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.
Indiana bill passes House and Senate, awaits Governor’s signature
March 15th, 2006
A legislative compromise in Indiana passed the House on Monday and the Senate on Tuesday and now heads to the Governor for final approval and signature. The Senate approved the legislation only after the group of 9 wineries that sued the Indiana Alcohol and Tobacco Commission agreed to drop their lawsuit.
Although it is fantastic that another prohibited state is moving to a limited direct model and opening to direct shipments, restrictions in Indiana HB 1016 will significantly limit the flow of wine shipments into Indiana. Similar to the current legislation in Colorado, HB 1016 requires an initial onsite visit to the winery by a consumer before wine can be shipped to the consumer directly via offsite sales. Colorado will likely remove this previous visit requirement when new legislation is finalized.
Other restrictions in the new legislation include a $100 permit requirement, a 3,000 case per year aggregate volume limit, and a two case per month volume limit per customer.
Read more here and here.
Dry Counties in Florida
March 13th, 2006
We’ve received a number or inquiries about the dry counties in Florida. Starting with a little background…
In the new Wine Shipment into Florida page, you will find the following text:
Dry Counties
Pursuant to Section 568.02, Florida Statutes, it is unlawful to sell alcoholic beverages containing more than 6.243 percent of alcohol by volume in a county that has voted against the sale of intoxicating liquors, wines, or beers. There are currently five Florida Counties to which this law is applicable: Lafayette, Liberty, Madison, Suwannee and Washington.
Taking a closer look at Section 568.05, we find this:
568.05 Penalty.–Any person who sells, or causes to be sold, any intoxicating liquors, wines, or beer in any county that has voted against the sale of intoxicating liquors, wines, or beer, or who keeps or possesses in any such county any intoxicating liquors, wines, or beer with intent to sell or dispose of same unlawfully, or who keeps or maintains in any such county a place where intoxicating liquors, wines, or beer are sold, shall be guilty of a misdemeanor of the second degree, punishable as provided in s. 775.082 or s. 775.083.
Many have questioned if this statute would hold if the sale technically takes place in California or any other state before the wine is shipped to a dry county. We contacted the Florida authorities about this question and got the following as a reply - “I would not ship to dry counties. You may refer to Florida Statutes Chapter 568 for details.” Sounds pretty clear to me.
Keep in mind that Florida will likely establish permanent legislation in the coming months. Let’s hope they address this issue more specifically in the new regulations.
Setback in Maine
March 7th, 2006
The Legal and Veterans Affairs Committee of Maine voted 8-2 against a proposal to allow direct shipments via a permit system. A fight is expected on the House floor.
Read more here, especially the Reader Comments section at the bottom of the article. Here are a few choice quotes:
As a Mainer who loves wine, I am very frustrated that the legislature is making it difficult for me to get the wines I want. The arguments about minors ordering wine are clearly weak, and may just disguise the pressure by those who really profit from the current arrangements: the distributors, who get to choose what to make available and to price it as they like. Wine here is more expensive than in other states for a reason! Distributors like to claim that anyone can obtain any wine by going through them. That, of course, is a bald-faced lie. Many small wineries sell *only* through their mailing lists. I don’t think it’s likely that we’ll get to see any of those wines. Most Maine towns do not have a local store that sells fine wine. Many consumers drive a long distance to go to a store, only to discover that what they want isn’t stocked or can’t be obtained in the state. It’s frustrating. Is it a wonder that the parking lots of the New Hampshire Liquor Stores are always full of cars with Maine plates?
I work for a large winery and we ship out of state with the usual requirements and have never EVER had a minor order wine for out of state shipping. I dare anyone to come up with a scenario where a person under age 21 orders a $40 bottle of Reserve Merlot. The arguments about underage drinking is so lame! Underage drinkers want BEER not wine - for heavens sakes get with the program.
It is ludicrous to imagine that kids will be ordering expensive wines from California. Kids know how to get hold of booze if they want it and most of them don’t even like wine. The distributors are the culprits here. They have absolute control of wholesale supply and they don’t want anything to disrupt that. The Legislature usually goes along, as they do with banking and other big interests.
Every single reader comment pushes for access to direct shipments.
Hawaii moves to end reciprocity
March 7th, 2006
Two similar bills would create a limited direct model in Hawaii, which currently has reciprocity with 13 other states. The proposals are similar to the laws established in New York, Connecticut, and Texas with a permit requirement and a per customer limit of 24 cases per individual per year.
Kentucky bill passes Senate, would prohibit direct shipments
March 6th, 2006
Senate Bill 82, which prohibits direct shipments in Kentucky, passed the state Senate and now moves to the House. Winery owners claim that this bill would kill the Kentucky wine industry. A second bill in Kentucy that would allow small wineries to ship directly to retailers remains in House committee.
This article has some very interesting facts about the Kentucky wine industry.
In the late 1700s and early 1800s, Kentucky was the third largest grape producing state in the country. The Civil War and Prohibition slowed graped production significantly and farmers thus turned to tobacco as a cash crop. In the 1990s, tobacco production declined. The state Congress then moved in with statutes designed to bring back the wine industry that once flourished.
“Small wineries” in Kentucky are those that produce less than 50,000 gallons (roughly 21,000 cases). The Kentucky legislature created laws to help these small wineries get off the ground. Small wineries would get an exemption to distribute directly to retailers because distributors would not pick up their wine. SB 82 would change that.
According to Jeff Tatman of Felice Vineyards in Kentucky, “Unless you are producing 100,000 cases a year, the distributor doesn’t want to carry your product because you aren’t making them enough money. Even if they are forced to pick us up, they are not going to push us.” In 2004, the total production of Kentucky wineries was 96,000 gallons and “most winery operators in the state are only producing about 3,500 cases of wine a year”.
This seems like a Catch 22. Distributors are not interested in picking up your wine until you produce a certain volume - let’s say 20,000 cases rather than the 100,000 suggested by Tatman (which could very well be true in Kentucky) to be conservative. But under the proposed legislation, all Kentucky wineries must use a distributor. This doesn’t add up and the assertion that Kentucky wineries would be killed by this legislation seems all too valid.
Compromise in Illinois passes Senate vote, moves to House
March 6th, 2006
Winery and beer distributor groups reached a compromise in the drawn out battle in Illinois. Senate Bill 2180 passed the Senate vote unanimously,and now moves to a House vote. The compromise would allow the nearly 200 Illinois wineries to sell wine at the winery as well as at two additional retail locations in the state.
Direct shipping would also be allowed into and out of Illinois. In exchange for dropping a previous visit requirement, the wineries agreed to drop the proposed per customer volume limit from 36 cases per individual per year to 12 cases per individual per year.
Costco case will challenge the three-tier system
March 3rd, 2006
From the Washington Times:
The potentially most important challenge to the three-tier system comes from neither consumers nor wineries. It instead is being issued by a corporate entity with the political muscle to match the wholesale lobby — the biggest wine retailer of all, Costco Wholesale Corp.
This article is worth reading.
Colorado bill moves forward
March 2nd, 2006
Colorado House Bill 1120 passed the Senate Agriculture, Natural Resources and Livestock Committee unanimously. Based on the Wine Institute model legislation, the proposed bill would create a limited direct permit system that would allow interstate shipments into and out of Colorado. Colorado currently is considered a reciprocal state and must change its laws to comply with Granholm.
