Wineries facing a lawsuit for failing to collect shipping taxes may have another means of relief according to a recent announcement by the Illinois Attorney General (AG). As first reported by attorney David Ruskin, the AG has indicated that she will conduct further reviews of pending False Claim cases based on new rules proposed by the Illinois Department of Revenue (IDOR).
On August 28, IDOR released a proposal for rulemaking, which would reinterpret Illinois’ existing shipping tax rules. The proposed rules restate that a wine shipper is not liable for collecting sales tax on shipments when (i) shipping charges are stated separately from the price of the wine; (ii) there is an option to pick up the wine on-site instead of having it shipped to Illinois; and (iii) the price of the wine doesn’t change depending on if the wine is shipped to Illinois or picked up on-site.
Importantly, this would resolve a central issue in the False Claim suits: that offering an option to pick up wine orders on-site relieves a winery of the obligation to collect sales tax on shipping, even if the on-site location is not in Illinois. Though this rule will not have the full force of law until after the entire 45-day rulemaking process is complete, it has had an immediate effect in moving the AG to review ongoing False Claim suits and dismiss them if the winery would qualify under this rule.
These welcome changes follow from the lawsuit initiated by the Wine Institute to counter the False Claim suits, which we reported on in a previous post. Attorneys at Reed Smith LLP, which is handling the Wine Institute suit, have drafted a summary of the points covered in the announcements from the AG and IDOR.
The Reed Smith LLP summary suggests that wineries that offer on-site pick are under no present obligation to collect sales tax on shipping, and that they can get the AG to dismiss False Claim suits they are currently facing. To get this relief, the AG is asking wineries to submit proof of their on-site pick up option in the form of an affidavit with specifics detailing the format of that option and the time period that the option has been offered (a winery may still be liable for taxes not collected during any period that an option was not offered).
However, the time period for the AG’s reviews is very limited. Wineries must have submitted their proof to the AG by SEPTEMBER 15 to have their case reviewed.
Wineries with questions regarding submitting proof of their on-site pick-up options should get in contact with their personal legal representative, or contact ShipCompliant and we will be happy to direct you to the proper channels.
For further background this issue, including a long list of resources and information, please see our December blog post.