How an Internet sales tax affects wine

The Senate is likely to pass a measure to have retailers collect sales tax for orders shipped out of state. The issue has been a hot-button issue since many big-box retailers perceive that online-only retailers have an unfair advantage and they have brought their largesses behind this tax equalization issue at the federal level. How would the Marketplace Fairness Act affect wine sales?

The answer is: probably not much.

Although wine e-commerce (hello, 1990s term!) has been growing, it is still hamstrung by regulations. Wineries can only ship to 36 states while retailers, who have much broader and more compelling offerings, can only legally ship to 12 states.

The other factor is shipping. If you buy a few bottles on the way home, you pay sales tax. But if you poke around online and throw some items in your virtual cart, you have to pay shipping even if you don’t have to pay sales tax currently. Let’s say the store charges $20 a case shipping, which is customary in the northeast for in-region shipments. If you’re buying $10/bottle wine, shipping is 16%, so it is almost prohibitive (unless the deal is extraordinary). If you order more than $300 worth of wine to have the shipping be less than the sales tax (assuming 7% sales tax). (Still, the online price may well be a lot cheaper than the in-store price, a phenomenon we have discussed before so it could be worth it.) If you’re ordering $300+ cases of wine, paying 7% sales tax is probably not a deal-breaker.

Such a law would therefore stand to impact wines north of $25/bottle and stores in New Jersey. Why sotres in New Jersey? Because if you do an online search for a wine, one from the Garden State usually is one of the cheapest available. Maybe there would be more shipping discounts in the wake of sales tax collection? But some of the lowest-price retailers are already extremely lean margins.

What do you think–how would the proposed sales tax bill affect your wine purchases? Or the wine industry writ large?

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8 Responses to “How an Internet sales tax affects wine”

  1. Until someone invents cheap teleportation (I’m looking at you, Mr. Elon Musk) shipping costs will always rear their ugly head. The wise winery or retailer finds ways to absorb some or all of those costs for the customer. It does however seem to me that most states I ship to require me to collect sales tax, the only two exceptions I can think of are MN and FL. So we’re already dealing with that…

  2. Aha, thanks, Jeff. Yet another reason why it wouldn’t make that much of a difference (assuming you aren’t the only virtuous one collecting the sales tax).

  3. I would think twice about paying a sales tax. The price of shipping is already an issue for me. Free shipping offers don’t apply to my purchases as I search for specific wines rather than good buys.
    When my on-line clothing store added sales tax because there was a store in town, I bought only when there was a discount or free shipping, but I’m more flexible about my clothing than I am with my wine.

  4. Actuallly, for wine producers, their is no internet sales tax issue involved because the producers are already required to collect sales tax in those states that have such a tax. Just another reason all states should allow producers to ship to consumers within those states….

  5. Dennis – thanks for the clarification.

    Some people have brought up the issue of calculating the various taxes as an obstacle for small businesses. But a recent NYT story on the subject pointed out a free software solution for that. And that pales in comparison to the compliance issues of the wine industry!

  6. As others have mentioned, wineries large and small already collect sales tax for their interstate shipments. In fact, we collect sales tax for purchases that are made in our tasting room and then shipped to the customers home. Many (like ours) have online sales that are substantially less than $1 million. Other regulations are much more problematic than collecting sales tax. Those regulations also add to the cost of shipping, as carriers add a fee to cover the cost of collecting a signature when they deliver.

  7. As a consumer, it would not affect me much. I only order online if it is something special that is hard to find (usually more expensive), and in those cases the tax is not going to impact my decision. I get less expensive stuff at my local wine store.

  8. We in the wine industry should be FOR the internet sales tax concept – WAIT read the rest – or we should be bring a class action lawsuit for discrimination.
    If we have to go through the Mickey Mouse of having to get a Sales Tax Permit in every state we ship into and required to put up the appropriate bonds – everyone else should be required to meet that mark.
    I believe less government is better government so I am totally opposed to anyone having to pay an out-of-state sales taxes.
    When you call me or order on line and pay with a credit card I have captured your funds and the product you just purchased NOW belongs to you.
    The sale occurred in my city – my state and I will pay the sales taxes here where the transaction ACTUALLY occurred.
    All the paperwork puts an “undue burden on small businesses” – that’s my story and I am sticking to it!

    Cord Switzer
    Fredericksburg Winery
    Fredericksburg, Texas


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