3 Ways Real-Time Software Benefits DtC Wine Shipping

Lizzy Connolly | April 27, 2021

Last year, wine shipments to consumers reached a record $3.7 billion, with a 27% year-over-year increase in direct-to-consumer (DtC) shipment volume. With no indication of slowing down, wineries must ensure that they utilize the right tools to protect their bottom line, collect the right tax rates and ensure compliance on every transaction. Implementing real-time software for DtC wine shipping needs can accomplish each of these goals. 

Understand the penalty risk

Real-time software helps wineries avoid potential penalties before they happen. For example, a winery can know ahead of time if it is not properly licensed in a state or does not have the proper label registrations to sell compliantly. Additionally, businesses can rest assured that they are compliant with all state, county and city regulations. 

Correct tax collection

Sales tax varies from one state to the next, which is why wineries need to ensure they correctly collect tax, regardless of their customers’ locations. Maybe a medium-sized winery in California gets three orders for its limited release Cabernet Sauvignon: one each in Minnesota, Florida and New Mexico. If the winery attempts to collect sales tax for each order using the Florida tax rate of 6%, it will overcharge the New Mexico customer but undercharge the Minnesota customer. These point of purchase miscalculations will require wineries to make up the difference from undercharging and to return any overages. Neither situation inspires confidence nor helps build long-term relationships with customers.

Wineries must collect the appropriate sales tax for each jurisdiction at the time of purchase to avoid creating a tax gap. Otherwise wineries face potential legal action from both states and consumers.

Avoid compliance concerns

Real-time compliance checks are also crucial. For example, different states will have varying requirements when it comes to limits on the permitted alcohol by volume (ABV) per shipment, the size of the order and packaging, the amount an individual can receive DtC in a time period (CAVL) and specific shipping label requirements.

If a state agency completes a wine purchase with an underage or invalid license, the agency knows that particular DtC wine shipper is illegally selling wine and not following the state’s established rules and regulations. Real-time compliance checks can help ensure that your business is protected if it is part of a sting operation or is selected for an audit. 

The DtC wine channel continues to grow each year, giving wineries great opportunities to expand their DtC operations compliantly and increase business sales. Real-time software for compliance and sales tax determination helps reduce risk and keeps customers happy. Incorrect tax reporting could lead to increased oversight of DtC wine shipments, fines, penalties or even a loss of licensure. Wineries should invest in real-time software and not leave tax and compliance to chance.

 

Take Action

See how Sovos ShipCompliant can help you with your DtC shipping compliance.