Filing requirements for farm distilleries under article 18 of the Tax Law.
Purpose:
To allow farm distilleries to file annual rather than monthly alcoholic beverage tax returns.
Text of proposed rule:
Pursuant to the authority contained in subdivision First of section 171, subdivision (1) of section 429, and section 436 (not subdivided) of the Tax Law, the Commissioner of Taxation and Finance hereby proposes to make and adopt the following amendments to the Alcoholic Beverage Tax Regulations of the Department of Taxation and Finance, as published in Subchapter H of Chapter 1 of Title 20 of the Official Compilation of Codes, Rules and Regulations of the State of New York.
Section 1. Subclause (1) of clause (b) of subparagraph (i) of paragraph 3 of subdivision (a) of section 60.1 of such regulations is amended to read as follows:
(“1”) a brewer, pursuant to sections 51 and 56 of the Alcoholic Beverage Control Law, or a farm brewery pursuant to sections 51-a and 56 of such law[, whose annual production of beer will not exceed 60,000 barrels] (“i.e.,” a “micro-brewer” or “farm brewery”); or
Section 2. Paragraph 4 of subdivision (a) of section 60.1 of such regulations is amended to read as follows:
(4)(i) A distributor that:
(“a”)(“1”) is an out-of-state winery and is required to register as a distributor solely because such person ships its wine directly to any New York State resident for such resident’s personal use; and
(“2”) is licensed by the State Liquor Authority of New York State as a direct shipper, pursuant to section 79-c of the Alcoholic Beverage Control Law; or
(“b”) is licensed by the State Liquor Authority of New York State as a farm winery, pursuant to section 76-a of the Alcoholic Beverage Control Law, or as a special farm winery pursuant to section 76-d of the Alcoholic Beverage Control Law[, or as a micro-winery pursuant to section 76-f of the Alcoholic Beverage Control Law];
(“c”) is licensed by the State Liquor Authority of New York State as a farm distillery, pursuant to section 61 of the Alcoholic Beverage Control Law;
may apply to the department to file an annual tax return in lieu of the monthly returns required by paragraph (1) of this subdivision. Such annual return shall relate to the distributor’s activities during the calendar year and shall be due on or before January 20th of the succeeding calendar year. Such return must show the information required in paragraph (1) of this subdivision, except that “month” shall be read as “year,” and must be accompanied by proof of such distributor’s continuing license as a direct shipper, farm winery, special farm winery or [micro-winery] farm distillery.
(ii)(“a”) If a distributor meeting the requirements of subparagraph (i) of this paragraph (a “qualifying distributor”) at any time during the period to be covered by an annual return ceases to be licensed by the State Liquor Authority, such distributor must file a return reflecting the distributor’s activities from January 1st of such annual period through the end of the month during which the distributor ceased to meet the qualifications of subparagraph (i) of this paragraph. Such return must be filed on or before the 20th day of the month following the month during which the distributor ceased to meet the requirements of subparagraph (i) of this paragraph, and any tax due must be paid with filing of such return.
(“b”) If a distributor meeting the requirements of clause (i)(“b”) of this paragraph at any time during the period to be covered by an annual return becomes reclassified with the State Liquor Authority as a winery other than a farm winery[,] or a special farm winery, [or a micro-winery,] such distributor must immediately begin filing monthly tax returns, as described in paragraph (1) of this subdivision.
(“c”) If a distributor meeting the requirements of clause (i)(“c”) of this paragraph at any time during the period to be covered by an annual return becomes reclassified with the State Liquor Authority as a distillery other than a farm distillery, such distributor must immediately begin filing monthly tax returns, as described in paragraph (1) of this subdivision.
(iii) If it becomes necessary for a qualifying distributor to begin filing monthly returns during an annual period, pursuant to the provisions of clause (ii)(“b”) or clause (ii)(“c”) of this paragraph, such distributor must also file a return reflecting the distributor’s activities from January 1st of such annual period through the end of the month during which the distributor ceased to meet the qualifications of subparagraph (i) of this paragraph. Such return must be filed on or before the 20th day of the month following the month during which the distributor ceased to meet the requirements of such subparagraph (i) of this paragraph, and any tax due must be paid with filing of such return.
(iv) If it becomes necessary for a qualifying distributor to begin filing monthly returns during an annual period, pursuant to the provisions of clause (ii)(“b”) or clause (ii)(“c”) of this paragraph, such distributor may apply to the department to file on an annual basis for the next or any subsequent calendar year if such distributor anticipates that it will again meet the requirements of clause (i)(“b”) or clause (i)(“c”) of this paragraph. Such application must include an explanation of why the distributor was required to begin filing monthly returns during the previous annual period and why the distributor does not expect such circumstances to re-occur in the upcoming annual period.
Text of proposed rule and any required statements and analyses may be obtained from:
Kathleen O'Connell, Department of Taxation and Finance, Office of Counsel, Building 9, W.A. Harriman Campus, Albany, NY 12227, (518) 530-4153, email: tax.regulations@tax.ny.gov
Data, views or arguments may be submitted to:
Kathleen D. O'Connell, Department of Taxation and Finance, Building 9, W.A. Harriman Campus, Albany, NY 12227, (518) 530-4153, email: tax.regulations@tax.ny.gov
Public comment will be received until:
45 days after publication of this notice.
Reasoned Justification for Modification of the Rule
The Department of Taxation and Finance submitted for publication in the Rule Review section of the January 8, 2014, issue of the State Register summaries of rules that were adopted by the Commissioner of Taxation and Finance in 2009, as notice of the department’s intent to review such rules pursuant to section 207 of the State Administrative Procedure Act. This information was also posted on the department’s web site (http://www.tax.state.ny.us./rulemaker/regulations/fiveyearrev.htm). The public was invited to submit comments concerning the continuation or modification of these rules by February 24, 2014. No public comments were received by the department concerning the 2009 amendments to 20 NYCRR Section 60.1 (Filing Requirements for Certain Wine Distributors Registered Under Article 18 of the Tax Law). The 2009 rule allowed certain New York State farm wineries, micro-wineries, and out-of-state direct wine shippers to file annual alcoholic beverage tax returns rather than monthly returns as previously required. In addition, the 2009 rule amended section 60.1 to reflect that out-of-state direct wine shippers are not required to report certain inventory information on their alcoholic beverage tax returns. The amendments were adopted by the commissioner on April 21, 2009 and published in the State Register on May 6, 2009 (TAF-07-09-00012-A).
The current rule expands the ability to file annual alcoholic beverage tax returns rather than monthly returns to entities licensed by the State Liquor Authority of New York State as a farm distillery, pursuant to section 61 of the Alcoholic Beverage Control Law. The rule would also eliminate unnecessarily specific references to annual production by farm breweries and an obsolete citation to the Alcoholic Beverage Control Law.
The expansion of the annual filing option to include farm distilleries will reduce the administrative cost and burden of tax return filing on such entities, with little or no resultant cost to state and local governments. The elimination of specific production references will make it unnecessary to amend the regulations merely because of changes in the production thresholds set forth in the Alcoholic Beverage Control Law.
For the most part, the amendments that were made in 2009 are not being amended by this rule; therefore, these 2009 amendments remain valid and are continued without modification, unless explicitly amended. Because the Department reviewed the entire 2009 rule in developing this rule, the 2009 rule and this rule will be reviewed in one combined rule review in the future, beginning in 2019.
Regulatory Impact Statement
1. Statutory authority: Tax Law, section 171, subdivision First, and sections 429(1) and 436 (not subdivided). Section 171, subdivision First of the Tax Law provides for the Commissioner of Taxation and Finance to make reasonable rules and regulations, which are consistent with the law, that may be necessary for the exercise of the Commissioner’s powers and the performance of the Commissioner’s duties under the Tax Law. Section 436 of the Tax Law provides for the authority provided by section 171 to be exercisable specifically with respect to the alcoholic beverage tax imposed by Article 18 of the Tax Law. Section 429(1) of the Tax Law, while providing generally for monthly alcoholic beverage tax returns, provides that the Commissioner may require tax returns to be made at such times and covering such periods as is deemed necessary in order to insure the payment of the tax.
2. Legislative objectives: The rule is being proposed pursuant to this authority to allow returns to be filed by certain filers for periods and upon such dates other than those prescribed in the Tax Law. The rule also eliminates an unnecessarily specific reference to annual production by farm breweries and eliminates an obsolete citation to the Alcoholic Beverage Control Law.
3. Needs and benefits: The rule amends section 60.1(a) of the Alcoholic Beverage Tax Regulations to allow entities licensed by the State Liquor Authority of New York State as a farm distillery, pursuant to section 61 of the Alcoholic Beverage Control Law, to apply to file annual alcoholic beverage tax returns rather than monthly returns as currently required. Records show that the tax liability of these farm distilleries is minimal; annual filing would reduce the burden placed upon these filers.
4. Costs:
(a) Costs to regulated persons: The regulated parties affected by this rule are farm distilleries that are currently filing Form MT-40, “Return of Tax on Wines, Liquors, Alcohol, and Distilled or Rectified Spirits,” each month. The regulated parties may elect to file an annual tax return. Form MT-40 will be modified to accommodate both monthly and annual filing. The administrative cost and burden of tax return filing will be reduced. However, to make the election to file an annual return, the regulated party will need to file Form MT-38, “Application for Annual Filing Status for Certain Beer and Wine Manufacturers.” Form MT-38 is a half-page form, currently used by certain beer and wine distributors to elect to file annual tax returns. Form MT-38 will be modified to accommodate certain farm distilleries. The cost to the regulated parties choosing to file annually to fill out this application form is miniscule. Overall, there is no measurable cost impact resulting from adopting this rule, which will benefit the regulated parties.
(b) Costs to the State and its local governments including this agency: It is estimated that implementation of this regulation will cause an estimated minimal State revenue loss. Because the returns that may be filed annually instead of monthly will be filed in the same fiscal year in which the monthly returns would have been filed, there will be no fiscal impact attributable to filing in a different fiscal year. The Department may experience a minimal cost from a loss in the use of the money. It is estimated that fewer than 50 farm distilleries will be eligible to remit tax annually rather than monthly, and eligible distilleries have such small liability and interest rates are so low, that the Department believes the loss would be insignificant. Additionally, it is estimated that annual, rather than monthly, processing of these returns should result in a slight reduction of this agency’s administrative costs. This rule will have no cost in terms of revenue impact on local governments.
(c) Information and methodology: This analysis is based on a review of the statutory requirements and on discussions among personnel from the Department’s Taxpayer Guidance Division, Office of Counsel, Office of Tax Policy Analysis Bureau of Tax and Fiscal Studies, Office of Budget and Management Analysis, and Management Analysis and Project Services Bureau.
5. Local government mandates: This rule imposes no mandates upon any county, city, town, village, school district, fire district, or other special district.
6. Paperwork: The rule imposes no reporting requirements, forms or other paperwork upon regulated parties beyond those required by statute. It is noted that this rule will reduce the number of returns required to be filed by the affected parties who apply and are allowed to file annual returns and, in turn, reduce the number of returns processed by the Department.
7. Duplication: There are no relevant rules or other legal requirements of the Federal or State governments that duplicate, overlap, or conflict with this rule.
8. Alternatives: The intention of the Department is to allow the option of annual filing for affected parties which will benefit both the affected parties and the Department. An alternative would be to offer quarterly filing, which would not be as beneficial to the affected parties or the Department.
9. Federal standards: The rule does not exceed any minimum standards of the Federal government for the same or similar subject area.
10. Compliance schedule: No time is needed in order for regulated parties to comply with this rule nor does the rule impose any new compliance requirements. The rule will take effect on the date that the Notice of Adoption is published in the State Register and affected parties will be allowed to make the election to file annual ABT returns for tax years beginning on or after January 1, 2015.
Regulatory Flexibility Analysis
A Regulatory Flexibility Analysis for Small Businesses and Local Governments is not being submitted with this rule because the rule will not impose any adverse economic impact or any reporting, recordkeeping, or other compliance requirements on small businesses or local governments beyond those required by statute. The rule allows certain New York State farm distilleries to file annual alcoholic beverage tax returns rather than monthly returns as currently required.
The following organizations are being given an opportunity to participate in the rule's development: the Association of Towns of New York State; the Office of Coastal, Local Government, and Community Sustainability of the New York State Department of State; the Division for Small Business of Empire State Development; the National Federation of Independent Businesses; the New York State Association of Counties; the New York Conference of Mayors and Municipal Officials; the Small Business Committee of the New York State Business Council; the Retail Council of New York State; and the New York Association of Convenience Stores; the Tax Section of the New York State Bar Association; the Association of the Bar of the City of New York; the New York State Society of Enrolled Agents; the New York State Society of CPAs; and the Taxation Committee of the Business Council of New York State.
Rural Area Flexibility Analysis
A Rural Area Flexibility Analysis is not being submitted with this rule because it will not impose any adverse impact on rural areas or any reporting, recordkeeping, or other compliance requirements on public or private entities in rural areas. The rule allows entities licensed by the State Liquor Authority of New York State as a farm distillery, pursuant to section 61 of the Alcoholic Beverage Control Law, to file annual alcoholic beverage tax returns rather than monthly returns as currently required.
The following organizations are being given an opportunity to participate in the rule's development: the Association of Towns of New York State; the Office of Coastal, Local Government, and Community Sustainability of New York State Department of State; the Division for Small Business of Empire State Development; the National Federation of Independent Businesses; the New York State Association of Counties; the New York Conference of Mayors and Municipal Officials; the Small Business Committee of the Business Council of New York State; the Retail Council of New York State; the New York Association of Convenience Stores; the Tax Section of the New York State Bar Association; the Association of the Bar of the City of New York; the New York State Society of Enrolled Agents; the New York State Society of CPAs; and the Taxation Committee of the Business Council of New York State.
Job Impact Statement
A Job Impact Exemption is not being submitted with this rule because it is evident from the subject matter of the rule that it would have no impact on jobs and employment opportunities. The rule allows entities licensed by the State Liquor Authority of New York State as a farm distillery, pursuant to section 61 of the Alcoholic Beverage Control Law, to file annual alcoholic beverage tax returns rather than monthly returns as currently required. It is estimated that fewer than 50 farm distilleries will be eligible for annual filing.
