Missouri to DTC wineries and alcohol marketplaces: Show me the sales tax
Most states that allow direct-to-consumer (DTC) shipments of wine, beer, or spirits require DTC shippers to obtain a direct shipping license and collect and remit applicable sales and use tax and excise tax. Missouri is one state that currently doesn’t require out-of-state direct wine shippers to collect sales and use tax. That will change for many DTC shippers starting January 1, 2023, when Missouri’s economic nexus law comes into effect.
What is economic nexus?
Nexus is a connection that triggers a tax obligation. Economic nexus is when that connection is based on sales activity in a state and not physical presence (e.g., $100,000 in sales in a state in the prior calendar year).
Before 2018, when the Supreme Court issued its groundbreaking ruling in South Dakota v. Wayfair, Inc., states were limited to taxing businesses with a physical presence in the state. Physical presence still creates a sales tax obligation, but thanks to the Wayfair decision and subsequent state action, all states with a general sales tax — including Missouri starting January 1, 2023 — require remote sellers to register and comply with sales and use tax laws once they reach a certain volume of sales in the state (the economic nexus threshold).
Missouri’s economic nexus threshold is $100,000 in cumulative gross receipts from taxable sales of tangible personal property delivered in the state during the previous or current calendar year. Businesses must determine whether they’ve reached that threshold at the close of each calendar quarter. Once a vendor has established economic nexus in Missouri, it must start collecting tax no more than three months following the close of the preceding calendar quarter.
Every state’s economic nexus threshold is unique. You can find detailed information about thresholds for each state in our state-by-state guide to economic nexus laws.
Impact on marketplace facilitators
In addition to establishing economic nexus, Missouri Senate Bill 153 created a sales and use tax collection obligation for marketplace facilitators.
Marketplace facilitators that have economic nexus or a physical presence in the state are liable for the tax due on all sales made through the marketplace on and after January 1, 2023. This includes their direct sales and sales made on behalf of a third party.
Any marketplace that has a physical presence in the state should continue to file sales tax as they’ve been doing. Yet if they also deliver goods into the state from outside the state, they’ll also have to register for vendor use tax come January 1, 2023.
Thus, a marketplace facilitator that has a physical presence in Missouri and also delivers goods from outside the state would have to collect and remit both sales tax and vendor use tax.
How will Missouri’s economic nexus law affect DTC wine shippers?
The Missouri Department of Revenue has confirmed that wine shipped directly to Missouri consumers from out of state qualifies as tangible personal property, and therefore must be counted toward the economic nexus threshold.
In other words, DTC wine shippers with no physical presence in Missouri will have to register for a permit to collect and remit vendor use tax in addition to excise taxes before the first return is due.
Does the economic nexus threshold include wholesale sales?
This is a big question. “It’s easy to get over $100,000 if you include wholesale sales,” says Avalara General Manager of Beverage Alcohol Jeff Carroll. “Not a lot of wineries will reach the threshold through DTC sales alone.”
The Missouri Department of Revenue has confirmed that if wholesale sales are not taxable, they wouldn’t count toward the economic nexus threshold.
If you’re not sure whether your sales into Missouri would establish economic nexus, Iowa and Minnesota could serve as a gauge: Their economic nexus laws apply to direct wine shippers and they both have a $100,000 threshold. There are more people in Missouri than in Iowa or Minnesota, so if you’re a DTC wine shipper and required to collect sales tax in those two states, there’s a good chance you’ll have to collect in Missouri as well.
Registration requirements for remote DTC wine shippers
DTC wine shippers that establish economic nexus will need to register for vendor use tax prior to their first return due date. For example, a business required to file for the January 2023 return period should be registered prior to February 28, 2023. However, that business would need to collect applicable taxes starting January 1.
The preferred and fastest way to register is online through the Missouri Department of Revenue My Tax portal; online applications are generally processed in three to five days. However, the department will also accept paper registration applications. The average processing time for paper applications is 10 to 14 days, and taxpayers will receive their registration packets by mail.
Though the Missouri Department of Revenue is responsible for administering Missouri sales and use tax, direct wine shippers will continue to obtain a direct shipper license from and file annual returns to the Missouri Department of Public Safety Alcohol and Tobacco Control. Currently, direct wine shippers are permitted to ship up to two cases of wine per month per person for personal use.
We still don’t know how frequently DTC shippers will have to file their sales and use tax returns (i.e., monthly, quarterly, or annually).
Will DTC shippers have to collect sales tax or vendor use tax?
Missouri sales tax applies to retail sales made from a location in the state. Missouri vendor use tax applies to sales by out-of-state vendors. See the Missouri Department of Revenue for more details, though the department hasn't yet updated its website to account for economic nexus.
Remote DTC wine shippers that ship wine from outside the state and meet the $100,000 threshold will be liable for vendor use tax rather than sales tax. However, wine shipped from a location in Missouri will be subject to sales tax, even if the vendor is based out of state.
This is a point worth underscoring. DTC shippers that ship from outside the state and from within Missouri (from a fulfillment house physically located in Missouri, for example) could be liable for both vendor use tax and sales tax.
Need help with understanding nexus? Avalara for Beverage Alcohol can help you understand regulatory changes. Get the nexus guide.
Need help with beverage alcohol tax compliance? Connect with us.
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