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Is the Marketplace Fairness Act Fair for Wineries?


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.

FedEx begins shipping to Vermont

From their wine landing page:

FedEx Express and FedEx Ground expands wine shipping services to accept legal wine shipments to consumers into, out of, and within Vermont. The effective date is November 1, 2006. For those shipping wine to VT consumers, please note changes on State Pairing Guide.

Vermont’s consumer direct legislation actually went into effect in May of this year, but this is the first time that a carrier has been approved to ship into Vermont. Licensed wineries can now officially begin shipping. The application requirements and license restrictions are spelled out pretty clearly in Vermont’s instructions on the permit application. In a nutshell, the permit costs $300, there are sales tax, excise tax, and reporting requirements, and a twelve case per calendar year per customer volume limit applies.

Vermont opens for direct wine shipment

We love to see a purple state turn blue! Vermont officially moved from a prohibited state to a limited direct state on Thursday when Governor Jim Douglas signed into law S.58. In-state and out-of-state wineries can now apply for a $300 direct shipping license and ship up to 12 cases annually to Vermont consumers. Wineries will be required to file direct shipping, excise, and sales tax reports regularly.

The bill also establishes a $200 self-distribution license for in-state and out-of-state wineries. This establishes a means for wineries to “sell up to 2,000 gallons of vinous beverages a year directly to first or second class licensees” provided the winery ships “no more than 40 gallons of vinous beverages per month to any single first or second-class licensee.”
We’ll post more details as they become available…