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LICENSING AND COMPLIANCE: HOW TECHNOLOGY HELPS


In our continuing series of looking at compliant direct shipping and the focus of regulators, we review the complexities of licensing and the individual rules around each license. Licensing is one of the four focus areas, others include Age Verification, Tax Calculation and Collection, and Auditability. Think of the four areas as ALTA.

Rooted in the fundamentals of Prohibition and the 21st Amendment, licensing and compliance have historically been a central focus to regulators in the alcohol industry. While federal law mandates oversight, the requirements vary greatly state-by-state, some being reasonable and others just false barriers to DTC sales, but they are there, nonetheless. Technology allows for the management of the rules and regulations. In fact, the U.S. Treasury Department recently issued a 64-page report looking into ways to improve competition for small producers by, among other things, making it easier for them to navigate and compete in the complex regulatory environment.

Keeping up with each state’s licensing requirements can be an insurmountable challenge for a small business. For example, the State of New Jersey requires wineries to have a Direct to Consumer (DTC) shipping permit, which costs $938 and must be renewed every year. Furthermore, producers selling in New Jersey are required to submit their wine labels for approval, at an annual cost of $23 each, to be renewed each year by November 30th. Producers selling and shipping into this state are also subject to 6.625% sales tax and an excise tax of $0.875 per gallon of wine shipped, with a limitation of twelve cases per person per year. Wineries must also report their sales taxes quarterly by the 20th of each month, excise taxes bi-monthly by the 15th, and overall direct shipments annually by March 20th.

Other states have similar requirements with their own renewal dates, while others have less rigorous requirements, such as Florida which does not require a DTC permit or the collection of sales taxes unless you have physical or economic nexus in the state, or if you are an out of state producer and your annual sales exceed $100,000 into the state. On the other hand, within certain states, some counties have “dry” zip codes which prohibit any direct shipments of alcohol to consumers. And five states have a total ban on direct shipping of alcohol from out of state.

To say the least, producers shipping across state lines must keep up with a maze of regulations to stay compliant.

The good news is that the DTC market has matured over the past 15 years and successfully met these regulatory challenges. Aided by technology, compliance companies, such as Vinoshipper, use online platforms and automation to make it seamless for a producer to meet all licensing and compliance requirements. Producers can have peace of mind knowing all sales are legal in real-time and states can be assured all sales are recorded and reported accurately along with the payment of taxes.


Original LinkedIn Article