Technical Information Release

Technical Information Release TIR 07-1: Taxation of Direct Shipments of Wine

Date: 01/10/2007
Organization: Massachusetts Department of Revenue
Referenced Sources: Massachusetts General Laws



This Technical Information Release [TIR] explains a new statute, Acts 2006, chapter 33 [the Act], permitting wineries located both in Massachusetts and elsewhere in the United States to sell wine directly to consumers. It also discusses the steps DOR will take in implementing the new law and assuring that taxes due under the statute are properly paid to the Commonwealth.

This statute was passed in response to Granholm v. Heald, 544 U.S. 460 (2005). Under prior law, Massachusetts wineries were allowed to sell wine directly to out-of-state consumers via mail order or over the Internet, but out-of-state wineries were not allowed to sell directly to consumers in Massachusetts. The Supreme Court in Granholm found that a similar lack of reciprocity under Michigan law violated the Commerce Clause by discriminating in favor of in-state businesses. It also determined that states could tax sales of wine into the state by requiring permits "as a condition of direct shipping," and could enforce their tax laws by requiring those with permits to "submit regular sales reports and to remit taxes." Id. From this it is apparent that a winery need not have a physical presence in a state before it is required to pay that state's taxes on the sale of its wines. Cf. Quill Corp. v. North Dakota, 504 U.S. 298 (1992).


Under the Act, the Alcoholic Beverages Control Commission [ABCC] is authorized to issue licenses to large wineries (those making 30,000 more gallons of wine) and to small ones (all others). In each case, only wine made from grapes is included in the 30,000-gallon figure. Out-of-state wineries must provide a true copy of the applicable alcoholic beverages license to manufacture, export, and sell wine, issued by the appropriate licensing authority.

Licenses issued by the ABCC allow wineries to ship directly to consumers, although a large winery may not ship directly to consumers if it has contracted with or been represented by a wholesaler during the preceding 6 months. Act, § 6 (G.L. c. 138, § 19F(a), (b). A household may not receive delivery of more than 240 liters of wine per calendar year in total from all licensees. For purposes of this TIR, a "household" is a domestic unit living together in the same dwelling, i.e., a single-family house, an apartment, or a condominium.

In addition to selling directly to consumers, small wineries are permitted to sell (1) at wholesale in kegs, casks or barrels to a person licensed under G.L. c. 138, §§ 12, 13 or 14; (2) at wholesale for resale in containers to a person licensed under G.L. c. 138, § 15 [2]; and (3) at wholesale to a person licensed under G.L. c. 138, §§ 18, 19, or 19B; as well as at wholesale to purchasers such as churches, educational institutions, incorporated hospitals, homes for the aged, and registered pharmacists. Id. (G.L. c. 138, § 19F(b)(2)(i)-(vi)).

The Act requires the ABCC to send copies of all wine shipment licenses to DOR to be kept on file. Id. (G.L. c. 138 , § 19F(c)). Recipients of winery licenses must register with DOR forthwith for the collection and payment of taxes. Shipping wine to consumers and others without registration is prohibited. The Department will report violations of this requirement to the ABCC for administrative proceedings and possible penalties, as follows:

1. For a first violation, a fine of $100;

2. For a second violation, a suspension of the winery's direct shipment license for not more than one year, a fine of $500, or both; and

3. For a third violation, prohibiting the winery from making shipments of wine under G.L. c. 138, § 19F, or through a wholesaler or importer under § 18.

Id. (G.L. c. 138, § 19F(g)).

Because the excises imposed under G.L. c. 138, § 21 are expressly made subject to G.L. c. 62C, license holders who fail to pay all required excises in a timely fashion will be subject to all provisions of that chapter, including those related to interest and penalties. In addition, purchasers and others should be aware that G.L. c. 138, § 21(g), provides that any person who knowingly purchases, sells or possesses any alcoholic beverages or alcohol not manufactured in, produced in or imported into the commonwealth by a licensed manufacturer, a winegrower, a holder of a wholesaler's and importer's license for the sale and importation thereof, or certain other licensees under various sections of c. 138 may be subject to a fine equal to double the amount of the excise which would have been payable by a licensee subject to this section if the alcoholic beverages or alcohol had been imported or sold by the licensee.

Persons licensed by the ABCC and registered with DOR for direct shipment of wines must report monthly to both the ABCC and the Department the total number of gallons of wine shipped into the Commonwealth in the preceding month to all its customers whether at retail directly to consumers or at wholesale to licensees under G.L. c. 138, §§ 12-15, 18-19B, 28, or 30, as well as to any other person or entity to whom the licensee has sold wine in accordance with the provisions of § 19F. Holders of direct shipment licenses must separately pay all required taxes to DOR on Form AB-DS, Alcoholic Beverages Excise Return, Direct Shipments to Massachusetts. Taxes are calculated as if the sale were made at the location where the delivery is made. License holders must pay the tax levied on importation of wine under G.L. c. 138, § 21 for each shipment of wine, as follows:

1. For each wine gallon, or fractional part thereof, of still wine, other than cider containing more than three per cent but not more than six per cent of alcohol as aforesaid, including vermouth, at the rate of fifty-five cents per wine gallon;

2. For each wine gallon, or fractional part thereof, of champagne and all other sparkling wines, at the rate of seventy cents per wine gallon;

3. For each wine gallon, or fractional part thereof, of all other alcoholic beverages containing fifteen per cent or less of alcohol by volume at sixty degrees Fahrenheit, at the rate of one dollar and ten cents per wine gallon;

4. For each wine gallon, or fractional part thereof, of all other alcoholic beverages containing more than fifteen per cent but not more than fifty per cent by volume at sixty degrees Fahrenheit, at the rate of four dollars and five cents per wine gallon.

G.L. c. 138, § 21(c)-(f).

Holders of direct shipment licenses must also keep records sufficient to determine whether the proper amount of tax has been paid, and must keep them for the amount of time specified in the Record Retention Regulation, 830 CMR 62C.25.1. The Department has the right, upon request, to perform an audit of a licensee's records. Act, § 6 (G.L. c. 138, § 19F(f)).


/s/Alan LeBovidge
Alan LeBovidge
Commissioner of Revenue


January 10, 2007

TIR 07-1

Table of Contents

[1]This TIR addresses only with those provisions of the Act dealing with tax administration. The Act also allows resealing and removal by patrons of unfinished bottles of wine at restaurants, etc., under rules to be established by the Alcoholic Beverages Control Commission.

[2]Direct shipments under this clause may not exceed 250 cases of wine annually.

Referenced Sources:

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