NJ Tax Laws Impede DTC Application Process

The provisions of Senate Bill 3172 became effective on May 1, 2012 making New Jersey the 39th state open for direct-to-consumer shipping. Under the new law wineries producing up to 250,000 gallons per year are eligible to apply for an Out-Of-State Winery License that allows them to ship up to 12 nine liter cases to a NJ consumer each year. The New Jersey Division of Alcohol Beverage Control has posted forms and application instructions on its website. The annual license fee ranges from $63 to $938 and is determined by the applicant’s annual production volume. Out-Of-State Winery licensees are responsible for paying the $0.875 excise and 7% sales taxes and filing bi-monthly reports. Unfortunately the combination of a capacity cap, a high license fee and NJ’s onerous corporate tax laws may continue to keep many wines from reaching NJ consumers.

Before beginning the direct shipping application process, wineries should be aware that corporations and limited partnerships are required to establish a business presence in NJ and pay a $125 registration fee. NJ tax laws are being interpreted to require that any corporation securing a license from a NJ agency (including an Out-Of-State Winery license) establishes nexus with the state of NJ and is liable for paying an annual corporate income tax of at least $500. Out-of-state limited partnerships must pay a $150 fee per partner per year, and both types of entities are required to file annual reports and designate a registered agent in NJ. (WI is currently working with local counsel in NJ to determine if any of these tax provisions might be avoided for wineries only making shipments into the state while having no other nexus with NJ.) Additionally, all applicants must post a bond, register brands and submit copies of TTB and alcohol beverage licenses/ permits from all 50 states. Wineries that do not hold a license are prohibited making on-site or off-site sales to NJ consumers.

Please click here for more details about the application process for the NJ Out-Of-State Winery licensee.