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In a recent reader query on ABC10’s column Why Guy asked what the so-called “California Legislative fee” was on the receipt of the food delivery company DoorDash, as well as other companies. Is it another state tax? The reader wanted to know.
ABC10 investigated, reportedly asking H.D. Palmer, a legislative analyst for the California Department of Finance. Palmer came back with a definitive answer: it is not a state tax or fee. He then directed the publication to DoorDash itself as the possible origin of the legislative fee.
On the reader’s receipt, his DoorDash bill listed a “California Legislative fee” for $1.90. An added fee created by DoorDash for itself. In other places throughout California, the fee reportedly appears on receipts as “Oakland Fee,” “San Mateo County Fee,” “Fresno Fee,” and even “Regulatory Response Fee.”
Turns out this fee is the food delivery company’s response to the caps on what it can charge restaurants in delivery fees put in place by cities across California. This misleadingly named “legislative fee” is how Doordash is making up the difference, by making the consumer pay for it. It’s usually anywhere from $1 to $2.50 and it’s done all over the country.
California recently passed a bill requiring food delivery apps to provide an itemized breakdown of costs to both customers and restaurants for each transaction. This means that it must list food price, fees, tips, and commissions separately. Though the original bill proposed putting a permanent cap on delivery fees, the version that passed prohibits companies like DoorDash, UberEats, Postmates, and GrubHub from charging higher prices for food than what the restaurant charges its customers.
This has become an issue of the utmost importance, as people have started to depend on delivery apps throughout the pandemic — something that companies took advantage of rather quickly. In March 2021, 47% of people in the U.S. ordered from one of the major delivery players, up from 38% a year ago, while delivery orders overall increased 137% in 2020, according to NPD Group data. Foodservice delivery fees typically average 15% to 30% and have been a major point of contention for both customers and restaurants using the service. A New York Times story in Feb. 2020 found that foodservice delivery markups can cost up to 91% more than if you ordered a meal directly from a restaurant.
Moreover, app-based food delivery drivers have also voiced concerns over a lack of pay transparency, with many reporting having their tips taken by food delivery companies. A 2019 report in the New York Times revealed DoorDash was using customer tips to subsidize workers’ base pay, which was followed by the company reportedly agreeing to pay $2.5 million to settle a lawsuit alleging DoorDash kept customer tips that were intended to go to their delivery drivers.
According to Market Watch, DoorDash, Uber Eats, Grubhub, and Postmates raked in roughly $5.5 billion in combined revenue from Apr. through Sep. 2020, more than twice as much as their combined $2.5 billion in revenue during the same period in 2019. Doordash’s revenue in the fourth quarter of 2020 more than tripled from the year prior. This cemented the platform’s market share gains ahead of rivals GrubHub and Uber Eats.
Last year, DoorDash and Uber raised its prices for customers in California in order to fund the new driver perks they promised if Prop. 22 passed, which it did in the Nov. election.