Untangling the complex world of wine direct shipping and compliance
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Virtual wineries taken to court

October 10th, 2006
By Rachel Dumas Rey- President, Compli Beverage Industry Compliance

Last week the California Department of Alcoholic Beverage Control took three “virtual” wineries to court stating that they violated the provisions of their licenses by pouring wine for consumers at a wine festival. So called virtual wineries typically hold two licenses in combination, a type 17 which is a wholesale license and a type 20, which is a conditional retail license allowing the licensee to sell wine directly to consumers via a wine club or internet sales. This combination of licenses allows a business owner to have a lot of the same privileges as a winery or type 02 license holder without having a bricks and mortar winery or the on-going compliance requirements that wineries have. The main prohibition of the 17/20 combo is that those licensees are not allowed to pour wine at consumer tastings and they cannot have tasting rooms. California is the only state that allows wholesalers to sell wine to consumers. The three wineries are arguing that the prohibition on public tasting is unfair to small proprietors and the charitable organizations that host the tasting events and are challenging what they claim is a “little known” law. The penalty for pouring wine at a consumer event without the correct permits is a 15 day suspension of the license or a fine. An administrative judge will give the ABC a decision within 30 days and the ABC will act on the decision within 100 days. At this point the California Assembly is not proposing a change in the law.

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