Massachusetts Missing out on an Estimated $3M Annually by Barring Direct Shipment of Wine

Friday, September 28, 2012

Map of Massachusetts

Over on Fermentation Tom Wark estimates that Massachusetts residents are currently missing out on $3 million in tax revenue annually by barring the direct shipment of wine:
States not currently allow wine to be shipped into their state can now fairly easily see the kind of tax revenue they are leaving on the table. For example, Massachusetts, which has a population roughly equal to Washington State can expect, based on information in this report to see $50,000,000 worth of wine shipped to that state, resulting in over $3,000,000 in tax revenue—were its legislators to change the law to allow direct shipping from wineries. 
This estimate comes from data presented in Ship Compliant's Direct-to-Consumer Shipping Report.

A few things that strike me as important to understand and discuss on this subject...

Massachusetts doesn't currently have a sales tax on alcohol. There is an excise tax however, which is paid by the distributors as wine comes into the state, based on volume.

Some amount of revenue would be raised if Massachusetts allowed direct shipments and collected this excise tax along with licensing fees for out of state wineries and retailers. But these amounts would be nowhere near $3M annually.

The key would be in collecting, effectively, an import tax on wine. Sound crazy? It's not. New Hampshire has no sales tax on wine sold in its state stores yet they aggressively collect an 8% tax on wine shipped to consumers from out of state.

New Hampshire is a bit of a different situation of course, given that the state runs much of the liquor business itself. But we can look to other states for examples here as well.

New Jersey recently opened up to shipment from out of state wineries. But the licensing fees and requirements were so high it was only viable the largest wineries. This will surely dampen the positive revenue effect more reasonable policies would have enabled.

Virginia seems a better state to emulate. When they decided to allow the direct shipment of wine they took a long hard look at the situation, decided to allow both winery and retailer direct shipments, thought about the impact to in-state businesses and decided it was in the collective best interest of the state to allow shipments. Set the taxes high and let it fly!

Current laws favor the interest of a few in-state entities over the collective revenue picture of the state. Don't like it? Write your state representative.

But an interesting central question, I think, is this:

Would you support a 6.25% import tax on wine shipped from out of state wineries and retailers if it was what was required to enable the direct shipment of wine to Massachusetts addresses?

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