Colorado, Minnesota & a Chicago Proposal.
A brief comparison of three retail delivery fee designs and their performance to date — Colorado, Minnesota, and a Chicago proposal.
The three models illustrate a tradeoff between rate, scope, and political resistance. Colorado kept the rate low and the scope broad. Minnesota raised the rate but narrowed the scope. The Chicago proposal pushes the rate and narrows the scope further than either state.
A brief comparison of three retail delivery fee designs and their performance to date.
Estimated net annual revenue, depending on the fee schedule chosen — from a flat $1.25 per transaction up to a tiered flat fee based on the value of the goods delivered. Built on ~108M billable Chicago transactions per year.
Colorado, Minnesota, and a Chicago proposal
Three jurisdictions have either implemented or proposed a retail delivery fee in the United States – Colorado, Minnesota, and this Chicago proposal. Each takes a meaningfully different approach to scope, exemptions, and revenue distribution, and the differences matter both for revenue projections and for political viability.
- Colorado (effective July 2022): the first US retail delivery fee, with a low per-transaction rate that applies to nearly every taxable retail delivery.
- Minnesota (effective July 2024): a higher per-transaction rate that only applies above a $100 order threshold and carves out broader product categories.
- Chicago (a variation proposed by Ald. Villegas November 2025, modified): a per-package fee at a substantially higher rate, targeted at parcel deliveries with category and demographic exemptions.
The three models illustrate a tradeoff between rate, scope, and political resistance. Colorado kept the rate low and the scope broad. Minnesota raised the rate but narrowed the scope. The Chicago proposal pushes the rate and narrows the scope further than either state.
Performance to date
Colorado generated $75.9 million in its first year (FY 2022–23) and $218.2 million cumulatively through early 2025, despite a retroactive small-business carve-out (SB23-143) added in May 2023. The fee declined from $0.29 to $0.28 effective July 2025 due to enterprise-fund rate adjustments. A 2025 repeal effort (HB 1144) was killed in committee, in part because the state’s budget office estimated repeal would cost $111.7 million in FY 2025–26 alone.
Minnesota is too new for confirmed actuals. The state’s pre-implementation projection was $59 million in the first year. Multiple repeal bills (SF 1058, HF 5, HF 183) were introduced in early 2025 but did not advance. The legislature also added new exemptions for fuel products and road construction materials effective July 2025, narrowing the base.
Chicago has not been implemented. The ordinance was introduced November 14, 2025, but was not included in the ‘26 budget. Villegas’s own revenue projection is $137.5–$275 million annually; the Mayor’s office has publicly stated it believes the fee requires state authorization to be legally valid. This report will further build out a Chicago proposal.
Revenue by fee schedule
Our recommendation is to employ a tiered base fee based on the value of what is being delivered. The scenarios below apply each candidate schedule to the same per-transaction base. Of the four tier-based scenarios, Tier D has the lowest impact on the smallest-value deliveries, while it likely has the most challenging implementation.
| Schedule | Avg fee / txn | Gross, $M | Net, $M | vs Flat $1.25 |
|---|---|---|---|---|
| Flat $1.25 (Nov proposal, per txn) | $1.25 | $135 | $118 | — |
| Flat $1.50 | $1.50 | $162 | $142 | +$24M |
| Tiered A — $0.50 / $1.50 / $3 | $1.69 | $183 | $160 | +$42M |
| Tiered B — $0.75 / $2 / $4 | $2.27 | $245 | $214 | +$97M |
| Tiered C — $0.50 / $1 / $2 / $4 | $1.55 | $167 | $146 | +$28M |
| Tiered D — $0.25 / $1 / $2 / $3.50 / $5 | $1.86 | $201 | $176 | +$58M |
| MN-style ($1.50 over $100) | $0.40 | $43 | $37 | −$81M |
The interactive explorer below lets you toggle each of these schedules and watch the revenue, the value-tier mix, and the volume sensitivity update against the underlying model.
Comparison by jurisdiction
The final column — Chicago/IPG — is the per-transaction model this report builds out.
| Dimension | Colorado | Minnesota | Chicago / Villegas | Chicago / IPG |
|---|---|---|---|---|
| Status | Active (Jul ’22) | Active (Jul ’24) | Proposed (Nov ’25) | In construction |
| Geography | Statewide | Statewide | Chicago | Chicago |
| Rate | $0.28 / txn (FY26) | $0.50 / txn | $1.25 / package | Tiered by delivery value |
| Unit of charge | Per transaction | Per transaction | Per package | Per transaction |
| Order threshold | None | Only if order ≥ $100 | None | None |
| Small-business exemption | <$500K CO sales | <$1M MN sales | No | <$1M IL sales |
| Product exemptions | None at product level | Drugs, medical, groceries, prepared food, baby products, fuel, construction | Drugs, medical, hygiene, groceries, prepared food | Same as Villegas, plus explicit baby products |
| Demographic exemption | None | None | None | Mobility challenges |
| Inflation adjustment | Yes, capped | No | No | Yes, capped |
| Legal incidence | Retailer (can pass or absorb) | Retailer (can pass or absorb) | Purchaser; retailer remits | Purchaser; retailer remits |
| Year-1 revenue | $75.9M actual | $59M projected | $137.5–$275M (Villegas) | $160–$215M |
| Revenue use | Transportation enterprise funds | Cities & towns, transportation | General fund / structural balance | General fund / structural balance |
Colorado is the simplest design and the broadest base. Any retail delivery containing any taxable item triggers the fee — there’s no order threshold and no product-category exemptions beyond what’s already exempt from state sales tax. This makes it administratively the cleanest of the three, but politically the most exposed: it hits every consumer including those buying inexpensive items, which is why the small-business carve-out was added retroactively. The framing as a “fee” rather than a “tax” was deliberate — Colorado constitutionally requires voter approval for new taxes, but not for fees, which is how the legislature was able to enact it without a public vote. This is paid by the retailer but can be passed on to the consumer.
Minnesota’s design is a direct response to the Colorado pushback. The $100 minimum order threshold removes the regressive sting on small purchases, the $1M small-business threshold is twice Colorado’s, and the broader product exemptions (food, medical, baby products) blunt the political opposition that affordability advocates raised against Colorado. The tradeoff is complexity: retailers must determine on a per-order basis whether the threshold is met, with multiple exclusion categories that are not the same as the state’s existing sales-tax-exempt list (e.g., baby swings are exempt from the fee but not from sales tax). This is paid by the retailer but can be passed on to the consumer.
Villegas’ is structurally different in three important ways:
- Per-package, not per-transaction. A consumer who orders three items from Amazon that ship in three boxes pays $3.75, not $1.25. This changes the incentive structure — consumers and retailers are pushed toward consolidation — and pushes per-order revenue substantially higher than either state model.
- Much higher rate than other cities. At $1.25, the Chicago fee is more than 4x Colorado’s rate and 2.5x Minnesota’s. On a typical $52 Amazon order, that’s a ~2.4% effective rate; on a smaller order it’s much higher.
- No order threshold. Unlike Minnesota, the fee applies to a $15 phone case the same as it does to a $500 television.
Why we propose per-transaction, not per-package
A per-package fee creates a fundamental fairness problem: the consumer has no control over how many packages a retailer chooses to use. A single Amazon order may arrive in one box or three, depending entirely on Amazon’s logistics decisions — but under the November proposal, the consumer pays $1.25 per box. This:
- Penalizes consumers for retailer behavior they can’t influence. A shopper who orders three items pays $3.75 if Amazon splits the shipment, $1.25 if it consolidates — same items, same effort, different fee.
- Differs from both established U.S. precedents. Colorado and Minnesota both impose per-transaction fees. Chicago doing something different — with no track record — invites both legal and political challenge.
There are several workable alternatives: a fee per planned delivery instance; a flat per-transaction fee similar to Minnesota or Colorado; or — our recommendation — a per-transaction tiered flat fee based on the value of the goods in the transaction.
Our proposal
Both pathways below hold the same category exemptions as the Villegas ordinance, but add an explicit inclusion of baby products. Where this proposal differs is that it adds a demographic exemption for people with mobility challenges, and a small-business exemption for businesses with less than $1M in local sales, similar to Minnesota. The mobility exemption is unique among all three models and would be operationally complex — it requires identifying eligible purchasers rather than exempt products — but it is possible to operationalize.
Pathway 1 — Flat fee
Like the November ordinance, a fee of $1.25 — but charged per transaction rather than per package, for the fairness reasons above. Simplest to administer; closest to the original proposal.
Pathway 2 — Tiered flat fee Recommended
A tiered base fee based on the value of what is being delivered. We would normally recommend a rate-based structure, but due to the IL constitution, a rate-based structure on a mechanism like this would fail to pass the ‘sales tax’ test — wherein the courts would likely view it as a version of a sales tax.
The proposed value-based fee structure would generate $160M–$215M, inclusive of the given exceptions outlined. Of the four tier-based scenarios, Tier D has the lowest impact on the smallest-value deliveries, while it likely has the most challenging implementation. There is one additional exemption that should be considered — whether or not the parcel delivery fee is waived if the delivery is done on a light-weight, non-combustion vehicle (like a cargo bike) — given that mitigates the externalities this attempts to tax.
Transaction volume methodology
Every revenue figure rests on the number of billable delivery transactions Chicago generates per year. The model estimates this top-down, anchored to Amazon’s February 2025 disclosure that Prime members placed nearly 100 orders in 2024, then scales to Chicago households and applies category and behavioral adjustments.
The top-down method — our primary approach — builds up an average of ~104 e-commerce orders per U.S. household per year (61.6 from Amazon, ~42 from everyone else), scales by 1.1M Chicago households and a 1.12 urban-density adjustment, then removes 15.5% for exemptions. That yields ~108M billable transactions. Two independent cross-checks — a Colorado per-capita benchmark and a bottom-up parcels-per-order calculation — land at ~119M and ~104M respectively. All three converge within 14%.
Two further adjustments convert gross transactions to net revenue: an 8% behavioral response (consumers shifting to in-store pickup or bundling orders, since a $1.25+ fee is meaningful where Colorado’s $0.27 was not) and a 5% compliance leakage allowance for small remote sellers and year-one ramp issues. Together these produce a net revenue multiplier of 0.874.
Explore the revenue model
Revenue depends entirely on which fee schedule the city adopts. The model is built on ~108M billable transactions distributed across five order-value bands. Toggle a schedule to see how net revenue, the value-tier mix, and the volume sensitivity shift. Every figure is calculated directly from the published model — the same numbers you’ll find in the linked spreadsheet.
Flat $1.25 — per transaction
Avg fee $1.25 / transactionThe original Villegas rate, applied once per transaction rather than per package.
The flat schedules draw evenly from every band — including a fifth of revenue from orders under $25. The tiered schedules deliberately shift the load toward higher-value orders: under Tier B and Tier D, more than 45% of revenue comes from orders above $100, and the share from sub-$25 orders falls below 7%.
Source: IPG Chicago Delivery Fee financial model. Net revenue applies a 0.874 multiplier (8% behavioral response × 5% compliance leakage) to gross. Sensitivity scales the base-case billable volume by ±15%.
View the full revenue table for all seven schedules
| Schedule | Avg fee | Gross, $M | Net, $M | % from $0–25 | % from $25–100 | % from $100+ |
|---|
Sources & data
- Colorado Department of Revenue, Retail Delivery Fee and Retail Delivery Fee Retailers pages.
- Colorado SB23-143 (qualified business exemption), C.R.S. §43-4-218.
- Minnesota Department of Revenue, Retail Delivery Fee page.
- Minnesota Statutes, Chapter 168E.
- Council of State Governments Midwest, “Have states implemented or considered adoption of a retail delivery fee?” (Feb 2025).
- Avalara, “Retail delivery fees under fire in 2025.”
- Chicago Sun-Times, “Ald. Villegas proposes $1.25-a-package ground delivery tax on Chicago consumers” (Nov 7, 2025).
- Crain’s Chicago Business, “Ald. Villegas to introduce $1.25 delivery fee ordinance in Chicago” (Nov 7, 2025).
- Block Club Chicago, “Package Delivery Tax Floated To Help City’s Budget Woes” (Nov 11, 2025).
Financial model — data sources
The revenue explorer above is driven by the IPG Chicago Delivery Fee financial model. Its underlying inputs draw on: Amazon’s February 2025 press release (US Prime order frequency); Capital One Shopping Amazon Prime Statistics 2024 (Prime household penetration); eMarketer 2025 (Amazon share of US e-commerce); Red Stag Fulfillment 2024 (Amazon average order value); the ShipMatrix / Pitney Bowes Parcel Shipping Index 2024 (US packages per household); and U.S. Census Bureau / American Community Survey 2024 estimates (household counts). Open the live model →