You asked for it, you got it! Driven by client requests from our Ideas Forum, ShipCompliant recently implemented reporting options to allow clients to take advantage of Michigan’s early and timely filing discounts.
Michigan licensees who file the Combined 160 return monthly or quarterly, on or before the 20th of the month, are eligible to take advantage of filing discounts based on submission date. Most licensees fall into the standard discount amounts of $6/month, $18/quarter, or $72/year but there is a formula for those who fall above or below the standard discount threshold, dependent on tax liability.
Learn more about Michigan’s filing discounts (Note: Access available only to ShipCompliant clients)
Early and Timely Filing
The Early Filer option in ShipCompliant was created for those who file quarterly or monthly returns, on or before the 12th of the month in which the report is due. For those who file on or before the 20th (but after the 12th) are eligible for a discount by selecting the Timely Filer option. Both frequencies automatically calculate the discount on the Michigan Combined 160 return and are available within the ShipCompliant Reports Settings page.
For all of you annual filers, do not feel alone. You too are entitled to a discount. Keep an eye out for an email alert notifying you when the Early and Timely Filer frequency options are available to select in your ShipCompliant account.
Don’t forget to submit your Michigan returns by the early or timely deadlines in order to secure your discount!
Learn more about Michigan’s filing discounts (Note: Access available only to ShipCompliant clients)
In short, yes, for a couple of reasons:
1. Wineries already pay sales tax in most states
2. The vast majority of wineries will likely be exempt from the law
So what is it, exactly?
Senate Bill S. 743, more commonly known as the “Marketplace Fairness Act“, is a pretty simple bill that would give states the ability to require out of state businesses that have “remote sales” in excess of $1 million annually to remit sales taxes. Each state would be able to opt in to the Act, but only after they have simplified their tax structure, either by joining the Streamlined Sales and Use Tax Agreement or to follow the steps outlined in the bill to simplify their sales tax requirements.
Will it pass?
With broad bi-partisan support, S. 743 passed out of the Senate with a vote of 69 to 27. However, a tough battle is expected in the House, and therefore the Marketplace Fairness Act has a long way to go before it is enacted with a signature from President Obama. Amazon.com is supporting the bill (presumably because they would like to move forward with their plans to build warehouses in each state to support same-day shipping), while eBay is one of the main voices in opposition.
What will it mean for wineries?
A lot hinges on the definition of “remote sales”. Keep in mind the fact that state legislation to allow wine shipments typically includes a provision that also requires wineries to register for and pay sales tax. As it stands in the Senate version, and based on our interpretation of the current language, sales by wineries to states where they are already required to pay sales tax would not be counted when considering the $1 million threshold for remote sales.
Based on some quick analysis, there are a few hundred wineries in the US that ship more than $1 million worth of wine to consumers each year. BUT, if you include sales only to those states (Alaska, Colorado, D.C., Florida, Iowa, Kansas, Minnesota, Missouri, New Hampshire, Oregon, and Wyoming) that do not require wineries to pay sales tax, then we estimate that less than 25 wineries would exceed the $1 million cap. In other words, the vast majority of the 7,000+ wineries in the US would be exempt from this law.
Wineries are already accustomed to calculating, collecting, and remitting sales taxes in most states. So, for those wineries that would not be exempt from this law, it would probably not be that big of a deal to add a few more states (initially the states of Iowa, Kansas, Minnesota, and Wyoming) to the list of states to which they would be required to remit sales tax. They already have the technology and processes to do so.
The bill would take effect, at the earliest, on October 1st, 2013. Once effective, the 22 “Streamlined” sales tax states would begin requiring sales tax for remote sellers with over $1 million in sales. After that, each of the remaining 28 states would choose whether to opt in to the Act and start requiring sales tax from remote sellers.
Verifying the age of online wine purchasers and shipping recipients is perhaps the most important and responsible task any online wine seller can engage in. Age verification not only protects your own licenses, but it supports the entire industry as being responsible and it protects against minors obtaining alcohol illicitly. As the new year approaches, direct wine sellers should make every effort to improve by incorporating one or more additional age verification tools into their direct selling protocols. What follows is a 7-point list that offers a variety of ways you can use age verification in the coming year to protect yourself, the industry and minors.
As you’re making the new years resolutions for your business, think about adding age verification to the list. I’d like to challenge each of you to do a better job at age verification in 2013. It will be easy, and we’ll help you through it. Please pick at least one item from the list below that you are not doing currently, and add it to your direct shipping program starting January 1st.
- Require the common carriers (FedEx, UPS, GSO, etc.) obtain an adult signature upon delivery
- Add an age affirmation gate on your website/store/mobile app
- Collect the date of birth of the purchaser
- Collect the date of birth of the recipient for gift shipments
- Use an online age verification provider to verify the age of the purchaser in Georgia, Kansas, Ohio, and Michigan
- Use an online age verification provider to verify the age of the purchase for orders to all states
- Use an online age verification provider to verify the age of the recipient for all gift orders
Require the common carriers (FedEx, UPS, GSO, etc.) obtain an adult signature upon delivery
This is a requirement for all wine shipments. No ifs, ands or buts about it. Work with your carrier to understand how to make sure your packages properly labeled for alcohol and ensure they’ll check ID and get an adult signature upon delivery.
Add an age affirmation gate on your website/store/mobile app
This is a pretty simple tool that will go a long way. Add a feature to your site that forces the visitor to affirm that they are of legal drinking age by checking a box prior to entering your website, shopping cart, or mobile application. Last time I mentioned this at a seminar, I got a few calls from some eCommerce companies saying that would damage the search engine optimization (SEO) for the products in the store. My response: you’re smart, figure it out! There’s got to be a slick way of enabling the age gate while also preserving the SEO of your site.
Collect the date of birth of the purchaser
If you’re going to add an age affirmation tool to your website/store/mobile app, why not take it one step further and collect the date of birth of the purchaser at that point? Alternatively, ask for the date of birth when the purchaser adds wine products to their cart. You’re going to need it at a minimum to include on the direct shipping reports due in Wisconsin, Michigan, and the four counties of Hawaii. You’ll also need it for audit purposes in New York and most of the states that you are shipping into, and it will also make for a much stronger match rate on your age verification checks when using an online provider (see below for details). States will typically require that you keep your records for two years for audit purposes, so we often recommend that you hold onto your data for at least 3-4 years just to be sure. Remember that dates of birth are very sensitive from a privacy perspective, so be sure to store them securely in your files.
Collect the date of birth of the recipient for gift shipments
For gift shipments, you’ll also want to collect the date of birth of the recipient. You’ll need this on the shipping reports due in Wisconsin and the four counties of Hawaii, and it will also result in a much stronger match if you decide to do age verification on the recipient. One thing to note here is that the purchaser will often not know the date of birth of the recipient. So, you don’t necessarily have to collect this at the time of transaction, but make sure you have your processes designed such that you can follow up and get the DOB of the recipient prior to shipping.
Use an online age verification provider to verify the age of the purchaser in Georgia, Kansas, Ohio, and Michigan
The states of Georgia, Kansas, Ohio and Michigan all have some kind of requirement for verifying the age of the purchaser. The easiest way to meet these requirements is to use an online age verification provider. ShipCompliant integrates with both Lexis Nexis (formerly ChoicePoint) and also IDology, both of which have been approved by the Michigan Liquor Control Commission. These services run about $.50 per check (per customer), and do not need to be repeated for subsequent purchases from an individual that has already been confirmed to be of legal drinking age. When running an online age verification check, you’ll need the purchaser’s name, address, and optionally date of birth. As mentioned above, if you include the date of birth you’ll get a much stronger likelihood of matching the individual in the age check provider’s database.
Use an online age verification provider to verify the age of the purchase for orders to all states
Wine Institute and Free the Grapes! both have codes that establish that (from Free the Grapes!’ code for direct shipping) “licensees must verify the purchaser’s age at the point of online purchase before completing any transaction.” Most of the bigger wine companies are therefore choosing not just to run an online age verification check in the four states that require it by statute, but to run online checks on the purchaser in all states that they ship to.
Use an online age verification provider to verify the age of the recipient for all gift orders
For gift shipments, you can also consider running an online age verification check on the recipient. Even though the common carrier will ask for identification and a signature for the person that actually signs for the package upon delivery, some wineries take a conservative approach and choose to run an age check on the recipient as well for gift shipments, especially on gift orders that originate from third party marketers.
Direct shipping permits for Michigan are renewable on May 1. The annual renewal cost for the Michigan Permit is $100; the same as the initial permit fee. For those wineries that do not have a direct shipping permit for MI now is good time to consider applying. Licenses are valid from May 1 – April 30 and the $100 fee is not prorated. The permit allows wineries to ship up to 1,500 9-liter cases to Michigan consumers. Brand registration is required. This can be completed through the MLCC’s online label registration program for no fee. Sales tax and excise tax must be paid and reports must be filed.
New Hampshire has updated its direct shipping permit application. The updated application is now available on Wine Institute’s website along with the instructions. Please be sure to complete the application in its entirety and attach all required documents. Incomplete applications will be returned. Applicants will be happy to note that there is no permit fee. Approved shippers are allowed to ship up to 60 containers of not more than 1 liter each to each consumer during a calendar year. Monthly reports and tax payments are required.
The Tennessee Alcohol Beverage Commission has updated their ”Direct Shipper Application Requirements – ABC” document posted on the TN ABC and Wine Institute websites. The original version of the document did not include the “Wholesale Gallonage Letter” requirement. The Wholesale Gallonage letter is one of 2 documents issued by the TN Department of Revenue that wineries must submit with their application. The second document is the “Certificate of Registration for Sales and Use Tax.” While the application on the TN Department of Revenue website says a bond is required, a bond is not required for wineries. For the TN DOR wholesale gallonage and sales and use tax application form, go to: http://www.state.tn.us/revenue/forms/general/f13005_1.pdf. Licenses are valid 1 year from the date issued and the annual license fee is $150.00. There is also a 1 time non-refundable application fee of $300. Additional information about the application process is available on the Wine Institute website. Wineries may also contact Sharon Loveall at the TN Alcoholic Beverage Commission with any questions about winery direct shipping permits at 615.741.1602, ext. 141
By Annie Bones, State Relations – Wine Institute
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.
Many questions have resulted from a new law prohibiting wine retailers from shipping to consumers in Michigan that recently went into effect. The new law specifically bans common carriers (FedEx and UPS) from delivering retailer wine shipments to Michigan consumers. This law does not affect the existing regulations for wineries shipping to consumers under the permit structure. Wineries with an approved Direct Shipping License may continue to ship to Michigan consumers via FedEx and UPS. Information about how to obtain Michigan Direct Shipping License can be found on the Wine Institute website http://www.wineinstitute.org/initiatives/stateshippinglaws.
Annie Bones, State Relations – Wine Institute