A distillery must pay sales or use tax on its products that it purchases back from a licensed wholesaler to offer as free samples to the distillery's customers. The distillery must either:
- Pay sales tax to the wholesaler when purchasing back the product that it will offer as free samples; or
- If the wholesaler does not collect sales tax on the purchase, the distillery must pay use tax on the product that it purchases back from the wholesaler.
The sales and use tax base cannot be less than the fair market value of the product that the distillery purchases back from a wholesaler. If the wholesaler collects sales tax on a sales price that is less than the fair market value of the product, the distillery must pay sales or use tax on the difference between the price charged by the wholesaler and the fair market value of the product.
Reference: Important Notice 18-13.