Filing a remittance is generally simple, only requiring the shipper to catalog total shipments made and calculate the tax due based on the products shipped. An excise tax return can be made more complicated if the return is required to be accompanied by a shipping report, for which the shipper must provide a detailed list of all shipments made during the reporting period, including date of delivery, name and address of recipient, and products shipped.
While excise taxes are in some ways a relatively simple aspect of the compliance burden for DtC shippers, they present a unique complication for retailers engaged in DtC shipping. This is because all alcohol sold by retailers has already had their state’s excise tax assessed and remitted against it. Retailers are required to purchase the alcohol they resell within their state’s three-tier market, meaning that it came from a local distributor (or from a self-distributing manufacturer where allowed) who was already obligated to pay the local excise tax for that alcohol. But if the retailer then resells that alcohol DtC into a different state, they would be obligated to remit the excise tax of that other state as well.
For example, if a California retailer ships a wine DtC to a consumer in Illinois, that wine would have already had a 20-cent per gallon tax remitted to California (paid by the distributor or winery the retailer received the wine from) and then would also be subject to the $1.39 per gallon excise tax in Illinois, to be paid by the retailer. As such, this creates a double-taxation scenario where alcohol shipped by retailers DtC is ultimately subject to more tax than alcohol shipped DtC by the manufacturer (who can sell alcohol that has not already been tax-paid in their home state). Requiring DtC shippers to remit the ship-to state’s excise tax does make policy sense, to create parity with other sales in that state and ensure the state keeps its coffers full, but the extra burden on retailers engaged in DtC shipping remains a point of contention, though perhaps it may just be the price paid by retailers to engage in this market.