Arizona Releases New Direct-to-Consumer License

On November 29, the Arizona Department of Liquor Licenses and Control (DLLC) released the application for the new Series 17W Direct-to-Consumer (DtC) Wine Shipment License. As discussed in a previous blog post this new license is available to wineries of all sizes, granting them permission to make DtC sales to Arizona residents. This new license applies to both onsite and offsite sales, so going forward, to make onsite DtC sales to Arizona residents, a winery must have a 17W license.

The application must be filled out online, and is available here. Instructions on how to fill out the application can be found here.

Applicants must have an Arizona Transaction Privilege Tax (TPT) number. (In Arizona, TPT serves as the equivalent of sales tax, and is due on DtC sales of wine; a monthly TPT return must also be filed, even if no sales have been made in the prior filing period.) The online application for a TPT license can be found here. It takes about 6-8 days for the Arizona Department of Revenue to process an application. You must have a TPT license number before you can apply for a type 17W license.

To apply, you must supply the DLLC with a copy of both your TTB Federal Basic Permit and your home state license. These copies can either be mailed to the DLLC, or electronically submitted in a PDF format.

The DLLC must also receive a payment of $225 before it will process an application. This payment must be mailed to the DLLC, and accompany an invoice that is generated after you fill out an application.

Once a winery receives its new 17W license, it may begin selling directly to Arizona residents. Compliance rules for these shipments include:

  • Age Verification – wineries must either receive a copy of the purchaser’s license, indicating they are over 21 years of age, or use an age verification service.
  • Labelling – all packages must be conspicuously labelled with the words, “CONTAINS ALCOHOL, SIGNATURE OF A PERSON AGE 21 OR OLDER REQUIRED FOR DELIVERY”
  • Annual Reporting – a report is due to the DLLC by January 31st every year indicating all of the DtC sales made the previous year. The first report will not be due until January 31, 2018, to report sales made in 2017. Sales made in December 2016 under a 17W type license do not need to be reported to the state; however, wineries should maintain records of these sales in case the Liquor Commission conducts an inquiry.
  • Tax Payments – all TPT and Luxury Taxes are due on every DtC sale.
  • Customer Aggregated Volume Limits – Arizona residents are limited on the amount of wine shipments they may receive from any one winery in a calendar year. This amount is scheduled to increase over the next few years, but in 2017, this limit is six nine-liter cases of wine per person per winery.

Notably, the addition of the 17W type license does not replace the existing Farm Winery license. Therefore, wineries with under 20,000-gallon annual production, that already have a Farm Winery license can continue to sell DtC under that license.

A 17W type license must be renewed annually in February.

If you have a ShipCompliant account, this new license and the accompanying rule set will soon be available.

8 Comments

  1. Monica

    We currently hold a 2W series license in order to sell DTC. Are we in need of this 17W license as well? What are the differences between these two licenses?
    Thank you.

    Reply
    • Alex Koral - Product Compliance Manager

      Hi Monica,

      The new 17W license replaces the old 17 type license, which basically allowed producers to receive special order sales for beer, wine, or spirits. The 2W license you mention (the Farm Winery license) is still in effect. This means that for wineries holding a 2W license, which also produce under 20,000 gallons, the existing DtC provisions will still apply. For DtC sales, there is ultimately little difference between the 17W and 2W license regarding both on-site and off-site DtC sales — though the 2W has a few less compliance rules, such as the annual shipping report and limits on a consumer’s annual purchases.

      The big difference between the 2W and 17W license is that the 17W license gives no permission to sell to Arizona wholesalers, whereas the 2W does. So, if you are a winery holding a 2W license who produces under 20,000 gallons annually, you should have the full gamut of permissions — to sell DtC both on-site and off-site, and to sell to Arizona wholesalers — and should not need another license. However, if your production is over 20,000 gallons annually, you will need a 17W license to sell DtC, either on-site or off-site; and then you will also need some kind of 2 series license (a type 2, 2L, or 2W) to also sell to Arizona wholesalers.

      Reply
  2. Karen Loewi Jones

    In a 2014 blog you posted the following: “The TPT simplification process has been pushed back until 2016, and therefore the majority of non-program cities will continue to handle their own licensing and taxes for the 2015 year. The following cities, however, will become program cities effective January 1, 2015:
    Bullhead City
    Somerton
    Willcox”

    Is this still in effect, or has it been simplified?

    Reply
    • Alex Koral - Product Compliance Manager

      Hi Karen,

      Thanks for the question. In a word, the TPT simplification process is still ongoing. This has been a multi-year process, with several delays along the way. However, the Arizona DOR has signaled that it will be taking some big steps in the near future to advance the simplification process. Part of this is a plan to unify all TPT reporting into a single form early in 2017. This will mean that, even if there are “non-program” cities still, you should not need to submit multiple tax returns for each locality in the near future. The DOR has stated that this should be in effect soon, so stay aware of this and hopefully we’ll be announcing some changes to the TPT filing process shortly. This is the state site on TPT updates, for more information.

      Reply
  3. Karen

    Thanks for your answer Alex. The thing that still prevents us from getting a license in Arizona is that you have to apply for a license in each city you ship to that is not a program city. Am I correct? This makes the license very expensive! Also, those cities are constantly changing as we get more wine club members.

    Reply
    • Alex Koral - Product Compliance Manager

      Hi Karen,

      You are correct that you will need to apply for a separate tax license for each non-program city in Arizona (there are a total of 13), which, as you point out, can add extra complication to selling DtC in Arizona. However, the state has made this process a bit easier, as you can apply for licenses for non-program cities at the same time that you apply for the state TPT license–that is, you do not need to submit numerous separate applications. But then, again, this can get expensive. From what we’ve seen, this can make the entire fee for TPT permits up to $400-500. Whether this is worth it, though, is something for you to decide personally.

      Reply
  4. Jessica

    Any updates on the non-program cities? The Arizona website is very cluttered and hard to distinguish the information. Is it still the case where we have to apply for various cities, but we just submit one form now? Thanks!

    Reply
    • Alex Koral - Product Compliance Manager

      Hi Jessica,

      Thanks for the question. We feel your pain—Arizona’s tax laws can be as difficult to parse as its website. But it does sound like you have the right idea of how program city registration works. When registering for sales tax in Arizona, you must register both with the state and with each “non-program” city that you sell to. It used to be that each registration happened separately, but sometime last year the state revamped its process so that you can now register with the non-program cities when you register with the state. There is still the separate fee for each registration, but at least now there’s only one form you need. Notably, you don’t need to preemptively register for each city in Arizona; if you make a sale to a city you are not yet registered in, when you next file TPT tax, you can tell the state you need to register after that fact, and then remit what you owe for that city. So you don’t need to anticipate every sale you’ll make to Arizona and register everywhere—you can do it as you go.

      Reply

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