Sales Tax Implications of Wayfair Ruling for Wineries
Implications for Wineries resulting from the South Dakota v Wayfair ruling
The Wayfair ruling (decided in favor of South Dakota by the Supreme Court) has changed the rules for retailers selling outside of their home state. Thanks to this ruling, certain online retailers and other sellers may soon be forced to collect and remit sales tax in all 50 states, based solely on their sales or transaction volume into a state.
Under prior law, making sales within a state was not enough to require that seller to collect and remit sales tax to that state. The seller was required to have some level of deeper connection to the state - generally a physical presence in the form of property (an office or warehouse), an employee based in the state, or company vehicles making deliveries into that state.
Instead, buyers of merchandise who received goods into a state were supposed to file and remit use taxes on those purchases. Few buyers complied with these use tax rules which are difficult to monitor and enforce. As a result, state tax revenues have been in a downward spiral as more and more sales have moved online.
These rules put the onus back on the seller to be the revenue collection agent for these states.
Wineries in Compliance
Many states have made the collection and remittance of sales tax a condition of receiving a license to ship wine to their state, which means that wineries who are fully compliant with licensing rules are already remitting sales tax in more states than other retailers. For these wineries, the Wayfair ruling will have limited impact on their sales tax compliance.
For sales to states like Colorado, Minnesota, Iowa, Missouri, Florida, Washington, DC, and Massachusetts that have been following historical nexus rules, however, wineries may be required to collect and remit sales tax for the first time.
We can expect to see a flurry of legislative activity in states seeking to make rule changes that allow them to profit from the Supreme Court ruling.
Wineries not Fully Compliant
If your winery has been playing a form of Russian Roulette with your licensing and sales tax compliance, now is the time to get it right. Get current with your licensing and implement solutions, like ShipCompliant, that can help you assess, collect, and remit the correct amount of tax in states in which you are selling.
Learn more from this article, written by the compliance specialists at Compli.