Sorry to resurrect an old thread, but I was wondering if those in the know might clarify something for me?
As this thread explains, the correct procedure is for a winery to collect my state’s sales tax and then ship the wine to me.
However, there are lots of CA wineries that don’t do that. Not to point fingers, but including lots of this board’s darlings…
So, why do they do it and others don’t (NOT collect tax on my shipments)?
Is it a question of size? - while you are small you can wing it, but as you grow larger the risks increase?
If that’s the case, are there examples of a winery that used not to charge tax, but then started to?
No need to finger point, I’m just interested in whether anyone has seen that happen?
What about when the customer is standing in front of you and paying in California even though they are shipping it to Oregon? This is retail, not winery direct.
It’s deductible. As long as it was proper for them to collect the tax, at least. If it isn’t, then they are making a mistake, meaning they should be notified.
I’m not up on all the new laws, but there at least used to be cases where sales tax was due in the purchase state and use tax was due in the shipped to state. If the shipped to rate is higher, you’d owe the difference.
This means that the winery has no “nexus” with your home state. That means they have no physical or economic connection to your state OTHER than the solicitation of sales. Sale alone is NOT enough to establish nexus. As an analogy, consider LL Bean sending catalogs all over the country. They will only collect tax in states where they have a physical location or employees. Same thing for the winery, except in their case, they’re soliciting electronically.
The point of sale aspect is a bit tricky, and possibly a gray area, but it should not be a ‘double whammy.’ If you place an online order from your residence and have wine shipped to you, I would expect that your state & local sales tax to be applied to the purchase. If you are buying at the cellar door at the winery, I would expect to pay local sales tax as if it was a purchase in that state, however by contracting the winery or a third party shipper to ship the wine to your residence after the fact, I wouldn’t see how or why you would have to pay your local sales tax on the purchase, unless you are in a highly regulated state such as PA.
Actually John, this is incorrect. Wine is unique and is not taxed like any other consumer good. If an out-of-state winery is shipping to someone in New York for example, it makes no difference if they have a nexus in New York or not. They are required by law to collect and remit New York sales tax (excise too!). There’s no ambiguity here.
Unfortunately, again not true. For example, a winery can hold a permit to ship to someone in Arkansas. However, to actually ship, the transaction has to happen face to face. Arkansas state sales tax has to be collected and remitted to Arkansas, even if the transaction happens in California. I believe the same is true for Indiana.
You’ve obviously done some homework on this and feel certain about the correctness of collecting out of State sales tax on all your mailing list orders. Would you mind sharing how you arrived at this conclusion? I’m not doubting you here, I’m just trying to better understand the laws that support this position. I buy from several CA wineries that don’t collect any tax, and your seems to be the minority position. I’m having a hard time understanding why any of them would shoulder the risk of non-compliance, if indeed there was “no ambiguity here”? Maybe the risk is minimal and the belief is this puts them in a more favorable position with customers? I don’t know either way, but to be perfectly frank, when looking at your offers vs. other wineries competing for the same relative like/kind wine dollars, your ‘all-in price’ (shipping cost charged being the other major variable consideration) places you in a less favorable position in terms of competing on a relative value basis.
The nexus rule for compelling an out of state entity to collect sales tax was established by a Supreme Court case in the 1990s (Quill Corp vs North Dakota, I think). In 2005, there was another case (Granholm vs Heald) that overturned certain state laws that allowed in state wineries to ship wine to consumers, but did not allow out of state wineries the same privilege. This seemed like good news. However, the decision also made clear that the Court recognized that states had the right to regulate alcohol shipments and that this right would allow them to attach conditions, like collecting their sales tax, to licenses they issued to out of state entities to ship wine into their states. A number of states subsequently passed laws that required the collection of sales tax as a requirement to be licensed to ship alcohol into their state.
The actual requirements that have been attached to shipping licenses vary a lot by state, with more or less onerous requirements about collecting, documenting, and remitting the tax,which can vary by the county and city in addition to the state, as well as various other requirements like limitations on amounts per state, or per person, or requiring the recipients to apply for licenses, etc. This is rather challenging (expensive) for small wineries, so some of them use the “title passes in our home state, but we’ll engage a shipper on your behalf” approach. That’s probably not compliant with the laws in the states of many of their customers and, in any case, most states have passed laws that require the recipient to remit use tax if the sales tax has not been paid (even for items other than alcohol).
I’m not a lawyer, so the preceding may not be correct it all details. But, it’s pretty much the gist of it.
How did I arrive at my conclusion? You make it sound like it’s debatable. Apply for a direct shipper’s permit with any state and they make it very clear what the laws and regulations are regarding holding the permit. Laws and regulations for direct shipping are readily available on the internet. As for our “all-in price” putting us in a less favorable position, I’ll respectfully disagree. If you feel our wines our overpriced with tax and shipping, feel free to find them cheaper from a retailer. No customer has ever told me our wines our too expensive. However, many have told me to raise our prices. Unfortunately (or fortunately, depending on your perspective), I’m not a very good listener.
You have experience in this area where I have none. Pardon the outsider looking in and asking newbish questions, but if the issue is so un-debatable, then help me understand why it is that other wineries in your same relative position are electing to forgo out of State tax collection? Were there only one clear and obvious conclusion to be drawn here, I would expect the position (with regard to collecting taxes) taken by others to be far more singular. In my experience, that is not even close to being the case.
Yes, I have found it cheaper to buy your wines through retailers than direct. In most cases, I am willing to ignore slight pricing differences, in order to favor the maker with direct (more profitable) patronage. Unfortunately, you have, for reasons I’ve heard you explain previously, have a much higher per bottle shipping cost than both retailers and many of your competitors. Far be it for me to tell you how to run your business, but when higher shipping costs are combined with State sales tax, it is considerably more expensive to buy direct. The rub here, is that retailers offer only a small slice of your range of bottlings, and if I direct my Carlisle dollars there (with only X dollars to allocate to Carlisle), I do so at the risk of limiting my access to the the ‘better’ wines on the mailing list. IOW, if I don’t go big on my list purchases, I will see less of the ‘good stuff’ being offered to me in subsequent mailers, and the retail channel won’t provide me access to those more limited production bottlings. Not much of a choice really, if I want to taste across the range of your offerings.
Z, you’re asking the wrong person. Mike has explained why he collects sales tax. How would he know why someone else doesn’t? If you actually want an answer, you need to talk to the wineries that don’t collect the tax.
As to your budget dilemma, there is a very simple solution: increase your wine budget! More wine, less whine.
Maryland has been known in the past to:
Run stings on wine shipped to WV for MD buyers, as Brian notes.
Place officers at the border of DC to catch retail buyers.
Arrest a man for having wine shipped to his home. Guns, police, the whole 9 yards. I believe for a single bottle of Lafite, but my memory may be faulty there as it was about 25 years ago.
Intimidate UPS into confiscating wine shipped to a WV address as it passed through the Hagerstown, MD distribution center.
It’s become much easier since the law was changed, but it’s still not legal for a retailer to ship to MD.
And more on topic, all the wineries I buy from charge me MD sales tax, and some charge me the excise tax. The excise tax is pretty small, so perhaps some just pay it themselves.
Z, as David kindly pointed out, you’re asking the wrong person as to why some wineries don’t charge you sales tax. You’ll have to ask them. I don’t have the time to list links to all 50 states regarding laws and wine taxation but since I have a few handy, here you go. Read them carefully and tell me if you feel there is ambiguity.
I’ll leave it to you to find relevant documents for other states in which you’re interested.
Yes, I have found it cheaper to buy your wines through retailers than direct.
Fantastic! I sincerely thank you for the support. Of course, as you mentioned, only 4 or 5 of our wines out of the 25 or so we produce see any kind of distribution. But if you’re happy with those 4 or 5, then for you there’s no reason to be on our mailing list. I’m curious though. Is Acsan really your last name? I have no record of an “Ascan” ever signing up on our mailing list so it makes me wonder how you know you can get the wines more cheaply at retail. Everything we sell direct is pre-release at a discounted price to offset (and then some) the shipping cost.
As my range of CA producer experience includes Carlisle, and Mike has always taken the stricter view (relative to his peers) with regard to interpreting his responsibility for collecting taxes on out-of-state wine sales, he is actually the first producer that came to mind here. He claims there is no ambiguity in interpreting the rules, yet my experience with many other CA wine producers is quite different. I was hoping for more enlightening answers than “apply for a direct shipper’s permit” and “laws and regulations for direct shipping are readily available on the internet”. While he can’t speak for other producers, he’s likely aware that interpretations of a wineries’ role in the tax collection process varies greatly among CA wine producers, and seems far less clear than his answer is meant to suggest.
A related previous experience with a friend, who I turned on to Carlisle, suggests to me that Mike tends to take the most conservative view of his role as tax collector. My friend signed up for the list (this was early on) and waited patiently for his turn at bat. When the time came to place his first order, it turned out that he had a problem getting wine shipped to his home address, because he was told by Mike that shipping to his State was a city-by-city problem (in a major metro area) and was related to his responsibility of collecting local taxes. My friend thought that odd, as he was on a dozen other CA mailing lists that didn’t have any problem shipping directly to the city he lived in. He couldn’t find someone in the approved cities to take delivery for him and ended up passing on Carlisle wine.
Too much CYA? I don’t know (I’m not ITB), but it does seems clear that other producers feel far less duty-bound in their tax collection role than Mike, and perhaps there’s more latitude in interpreting the rules than his earlier reply seems to suggests. Conversely, Mike may be strictly correct in interpreting his responsibilities to collect taxes and everyone else is simply winking and nodding past what is actually required of them. Either way, the issue seems less clear from a customer’s perspective and I’m still left grasping for an understanding of why there are so many different interpretations in there is indeed (as Mike suggests) “no ambiguity here”.
Thanks for the reply, Mike. I was multi-tasking and didn’t see your post until after I hit submit.
I understand the issue is complicated and reading 50 different sets of rules will not help to better my understanding. Your are aware of other producers taking a less narrow interpretation of the rules, no? I was simply curious what discovery process led you taking a different path than others seem to follow.
As for your list: I have an arrangement with my BIL to share an allocation, so it his name on the contact information. I didn’t mention which bottlings I bought previously, so I’m not sure why you seem to think I’m happy “with those 4 or 5”? I read your most recent pre-release letter from Howdy-doo to Gratias and can assure my interest is broader than 4 or 5 wines. Though testy and accusatory exchanges like this only serves to diminish my interest in any of your wines.
I am acutely aware of people taking a “less strict interpretation” of the the Speed Limit laws than I do. While I feel that I can hit maybe 70 in a 65, others feel like they can go 75 or 80 or even faster. This does not mean that the law is open to interpretation. When it comes to wine law, state taxes, etc Mike is completely correct in his stating of the law.
In the case of other wineries, I do not know if they are purposefully choosing to ignore the law or if they are choosing to pay the taxes and subsidize the purchase (for innumerable reasons…perhaps because they make more money on direct sales, perhaps they don’t have a POS system set up to deal with it, etc). I would not feel comfortable saying they are violating the law, because I don’t know if that is the case.
But I do think that holding a winery, with remarkably fair prices such as Carlisle, up to question because they are doing what the law requires is a bit odd.
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