With Governor Inslee signing the 2019-2021 Washington State Operating Budget into law, several changes to our current tax law took place. One of specific importance to Washington wineries is the significant change to the nonresident sales tax exemption when a customer from a qualifying state makes a purchase at our winery or tasting room. Below is information on what the changes mean for all tax payers and collectors. Important note: this tax collection change does NOT apply to sales of wine delivered to customers outside the state.
Courtesy of the Washington State Department of Revenue
As you may know, during the 2019 session, the Legislature modified the nonresident exemption. Effective July 1, 2019, the retail sales tax exemption is no longer available at the point of sale. Instead, eligible nonresidents who have paid at least $25 in state sales tax on qualifying purchases may apply for a refund of the state portion of the retail sales tax from the Department on an annual basis.
Sales of wine
Beginning July 1, 2019, wineries in Washington must collect sales tax on their sales of wine and other tangible goods sold to nonresidents when the nonresident customer takes delivery of those goods in this state (i.e. customer takes possession of the goods in Washington at the time of sale.) The exemption will no longer apply at the point of sale, no matter where the customer resides/lives.
Interstate and foreign sales
If a Washington winery delivers wine or other items to a customer at a location outside the state, those sales continue to be exempt from Washington’s retail sales tax and retailing B&O tax as “interstate and foreign sales.” There is no change to the way these sales are taxed or reported. Wineries do not need to start collecting Washington taxes on products shipped for delivery outside the state.
For more information, see our Special Notice on our website.
Support for the Craft Beverage Modernization and Tax Reform Act (H.R. 1175/ S.362) continues to build momentum with 218 members of the United States House of Representatives and 65 members of the Senate supporting the bipartisan legislation. We want to take a moment to say a huge “THANK YOU” to Senator Maria Cantwell, Senator Patty Murray, and Representatives Dan Newhouse, Susan Del Bene, Derek Kilmer, Cathy McMorris Rodgers, and Jaime Herrera-Beutler for being leaders on S.362/H.R. 1175 and supporting their Washington wine industry by agreeing to sign on as cosponsors of the legislation.
Introduced by Representatives Ron Kind (D-WI) and Mike Kelly (R-PA) and Senators Ron Wyden (D-OR) and Roy Blunt (R-MO), the legislation will make permanent reforms enacted in 2017 that create a fair and equitable tax structure for brewers, winemakers, distillers and importers of all beverage alcohol.
Important to Washington wineries within CBMTRA 2019 is both the simplification of the excise tax credit but equally important is creating a permanent change to the federal excise tax rate of $1.07 for wine up to 16% ABV. Prior to 2018, the tax rate unfairly changed from $1.07 to $1.57 on any wine above 14% ABV effectively taxing such higher ABV wine as fortified wine. Finally, CBMTRA 2019 makes permanent the allowance for sparkling wine producers to have access to the improved version of the small producer tax credit, ending a luxury tax rate of $3.44/gallon on all sparkling wine harkening back to the 1930’s and a time when sparkline wine was considered a foreign luxury.
The support for the legislation by the majority of the House and Senate is a unique coalition of alcohol trade associations including the Brewers Association, Beer Institute, Distilled Spirits Council of the United States, American Craft Spirits Association, Wine Institute, WineAmerica and the United States Association of Cider Makers.
The CBMTRA 2019 is the Washington Wine Institute’s #1 federal legislative priority. We are fortunate to have the leadership of our national association of American wineries, WineAmerica, working hard every day in Washington D.C. to push this legislation across the goal line. As a WWI member we are grateful for your investment, and we strongly encourage you to also join WineAmerica and invest in this crucial work bringing permanance to our outdated federal excise tax structure and tax savings to every your winery to reinvest and grow.