What Does It Take to Get a Drink Around Here? Wacky Tax Wednesday
- Sales and Use Tax
- Mar 12, 2015 | Gail Cole
When I last visited Arkansas, an admittedly long time ago, I was smitten by the beautiful land and healing hot springs. I tried milk fresh from a cow for the first time in my life and realized there might be hope for milk, after all. I didn’t notice any wineries.
And yet Arkansas does have wineries. Arkansans have been growing grapes and making wine since European immigrants settled the area in the 1880s. But you might not know that if you’ve never been to Arkansas, because as far as I can tell, you have to be in Arkansas in order to buy Arkansas wine.
A VERY brief history of Arkansas wine sales
- For the first time, Arkansas wineries are allowed to ship wine directly to Arkansas residences, provided the buyer visits the winery and purchases the wine on-site. Wine from out-of-state wineries may not be shipped directly to Arkansas residences.
- The Supreme Court rules that Michigan and New York cannot ban interstate direct shipments of wine while allowing in-state wineries to ship to residents (Winespectator). Arkansas is now “at odds … with the U.S. Supreme Court over the issue of direct-to-consumer wine shipping.”
- The Small Farm Winery Law of 2007 takes effect, repealing the 2005 native wine law that was at odds with the May 2005 Supreme Court ruling.
- The Small Farm Winery Law allows qualifying in-state and out-of-state small farm wineries to apply to the Alcohol Beverage Control Board for a small farm winery license. In-state wineries may sell the wine of qualifying out-of-state wineries.
- Direct shipments of wine by all wineries (in-state and out-of-state) are prohibited.
- Direct shipping returns! Under Act 483, Arkansas wineries can ship wine directly to the private residences of Arkansans who have visited their winery.
- Arkansans can have wine shipped to them from out-of-state wineries that they have visited.
- Direct shipment of off-site sales (phone, fax and internet orders) is prohibited.
Direct shipment sales and delivery
Arkansas and out-of-state wineries may only ship one case of wine per quarter to Arkansas residents who purchased wine on-site, at the winery. Other shipping restrictions:
- All wineries wishing to ship to an Arkansas residence must apply for- and pay for- a wine shipping permit.
- All wineries that ship to Arkansas residences must
- Register to report taxes on a monthly basis.
- Collect and remit Arkansas wine excise tax or light wine excise tax.
- Collect and remit Arkansas gross receipts (sales) tax.
- Collect and remit Arkansas liquor excise tax.
- Register to report taxes on a monthly basis.
- Shipments may only be delivered to wet territories (approximately half of the counties in Arkansas are dry).
- Wine may only be delivered “during the hours of the day that alcoholic beverages may be purchased in the state.” State law allows alcohol sales between 10:00 a.m. and 12:00 a.m., though localities may enact more restrictive hours. It may be delivered any day of the year except Christmas Day (alcohol sales/deliveries have been allowed on Election Day since 1989).
Under the 2013 law, wineries are not required “to collect a local tax that would be imposed by a municipality, town, or other political subdivision of the state.” Only state taxes apply.
However, that fact that wineries don’t have to collect local taxes puts the state out of compliance with the Streamlined Sales and Use Tax Agreement (SSUTA), of which Arkansas is a member.
As a result, effective July 1, 2015, the sales tax law for direct shipments by wineries is amended so that the state will be in compliance with SSUTA. Senate Bill 230 (Act 236) reads as follows:
[T]he Streamlined Sales and Use Tax Agreement requires that the tax base for local taxes be identical to state taxes unless otherwise prohibited by law.”
In order to be compliant with the SSUTA, Act 236 strikes the section that reads:
“A winery does not have to collect a local tax that would be imposed by a municipality, town, or other political subdivision of the state.”
Under Act 236, which takes effect on July 1, 2015, out-of-state wineries and in-state wineries that sell directly to Arkansas residents are “treated equally in their responsibility to collect Arkansas state and local taxes.”
There has been much talk in recent years of out-of-state sellers, nexus, and remote sales tax. It’s a dicey issue. Many states want sellers to remit tax on remote sales to their residents, and some states require remote sellers with affiliate or click-through nexus to do so. The situation generally looks like this: a buyer in his or her home state purchases taxable goods online, by phone, or via mail order from a seller located in another state. The goods are delivered to the buyer. The seller may or may not be required to collect sales tax; if not, the buyer must pay state use tax on the sale.
Here we have a neat twist on that situation. The Arkansas resident is required to leave Arkansas to purchase wine from a winery in another state. It’s against the law for the Arkansas oenophile to call a favorite California winery to buy wine, or order wine from that winery online. Said Arkansas oenophile must be physically present in another state to buy the wine. Only then can the wine be shipped to the Arkansan’s home.
The actual sale of the wine must take place at the out-of-state winery, and therefore the other state’s taxes presumably apply. Yet to deliver to an Arkansas residence, the winery must collect and remit Arkansas taxes.
To the best of my knowledge, Arkansas legislation does not address that issue.
Share your wacky tax tales in the comments below. We know you have them!