Corkage and tax collection?

We ate last night at a place in WI that friends go to regularly. We close the place down and the waitress and her bartender brother join us. The talk turns to $10 corkage at Sun Wah (Chicago)…

“Yeah, we used to do that, but not anymore cuz it’s illegal. The restaurant is supposed to record the bottle and pay tax on the estimated value”

Wow, you learn something new every day.

Chris, is this an IL law? I can see where the state is coming from given the theoretical loss of tax revenue by charging a flat corkage fee. But how would a restaurant document value of corkage bottles? Wholesale, retail, normal restaurant markup? Seems like an un-implementable part of the law.

Interesting. Given that Chicago is the home of Al Capone and the reason for the three tier system, and that the politicians are all of sterling character, I’m wondering what the angle is. The distributor still made the sale, so they can’t be interested and the bottle the customer brought in has been paid for and taxed, so what is the law trying to accomplish?

From a few minutes of cursory research, it appears that IL charges sales tax on any corkage fee, but the tax is calculated on the amount of the fee, not the value of the bottle.

In WI, it appears that BYO is prohibited, whether corkage is charged or not.

She was talking about Chicago where both of them used to work. She was sure that Sun Wah was breaking the law. My response was that the liquor tax was already paid when the person bought the wine. I kinda think she was confused*

*Minnesotan for “talking out of her ass”

The customer has already paid sales tax on the bottle, so it doesn’t make sense that the state would tax the value of the bottle again, particularly since the restaurant did not take title to it. Taxing the corkage fee does make sense.

Sounds like she was confused. Or if that’s what she was told by Sun Wah mgt, sounds like a made-up excuse to blame the govt when customers ask why they prohibit corkage.

Restaurants will say crazy stuff to try and deny corkage to guests. In the vast majority of cases, they are just saying: spend your money elsewhere.

(Corkage and BYOB is illegal in Wisconsin.)

They didn’t previously work at Sun Wah. Rather, some other place in Chicago. I steered the convo to liquor distributors and politicians.

I’ll lay a lot on IL. Greed but he’s talking about WI. here.

Which state is worse for wine enthusiasts - IL or WI ?

I must be missing something here but I don’t find any issue with being a wine enthusiast in IL, we can ship in no problem have a strong retail presence given we are Midwest and have no local major vineyards. Sure we pay a little tax on wine but in IL you pay tax on everything. So the answer must be WI, plus they have the Packers so the answer is always WI when talking about worst anything

Corkage is a service right? I thought services were not subject to sales tax?

As far as I know you would pay tax on corkage only in Illinois. You pay because the corkage is revenue.

Used to have a wine group here in WI. Met at a restaurant once a month on a slow night. Worked pretty good. We all brought wine, tasted and then had dinner. Think anywhere from 20 - 30+ extra meals on a slow night. We gave them an anticipated head count ahead of time. Every so often they prepared a special meal for us wine geeks…I remember the German theme nights being awesome. We purchased good stemware and left them at the restaurant for anyone to use when we were not there. The" no corkage law" killed the group. Bummer it was a good time and introduced many people to new wines.

In many states, there is tax on restaurant meals but not on food purchased at the grocery store. I would guess it falls under that concept rather than pure “service.”

But, surely, on a board with 30% lawyers, we must have someone who actually knows something about tax.

It isn’t uncommon for a state to charge sales tax on charges for services incidental to the taxable sale of goods.

Except restaurant meals, right, where the service arguably is most of the value?

From Board of Equalization publications, corkage is explicitly taxable in California ("cake-age would be, as well). I think the same is true in many other states, eg, New York. I think the idea behind taxing it is that it’s a mandatory charge that compensates the establishment, not the server.


From a sales tax standpoint, restaurants are in the business of selling goods, and the services are incidental to the sale of goods. If a service charge is added by the restaurant, that may be included in the cost subject to sales tax, depending on the state.

States that exempt groceries from sales tax generally have a specific statutory exemption that may be limited. In Georgia, for example, the exemption for groceries excludes food prepared in a grocery store and applies only to state sales tax and not necessarily to local sales tax.