Wine Technology Blog @ WineWeb.com

We noticed that another wine e-commerce service launched a few days back, and maybe because it's getting close to Halloween, their take on sales tax spooked us a bit. They state that :...we ask which states you must charge sales tax. This is usually only the state(s) in which your winery holds a physical presence."

Here's the WineWeb's take on sales tax and how we've built it into our e-commerce service.

• Over 20 states require a winery to collect sales tax on direct shipments. In some states this rate is different from the tax rate that a customer would pay at their local wine shop on purchases.
• Some states have a flat sales tax rate, other states have varying tax rates based on the county and/or city.
• All states charge tax on the handling portion of the shipping cost. Some states (11) charge tax on the entire shipping cost.
• Some states (18) require sales tax on non-wine items that that winery ships into the state.

Here's how it works for a winery using the WineWeb's e-commerce service:

• The winery selects each state where they are allowed to ship. If that state requires sales tax to be collected, and the rate varies by destination, the winery can have the system determine the rate based on the customer's location. The winery could also elect to collect a flat rate in that state, mindful that all taxes collected must be remitted. If the state requires a flat rate, the system proposes the appropriate rate.
• The system computes the sales tax amount for all items that are taxable in that state, including shipping, handling and merchandise items. The winery does not need to remember or define these rules.
• When a customer places an order, the system uses the shipping ZIP Code not to directly determine the sales tax, but to determine the taxing jurisdiction (county or city). The sales tax rate is then retrieved based on the taxing jurisdiction. We believe that a ZIP Code match to a sales tax rate is error-prone as about 20% of all ZIP Codes in the country cross a county line. If the system senses that the ZIP Code crosses a county line, and if the tax rate or deliverability varies across those counties, the system prompts the customer to select their county, to ensure that the correct tax rate is applied. The county is then stored with the order data for compliance reporting.

We maintain the sales tax rates, ZIP Codes and dry area so you don't need to spend time and effort to understand them. We also use a compliance company to help ensure that our information is accurate and up-to-date. Nothing spooky about that.