I used to complain that the federal income tax is really three taxes in one. First comes the actual tax dollars that you have to pay. The time and trouble of record-keeping and so forth is the second tax and the third is the cost of preparing and filing the returns (or having others do that for you).
The Tax Tax Tax
I used to do everything by hand and sometimes the opportunity cost of the time I spent was almost as large as the check I wrote. Then came tax preparation software such as Turbo Tax and that cut the time cost quite a bit. Then the ability to import financial data directly into the tax program made things better. Finally, free and efficient electronic tax filing arrived — modified rapture!
I’m still not a very happy guy when I am doing my income taxes, but I appreciate the fact that the process is more efficient now so that I can spend my time doing other productive things like writing this blog.
The Wine Regulation Tax
Imagine if you still had to do your taxes by hand, but that you had to do them for 40 different tax systems! The combined compliance costs would be an enormous drain on productivity. It would be tax tax tax forty times over. Yikes!
This is more or less the situation for any winery that is trying to do direct-to-consumer business in the 40 states that allow this activity. Each state has its own rules and regulation and each requires regular reporting , payment and so forth. Although most of us imagine that the logistics of shipping are the main barrier to direct-to-consumer wine sales, the compliance costs are significant business barriers. They are like a tax on direct wine shipments and sometimes high enough to discourage wineries from entering the inter-state direct-to-consumer business at all or to limit it to just a few states.
Like a Tax Cut?
Which is why I was interested when ShipCompliant introduced its new AutoFile product yesterday. AutoFile has the potential to vastly reduced the amount of staff time devoted to multi-state direct-to-consumer wine sales compliance and to make multi-state operations more feasible. ShipCompliant estimates that a medium-sized winery shipping to all 40 states would need to file about 600-800 annual, quarterly, bi-monthly and monthly regulatory reports and tax filings in the course of a year, costing hundreds of staff hours. Their program does for compliance what Turbo Tax, account downloads and e-File did for my income tax experience.
You still have to pay the taxes and fees, of course, but reducing the costs of record-keeping and filing almost seems like a tax cut to me. AutoFile and products and services like it are small but import steps to make the dysfunctional US direct-to-consumer wine market a bit more efficient, which benefits both wine producers and consumers.
Thanks to Tom Wark for letting me about this product.