New York State regulations are clear that failure of a license holder to pay taxes under Article 18 of the NY Tax Law is a cause for valid revocation, cancellation, or suspension of a liquor license (see 9 NYCRR 53.1). Similarly, New York State Courts have consistently upheld failure to pay sales taxes as valid cause for revocation of a liquor license (see Family Liquor Store, Inc. v. New York State Liquor Authority, 283 A.D2d 191 (2001)).
New York maintains a three-tiered liquor licensing system – meaning, you may be licensed as either a (1) manufacturer, (2) distributor/wholesaler, or (3) a retailer. This three-tiered system evolved out of the prohibition era. Prior to prohibition, brewers and distillers owned their own saloons, which meant they held direct ownership interests in bars which in turn resulted in a number of anticompetitive practices – pressure on bars to continually increase sales, pushing patrons to frequent overindulgence, hence prohibition and the eventual three-tier system we see today.
The type of liquor license held determines the ultimate tax due to New York State and associated filing requirements.
First Tier and Second Tier – New York State imposes an excise tax on the sale or use of beer, cider, wine, and liquor, also commonly known as the “Alcoholic Beverages Tax” or “ABT”. This excise tax applies to all “distributors” of alcoholic beverages. The New York State Tax Department requires all “distributors” of alcoholic beverages to formally register with the department using Form TP-215.
An individual or business is considered a “distributor” if (among a couple other categories which are not germane to this discussion) you:
- Import (or cause to be imported) alcoholic beverages into New York State for sale or use for in the state; or
- Produce, distill, manufacture, brew, compound, mix, or ferment liquor, beer, cider, or wine in New York State for sale.
Registered distributors must file an excise tax return with the New York State Department of Taxation and Finance each month, even if no tax is due, unless you elect to file on an annual basis. New York City imposes an additional excise tax on the sale or use of (1) beer and (2) liquor containing more than 24% of alcohol by volume. The tax itself is a set dollar amount per gallon or liter, as the case may be, of product sold or used (e.g. $0.30 per gallon of wine).
Third Tier – Holders of retail liquor licenses are required to remit sales tax to New York State. Retail licenses come in many forms (e.g. restaurants, liquor stores, wine stores, grocery stores, gas stations, golf courses, sports arenas, etc.), but it is the sale to the ultimate consumer that triggers the licensee’s New York State sales tax obligation.
Together with an application for a retail liquor license, the applicant must apply for and submit a Certificate of Authority to Collect New York State Sales Tax. In today’s world, that certificate is applied for online. Each individual applying for a Certificate of Authority must create a unique login, which creates a portal for each entity for which you wish to apply for a Certificate of Authority.
Note – not only must retail liquor license holders apply for and receive a Certificate of Authority to collect sales tax, but New York also requires “distributors” to register with the Tax Department for sales tax even if they only produce and/or distribute to other wholesalers or retailers.
The application requires numerous pieces of business and corporate information of the applicant (e.g. contact information, entity type, date business begins, bank account information, license numbers, tax preparer, etc.). It is important to note that there is no way to expedite the request for the Certificate of Authority, and the New York State Department of Finance advises that the certificate be requested a minimum of twenty (20) days prior to either making taxable sales, accepting New York State exemption documents or otherwise providing taxable services within New York State. The Certificate of Authority will not be emailed, only mailed to the address provided for the applicant.
Although not directly on point, but still a frequent topic in Noonan’s Notes – from a residency perspective, it is not necessary for an individual to be a resident of New York State to be eligible to hold a liquor license, or otherwise hold an interest in an entity that holds a liquor license. By way of an Advisory Opinion (Advisory #2015-21), the New York State Liquor Authority (“NYSLA”) clarified who is eligible to qualify for a New York liquor license:
- A citizen of the United States;
- An alien lawfully admitted for permanent residence in the United States;
- Foreign nationals from reciprocal treaty countries set forth in a list maintained by the U.S. Department of State;
- Foreign nationals from any other country who can satisfy the Authority that his/her country has a treaty with the United States that permits citizens of both countries to engage in trade and/or work in each other’s country on a reciprocal basis
The same Advisory Opinion also clarified that, “a citizen of another nation that qualifies under this Advisory is not required to be physically present in the United States to obtain a license.” Rather, a “relatively” clean criminal background together with the proper NYSLA questionnaire forms and fingerprint scans allow any qualifying individual to apply for, or to hold an interest in an entity applying for, a liquor license.
Disclaimer:
This blog is a form of Attorney Advertising. Hodgson Russ LLP provides this information as a service to its clients and other readers for educational purposes only. Nothing in this blog should be construed as, or relied upon, as legal advice, or as creating a lawyer-client relationship.
