Before jumping into a direct shipping program in a new state, wineries should consider their current prospect list, market potential, shipping difficulty and costs. When it comes to calculating start-up costs to enter a new state, there is often more than meets the eye. In addition to license fees, wineries may need to budget for a number of “hidden” fees including bonds, label registration fees and other application fees.
Some states require wineries to obtain a bond in order to secure a direct shipping license. A bond is a written guaranty, purchased from a bonding company (usually an insurance firm or a surety company), to guarantee that all taxes due will be paid to the state. If there is a failure to pay, the bonding company will make good up to the amount of the bond.
Bonds for direct shippers range from $500-$1500 depending on the state, but premiums, or out-of-pocket costs, to wineries typically average around 10% of the total bond price, or $50-$180 out-of-pocket on an annual or biannual basis. Different bonding agents may quote different rates, so it pays to shop around.
Connecticut, Idaho, Illinois, Indiana, Kansas, Texas and Wisconsin all require that wineries secure a bond before submitting your license application. For wineries that ship 40,000 gallons or more annually, Oregon issues a bond document after the license application has been received but before the license is issued. Wineries that ship less than 40,000 gallons to Oregon annually can apply for a bond wavier.
Several states require brand or label registrations for direct shipping. Ohio, a state that 26% of direct shippers have in their program, requires wineries to register all the labels that will be shipped into the state for a one-time registration fee of $50 per label.
If that sounds pricey to you, consider Connecticut who charges $200 per label and requires labels to be re-registered every 3 years if they are still actively shipped into the state.
Georgia, Michigan, New York, North Carolina and Virginia do not charge a fee though label or brand registration is required in these states.
Some states may require business, Secretary of State or tax registration, or other one-time application fees. This varies from state to state and depends on how your business is structured. Wineries that start shipping to Arizona, Connecticut, Hawaii, Kansas, Maine, Michigan, North Carolina, Ohio, Tennessee, Virginia or Wisconsin may encounter one or more of these fees.
License, bond, label registration and application fees all factor into the true break-even costs of shipping to a new state. The key to ensuring a profitable direct shipping program is to research thoroughly in order to avoid getting caught off-guard with unexpected costs.
The direct shipping applications for Maine are now available on the Wine Institute website. The direct shipping permit allows wineries to ship up to 12 nine liter cases of wine to a recipient’s address each year. The Department of Public Safety, Liquor Licensing and Inspection Division has confirmed that there are no prohibited shipping areas at this time. The annual permit fee is $200 plus an additional $100 filing fee. Applicants will have to register with Maine Revenue Services to pay sales and use taxes before submitting their permit application. Maine Revenue Services will send applicants a Retailer’s Certificate to confirm that their sales tax account has been established. There is no fee to register with Revenue Services and the tax registration forms can be sent in via U.S. mail or electronically. The processing time for electronically filed applications is significantly shorter. Only sections 1 and 5 of the tax registration form must be completed.
Once wineries have received their Retailer’s Certificate they can submit their completed direct shipper application to the Liquor Licensing and Inspections Unit, along with a copy of their federal basic permit and application fee. The direct shipper application must also be notarized. Once wineries receive their direct shipping permit they will be responsible for paying excise tax to the Department of Public Safety and sales tax to Revenue Services. In addition, a direct shipping report must be filed twice a year. Reporting forms will be posted on the Wine Institute website once they become available. Should you have any questions please contact Annie Bones in Wine Institute’s State Relations Department at email@example.com.
Wineries are now able to apply to the Tennessee Alcoholic Beverage Commission for a Direct Shipper license. Direct Shipper licensees may ship no more than 1 case (9 liters) of wine to a Tennessee consumer during a calendar month and total shipments to each consumer may not exceed 3 cases (27 liters) of wine during a calendar year. Only Tennessee consumers located in a wet region are allowed to receive wine shipments, and common carriers will not deliver shipments to an address that is located in a jurisdiction that has not authorized the sale of alcoholic beverages. A complete list of jurisdictions that have approved sales of alcohol is available on the Wine Institute website.
The first step in the direct shipper application process is registering to pay taxes, by submitting an “Application for Registration” to the Department of Revenue. The “Application for Registration” form must be completed by hand (Do Not file online version of the application.) Direct Shippers should select “Wholesale Gallonage” and “Sales and Use Tax” in section 1 and describe their business activity as “direct shipping” in section 15. Direct Shipper’s are not required to post a bond.
Once the Department of Revenue has processed the application for registration the direct shipper applicant should receive two documents: a “Certificate of Registration” and a letter confirming the tax registration process has been completed. Do not submit the Direct Shipper License application to the Alcoholic Beverage Commission before receiving these documents. The confirmation letter issued by the Department of Revenue must be submitted with the Direct Shipper License application. Direct shipper license applicants must pay a one time non-refundable fee of $300.00 and an annual license fee of $150 to the Tennessee Alcoholic Beverage Commission before receiving their license. Payment totaling $450.00 should be included with the application packet. In addition, the following documents should be submitted with the direct shipper’s license: copies of contracts with common carriers shipping wine to Tennessee consumers (also known as “Alcohol Shipping Agreement”), a copy of the applicant’s organizational document, and a copy of the applicant’s federal basic permit.
The direct shipper’s license is valid for 1 year from the date of issue. Direct shipper’s must file reports, pay a state sales tax of 9.25% and pay excise tax. The Department of Revenue will send the appropriate reporting forms and instructions to licensees based on their filing status. The application forms and instructions are available on the Wine Institute website. Wineries should remember that shipping to consumers in Tennessee without a license is classified as a felony. Should you have any questions please contact Wine Institute’s State Relations Department at 415-356-7530 or firstname.lastname@example.org.
Tennessee direct shipping license applications are now available. While Tennessee officially became a Limited state on July 1, wineries cannot legally ship to this state until their direct shipping license has been approved.
The application states that direct shippers may only ship to wet areas within the state; a condition that may make the state slightly less available than initially anticipated. This requirement is different than those of other states such as Florida, New Hampshire and New York, where clearly defined dry areas are prohibited from shipping. Major cities such as Memphis, Nashville, Knoxville, and Chattanooga are all considered wet areas that are open for shipping.
Tennessee direct shipping license applications are available by directly contacting the Tennessee Alcoholic Beverage Commission at (615) 741-1602. The license requirements and application can also be viewed online. Wineries that prefer a full concierge service for obtaining their license can order online through easywinelicensing.com.
To obtain a direct shipping license, wineries must first register with the Tennessee Department of Revenue. Once this step is complete, wineries pursuing a direct shipping license must submit the following to the State of Tennessee ABC:
License application (available from state)
$450 fee ($300 one-time application fee + $150 licensee fee, payable upon approval of application)
Copy of Certificate of Registration for Sales & Use Tax
Copies of all contracts with common carriers that will ship wine to Tennessee residents
Copy of the applicant’s organizational document (e.g. corporate charter or articles of organization)
A copy of applicant’s Federal Basic Permit
Tennessee direct shipping licenses expire December 31 of every year, and renewal applications must be postmarked by January 9 of the following year to avoid a $250 citation.
Licensed wineries can ship a maximum of one case per month and up to three cases annually to Tennessee residents. Retailers are still prohibited from direct shipping to Tennessee.
Tennessee, Kansas Open For Direct Shipping
Today, both Kansas and Tennessee open for direct shipping – the first two states to open in almost three years. These are the first states to change from Prohibited to Limited since Vermont in late 2006.
As of today, Kansas residents have direct access to up to twelve cases of wine per address from licensed wineries per year. Kansas special order direct shipping license applications are available online. After registering with the Secretary of State for $36, wineries must submit proof of business tax registration, a $50 license fee, a $50 application fee with their license application as well as post a $750 bond.
North Dakota Excise Tax Decreases
Beginning today, sparkling wine will be taxed at $0.50/gallon, down from $1.00/gallon.
Nevada State-Wide Sales Tax Increase
Effective July 1, Nevada has increased its Local School Support Tax from 2.25% to 2.6%; a 0.35% increase in state-wide sales tax. This new tax will be collected at a local level. Also, the 0.25% Collection Allowance, scheduled to increase back to 0.50%, remains in effect for sales and use taxes collected.
Local Tax Increases
The following local tax rates are effective today:
In Arizona, the city of Kearny has increased its retail and use tax rates from 2.5% to 3.0%
In California, voters in Los Angeles County approved a new 0.50% district tax increasing their tax rate to 9.75% (including the 8.25% state tax rate). Also, the City Council of Laguna Beach located in Orange County voted to repeal the 0.50% Temporary Transactions and Use Tax prior to its scheduled end date, lowering their tax rate to 8.75%
In Georgia, the counties of Camden, McIntosh and Wayne will increase their local tax rates by 1%, making the total local option tax 3.0%
In Washington, sales and use tax within all of Wahkiakum County will increase one-tenth of one percent. The new rate will be 7.6%
Ohio Electronic Filing
For Ohio Sales and Use tax semi-annual filers, the January – June return is the first return that is required to be filed online. There are two filing methods available to direct shippers to report Ohio sales taxes electronically:
Express Data Entry – Upload a .CSV to the Ohio Business Gateway (OBG), and make any final adjustments on the OBG’s website
eForms – Enter tax calculations step-by-step into Ohio’s web application
If you can’t decide which filing option is right for you, view a comparison of the different filing options (please note that TeleFile is not available for direct shippers). If you have any questions about the requirement, please visit Ohio’s Department of Taxation website, or call the Ohio DOT at 800-282-1784.
As of June 25th, wineries may apply for a Special Order Shipping License that allows them to ship off-site sales to Kansas consumers (on-site sales do not require a Shipping License). The initial costs for the Special Order Shipping License include a $50 license fee and a $50 registration fee. The license will be valid for 1 year from the date issued. The cost to renew a license is the $50 license fee plus a $10 registration fee. Wineries with a license will be able to ship up to 12 cases of wine to any one consumer or address each calendar year. Direct Shippers are required to confirm the consumer is at least 21 years old by physically examining a government issued form of identification or by using an age verification service approved by the ABC. Lexis Nexis, Wine Institute’s preferred age verification provider, is an Approved Internet Based Age and Identification Service Provider for Kansas.
The Kansas Special Order Shipping License Application and Instructions (Form ABC-800 rev.6/29/09) are posted on the Wine Institute website. In addition to the License application wineries are required to obtain a bond for $750, submit a Kansas Business Tax Application, and file form ABC-160 entitled “Irrevocable Consent to Jurisdiction” with the Kansas Secretary of State’s office. There is a $35 fee to file form ABC-160 and a $1 fee for each additional file stamped copy of the form. Wineries registered as a supplier in Kansas and doing business through the 3-tier system should have already filed form ABC-160 and will not need to file the form a second time. Wineries who have already filed ABC-160 can obtain a copy of their Irrevocable Consent to Jurisdiction letter on the Kansas Department of Revenue website. A copy of the Irrevocable Consent to Jurisdiction should be attached to the application or faxed to the Department of Revenue upon receipt. Special Order Shipping Licenses will not be issued until Alcohol Beverage Control has a copy of the document. The Kansas Business Tax Application should be completed by hand and mailed in with the Special Order Shipping License Application.
Wineries located outside of Kansas applying for the Special Order Shipping License are not required to complete Section 3- “Business Ownership Information,” Section 5– “Background Qualifications” or Section 9 “Management Services Disclosure” of the application. In Section 6, Part 2 and Section 8, Part 1 it is not necessary for out-of-state applicants to attach additional documentation.
Should you have any questions about the Special Order Shipping License Application process or forms please contact Annie Bones with the State Relations Department of Wine Institute at 415-356-7530.