Out-state Illinois Winery Shipper’s licensees’ must remit state and local taxes on direct-to-consumer wine sales come January 1. Note: collecting local taxes proves taxation is not a reason to argue against retailers’ interstate commerce in alcohol.
The country-spanning impact of South Dakota v. Wayfair just hit the Illinois direct-to-consumer wine market. The Illinois Department of Revenue has announced that beginning January 1, Winery Shipper’s License holders with no physical presence in Illinois will need to remit the Illinois Retailer’s Occupation Tax provided they do not have a physical presence in Illinois and they meet the $100,000 in sales or 200+ transaction benchmark. This is in-line Wayfair’s determination that out-state retailers must abide by and pay in-state and local taxes when selling to residents of another state (provided perhaps that the thresholds of transactions or volume of sales are met).
You can read the bulletin published by the Illinois Department of Revenue for those holding Winery Shipper’s Licenses issued by the Illinois Liquor Control Commission here.
Of note, thresholds, instructions for updating your registration with the Illinois Department of Revenue, and information on determining the taxes owed:
What are the tax remittance thresholds?
The tax remittance thresholds are:
1. the cumulative gross receipts from sales of tangible personal property to purchasers in Illinois are $100,000 or more; or
2. the retailer enters into 200 or more separate transactions for the sale of tangible personal property to purchasers in Illinois.
Winery Shipper’s License holders who meet or exceed the threshold in either paragraph 1 or 2 shall be liable for all applicable state and locally imposed ROT on all retail sales to Illinois purchasers
Do I need to change my registration with the Illinois Department of Revenue (IDOR)?
If you are a Winery Shipper’s License holder, do not have physical presence in Illinois, and meet one of the tax remittance thresholds, you must update your registration with Illinois. In your MyTax Illinois account, click on “Register for New Tax Accounts” and then select “Retailer” to complete the registration.
Contact the Central Registration Division at
• by phone at 217-785-3707 or
• by email at REV.CentReg@illinois.gov,
for information about or assistance with updating the registration of your business.
How do I determine the retailers’ occupation tax rate to collect and remit?
On and after January 1, 2021, Winery Shipper’s License holders with no physical presence in Illinois and who meet or exceed either of the tax remittance thresholds are deemed to be engaged in the occupation of selling tangible personal property at the Illinois location to which the tangible personal property is shipped or delivered or at which possession is taken by the purchaser (destination sourcing). In other words, sales of wine made to Illinois purchasers by a Winery Shipper’s License holder who meets either tax remittance threshold and has no physical presence in Illinois is taxed at the destination ROT rate (including local ROT).
Use the Tax Rate Finder (currently under development) to look up location specific tax rates. Depending on the location to which the wine is shipped, the actual sales tax rate may be higher than the state rate (6.25%) because of home rule, nonhome rule, mass transit, park district, county public safety, public facilities or transportation, and county school facility tax.
For those wondering – yes the Winery Shipper licensee must still report and pay the Illinois Liquor Gallonage tax. (Form RL-26-W Liquor Direct Shipper Return)
The silver lining here? Taxation at a local level for shipping has never been easier. This alleviates a major argument that those opposed to allowing alcohol retailers the right to participate in interstate commerce. The old “we’ll lose the tax money” or “we can’t figure our taxation” or “taxation would be hard” arguments have long been paper tigers in the fight to keep consumers and retailers from exercising their Commerce Clause rights. The vast majority of internet retailers and companies offering internet retail services have contended with these issues and created vast databases of local taxation. States are also keeping track and provide resources to those looking to comply by offering databases and systems for calculating local taxes. Adding the alcohol tax is easy.
For those of you longing for the days of wild-west internet commerce and the dream that taxation wouldn’t happen, I leave you with this Firing Line gem to remember the times when these topics were even debated.