Bonds

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.

Label Registration

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.

Application Fees

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.

If you are at all interested in the shipping and distribution of wine, this is an excellent resource that is well worth reading.  You can view the most recent version of the document anytime by visiting the ShipCompliant Blog and clicking the link located under “Compliance Resources”, or by visiting CorbinCounsel.com and clicking on the home page link, “Notes on Wine Distribution.”

Click Here to View NWD Release 32

When filing the Wisconsin sales and use tax return, form ST-12, Schedule CT should be used to report these additional local taxes. The first sales and use tax return with local taxes is due for monthly filers in November for the month of October. For quarterly and annual filers, the first report with local taxes will come due on January 31st, 2010. Because this new rule became effective on October 1st, annual filers need only to pay the 5% state sales tax rate for the first nine months of the year, but should pay state tax and local tax for the final three months.

All Registered Retailers Must Collect Sales and Use Taxes for All Wisconsin Counties and Stadium Districts

Effective October 1, 2009, all retailers that are registered in Wisconsin to collect and remit the 5% Wisconsin state sales and use tax are also required to collect and remit the applicable county and stadium sales and use taxes for any sales that are sourced to a county or stadium district that has adopted the applicable county or stadium sales or use tax. This provision applies regardless of whether the retailer is “engaged in business” in the county or stadium district to which the sale is sourced.(Section 77.73 (3), Wis. Stats., as created by 2009 Wisconsin Act 2 and amended by 2009 Wisconsin Act 28)

There are two methods for filing the Wine Tax Return and all related schedules, electronically:

1) The Free-File filing application is available to anyone who has a Wisconsin Liquor Tax Permit Number, and you don’t have to set up a special account to start using it. Free-file will save all your data, so you can work on it as you ship orders, save it, and come back to it later. Entering the schedule information (e.g. the name of the recipient, how much wine they received) will automatically calculate the tax form. You can watch a detailed training video for more complete information on how to report using the Free File format. It’s about a half of an hour in length, and is very thorough. I had the best luck viewing the video in internet explorer. Payment options for Free-file include Electronic Funds Transfer (EFT), or a payment voucher, which you can print out and then mail in with your payment to the Wisconsin Department of Revenue. If you decide to pay your taxes via Electronic Funds Transfer (EFT), it takes about a week to process your registration, so don’t wait until the last minute. For more information about EFT payments, you can visit the Wisconsin EFT web page, or call (608) 264-9918.

2) The Liquor Tax File Transmission filing method is a quick and painless way to submit your tax return. You won’t have to hand-enter all of your data, which can save you a lot time. And just the same as Free-file, you don’t have to set up a special account, so you can begin using it immediately. This filing method does need some initial development, as it requires the creation of an XML file. If you are computer savvy, you can create this file yourself, or, if not, you could have someone that is computer savvy create it for you (ShipCompliant will provide this service to its clients, in case you were wondering). After you have saved the XML file to your computer, just upload the file using Wisconsin’s file transfer application, and wait for an immediate confirmation of receipt. The Electronic Funds Transfer (EFT) payment option is available for this filing method.

Last but not least, for those direct shippers that shipped wine to Wisconsin consumers under the old reciprocity statutes (California wineries only), don’t forget that the “Annual Reciprocal Wine Shipment Report” must be filed for shipments made from January 1, 2008 through September 30th, 2008 (and don’t forget the required dates of birth for both purchaser and recipient). This form can be submitted in paper format. Because the “Annual Reciprocal Wine Shipment Report” only includes shipments through September, it can be submitted now, or anytime before January 31st, 2009.

Also included in the legislative changes is the ability for wineries that produce less than 25,000 gallons of wine per year, to sell wine to retailers through a “co-operative wholesaler”. Co-operative wholesalers must be created before December 31st, 2008. To learn more about the legislative changes and co-operative wholesalers, read “Direct Shipping Bill Receives Governor’s Signature“. Also, “Permit Applications Available” contains more detailed information on these legislative updates, and information on how to become permitted as a Direct Wine Shipper in Wisconsin.

Also included in the legislative changes is the ability for wineries that produce less than 25,000 gallons of wine per year, to sell wine to retailers through a “co-operative wholesaler”. Co-operative wholesalers must be created before December 31st, 2008. To learn more about the legislative changes and co-operative wholesalers, read “Direct Shipping Bill Receives Governor’s Signature“. Also, “Permit Applications Available” contains more detailed information on these legislative updates, and information on how to become permitted as a Direct Wine Shipper in Wisconsin.

The winery focused seminar presented along with Wine Institute, FedEx and Wine Business Monthly, will feature Steve Gross, Director of State Relations at Wine Institute, with a state-by-state legislative update.  Special guest Tom Ourada, Tax Revenue Specialist with Wisconsin DOR, will provide insight on Wisconsin’s new direct shipping legislation.  These informative presentations will be complemented by shipping compliance tools and workflows from ShipCompliant and FedEx.

The retailer focused seminar presented along with Specialty Wine Retailers Association (SWRA) and Wine Business Monthly, will feature Tom Wark, Executive Director of SWRA, with a state-by-state update from the retailer perspective along with best practices and a product demo from ShipCompliant.

Both events are run in a ‘virtual’ online format where you hear the speakers by calling into a conference phone line and see their presentations by logging into a coordinating web conference.

Don’t miss this opportunity to get time-critical updates without the cost of attending an event in person.

Form BT-138, “Alcohol Beverages Tax Bond” (the bond amount should be equal to two times the estimated monthly tax due; minimum of $1000) and Form AB-123, “Distilled Spirits/Wine Permit Application” should be mailed to the WI DOR along with payment. Prospective direct wine shippers also must register to pay sales tax. The wine shipping permit application will not be processed until an Application for Business Tax Registration (aka “Seller’s Permit”) is completed. The fee for business tax registration is $20. If filing online (recommended – the application is processed much faster if done online), mail in the business tax registration fee with your $200 wine shipper permit fee and wine shipper permit application.

For expedient processing, an applicant should submit a copy of its state liquor license along with the Out-of-State Winery Shipper’s License application. An applicant must also submit the brand registration form (for brands not already registered with the state) prior to, or simultaneously to the submission of the application. In addition, a winery must register for sales and excise tax. An accelerated tax permit approval process is available for those wineries which have a distributor in state. In any event, and with time running out, electronic submissions will be approved faster than those send via conventional mail. See our previous post for more detailed instructions and a checklist for the application process with links to forms.

Also, as a reminder, Georgia will open up on July 1st, and Wisconsin will begin their new permit system on October 1st. We’ll have the full details of the application process in both states as they become available.

The new direct wine shippers permit allows licensees (licensed wineries that are located in- and/or out-of-state) to ship wine directly to an of-age and non-intoxicated individual in Wisconsin. The individual may receive no more than 108 liters of wine annually from any combination of licensees. The individual is responsible for compliance with this annual limit. The fee for this permit is no more than $100/year. Sales tax, excise tax and reporting are required quarterly.

This is good news for direct to consumer sales – no capacity caps, no touchy age-validation restrictions… but there’s a catch concerning self-distribution: all sales to retailers must go through a wholesaler.

Legislative Intent… Without the 3-tier system, the effective statewide regulation and collection of state taxes on alcohol beverages sales would be seriously jeopardized. It is further the intent of the legislature that without a specific statutory exception, all sales of alcohol beverages shall occur through the 3-tier system, from manufacturers to licensed wholesalers to retailers to consumers. Face-to-face retail sales at licensed premises directly advance the state’s interest in preventing alcohol sales to underage or intoxicated persons and the state’s interest in efficient and effective collection of tax.

Luckily, there are a couple safeguards for small manufacturers.

“All wholesalers must work diligently to ensure that distribution channels are available for the sale of intoxicating liquor products through wholesalers to retailers in this state.”

The legislation isn’t clear about methods or consequences for wholesalers if they fail to adhere to this clause.

The other safeguard: small wineries (producing under 25,000 gallons of wine in a year) may group together to form a “Cooperative Wholesaler”; this Cooperative must become licensed to act as a regularly-licensed-wholesaler in order to sell to retailers or other regularly-licensed-wholesalers. The maximum number of Cooperatives allowed is six, and they must be created between October 1, 2008 and December 31st, 2008. The Cooperative must have a single location within the state of Wisconsin (a winery can only belong to one Cooperative). If the Cooperative’s members consist of both in- and out-of-state wineries, then the board of directors must also include both in- and out-of-state members. Members may not be employees of the Cooperative, but may volunteer.

The bill passed through the Senate and the House in late February and was approved by Governor Doyle on March 13th. Last year, a similar bill was passed by the House and Senate, but was vetoed by Governor Doyle partly because the bill would have banned self-distribution altogether, and did not “adequately address the needs of small entrepreneurial wineries.” This year’s bill seems to address the aforementioned needs and received backing by the Wisconsin Wine and Spirit Institute. The new law goes into effect on October 1, 2008.