A look at how beverage alcohol businesses are managing compliance

Beverage alcohol businesses must be tired. A new Avalara/Potentiate survey shows they spend an average of 50 hours per week on tax management and compliance. That doesn’t leave a lot of time to kick back with a glass of your favorite wine, beer, or cocktail and enjoy a day off. In comparison, it takes just shy of 43 hours to watch all five seasons of “Arrested Development.” 

Dealing with beverage alcohol compliance is a full-time job, and it’s not an easy one. Just trying to keep up with changing regulations and requirements might drive you to go on a sitcom binge to distract you from your worries. The wineries, breweries, distilleries, and retailers surveyed report a myriad of challenges around sales and use tax compliance as well as industry-specific obligations.

The top tax compliance obligations giving beverage alcohol businesses grief

All the industry sectors surveyed said they have a tough time filing sales tax returns with the appropriate state and local jurisdictions, and they’re challenged when it comes to keeping track of changing state and local sales and use tax rates. Wineries and retailers who sell off premises were most likely to identify these as top concerns. Distilleries (46%) and wineries (49%) especially find it hard to know where to register for sales tax permits. In addition, 37% of all businesses struggle with keeping track of product exemptions and customer exemptions.

Eighty-two percent of businesses surveyed sell on their own website, and many sell on marketplaces and other ecommerce platforms. With more and more beverage alcohol businesses selling online, it’s little surprise that 45% of all respondents said they have difficulties complying with direct-to-consumer shipping regulations. 

More than half (51%) of retailers that sell off premises and 46% of wineries mentioned obtaining, revising, and renewing product registrations as troublesome. Other problematic areas include:

  • Adhering to regulations related to trade and marketing practices
  • Knowing the correct alcohol rates to charge
  • Renewing licenses and bonds 
  • Understanding when and how to get licensed

Manual compliance methods could be slowing wineries down

Few of us leave the sofa to change the TV channel anymore; that’s why we have remotes. Tax compliance management is similar. You can rely on technology to streamline compliance or use manual methods. Just over half of the beverage alcohol businesses (54%) surveyed have automated sales and use tax, while 49% are using an automated solution to manage taxes related to beverage alcohol. 

According to data from the survey, wineries are less likely than breweries and distilleries to automate tax and more likely to use manual methods and tools. This could help explain why wineries spend more time on compliance than the other sectors. On the opposite end of the spectrum are distilleries, which are most likely to have automated compliance and spend the fewest hours on tax management. It’s also worth noting that because breweries and distilleries are permitted to ship to far fewer states than wineries, they may need to devote fewer hours and staff to compliance.

Businesses may not be evaluating tax compliance often enough

Results show only 20% of businesses evaluate their tax compliance methods and solutions for possible changes or upgrades at least annually. When they do consider new technology, it’s typically in response to factors like heightened monitoring by government agencies, legislative changes, or increased complexity stemming from rates and rules. 

The world of beverage alcohol compliance changes frequently and rapidly. Businesses that wait two years or longer to review tax compliance methods and solutions might not be equipped to stay on pace.

No season spoilers here: Tax compliance is tricky

Few people find tax compliance funny. To find out how automation can save you time and help your business navigate common challenges, talk to our Avalara for Beverage Alcohol compliance experts. It’s up to you to choose whether to spend the extra hours you’ll get back on other business priorities or finally enjoying a refreshing beverage while following the antics of a dysfunctional riches-to-rags family.

Read more about how producers and retailers are managing compliance in The state of beverage alcohol tax compliance. 

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