Get ready for a Texas ABC direct shipping audit

If you’re one of the roughly 1,600 companies that holds an Out-of-State Winery Direct Shipper’s permit in Texas, expect to receive a Notice of Routine Audit from the Texas Alcoholic Beverage Commission (TABC) in the near future.

On July 22, 2019, the TABC sent out a warning notice to permit holders announcing its intention to begin these audits September 1, 2019. Through conversations with the TABC Audit & Investigations department, we confirmed that all permit holders will receive a notice eventually. Roughly 30 companies received notices in September, and 30 more will come in October. Monthly tranches of notices will then continue from the six auditors assigned until the process is completed.

The primary objective of the audit is to ensure that proper excise taxes are being paid. The TABC also wants to ensure that permit holders are following the rules, including the limitation on shipping products either produced or bottled by the permit holder.

As you can see from the list below, the notice requires a fairly extensive response in a very short turnaround time (10–12 days). In some cases, the TABC will grant short extensions for responding to the initial request. In our calls with the TABC, they seem very receptive to feedback about the process and went out of their way to say that they may adjust the process in the future based on the feedback and results of the first rounds of audits.

Once the initial response has been reviewed and compiled by the TABC (including cross-referencing excise tax payments and carrier shipping reports), they may send follow-up questions for additional clarification.

Example: Information requested from Notice of Routine Audit

Note: Dates will vary.

1. Electronic copy of the data used to report Texas wine sales on Excise Tax Reports from <dates redacted>
2. Organizational chart including affiliates and subsidiary companies that includes officers and directors
3. Any contract agreement or arrangement with another winery to produce or bottle wine to be shipped into Texas
4. Copy of Texas sales tax permit
5. Copy of current TTB Federal Basic Permit
6. Copies of invoices and shipping information (bill of ladings, manifest, etc.) for all wines shipped into Texas for the months of <dates redacted (3 months)>
7. Copies of bottling reports and Federal COLAs for all wines shipped into Texas for the months of <dates redacted, same time period as #6>
8. Copies of production records for all wines shipped into Texas for the months of <dates redacted, same time period as #6>
9. Copies of all invoices for the top 20 customers who received wine in Texas from <dates redacted, same time period as #1>
10. Contract agreements or arrangements with Fulfillment Centers or Similar Service Companies

If you’re a current client of Avalara for Beverage Alcohol, please check your email for some additional guidance on how to assemble all the information required. Want to find out more about our compliance services? Contact us now and we’ll help you get started.