Retail Delivery Fees: A Regressive Approach to Modern Commerce

Policymakers must always consider the broader economic impacts that may result when they consider new revenue sources, especially as affordability remains a key concern for consumers. As Virginia Governor Abigail Spanberger stated during a January address to the Commonwealth’s General Assembly, “Affordability is not only a family budget issue; it’s an issue of economic competitiveness.” 

Although well-intentioned, bills that introduce retail delivery fees risk undermining affordability, small-business competitiveness, and neutral tax policy. Retail delivery fee proposals share a common structure: a flat, per-delivery charge applied to retail transactions involving delivery. This fee would be charged in addition to existing sales and use excise taxes. In Virginia, proposals including HB 900 and HB 1179 would impose fees ranging from $0.20 to $0.50 per delivery, with additional surcharges in Northern Virginia localities, regardless of the order’s value or size. 

A flat per-delivery tax is regressive and distortionary by definition. It applies equally to orders regardless of their size or value, taxing transactions rather than profits or net income. This approach penalizes the very commerce models that have helped keep low prices for consumers. A per-delivery tax disproportionately impacts low-income households, especially those who rely on delivery for considerations such as accessibility, access to rural areas, or time-constrained schedules. For families already navigating affordability issues, these fees are not abstract policy choices but tangible impacts that lead to higher prices and fewer options. 

Moreover, such narrowly targeted taxes create costly frictions. Because the tax is a flat per-delivery amount, it becomes prohibitive for small orders, forcing retailers either to increase minimum purchase sizes for free delivery in Virginia or to pass on the tax directly to consumers. At the margin, this could lead to in-store purchases and/or buy online, pick up in-store , displacing home delivery.

A bill like HB 900 fails a cost-benefit analysis:

1. Assume a retail delivery van can hold over 200 packages. 
2. If customers each drive to the store, they often end up driving about 3.8 miles each way (7.6 miles round-trip), which for 200 distinct trips takes 1,520 miles and puts 200 vehicles on the road. 
3. By contrast, a single retail delivery van can deliver those 200 packages in one shift along an optimized route, often driving a distance of as little as 100 miles even in relatively low-density areas. 
4. This means that replacing one retail delivery van with 200 individual customer trips to the store adds 199 vehicles and 1,420 miles driven. 
5. Now consider that the average American household received 167 packages by delivery in 2024, and Northern Virginia Transportation Commission counties and cities had about 0.76 million households in 2024.
6. This implies that Northern Virginia had about 127 million packages delivered to households in 2024.
7. If a $0.20 retail delivery tax in Northern Virginia led to 10% of those home deliveries being replaced by individual customer trips to the store, that would add an incremental 12.7 million vehicle trips and 90 million vehicle miles driven per year. 35% of Amazon orders during Prime Day 2025 were placed for $20 or less, so a new $0.20 retail delivery tax is greater than 1% for over a third of orders, and highly salient.
8. Those 90 million incremental vehicle miles impose congestion externalities of at least $0.10 per mile, as well as accident risk externalities of up to $0.05 per mile, and also directly cost about $0.01 per mile in road wear, for a total of up to $0.16 per mile. That comes to over $14 million in incremental costs just from these categories. 
9. Assume each trip to the store takes 8 minutes each way, for 16 minutes total. Those incremental 12.7 million vehicle trips per year take about 203 million minutes (3.4 million hours). Using Virginia’s current minimum wage of $12.77 per hour as a very conservative estimate of the value of Virginia customers’ time, this amounts to $43 million in lost time for Virginia customers.
10. Thus, the bill would cost at least $57 million per year. 
11. Assume a $0.20 retail delivery tax per trip, with 90% of deliveries continuing and 127 million deliveries, total revenue from the tax is $0.20 * (0.9 * 127 million) = $23 million per year in new revenue.
12. Net loss: $34 million per year.

Such an approach also directly contradicts Governor Spanberger’s stated policy goals. In her January Assembly remarks, Governor Spanberger underscored that when “costs rise, small businesses face higher expenses and workers have less money to spend.” A per-delivery tax disproportionately impacts smaller businesses and marketplace sellers that rely heavily on affordable delivery services to reach customers, especially those outside their immediate geographic area. This dynamic ultimately discourages entrepreneurship, constrains small business growth, and narrows consumer choice. 

Supporters of these retail delivery fees also often point to the real and legitimate need for transportation funding. However, funding transportation infrastructure through transaction-level penalties on a ubiquitous form of commerce that could disproportionately affect low-income households is the wrong approach. Further, traffic congestion, road wear and auto emissions could increase, as having more customers drive to and from a store to pick up a small item is far less efficient than dispatching one truck to deliver those packages along an optimized route. A tax intended to fund transportation projects that unnecessarily and inefficiently increases traffic congestion, road wear, and auto emissions is profoundly counterproductive.

At a time when state and local policymakers should be focused on attracting innovation-driven investment, these policies would send the opposite signal: that efficiency and modern commerce will be taxed for merely existing. 

Retail delivery fee proposals reflect a broader policy approach that treats modern commerce as a convenient target rather than an engine of affordability and competitiveness. Policymakers should carefully consider the broader impacts of taxing efficiency-enhancing and pro-competitive business practices. Affordability and competitiveness are best achieved by pursuing balanced, growth-oriented fiscal and revenue policies.