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Wyoming’s New Economic Nexus Rules May Affect DtC Wine Shippers

Fri, 01/11/2019 - 08:40

Last year, the Wyoming Department of Revenue (DOR) announced new “economic nexus” rules, expanding the number of businesses that will be required to collect and remit tax on sales made into the state.

We have recently confirmed with the Wyoming Liquor Control Division (LCD) and the DOR that licensed wineries making direct-to-consumer (DtC) sales to Wyoming residents will also be required to collect and remit sales tax, if they meet the new nexus thresholds.

Who now has sales tax nexus in Wyoming?

According to Wyoming’s economic nexus rules, businesses without physical presence in the state must begin collecting sales tax on sales to the state if annually they:

  1. Have gross receipts of more than $100,000 in the state — this includes all sales, including otherwise tax-exempt sales, such as distributions to the LCD; or
  2. Make more than 200 separate transactions into the state.

Anyone meeting these thresholds will be required, as of February 1, 2019 to begin collecting sales tax on retail sales they make in the state, and begin reporting these sales as soon as March 2019.

If you do not make any retail sales to the state (so are not engaged in the DtC wine market there) you are not required to register as a sales tax collector, even if you do still distribute your products to the LCD or other in-state retailers.

Wyoming was actually quite early to the economic nexus party, passing rules requiring remote sellers to collect and remit sales tax even before the Supreme Court’s monumental ruling last year in South Dakota v. Wayfair, in which such economic nexus rules were legitimized.

Wyoming had to stay implementation of those rules until the Supreme Court made its ruling in Wayfair,  but even then the state waited a little while before announcing in November that its rule would be effective in February.

What does this mean for DtC shippers?

The Wyoming LCD and DOR have confirmed with ShipCompliant researchers that wineries making DtC sales to the state will be subject to the economic nexus rules, just as any other remote seller. Therefore DtC shippers should review their annual transactions to the state and determine if and when they will have to begin collecting and remitting sales tax on their DtC orders to Wyoming..

Sales tax collection applies in addition to the 12 percent markup on wine purchases that the state also requires from DtC shippers.

Wyoming sent out notices to many wineries that they believe are close to the $100,000 or 200 separate transactions thresholds, informing them of their likely sales tax obligations.

If a winery has received this notice but will not meet the economic thresholds, it should reach out to the DOR right away. As the notice states, if a winery that received this notice does not either register for sales tax or notify the DOR that it is not subject to these new requirements by January 21, 2019, the DOR will assume a compliance failure and take appropriate punitive action.

If you received a notice, but are in fact not subject to the economic nexus rules (i.e., you will not exceed the annual thresholds), submit a written statement to that effect either by email to terri.lucero@wyo.gov, or by post to:

Wyoming Department of Revenue

Attn: Terri Lucero, Administrator, Excise Tax Division

122 West 25th St.

Cheyenne, WY 82002

In addition, wineries that use their DtC license to sell directly to Wyoming retailers should make sure to file “resale certificates” from their retailer customers with the DOR in order to be exempted from sales tax collection for such sales. These are “sales for resale,” for which the Wyoming retailer will be the party responsible for collecting and remitting sales tax, not the winery. This is standard practice for wholesale distributions of all products.

ShipCompliant is working to enable collection and remittance of sales tax for DtC wineries that meet the thresholds, and will send out notice to users when this functionality is ready. As more developments come out, we will make sure to keep you informed.

 

Tackle compliance in every state with our Direct-to-Consumer Wine Shipping Rules

 

 

 

The post Wyoming’s New Economic Nexus Rules May Affect DtC Wine Shippers appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

How to Expand Your Brewery’s Footprint: Craft Beer Distribution Laws and Market Conditions

Wed, 01/09/2019 - 17:22

It’s no secret that the craft beer scene has exploded over the past two decades in the United States. The total volume of beer produced by microbreweries has jumped from around 700,000 barrels in 2004 to nearly 6 million as of 2017, according to our friends over at the Brewers Association. Likewise, the total number of American breweries has skyrocketed from just over 1,500 at the turn of the century to well over 6,000.

This is great news for beer enthusiasts – both makers and drinkers – across the country, and indeed around the world. The market has seen continuous growth over the past several years; despite beer sales dropping in general, craft beer was up 5 percent in 2017 according to the same Brewers Association report.

While breweries are taking advantage of this pathway to increased sales and expansion, they are also faced with growing pains – and that’s perfectly natural for a business in any industry, let alone one as heavily regulated as alcohol production.

In addition to logistical issues most growing organizations face like analyzing the market, licensing, and managing distribution, brewers also have to cope with a bevy of federal, state, and local regulations. To help beer producers with their expansion efforts – in terms of both new products and geographical reach – we’ve compiled a guide, 10 Key Steps to Expanding Your Brewery’s Footprint.

This is the first in a short series of blogs detailing some of the issues breweries face when expanding. Stay tuned for the ensuing editions by subscribing to the ShipCompliant blog.

 

Understand your own ability to comply with craft beer distribution laws

Each state – and many local jurisdictions – has its own registration process, compliance obligations, and tax rates. This complicates expansion and distribution into new areas. Before you launch a new product or start selling into a new area, you should assess your internal resources. You’ll need to factor in the size of your team, the depth – or lack – of knowledge you have about multiregional compliance, and the finances you have allocated to address it.

Remember, registering products in new jurisdictions can be expensive and time consuming. If you spend too much time or money putting out a series of fires during registration because you weren’t fully prepared to handle it, you may end up hindering your own growth. It’s important to have a fully fledged plan in place and a complete understanding of requirements in each new area you intend to sell into before you actually attempt to expand.

 

Research the markets(s) where you intend to distribute beer

Compliance is a big component to expansion, but it’s also imperative to understand the state of the market itself. Different regions may have different trends in both beer production – for example, New England is known for its IPAs, Colorado for its darker beers, etc. – and consumption alike. Heavier winter beers probably aren’t going to sell as well regardless of the season in, say, Florida as they might in the midst of a chilly Minnesota November.

In addition to following trends, you should think of the ways you can diversify your products from those that are already selling well. What about your beer stands out from the local offerings, or from popular nationally distributed craft brews?

We’ll have more on how your branding can impact your beer’s identity – and, thus, how it resonates with consumers – in the next edition of this series. Until then, cheers, and happy brewing. 

 

 

Find out how ShipCompliant by Sovos can help your brewery stay on top of compliance by signing up for a free demo.

 

 

 

The post How to Expand Your Brewery’s Footprint: Craft Beer Distribution Laws and Market Conditions appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

The TTB Wants You – To Comment on Labeling and Advertising Rules

Tue, 01/08/2019 - 14:50

The end of 2018 proved to be a moment of flurious activity in the Trade and Tax Bureau (TTB). Last year, after the passage of the Craft Beverage Modernization and Tax Reform Act, the agency had to spend the holiday season tearing through the major tax overhaul, striving to implement rule changes that were set to take effect mere days later. In 2018, while the TTB’s late-year activities are a bit more long-ranging, the agency was still far from taking it easy.

The TTB’s biggest undertaking at this time was an announcement on November 26 of the publication of a proposed rulemaking to “update, simplify, and clarify the labeling and advertising regulations for wine, distilled spirits, and malt beverages.” This massive proposal (taking up well-over 100 pages of the Federal Register) has important implications for the beverage alcohol industry, which will be discussed in more depth below.

But along with this proposed rulemaking, the TTB has also been busy recently establishing and proposing new American Viticultural Areas (AVA). AVAs are an extremely important resource for the wine industry, as they provide accurate and dependable information for consumers regarding the source location of wines. Under federal laws, in order to use an AVA, 85% of a wine must be sourced from grapes grown within the AVA. For an industry taken by the idea of terroir (and rightly so!), having that assurance can be invaluable.

In recent weeks, the TTB has announced the establishment of AVAs for the Upper Hudson (NY) and the Van Duzer Corridor (OR), along with expanding the territories for the established Arroyo Seco (CA) and Monticello (VA) AVAs. In addition, there are also proposals to establish new AVAs for the Crest of the Blue Ridge Henderson County (NC), the West Sonoma Coast (CA), and the Eastern Connecticut Highlands (CT).

 

Proposed Amendments to Labeling and Advertising Regulations

While new and expanded AVAs are important news, the leading regulatory changes the TTB is working on are those listed by the agency in Notice No. 176, the proposed rulemaking published in the Federal Register of Monday, November 26, 2018.

As the TTB notes, this proposed rulemaking is just the latest in its multi-year effort to “Facilitate Commerce through a Modern Labeling Program Focused on Service and Market Compliance.” This effort has also included removing formula requirements in certain conditions, expanding the list of allowable revisions for labels where they do not need a new COLA, improving the functionality of COLAs Online and Formulas Online, and add lots more staff to handle labeling and formula regulations.

In the proposed rulemaking, the TTB sets out a number of regulatory adjustments and changes they hope to implement, with the stated intent of improving “understanding of the regulatory requirements and to make compliance easier and less burdensome”. These changes the TTB proposes include:

  • Incorporating changes to label standards that have arisen from statutory changes (e.g. the use of semi-generic designations on wine labels) or from international agreements (for instance, incorporating designations of geographic significance).
  • Permitting greater flexibility on the placement of mandatory information on labels.
  • Permitting greater flexibility for wine labels when certain appellations or when using multiple varietal designations.
  • Codifying long standing TTB interpretations of rules with First Amendment implications, such as the stance that the prohibition on disparaging statements does not prohibit truthful and accurate comparisons with competitor’s products.
  • Modernizing and finalizing rules regarding alcohol content statements for wines and malt beverages, including removing outdated language like the ban on use of the term “pre-war strength” (referring to pre-World War I strengths).
  • Instituting rules regarding packaging label requirements, including extending the requirement that opaque packages include mandatory label information to malt beverage products.
  • Clarifying rules regarding the use of terms associated with one commodity when used on labels of a different commodity, to prohibit such uses when they would confuse a consumer but permitting them when the use would not be misleading.
  • Consolidating alcohol advertising regulations in a single, new part 14 to title 27 of the Federal Register, which will aim to unify rules for all three commodity lines of wines, beers, and spirits.

Note that this proposal does not address other ongoing labeling initiatives by the TTB, such as “Serving Facts” statements, gluten content statements, standards of fill, or modern advertising issues (i.e. social media).

As said, the proposed rules cover more than 100 pages of regulatory adjustments, which can be rather dry reading. For anyone looking for an easier summary, the Libation Law Blog has promised to closely digest the proposed rules and provide helpful summaries of what they find.

The TTB also states that they intend to provide industry members with three years to update their practices and get into compliance with the rules once they are finalized.

Before they get finalized, however, there is opportunity for industry members to file their own comments and suggestions to the agency — indeed, that is the purpose of this proposed rulemaking, to solicit comments from the audience of affected individuals so that when the agency finalizes their rules, they are suited to the real life situation of those affected.

Anyone affected and interested by the proposed rulemaking is encouraged to voice their opinions to the TTB. The comment period is set to close on March 26, 2019 (though we have heard of a petition to extend that period). Before this period ends, comments can be submitted:

  • Online at the Federal e-Rulemaking Portal.
  • By mail, addressed to Director, Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW, Box 12, Washington, DC 20005.
  • In person or courier to the Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW, Suite 400, Washington, DC 20005.

However, while the TTB is open to comments from all and sundry, it is recommended that you not take this opportunity frivolously. A well-thought, incisive comment, professionally drafted perhaps with the consultation of an attorney will have a much greater impact than something put together late one night. Indeed, many industry groups are likely to file their own comments, so if you are part of any associations or organizations, consider reaching out to them to see how you can support or influence whatever they might submit to the TTB.

While the government shutdown continues, many agencies have ceased many normal functions. This will affect the ability of agencies to receive comments, consider them, and draft new rules. Though the due date for comments to the TTB is not until the end of March — hopefully long after the shutdown has ended — note that any comments you submit may not be properly received until normal government functions have resumed.

The post The TTB Wants You – To Comment on Labeling and Advertising Rules appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

BevAlc Roundup | Government Shutdown Affects Beverage Alcohol Industry, Trends to Watch in 2019, and Breweries Move to Sustainability

Mon, 01/07/2019 - 14:48

2019 is now upon us, and with it comes the first Roundup of the new year! Already there are a number of critical ongoing issues that are affecting the beverage alcohol industry, in particular the government shutdown, now in its 3rd week. With the government at a standstill, beverage alcohol producers, who require approval from the federal government for their formulas and labels, are unable to release new and planned products. While threats of a prolonged shutdown may be just that — only threats — the prospect of further delays will bring compounding difficulties for the industry as it begins the year.

In other news this week, we also look at the upcoming Supreme Court arguments in the Tennessee liquor store residency case, along with a very interesting legal analysis on whether the plaintiffs are even justified in bringing their complaint and what might happen if the Court’s decision is based on this procedural question and not on the underlying legal principles. We then look at what might be included in a rumored sell off of brands by Constellation and why flagship brands tend to struggle. And finally, we celebrate the centennial of our very trusted and valued partner, Wines & Vines!

Speaking of Wines & Vines, stay up to date with the latest trends in the DtC wine market with the Sovos/Wines & Vines 2018 DtC Report. Make sure to download your copy here! (But know that the 2019 Report is coming just around the corner!)

 

Regulatory News and Discussions

TTB Closes Operations Amid Government Shutdown | Since mid-December, the federal government has been shutdown due to a budget impasse, leading the TTB to cease many regular actions. ShipCompliant

Government Shutdown Means You May Not See Any New Beers or Wines for a While | Breweries and wineries require federal approval for their products’ labels, but with the TTB closed during the shutdown brewers and vintners who want to roll out something new can’t. Fortune

Supreme Court to Hear Oral Arguments in Tennessee Retail Residency Case January 16 | The U.S. Supreme Court is scheduled to soon consider arguments in a case centered around the 21st Amendment and the three-tier system. Wine Business

Will the Roberts Court Stand Down on the Tennessee Wine Case? | An important but may be overlooked question is whether the plaintiff, Tennessee Wine and Spirits Retailers Association, has standing to sue? Irish Liquor Lawyer

New Laws Affecting the California Alcohol Sector in 2019 | Winery and alcohol producers now can post on social media about upcoming special events at restaurants, bars, wine stores or other venues in California. Wine Business

How Colorado’s New Liquor Law Will Affect the Craft Beer Industry | As of January 1, full-strength beer became available in grocery stores across the state. 5280 Magazine

Whiskey Sour: U.S. Craft Distillers Say Trump Trade War with Europe Is Killing Export Plans | Washington’s trade dispute with Europe may have faded from the headlines in recent months, eclipsed by grander tensions with China, but the fallout continues for many companies around the country that have long targeted Europe as an achievable export market. Washington Post

 

Industry Updates: Market Conditions and Developments

State of the Industry: What’s To Come For Alcohol in 2019? | The past year has seen the continued growth of craft beer and craft spirits, an increased number of microbreweries, and a rise in experiential drinking. Beverage Daily

Constellation’s $3 Billion Wine Sale: What’s on the Block? | Last fall, multiple reports surfaced that Constellation Brands is exploring a selloff of several wine labels—among them Clos du Bois, Cook’s, Arbor Mist, and Mark West—as it looks to continue premiumizing its portfolio in line with market trends. Shanken News Daily

Hop Take: Flagship Beers Are Failing Because Consumers Get Bored Quickly | This is the dichotomy of the craft beer business: The most successful craft brands are the ones suffering the most. VinePair

Top 10 DTC Sales Growth Practices | VinQuest 2018 reveals the importance of the human touch in DTC wine sales. Wine Industry Advisor

The Hispanic Consumer Is Key to the Future of the Wine Industry | Taking into account the expected demographic growth, according to research studies by Rabobank, a global agroindustrial bank together with the Wine Institute, by the year 2033 it is expected that Latinos could buy 96.5 million boxes of wine. Abasto

 

Digestif

Beer and Eco-Innovations | From small craft brewers to big multinational brewing conglomerates, there’s a growing self-awareness and collective consciousness about how the industry can change and become “greener”. Living It

100 years of Covering the Wine Industry | As the North American wine industry grew and evolved, so did Wines & Vines. Wines & Vines

The Best and Worst Beer and Liquor Trends of 2018 | 2018 was a weird year, as a drinker — and as a person who writes about the craft beer and spirits industries. Paste Magazine

Winemaking Disasters: When Wine Goes Wrong | Making wine is not easy. From natural disasters and vineyard pests to human error and deliberate sabotage, Matt Walls shares some of the trials and tribulations that winemakers have overcome to get the bottle to your table. Decanter

Wine Enthusiast 2019 Vintage Chart | A general guide to the quality and drinkability of the world’s wines. Wine Enthusiast

 

Find out how ShipCompliant by Sovos can help your business stay on top of compliance by signing up for a free demo.

 

The post BevAlc Roundup | Government Shutdown Affects Beverage Alcohol Industry, Trends to Watch in 2019, and Breweries Move to Sustainability appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

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