Modern Tax Collection for Online Sales – Marketplace Facilitators

One of the most important considerations (after minors purchasing online) for state regulators in the alcoholic beverage industry at all levels of government is tax calculation, collection, and remittance, all of which have been dramatically enhanced using technology.?

Four focus areas for regulators are Age Verification, Licensing and Compliance, Taxation, and Auditability, or as we think of them as ALTA.?

Wineries and other alcoholic beverage producers must navigate a complex maze of sales and excise taxes. With more than 3,800 individual tax rates across local, state, and federal jurisdictions, with a maze of over 2.6 million zip codes, there is a lot to manage. This means there are endless ways to incorrectly calculate what is owed to stay legally compliant. Being delinquent in tax payments is a serious threat to any enterprise and can lead to nightmare scenarios that push the most honest, well-intentioned business owners out of business.?

A ripple effect of the “South Dakota v. Wayfair” Case of 2018 many states are now moving to destination-based sales tax and that can cause numerous reporting and business issues, as it did in Colorado. With more localities adding in their own special district taxes, the problem is only going to get worse for businesses to stay up to date and compliant. Also, in some states, there are alcohol specific sales tax rates and possibly “other taxes or fees” that are required to be collected at the time of sale. For example, Maryland has an additional 3% sales tax add-on for alcohol, New Hampshire requires the seller to pay an 8% markup fee, and Kentucky requires both sales and excise tax to be charged and shown separately on the invoice.?

Often ecommerce and shopping cart providers require their clients to provide the tax tables to be used. Many of the tables available only calculate to the five-digit zip codes, are not regularly updated, and only calculate at the state level.??

States are moving towards electronic reporting to help speed up the process of reporting and collection of taxes. Ensuring accurate real-time reports is vital for the quick reporting required. More states are moving to monthly rather than quarterly and annual reporting and so having all the data quickly and efficiently in one place is crucial.??

States have implemented Marketplace Facilitator rules for the collection and remittance of sales tax, making it efficient for the states to collect sales tax and other fees, cutting down on the work and worry of the seller. These rules exist in 38 states currently and apply to businesses such as Amazon, Etsy, Vinoshipper, and others.?

It is likely that states will extend the collection and remittance of taxes to excise tax as well in due course. Some states like California have already extended the responsibility of Marketplace Facilitators for the collection and remittance of other fees and taxes. Vinoshipper is one of the first marketplace facilitators to manage sales tax under these rules in the alcohol beverage industry and the savings in time and worry to our clients has been substantial. The states acknowledge this new system is far more efficient for the collection of fees and taxes than previously existed. ?

Technology is making it easier for both producers and regulators to keep track of sales and apply the proper taxes, regardless of how complicated the rates are across political boundaries. In fact, using a robust e-commerce platform such as Vinoshipper, transactions include accurate, real-time calculations and tax payments which dramatically enhance compliance and eliminate risks for all parties.?

With the use of technology, tax collectors and other regulators have data and tools that are more powerful than ever, which instill confidence throughout all levels of government, including the many enforcement and benefit programs that depend on taxpayer funding.?

Utilizing integrated technology smooths the collection and remittance of taxes and provides states with an easily auditable system and assurance of full tax compliance.?