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Illinois: Out-of-State Wineries Must Collect Use Tax


 Out-of-state wineries selling to Illinois residents must collect use tax.

Anyone following US politics this year will have undoubtedly heard of the Marketplace Fairness Act of 2013 (MFA), federal legislation that would allow states to require out-of-state retailers that do not have physical presence within their borders to collect and remit sales tax.

While federal lawmakers weigh the pros and cons of MFA,  numerous states have already stretched the definition of nexus, requiring certain out-of-state businesses to collect sales and use tax on their behalf. For example, Minnesota passed an Amazon tax law that took effect on July 1, 2013 (and Amazon terminated its relationship with Minnesota affiliates).

In a similar spirit, the Department of Revenue has issued a General Interest Letter in response to an inquiry from an out-of-state winery about its sales tax obligations in the Prairie State.

The winery explained the following:

  • "[W]e do not have any nexus in the state of Illinois;"
  • "We are going to sell wine directly to IL residents through online catalogs and our website;" and
  • "We are going to ship our products via COMPANY."

The winery went on to explain that they don't "solicit sales of taxable products or services through employees, salespersons, independent agents, or service representatives located in Illinois. We sell our products through our website and online catalogs and we have no connection with the state of Illinois."

Does the winery have to collect tax from Illinois residents?

Survey says...

Yes.

In spite of the fact that the out-of-state winery has no physical presence in Illinois, tax must be collected and remitted. Use tax, not sales tax.

As explained by the Department of Revenue:

  • "Under the Liquor Control Act of 1934, out-of-state wineries who are going to sell wine directly to Illinois residents must complete an Application for State of Illinois Winery Shipper's license ("Direct Shipping Permit"); and
  • "[A] licensee who is not otherwise required to register under the Retailers' Occupation Tax Act must register under the Use Tax Act to collect and remit use tax to the Department of Revenue …."

So there it is.

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photo credit: Carlos Madrigal via photopin cc


Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.