather than breaking it out on each order. They also exempted retailers with less than $500,000 in sales in the previous year.
Since the fix was adopted, Kipp says she has stopped hearing complaints about the program.
"This is trying to future-proof our transportation funding. We keep getting performance grades from civil engineers saying we're at a C- or D for our infrastructure. We needed to think about ways to get more revenue in the system."— Minnesota state representative Erin Koegel
Last year, lawmakers in Minnesota enacted their own retail delivery fee, a 50-cent charge on purchases of more than $100. Lawmakers heard from local governments that they were struggling to maintain their roads and badly needed state aid to make up the gap.
"This is trying to future-proof our transportation funding," says state representative Erin Koegel, who sponsored the bill. "We keep getting performance grades from civil engineers saying we're at a C- or D for our infrastructure. We needed to think about ways to get more revenue in the system."
Koegel said the measure was a compromise. She said delivery trucks are increasing congestion in many cities and damaging streets that weren't built to support large vehicles. However, lawmakers ultimately decided to limit the fee to more expensive purchases in order to protect lower-income consumers.
Local governments say they are struggling to maintain their roads, many of which were not built to support delivery vehicles. Photo by krblokhin/iStock Editorial/Getty Images Plus.
Minnesota's fee is projected to generate $59 million in its first fiscal year. The funding will be distributed to cities, counties, and towns to help with their road-funding needs.
Cities and counties in Washington State also have asked for help, and some local leaders have asked state lawmakers to consider a retail delivery fee — or to authorize cities to collect one. State lawmakers commissioned an analysis looking at the potential for such a program. The report found that a fee could generate $45 million to $112 million in revenue in 2026.
"We're now seeing that there's traffic on our system throughout the day, and the growth of these delivery services is a part of that," says state senator Marko Liias, who chairs the Transportation Committee. "We've had a history in transportation of user-based fees. This feels like a mechanism that could help in that regard."
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