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New York: With the arrival of summer, wine tasting just became more palatable

Wine tasting (and wine drinking, in general) has experienced a renaissance in recent years in the U.S. When you think of wine, you may inevitably think of regions of France, Italy, Spain, Argentina, and Germany, as well as Napa Valley in the U.S. But what about New York? A better question might be why not New York?

Outside of California, New York ranks third in grape acreage (behind the State of Washington) in the U.S. Not all of these grapes are grown for wine, but wine production and wineries are growing in the Empire State. How big is wine in New York? The state of New York is home to 320 wineries, the fourth largest in terms of number of wineries in the U.S. This number of wineries in the U.S. and in New York is expected to continue to grow, rising from 4,712 wineries in the U.S. in 2007, according to WineAmerica, to 7,762 wineries in 2013, according to Wine & Vines magazine.

State wine sales initiative

In the spirit of supporting the growth in agriculture and business that wine brings to the state, New York Governor Andrew Cuomo announced a “new” tax exemption on wine tastings. Prior to this announcement, it was commonly understood that New York’s Tax Law provided an exemption from sales taxes when the products are used “at an event sponsored by a winery, farm winery, wholesaler or importer at its licensed premises[.]” The exemption was not previously understood to cover general wine tastings on such seller’s premises.

While the exemption on wine tastings is not entirely new, the application of the sales tax exemption to general wine tastings held for a nominal fee or no fee at wineries, and on the premises of licensed wine wholesalers and importers is new. To effect this change, and to clarify the public’s understanding of the sales tax exemption provided under Section 1115(a)(33) of the Tax Law, the New York State Department of Taxation and Finance (the Department) worked with the Division of Alcoholic Beverage Control. The Department then published Technical Memorandum TSB-M-14(9)S (the Memorandum) to clarify the application of the exemption.

An “event” becomes more commonplace

The Memorandum clarified the understanding of what constitutes an “event” or “occasion” held by a winery, farm winery, wholesaler, or importer on such seller’s licensed premises. The event, according to the Memorandum, is simply the winery (or other sellers listed above) hosting a tasting on its licensed property in exchange for a nominal fee or no fee in accordance with Section 80 of the ABCL (Alcoholic Beverage Control Law). Note that the reach of this exemption is fairly narrow. This section does not allow the exemption to apply to tastings held off of the seller’s licensed property.

Wine tasting simplified

This “new” exemption not only benefits the consumer through cost savings, but it also makes pricing wine tastings more straightforward and relieves the wineries of some of the sales tax administrative duties associated with such wine tastings (no more collecting, recording, and remitting sales taxes on small wine tasting fees). Nonetheless, note that sales tax still applies to the actual purchase of bottles and cases of wine, as well as wine by the glass if served in a way that does not qualify as a tasting under the ABCL.

If your winery has any questions regarding this recent clarification to the sales tax law, please contact us.

New Jersey: Click-through nexus legislation enacted

New Jersey has enacted A.B. 3486, which among other things, adopts click-through nexus provisions that expand the number of sellers required to collect and remit New Jersey sales tax. The click-through nexus provisions apply to sales made on or after July 1, 2014.

Under the New Jersey click-through nexus provisions, a seller’s duty to collect and remit sales tax is presumptively triggered when a seller of tangible personal property, certain digital products, or certain taxable services enters into an agreement, for a commission or other consideration, with an independent contractor or other representative physically present in the State of New Jersey to refer potential customers, whether by a link on a website or otherwise, to the seller (a Click-Through Nexus Arrangement).

The above provision only applies if the cumulative gross receipts from sales to customers in New Jersey referred to the seller under these Click-Through Nexus Arrangements are in excess of $10,000 during the preceding four quarterly periods. In addition, this presumption of nexus can be rebutted by showing that the independent contractor or representative that is a party to the Click-Through Nexus Arrangement did not engage in any solicitation in New Jersey on behalf of the seller that would satisfy U.S. Constitutional nexus requirements during the four quarterly periods at issue.

The New Jersey Assembly Budget Committee reported favorably on the bill and stated that the New Jersey Department of the Treasury informally estimated that the click-through nexus provisions of the bill are expected to generate $25 million in revenue for fiscal year 2015.

The Multistate Tax Update will continue to follow this growing trend of states enacting click-through or affiliate nexus laws. Please refer to our other alerts dated June 12, 2014, May 16, 2013, and Dec. 5, 2014 regarding click-through or affiliate nexus topics.

California: Board of Equalization proposes regulations implementing partial tax exemption for certain specified industries

The California Board of Equalization has provided notice for a final hearing on the adoption of proposed Regulation 1525.4 (Proposed Regulation), which would implement, interpret, and make specific the partial California sales and use tax exemption available for certain qualified purchasers of equipment purchased for manufacturing, research, and development that went into effect on July 1, 2014. More detail about such partial tax exemption is provided in an earlier Multistate Tax Update.

The final hearing is scheduled for July 17-18, 2014 in Sacramento, California. Among other things, the Proposed Regulation includes appendices for the exemption certificates for use in claiming the partial tax exemption and provides guidance about when an exemption certificate is timely provided to a retailer in order to claim the partial tax exemption. The Proposed Regulation provides that a “certificate will be considered timely if it is taken any time before the seller bills the purchaser for the property, any time within the seller’s normal billing or payment cycle, or any time at or prior to delivery of the property to the purchaser.”

Upon approval of the Proposed Regulation, the provisions of such regulation will apply retroactively to July 1, 2014.

For additional information regarding these subjects or any other multistate tax issues, please contact:

David M. Kall

Susan Millradt McGlone

Jeremy J. Schirra

Multistate Tax Services

Businesses must be vigilant and careful in managing their state and local tax liabilities and exposures. We understand this can be a daunting task. McDonald Hopkins Multistate Tax Services provides a broad range of state and local tax services including tax controversy, tax evaluation, tax planning, and tax policy. With professionals who have worked both inside and outside government agencies, our multistate tax team leverages its knowledge and experience to help clients control their complex multistate taxes.