Last week, researchers presented to the Washington State Joint Transportation Committee the results of a study exploring the potential for a statewide retail delivery fee—a fee imposed on orders of taxable retail items delivered by motor vehicles within the state. The study provides information, data, and analysis to policymakers as they consider the development of such a fee.
The study was funded by cities’ portion of state gas tax revenues, at the request of AWC, and was conducted by CDM Smith. The report does not include a policy proposal or recommendations to the Legislature. The study is intended to gather and share information about what a retail delivery fee might look like in Washington. If legislation proposing a retail delivery fee were to be introduced, it would be up to state policymakers to determine its implementation, including what kind of exemptions to include to apply the fee equitably.
As our city readers know, local governments have a transportation funding shortfall. Cities and towns face significant challenges keeping up with street and bridge maintenance. Washington’s cities fund their transportation systems primarily on their own: on average, nearly 70% of city transportation expenditures are from general funds. A lack of state-funded support, decreased funding from fuel tax receipts, increased construction costs, structural budget deficits, and competing priorities all negatively impact local governments’ ability to fund basic transportation. As a result, local governments must identify new and sustainable transportation revenue sources.
The state, like many others across the country, is also struggling to keep up with basic transportation maintenance due to the widening gap between available funding and the needs of the statewide infrastructure system. Nationally, traditional funding sources like the gas tax continue to decline, exacerbating the funding needs of both state and local transportation systems. Modern consumer demands have created impacts to that system, and an alternative revenue source is needed that links those demands with their impacts to the states roadways.
A retail delivery fee is one such funding source. Two other states, Colorado and Minnesota, have enacted a retail delivery fee. In both states, the retailer or marketplace facilitator that collects the sales tax on the tangible personal property sold and delivered also collects and remits the retail delivery fee. Washington’s study evaluated the policy in these two states to learn from their example.
The purpose of the study was to:
- Determine the annual revenue generation potential of a range of fee amounts;
- Examine options for revenue distributions to state and local governments based upon total deliveries, lane miles, or other factors;
- Estimate total implementation costs, including start-up and ongoing administrative costs; and
- Evaluate the potential impacts to consumers, including consideration of low-income households and vulnerable populations and potential impacts to businesses.
The researchers considered various scenarios for the fee, including exemptions for small businesses and for orders under a $75 threshold. They found that, depending on each scenario, the annual revenue-generating potential of the fee could range from $49 to $112 million in 2026 and $70 to $160 million in 2030.
The final report to the Legislature can be found here.