sales tax on out of state shipments

Alcohol sales are complicated. In some cases, the retailer (in this case the winery) is merely acting as your agent in contracting with a common carrier to deliver the wine and title to the wine passes to you in the state the retailer is located in. If this is the case, state sales tax must be paid.

In addition to the laws of the state the retailer is located in, the situation can also be affected by the state being shipped to. For instance: if you were located in, oh, Colorado, the retailer needs a direct shipment license ($50/year) and while California sales tax wouldn't be paid, a Colorado excise tax of $0.0733/l would be.

Weirdly enough, I was pondering this very question tonight, when I received an offer from and Oregon winery (more on this in another thread) that included state sales tax for certain states, my own included. Each state was different, so I'd assume it was the states' own sales tax they were charging, but why only some states I'm not sure. Perhaps in those states they must go through a local distributor or something, which makes the sale an in-state one.

Mark Lipton

Many DESTINATION states require out of state shippers to collect the sales tax for them as a condition of being allowed to ship into their state.

The states have caught on. They can require the shippers to collect the sales (use) tax as a condition for allowing alcohol to be shipped into their state. This lets them capture the tax that they would otherwise have to rely on the recipient to voluntarily pay.

>

i assure you that the state of Texas requires a sales tax paid on all purchases made within the state.

my company was in MD. i sold only to resellers. i did sloppy paper work and did not acquire reseller certificates from the resellers. The state of texas filed suit against my company for $250,000 of uncollected sales tax from 1999 to 2007. they also requested $250,000 in penalties.

texas was the >Does anyone have any information that would help answer the question

My state (Colorado) requires out of state sellers to collect an excise tax but no sales tax (see

The winery in question provided the explanation below. They charge everyone a sales tax, regardless of whether they are a CA resident or live in some other state and don't get their hands on the wine until it's delivered to them. I'm not sure how the California Bureau of Equalization views this practice (they probably don't mind as long as the money ends up in their coffers) but I'm pretty sure it wouldn't make the Colorado Department of Revenue very happy since the winery is clearly shipping to Colorado without a permit and without reporting the required excise tax.

As a small family bus> Mart> > Does anyone have any information that would help answer the question

I pay Virginia sales tax when wine is shipped to me from CA.

Each state is different. VA apparently requires a 5% sales tax (here's a useful site:

but CO only requires the $0.0833/liter excise tax and no sales tax. But no state requires that the seller collect a California sales tax.

The question is: are CA wineries allowed to collect a CA sales on shipments to other states?

Yes. But it depends upon two primary issues:

1) When does it become your wine. Some state its yours and then they arrange shipment as a convenience.

2) The freight forwarder may/may not have licensing in all states and that may then involved #1.

Martin, As was already mentioned, this same rationale has been employed by wineries and retailers to skirt bans on interstate shipping (you buy the wine in CA and they simply ship it to you). AFAIK, this rationale has never been challenged in court, and I wouldn't be surprised to see it thrown out on legal grounds. Since the usual application is a consumer-friendly thing (i.e., making wine available to people in states with harsh interstate shipping laws), there haven't been many people inclined to challenge such a policy apart from distributors or state governments. This winery is the first that I've heard of who applies the principle in this way.

Mark Lipton

One standard state tax issue is most retailers or business interest will charge a tax if they have equity arrangments in the state the recipient is in.

FYI, if you buy mail order coat from Cole Haan in San Fran, and they have a store in Indiana they will charge you state tax. The same if they did not have a store but had a distribution center they have interest in the state the recipient is in.

Dell Computer was a great buy for me because a few years ago they did not have a retail site in Charlotte, NC so no sales tax. But when they did, I ordered and was charged a sales tax.

If a winery has an equity arrangement with the distributor in a state they could be required to charge sales tax in the originating state.

True. This particular winery has no such arrangement.

I made some calls and here's what I've found out:

According to the CA Bureau of Equalization regulation 1700 of the tax reimbursement code (or some such document) the decision whether to charge sales tax or not on out of state shipments is at the discretion of each vendor just as long as they report it, of course.

According to the Colorado Dept. of Revenue, every vendor that ships wine to CO is required to have a permit on file with them and pay the specified excise tax. Skirting this requirement by paying the CA state tax doesn't absolve the winery of this responsibility, regardless of disclaimers such as the one below (copied from this winery's site):

ALL ALCOHOLIC BEVERAGES ARE SOLD IN CALIFORNIA AND TITLE PASSES TO THE BUYER IN CALIFORNIA. We make no representation to the legal rights of anyone to ship or import wines into any state outside of California. The buyer is solely responsible for shipment of alcoholic beverage products. By placing an order, you authorize us to act on your behalf to engage a common carrier to deliver your order to you.

So it seems that this winery is either breaking the laws of at least one state (likely all but CA), or has managed to find a "small loophole" in the direct shipping laws. I wouldn't have a huge problem with either if it was to the benefit of the consumer. But in this case, by charging the

7.25% CA tax most of their out of state customers end up paying more than they would normally have to, in some cases the full 7.25% more.

Martin, taxes are rarely to the benefit of the consumer!!!! :-(

Well, feel free to complain to your state, but I'd bet all that would happen is that the winery will stop shipping to your state. Charging the sales tax is a decision trying to legitimize the "title transfers" workaround.

On Apr 16, 5:25 pm, DaleW wrote:

This whole question of charging tax or not when two states are involved is extremely complex even without adding the complexity of alcohol sales. A legislative division of government can pass just about any law it wishes, and this has been so a very long time. Caligula was made a god by law, likely because members of the Roman senate knew that they might not be alive much longer if they did not. A court challenge, and often appeals to higher level courts, usually is required to strike down a law or parts of it. When two states are involved, then a federal court often must be used. There was recently a very high profile US supreme court decision concerning a mother company in one state that owned another company in another state. The state of the owned company claimed it had the right to tax the mother company in another state. The owned company apparently did not depend on the mother company for materials, etc.

A law is meaningless without penalties for violation of it. For sales, and especially for alcohol, the penalties can vary greatly for seller and buyer. For alcohol sales, penalties tend to be far more severe for the seller than buyer and are far more likely to be enforced for the seller. For a store in only one location in one state, the owner in general must worry only about the laws of his or her state. If the owner's state allows shipping of alcohol, with perhaps some restrictions, the owner will very likely obey these laws. However if the alcohol is bought by someone in another state and shipped there, then the store owner need not worry about the laws of the other state, unless his and the other state have mutual agreements to enforce the other state's laws in certain cases. If an illegal alcohol shipment is found by the authorities in the buyers state, they may contact the seller and complain, but that is about all they can do in many cases. However then the penalties for the buyer come into play. The most usual thing that happens in this case is that the shipment is seized by the authorities. This can happen, but it is very rare in many areas.

For a chain that has stores in many states, they likely will follow the letter of the law in all states in which they are located or might be located in the future. Thus a wine producer in, for example, California is likely to be much more strict than a retail store there. First, the wine producer may have sales through the legal distribution system in some states. They will thus not want trouble with state officials there. In addition they may hope to expand distribution to more states in the future, and thus do not want to ruffle the feathers of officials in states they do not yet sell to. Also they will not want to offend retailers in other states that sell their wines by selling the wine for less than possible in the state because of markups in the 3-tier distribution system. International shipments are another matter. This likely is not much of a problem for wine since wine is heavy and international air express between Europe and North America will cost more per bottle than all except very high end wines. However, if one can bear the shipping costs, some stores in Europe will ship wine or spirits to the US. Only a very small number of packages seem to be opened for inspection by customs. The packages will more likely be inspected by equipment to detect explosives, radioactivity, etc. Dogs may be used that are trained to sniff drugs, body parts, etc. There are now companies that specialize in the paper work required for international shipment and packing. Thus even a small shop, with a good web site, can ship internationally now without much effort on their part.