Response to Wholesalers Claim "DTC Shippers Don't Pay Taxes"
Part 2 in a 5-part series on why nobody trusts wine wholesalers
This is Part 2 of 5 issues of this newsletter that will detail the Wine & Spirit Wholesalers Association’s incompetence and duplicity on the issue of direct shipment of alcohol.
Recently the Wine & Spirits Wholesalers of America attempted to discredit direct-to-consumer shipments of alcohol. They did this in the form of a response to an article that Alex Koral of ShipCompliant published at Wine Industry Advisor.
No one believes a single thing WSWA says about direct shipping. Not retailers, producers, or even wholesalers, let alone the consumers WSWA hopes to thwart from obtaining the wines wholesalers don’t distribute. WSWA has spent three decades crying wolf and we know what happens to the little boys that cry wolf.
In this second installment of my series on WSWA incompetence on the issue of direct-to-consumer shipping, we look at their claims surrounding taxes and direct shipping
DTC SHIPPERS DON’T PAY TAXES
The loss of tax revenue not only deprives the state of taxes it relies upon to fund law enforcement and education, but it also undercuts legal, compliant, in-state businesses that make up local communities. Most states lack the bandwidth and resources to analyze common carrier reports (where available) to expose the lack of DTC shipping compliance; however where investigated, these reports have led to some shocking numbers….There is no replacement for the existing state-based, accountable tax collection systems. States can preserve tax collections and public safety goals by encouraging e-commerce solutions such as local, licensed delivery from in-state retailers. DTC shipping opens the door to widespread tax evasion – which harms citizens and law-abiding state-licensed businesses.
In the course of making baseless claims about tax evasion by direct shippers, WSWA makes note of the fact that Ohio, Virginia, Michigan, and North Carolina have all had to make efforts to stop “illegal” shipments into the state that they say deprive those states of tax revenue. What they don’t argue (because they can't) is that out-of-state shippers that have been granted direct shippers licenses by the above states don’t remit taxes. No states have claimed they have any problem obtaining tax revenue from out-of-state wineries or retailers who are able to obtain a license to ship wine into states.
It’s true that some states have sent cease and desist letters to unlicensed out-of-state shippers and some states have gone so far as to sue some of these shippers in federal court. However, that’s not to say that taxes have not been paid on these shipments. It’s just that they haven’t been paid in the states that are complaining. Any wine shipped from a retailer in State A to a consumer in State B has seen excise taxes paid to the federal government and to State A as well as sales taxes to State A.
Moreover, WSWA fails to make any mention of the fact that those wines that are shipped into states by unlicensed out-of-state wineries and retailers aren’t being shipped on “spec”. Those wines were ordered by residents of State B. On the one hand, it should be noted that no law in any state prevents a resident from buying wine from an out-of-state vendor. It’s the shipping of the consumer’s wine into the state that upsets WSWA.
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On the other hand, why are these residents even ordering and arranging shipments into their state? The answer is simple. They could not find the wines they wanted from the pitiful selection of wines that wholesalers distribute in the state. And this is the problem. The vaunted system of alcohol regulation that WSWA so ferociously supports can’t come close to satisfying consumer demand, let alone the needs of producers or retailers in 2022.
There is an obvious solution to what WSWA and a tiny number of Attorneys General see as the problem of unlicensed shipments and lost tax revenue: Give consumers the legal ability to buy from all out-of-state producers and retailers. Offer shipping permits to out-of-state wineries, distillers, brewers, and retailers, require them to pay a permit fee, require them to remit taxes, and require them to submit reports. Both producers and retailers and their associations have all said they are more than happy to ship under these conditions. The state gets its tax revenue and consumers get the products they want.
There’s one problem with this seemingly rational and workable option: Wholesalers don’t get what they want: a cut of every wine every consumer in their states purchases. Talk about whiney cry babies!
WSWA has no credibility on the issue of taxes and direct shipment. For too long they have told lies and turned away from the truth. It’s why nobody, including producers, retailers, consumers, and even their own members believe anything they have to say about direct shipment.
Read Part 1 of this series: “Response to Wholesalers' Claim "Minors Use The Internet to Obtain Alcohol"