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Buckeye Budget Bill Could Affect Direct Shipping

The Ohio Senate unanimously passed HB 119, which would move Ohio towards becoming compliant with Granholm. HB 119 creates a permit system for wineries seeking to ship directly to consumers in Ohio.

As reported by the Dayton Daily News, the direct shipping provision was inserted by the Senate as an amendment to the proposed 2008-09 budget bill. Some controversy regarding the bill exists as is evidenced by comments from vintners who feel that Ohio wineries have been purposely left out of the legislative process altogether. Others in Ohio, however, believe HB 119 is a good bill for both in-state and out-of-state wineries. HB 119 will next be considered in a Conference Committee of both chambers of the legislature.

If passed as is by the Conference Committee and signed by Governor Tom Strickland, the bill will require wineries who ship into the state of Ohio to obtain an “S Permit” at the cost of $25.00. Wineries that qualify for the “S Permit” must produce less than 150,000 gallons/year, send copies of invoices of all shipments to the Department of Commerce Division of Liquor Control, and report all shipments of wine into Ohio and its destination annually. HB 119 also creates the “B-2a Permit” allowing wineries that produce less the 150,000 gallons/year to distribute directly to retailers.

An interesting aspect of HB 119 is the customer volume limit of 24 cases of wine per year. The language in this provision is similar to that contained in the Massachusetts General Laws that we mentioned in an earlier post. This provision may burden wineries to track the shipment of wines by all “S Permit” holders. Furthermore, this limitation is applied to “Family Households,” a term which remains undefined by the Ohio Legislature at the time of this post.

Another important provision in the Ohio bill is the 150,000 gallon production limit. This limitation, while significantly larger than those applied in Massachusetts, seem to be of the same effects as those under current attack in the Family Winemakers of California v. Jenkins case. A ruling by the Massachusetts District Court in favor of Family Winemakers of California may give wineries some ground to challenge these limitations should they become law in Ohio.

Finally, HB 119 establishes a tax scheme for wines shipped into Ohio. In essence, wines containing 4-14% alcohol by volume are subject to a tax of 30 cents/gallon; wines containing 14-21% alcohol are taxed at the rate of 98 cents/gallon; and sparkling wine will be taxed at the rate of $1.48/gallon.

The ShipCompliant research team will track the progress and effects of HB 119. Stay tuned…

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