Louisiana releases updated guidance for wine direct shippers
On July 1, 2020, Louisiana became the 43rd state (plus Washington, D.C.) to enforce economic nexus: Many out-of-state wine direct shippers are now required to collect and remit applicable Louisiana state and local sales taxes under the economic nexus law. This has raised many questions for wine shippers, which the Louisiana Department of Revenue recently answered in Information Bulletin 20-018.
This is a big change for some wine direct shippers. Prior to July 1, 2020, all out-of-state wine direct shippers were required to collect the state portion (4.45%) of Louisiana sales tax, but only in-state wine direct shippers were required to collect and remit applicable local sales taxes.
New sales tax obligations for out-of-state DTC wine shippers
Out-of-state wine manufacturers, producers, and retailers that sell and ship wine directly to consumers (DTC) in Louisiana must register with the Louisiana Sales and Use Tax Commission for Remote Sellers (the Commission) within 30 days of establishing economic nexus with the state. The Commission “serves as the sole entity in Louisiana to collect and remit sales and use tax from remote sellers.”
An out-of-state seller establishes economic nexus in Louisiana if, in the current or previous calendar year, it:
- Has more than $100,000 in gross revenue from sales of tangible personal property (e.g., wine), products transferred electronically, or services in the state; or
- Made at least 200 separate transactions of tangible personal property, products transferred electronically, or services in the state.
Tax-exempt sales, including sales for resale to wholesalers, count toward the $100,000 sales/200 transactions threshold. However, sales made through a marketplace should be excluded when calculating the economic nexus threshold.
Sellers of wine club memberships that send one or more separate shipments of wine to a Louisiana purchaser should count each invoice as a separate transaction.
The new requirement has created some confusion for out-of-state DTC wine shippers already registered with the Louisiana Department of Revenue (LDR) and collecting and remitting sales tax in Louisiana. And there are many such wine shippers.
Requirements for DTC wine shippers with a Sales Tax Registration Certificate
All out-of-state DTC sellers of still and sparkling wine with customers in Louisiana should already be registered with the LDR. Remote DTC wine shippers have been required to obtain a Sales Tax Registration Certificate and collect and remit the state portion of the sales tax (4.45%) since July 1, 2016.
Due to the complexity of local sales tax compliance in Louisiana, no out-of-state sellers were required to collect local sales tax until economic nexus took effect July 1, 2020. Local sales tax complexity stems from the fact that Louisiana is a home-rule state where local governments, not the Department of Revenue, administer local sales tax.
Starting July 1, 2020, a holder of a Sales Tax Registration Certificate must register as a remote seller with the Louisiana Sales and Use Tax Commission for Remote Sellers within 30 days of meeting either economic nexus threshold ($100,000 in sales or 200 transactions). Collection of state and all applicable local sales taxes must commence within 60 days of establishing economic nexus. Collected taxes should be remitted and returns filed through the Commission’s online portal.
However, current holders of a Sales Tax Registration Certificate don’t need to register with the Commission unless they’ve established economic nexus with Louisiana. Those without economic nexus should continue to collect state sales tax only, filing returns with the LDR as usual.
Alternatively, DTC wine shippers that do not have economic nexus with Louisiana may voluntarily register with LDR for a Direct Marketer Sales Tax Account (explained below).
Requirements for DTC wine shippers with a Direct Marketer Sales Tax Account
While it’s true that Louisiana hasn’t required any out-of-state DTC wine shippers to collect local sales tax until now, remote sellers could choose to collect local sales tax. In fact, the LDR encouraged voluntary collection by allowing remote sellers to register as a Direct Marketer and collect a flat combined state and local sales tax rate of 8.45%, rather than the state rate plus varying local rates.
Starting July 1, 2020, Direct Marketers must register as remote sellers with the Commission within 30 days of establishing economic nexus, and collect state and all applicable local sales taxes within 60 days. Payments and returns must be remitted through the Commission’s online portal.
However, a Direct Marketer who has not established economic nexus should continue with business as usual: Collect the combined 8.45% sales tax on all Louisiana sales and remit it to the LDR with a Direct Marketer Sales Tax Return. Note: Direct Marketer Sales Tax Returns and payments must be submitted electronically.
Registration and collection timeline for remote sellers
The Commission has provided a helpful timeline to help remote sellers navigate new obligations.
July 1, 2020
Deadline for remote sellers, including remote DTC wine shippers, to determine whether they have economic nexus.
If an economic nexus threshold was met during the 2019 calendar year or the 2020 calendar year to date (January 1, 2020–June 30, 2020), the remote seller must submit an application with the Commission within 30 days then start collecting state and applicable local sales taxes within 60 days.
July 31, 2020
Deadline for remote sellers with economic nexus as of July 1, 2020, to submit an application with the Commission.
Remote sellers may begin collecting sales and use tax “immediately following notice of an approved application,” which typically takes one to two days.
Note: Remote sellers should continue to remit and file as usual (i.e., as a Direct Marketer or Sales Tax Registrant) until their application has been approved and they start collecting under the new remote seller’s permit.
September 1, 2020
Deadline for remote sellers with economic nexus as of July 1, 2020, to begin collecting state and local sales tax.
Remote sellers whose application has been approved by the Commission must begin collecting applicable local sales tax on September 1, 2020, if not already doing so.
Taxes collected during a month must be remitted on or before the 20th of the following month. Thus, taxes collected in July are due by August 20, taxes collected in August are due by September 20, and so on.
Note: Remote sellers not collecting under the new remote seller’s permit during July or August should file the July return (due by August 20) and the August return (due September 20) as normal.
Since remote sellers with economic nexus as of July 1, 2020, must start collecting under the new remote seller’s permit starting September 1, taxes collected during the month of September must be remitted with the new remote seller’s return through the Commission’s online portal by October 20, 2020.
Additional information for DTC wine shippers
DTC wine shippers with a physical presence in Louisiana are liable for state and local sales tax even if selling less than the economic nexus threshold.
All in-state and out-of-state DTC wine shippers are required to obtain authorization from the Louisiana Department of Revenue to make direct shipments of wine to Louisiana consumers, and pay the annual fee. Remote DTC wine shippers must also obtain a license from the Louisiana Office of Alcohol and Tobacco Control and pay the annual permit fee.
Finally, in addition to sales and use tax, all in-state and out-of-state DTC wine shippers must report and remit Louisiana excise tax on sparkling and still wines. Additional details are available on Revenue Information Bulletin 20-018.
Avalara for Beverage Alcohol can help wine direct shippers with these compliance requirements and more in Louisiana and other states.
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