Archive for March, 2006
Application forms to direct ship wine to Michigan are now available!
March 31st, 2006
Michigan�s direct shipping application process appears to be very straightforward (at least compared to other forms I have read through recently). Wineries who wish to ship wine directly to Michigan consumers must complete the Michigan Liquor Control Commission�s (MLCC) Direct Shipper Application, pay the $100 permit fee and register with the Michigan Department of Treasury. Wineries can register with the Department of Treasury by completing Sales/Use Tax Registration Form 518. All forms can be found by going to Wine Institute�s Direct Shipping web site at www.wineinstitute.org/shipwine/ and selecting Michigan under the State Shipping Laws section.
Michigan will begin issuing Direct Shipper Permits on April 1, 2006. Wineries who submit their applications after April 1 will have to wait about two weeks for their applications to be processed. Once a winery has received their approved Direct Shipper Permit it must register their brands. A password will be sent with the approved Direct Shipper Application that allows the winery to logon to the Michigan website www.michigan.gov/cis/ and register their brands. If registering online isn�t for you or your computer just exploded it is also possible to register brands by sending the information in via U.S. mail.
Okay, you have your license and registered the brands. It�s time to sell your wine, but make sure you only sell wines to consumers whose age has been verified as being 21 or older. Age can be verified by obtaining a copy of the consumer�s photo ID or by using an Age Verification Service, such as ChoicePoint.
Wineries must pay a 6% sales tax on all direct shipments. Sales Tax payments will be due either monthly, quarterly or annually. The payment schedule is determined by your estimated total sales. Wineries are also responsible for submitting the Michigan Wine Tax Report and payment of excise taxes quarterly. This is a little confusing because the Michigan Wine Tax Report has instructions to be filed monthly � ignore the instructions � the form has not been updated since the new law passed.
I hope the application process goes smoothly for you. I know there are a lot of Michigan consumers anxiously awaiting their shipments!
Annie Bones
March 31st, 2006
We’re pleased to announce that our friend Annie Bones is joining us as a contributing blogger. Annie is the State Relations Coordinator for the Wine Institute and her first post is coming shortly…
New York reciprocal shipping privileges and quantity limits
March 30th, 2006
As if keeping track of over 7,500 direct shipping rules wasn’t hard enough already!
Let’s start with a little background on the issue of New York reciprocal privileges. Even though they published their advisory in August of 2005 (after the Granholm decision), the New York regulations included the following language about reciprocity.
The newly enacted ABCL 79-c indicates that the holder of a Direct Shipper’s License may ship up to (“no more than”) 36 cases of wine (no more than 9 liters each case) per year directly to a New York resident of legal age, “provided *** that the state in which such out-of-state winery is located affords to New York State winery and farm winery licensees reciprocal shipping privileges, meaning shipping privileges that are substantially similar to the requirements of this section” (emphasis added).
Language in the Bill Summary of S.5925 provides guidance with regard to the manner in which the Legislature intended the “reciprocal shipping privileges” requirement to be construed (emphasis added): “[I]f a winery is located in a state that has limitations on wine that can be shipped to that state, such winery shall be subject to the same limitations; providing that such limitation does not exceed the limitations set forth in the state of New York”.
An out-of-state winery applying for a New York State Out-of-State Direct Shipper’s License is required — at Questions 37-38 of the application — to provide advice regarding the quantity limits imposed by the applicant’s state upon New York State wine manufacturers seeking to directly sell and ship wine to resident customers of the applicant’s state.
An out-of-state wine manufacturer may not be issued a New York State Out-of-State Direct Shipper’s License unless such out-ofstate wine manufacturer agrees to limit the quantity of his wine shipments into New York to the maximum number of cases per month and per year that the applicant’s state allows New York wine manufacturers to directly sell and ship to a resident customer of the applicant’s state. (Question 39)
Basically, this is merely a more complicated version of the original interstate reciprocity arrangements. Prohibited states can not ship directly to New York. Limited states can ship what they allow NY wineries to ship into their state. States without a limit (California) can ship up to 36 cases per year to New York.
Does this sound like a violation of the Granholm ruling? I think so too.
Complicating things further, we heard an interesting twist from one of our clients yesterday. This California winery began the permit application process in December. Knowing that the California laws would change on January 1st, this winery did not put a limit on Questions 37 or 38 of the NY Out-of-State Direct Shipper’s License application. But when the NY ABC reviewed the application in January, they asked this winery to change their application to read 2 cases per month and 24 cases per year to reflect California’s pre-January limits. The winery obliged, and thought their limit was then set at 2 cases per month.
I called New York this morning for clarification because we knew that they were accepting new applications at 36 cases per year from California. We wanted to know if the winery could re-apply for their license under new terms. According to the ABC, this is not necessary. All California applications that originally read 2 cases per month were amended to read 36 cases per year and this winery is now safe to ship up to 36 cases to any NY resident each year.
Washington opens for non-reciprocal states
March 19th, 2006
Governor Chris Gregoire signed into law a bill that will allow all out of state wineries to ship to directly to Washington consumers. Previously, Washington had reciprocity arrangements with 13 states. The new regulations will make it more difficult for those 13 states because they will be required to obtain a direct shipping permit and pay taxes, but will also allow for shipments from non-reciprocal states.
On a similar front, Washington continues to revisit their laws surrounding shipping wine directly to retailers. The Costco case gets back into full swing this month. Costco is challenging the constitutionality of the Washington laws that require out-of-state wineries to go through distributors instead of shipping directly to retailers. This is a very important challenge to the three-tier system of wine shipping that states around the country are watching closely. Costco alleges that the laws create an unfair monopoly for distributors and artificially inflate wine and liquor prices.
Idaho removes reciprocity
March 19th, 2006
Idaho officially removed its reciprocity language in House Bill No. 454, establishing itself as a limited direct state. Idaho joins California and Washington as reciprocal states that moved to a limited direct model to comply with Granholm. Other reciprocal states are likely soon to follow, including Colorado and Hawaii.
With the new legislation, which goes into effect on July 1st, out of state wineries can purchase a $50 annual permit to ship wine directly to Idaho consumers. Limitations include a per individual volume limit of 24 cases per year, sales and excise taxes, and an annual reporting requirement.
The Granholm case effectively established that states must treat in-state and out-of-state wineries evenhandedly. Although the Granholm opinion did not specifically address the legality of reciprocity, Idaho did not want to risk a court challenge. Check out the Statement of Purpose from the admendment to HB 454 (emphasis added):
In a recent United States Supreme Court ruling requiring equal treatment of in-state and out-of-state wineries in the direct shipment of wine to consumers, Idaho’s law needs to be changed to a permit state from a reciprocal state.
This change would be equally beneficial to Idaho wineries as to out-of-state wineries. This proposal will establish a permit system that applies the same rules to all wineries, regardless of location.
This proposal would increase the collection of sales and excise taxes on wine shipped to Idaho consumers and establish greater public safeguards to prevent wine shipments to minors. It also will create a licensing requirement and fee to support oversight of wine shipments. This will also eliminate the potential for a legal challenge to our existing law.
