Ask Alex: Your Bev Alc Compliance Questions Answered (August 2020)

Alex Koral | August 10, 2020

Do you have questions about the rules, regulations, and compliance requirements of the beverage alcohol industry? This series, Ask Alex, is a perfect opportunity to get those pressing questions answered straight from one of the industry’s regulation and market experts, Alex Koral, Senior Regulation Counsel, Sovos ShipCompliant. 

To take advantage of this opportunity and get your questions answered, submit questions to askshipcompliant@sovos.com and we’ll answer them here, in this blog series.

What is going on with the new tax in Chicago for DtC wine shippers?

As we mentioned in a recent blog post, Chicago is extending its city excise tax on sales of alcoholic beverages to all sales made into the city, including those coming from out-of-city sources. Previously, this tax only applied on sales made in the city, in local package liquor stores. But Chicago saw a tax gap from sales of alcohol that were coming from outside of the city, and so they implemented an ordinance change to fill that gap; going forward, all sales of alcohol that finalize in Chicago need to have this tax applied, including direct to consumer shipments of wine.

For anyone affected, this means registering with the City of Chicago Finance Department, and filing a monthly report remitting the city excise tax. The broader implication of this tax, though, is that it is the first time a city is demanding tax remittances from non-local sellers. 

While it is not new for DtC shippers to have state-level tax liabilities, it has never been the case for a city-administered tax. Generally, cities were seen as too locally-focused to impose taxes on remote sellers, but with Chicago beginning enforcement of this tax requirement this position may change. 

There are other cities out there that extend their own excise tax on alcohol sold in their jurisdictions, so we’ll have to see if they follow Chicago. But we’ll also have to see how well Chicago manages the collection of these new taxes. There will be a lot of new tax filers that the Finance Department will have to process.

What most struck you the most about the Wine Summit Piccolo virtual event?

It was so wonderful to see how our audience continues to engage with us and look for valuable information and updates about the wine industry, even in these challenging times. Our annual summit is always a highlight of the year, when we get together to learn and connect and build on our collective experiences. And we were all saddened to have to cancel the live event. So seeing how well everyone moved to a virtual summit was extremely heartening and made me very encouraged about the future of this industry as we move out of the ongoing crisis (hopefully sooner than later). 

It also came across to me that the DtC shipping market is at a bit of a moment of truth. While shipping by wine producers is a well-established market, there continue to be questions and concerns coming from state regulators, which came through from the panel with Matt Botting and Dexter Jones, from the California and Texas ABCs, respectively (whom I want to extend another huge thank you to for joining us!). No one thinks we can put the wine shipping genie back in the bottle, but we all need to make sure that everyone involved is following each state’s rules and are working to reduce any lingering leeriness that regulators have about this market. This will be especially true as more parties, like retailers, breweries and distillers, look to enter the DtC market in their own right.