QB Winery Solutions

An Easy Way to File CA Sales Tax (without Ship Compliant)

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If you have more than $500,000 in revenue in California (excluding distribution and wholesale sales), you are subject to the sales tax filing rules that were effective April 1, 2019. Many small wineries now meet this requirement and filing the California Sales Tax return is much more complicated than in the past. You can thank South Dakota vs Wayfair for this new complication. In the past, the district tax only applied to companies that had a “physical presence” in that district, but it now applies to any winery (or business) that exceeds $500,000 in retail sales in California.

This is not as simple as looking up the zip code because it might cross different districts. For example, the zip code for Healdsburg, 95448, includes addresses in the City of Healdsburg which are taxed at 8.75% whereas an address in Dry Creek Valley which is outside the city has the rate of 8.25%

The State of California has a nice webpage where you can plug in an address and it will lookup the sales tax rate. Click Here. But it is not realistic to lookup up every address.

You could signup for a service like ShipCompliant or Compli, which are programs designed for the wine industry, but these are expensive, and you may not justify the fee just to file your California Sales Tax Return.

Here is the outline for a process that will cost about $210 per year. I will record a complete video to show the steps, but in the meantime, these are the basic steps

  1. Sign up for a Basic plan at Taxjar.com. This is a sales tax program that will look up the sales tax rate. It is not an alcohol compliance program, so you will have to keep an eye out for those details with whatever procedure you are currently using.
  2. Find a report from your POS program that includes the shipping address and the taxable sales.
  3. Edit that report to fit the format required by Taxjar.
  4. Upload the report to Taxjar.
  5. Print the California report and use those details to enter the sales in the various districts.

This process is super fast. The most complicated part is formatting the report to match Taxjar’s required format, but once you do it the first time, it will be easier the next time.

Note: TaxJar could file the California return for you, but there is additional information that must be included, so you still have to file the return yourself using the CDTFA portal. But, having TaxJar summarize the sales for each district is a huge time saver.

If you already have ShipCompliant: You need to turn on the reporting module, and then turn on the California state form. Make sure your settings have been revised for the new rules.  As with TaxJar, you will use ShipCompliant to calculate the sales by district, but you will still need to manually enter the details into the CDTFA sales tax portal.

If you are interested in the full mini-course on how to file the California sales tax return, fill out the form below and we will notify you as soon as it is ready.

California Sales Tax MAJOR CHANGE

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The CDTFA (California Department of Tax and Fee Administration) made a significant change in the sales tax rules effective April 1st.  Click Here for the ShipCompliant article on this change.

Here is a summary of the changes.

  • Applicable for wineries with over $500,000 DTC revenue in California
  • Sales tax is now based on the district that the wine is shipped to, regardless if you have a physical presence in that district.
  • Retroactive to April 1st

The hardest hit by this rule change are the micro wineries, because the larger ones are already using ShipCompliant (or something similar)

Note: I called the CDTFA to clarify some of the details, but if you have any questions call them directly at 1-800-400-7115. I am only sharing the guidelines

Applicable for wineries with over $500,000 DTC revenue in California

  • If you are not close to this threshold, go back to your racking project. Just keep this number in the back of your head.
  • Only DTC revenue shipped in California (yes, pickup at the tasting room counts at “shipped in California”). So distribution and wholesale sales are excluded. Also the rules states “tangible personal property” so that would exclude things like event fees, but again…check with your compliance consultant to determine what other exclusions would apply to your situation.
  • First, calculate your DTC revenue in 2018. If you were under $500k, you are excluded for now. When you cross that threshold, even if it is in the middle of the year, the rule will begin to apply.
  • If you include in “California taxable sales” the sales you make to states that you are not licenced in, then you will need to know that total for this threshold. (See below if you this is not clear)
  • If you are not in California, the rule applies if you ship $500k of personal property into California

Sales tax is based on the district it was shipped to

This is the crux of the rule change. In the past you only paid for districts where you had a physical presence. I know that many of you have been doing this all along, especially folks who worked in a large winery and then transferred to a smaller one, but it was actually not correct.

The solutions to this are:
  1. Use ShipCompliant
    • This is fine if you feel you are can justify the fee, because the program works well.
    • File the CA return through ShipCompliant, because there will be a lot more boxes to fill in.
    • If you currently have ShipCompliant, double check your settings to make sure they will meet this new rule
  2. Do it manually
    • Only for the wineries with minimal shipments
    • You will need to run a report that lists the shipments by zipcode, then match the zip code to the district. Check with your POS program to see if this report exists. If you push in your sales, you can run this report in QuickBooks. Pop a question in the forum for the checklist to make sure you are pushing in all the details.  (I asked the VineSpring team to add this column to their Sales Tax Reconciliation report…let’s see if they come through)
    • Download the CDTFA report with the districts and tax rate. What is useful are the district names. Click Here
    • I am still googling for a report the lists the CA zipcodes and the district it is in.
    • Remember, you are only liable to pay for what you should have collected, not what you actually collected, unless you collected too much. So charge your customers for the CA Statewide rate (currently 7.25%). When you file your return, you will end up paying a little more than what you collected, but consider that a savings over using expensive software.
  3. Do a semi manual method
    • Upload your shipment report (described above) to a Sales Tax reporting program that is not winery specific. There are a few out there, and I am testing one right now. That’s it.
    • However, you will not have live updates to the district rate changes, so hopefully your POS program will have that.
Notes for everyone
  • Make sure your POS program is properly setup. If the winery is in a district with a high rate, you don’t want to be charging all of your shipments that rate. The best would be to have an on-site rate (your home district) and a shipment rate (the CA Statewide)
  • I would strongly recommend NOT setting up a QuickBooks sales tax item for every district. This is too time consuming to manage. I don’t think the difference between what you collect from your customers and what you pay when you file your sales tax return warrants the giant mess you will have with all of these sales tax codes.
  • Frankly, I recommend that you shut off the QB sales tax feature and let your POS program handle that calculation
  • Double check your ShipCompliant settings

Retroactive to April 1st

This was signed on April 25th and made retroactive to April 1st. So if you already ran your April club run, you are SOL. Sorry.

One final note

Just to clarify what are “California taxable sales”… let’s discuss the 3 ways I have seen wineries handle out-of-state sales

Out-of-State Options

  1. If licensed in that state, charge that state’s rate. Report and pay to them.
  2. If not licensed in a state
    1. Charge CA rate. Report and pay to CA
    2. Charge zero. Since the wine was shipped out-of-state, CA cannot say it was a CA sale so it is excluded. Since you are not licenced, do not report, and do not pay that state, and include with the Out-of-State exclusion on your sales tax return.
    3. Use a third party shipper like Vinoshipper. Their system will charge the tax, collect it, report it, and pay it.

Discuss with your Compliance specialist or legal team which option you are comfortable with.

Stay tuned for that mini-course on Sales Tax I have been promising for over 3 years now….

Cheers!

Jeanette

 

Office Hours 12-18-18

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Here is the recording for office hours. The topics that came up were:

  1. Year-end Quickbooks
  2. Costing Class Quick Rundown
  3. Juice Flow & Blending Math
  4. Custom Cash
  5. Journal Entry & AR List
  6. Write-off a customer + Credit Memo
  7. Expense vs Cost of Wine
  8. G&A Costs + GAAP
  9. Bottling

These are the links to places we discussed:
Juice Flow & Blending Math
Quickies
Bottle Runs

Silver Club members, please log in to view the recording

Clear Old Transactions in Accounts Payable

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This is a companion video to the Year End Preliminary Checklist. Go here to find that post Year End Prelim Checklist.

In this video I show how to clear out transactions that keep showing up, month after month in your Accounts Payable Aging Report. These must be cleared so that you have a realistic value for total Accounts Payable that you owe. Often they are duplicate bills which means that you have reported too many expenses.

This step could be done at any time, not just at the end of the year. If you make a regular habit of reviewing these lingering transactions, your file will stay tidy, clean, and accurate.

This video (must be a Silver Club member to view) will walk you through the steps. If you would like assistance, come to Office Hours or use this link to set up a coaching session https://QBWinerySolutions.as.me/Coaching  

DOWNLOADS

Year End Preliminary Checklist

 

Clear Old Transactions on the Bank Reconciliation

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This is a companion video to the Year End Preliminary Checklist. Go here to find that post Year End Prelim Checklist.

In this video, I show how to clear out transactions that keep showing up, month after month. These must be cleared so that you have a realistic value for your bank balance. Often they are duplicate transactions, so that, for example, if you have a duplicate payment for some corks, that will make the cost of your wine too high.

This step could be done at any time, not just at the end of the year. If you make a regular habit of reviewing these lingering transactions, your file will stay tidy, clean, and accurate.

This video (must be a Silver Club member to view) will walk you through the steps. If you would like assistance, come to Office Hours or use this link to set up a coaching session https://QBWinerySolutions.as.me/Coaching  

DOWNLOADS

Year End Preliminary Checklist

 

Clear Old Transactions in Accounts Receivable

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This is a companion video to the Year End Preliminary Checklist. Go here to find that post Year End Prelim Checklist.

In this video I show how to clear out transactions that keep showing up, month after month in your Accounts Receivable Aging Report. These must be cleared so that you have a realistic value for total Accounts Receivable due to you. Often they are leftover short pays or credits that have not been applied. Sometimes they are invoices that you have, sadly, decided you will never collect.

This step could be done at any time, not just at the end of the year. If you make a regular habit of reviewing these lingering transactions, your file will stay tidy, clean, and accurate.

This video (must be a Silver Club member to view) will walk you through the steps. If you would like assistance, come to Office Hours or use this link to set up a coaching session https://QBWinerySolutions.as.me/Coaching  

DOWNLOADS

Year End Preliminary Checklist

 

Year End Winery Accounting Preliminary Checklist

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Harvest has begun, that means that the year end is right around the corner. While you are waiting for the grapes to ferment, this is a great time to review your winery accounting file to make sure that you are caught up with the bookkeeping tasks. If you do these now, you won’t have to scramble next year when you need to send the file to the tax preparer.

We call it the Preliminary Checklist because this gets the file ready for the year-end. There are additional tasks to be completed to officially close out the year.

One key task is completing what we call The Costing Book. We  can start to lay this out, but it cannot be completed until several of the tasks on this list are completed. Please note that if you would like our assistance in completing The Costing Book, this Year End Preliminary Checklist must be completed before we will begin that step.

This video is an overview of each step. For some companion videos check out these quickies.

This video (must be a Silver Club member to view) will show you how to find all the information. I will add more videos to show you how to do all of the steps. If you would like assistance, use this link to set up a coaching session https://QBWinerySolutions.as.me/Coaching  

DOWNLOADS

Year End Preliminary Checklist

 

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