Archive for October, 2007
Wrong, but Not Surprising: A Loss in Extending Granholm to Shipments by Retailers
October 5th, 2007
The recent decision in Arnold’s Wines, Inc. v. Boyle, Docket No. 06 Civ. 3357 (Southern District of NY, Sept. 9, 2007), which upholds New York’s requirement that retailers be located within the state to sell and ship to New York residents, illustrates the difficulty of separating dictum from holding in the Granholm case. (See the September 18th blog post for an explanation of the difference.)
My reading of the Arnold’s Wines opinion is that Judge Howell failed to put a famous statement from the 1990 North Dakota case, quoted in Granholm, in the context of the Granholm holding. The key quotation is that North Dakota had a 21st Amendment right “to require that all liquor sold for use in the State be purchased from a licensed in-state wholesaler.” States and local licensee trade associations cite the statement as a fundamental principle of constitutional law, while out-of-state plaintiffs dismiss it as mere dictum and therefore incapable of serving as the decisional principle in discrimination cases. In Arnold’s Wines it appears each side was half right.
To determine whether the North Dakota reference in Granholm is controlling precedent, one must examine the latter opinion to see if it was necessary to the result. When one does that, it seems clear that New York has the right to require all wine to go through a three-tier system, but no right to require that any element of that system be located within the state of New York unless the discrimination against out-of-state sellers can be justified under the Commerce Clause.
Nothing in the Arnold’s Wines memorandum opinion suggests evidence of justification other than New York’s desire to have a three-tier system and the general objectives of states’ adopting such systems after Repeal. Three-tier systems are like any other exercise of regulatory power by the state; they are valid only if they either do not discriminate against interstate commerce relative to local or discriminate no more than necessary to serve a legitimate state purpose that cannot be achieved by available nondiscriminatory means. The burden is on the state to justify discrimination. However, the court decided that the defendants win as a matter of law, with no factual hearing. It looks to me as if the court wrongly deprived the plaintiff of its right to require the state to prove its case.
Free the Grapes!: New Illinois Law to Expand Consumer Choice for Winery-to-Consumer Shipments from 5 to 50 States, But Corks Out-of-State Retailers
October 5th, 2007
From Free the Grapes!:
Illinois Governor Rod Blagojevich yesterday signed House Bill 429 which goes into effect June 1, 2008. The new law dramatically expands consumer choice for winery-to-consumer purchases made by Illinois wine consumers. Under the new law, wineries in all 50 states may purchase a permit to ship. Under the old law, wineries in just five states, including Illinois, were allowed to direct ship to Illinois consumers. The trading network of states with so-called ‘reciprocal’ wine shipping arrangements has decreased from a dozen to just five: New Mexico, Wisconsin, Iowa, Oregon (changes to permit law in January 2008) and Illinois (changes to permit law in June 2008).
“The new law is a boon for winery-to-consumer shipments, and long overdue, but unfortunately it corks out-of-state retailers. An amendment, widely supported by Illinois consumers and Free the Grapes! would have allowed out-of-state retailers the same privileges as wineries. It was defeated by powerful Illinois retailers and wholesalers,” said Jeremy Benson, executive director, Free the Grapes!, a winery-consumer grassroots coalition.
Illinois wine shipping bill signed by governor
October 4th, 2007
Governor Blagojevich signed HB 429 yesterday, temporarily ending an extremely tough battle to pass wine shipping legislation in Illinois. The new laws will not take effect until June 1st, 2008. Illinois will move from a reciprocal state to a permit state for winery direct shipping and will also enable limited self distribution for wineries that produce less than 25,000 gallons per year.
HB 429 will allow Illinois retailers to ship to consumers, but will prohibit out of state retailers from doing the same. This will almost certainly be challenged by the Specialty Wine Retailers Association, who will seek evenhanded access to shipping directly to Illinois consumers.
For more information on HB 429, please see our previous post.
Ohio Direct Shipping Permits Available for Wineries Producing Under 150,000 Gallons Annually
October 3rd, 2007
As of October 1, 2007 only wineries producing up to 150,000 gallons annually with an approved S Permit issued by the Ohio Department of Commerce Division of Liquor Control and registered with the Ohio Department of Taxation may ship to Ohio consumers. Wineries producing 150,000 gallons or more annually are prohibited from shipping both on-site and off-site sales to Ohio consumers as of October 1, 2007. The application fee for the S Permit is $25.00 annually. Under the new law an Ohio family household may receive an aggregate total of 24 cases of wine annually.
Wineries applying for the S permit must pay a $25.00 fee and have the application notarized. The permit must be renewed by each year by October 1st. It is expected to take 3-4 weeks for the applications to be processed. Next are some tips to help you complete the permit application. Type of Applicant is determined by whether or not the winery has a relationship with an Ohio distributor. If the winery applying for a permit has a distributor in Ohio “out-of-state supplier” should be selected as type of applicant. Wineries that do not have a relationship with a distributor should select “unregistered in Ohio out of state wine manufacturer.” The first question on the application references a tax credit under 27 D.F.R. 24.278. This refers to a section of the “small producer’s tax credit” that all wineries producing less than 150,000 gallons annually are entitled to under federal law.
The Division of Liquor Control will notify the Department of Taxation, Excise Tax Division that you have applied for the S permit. Excise tax forms and instructions should arrive via U.S. Mail approximately 30 days after you have submitted your S permit application. Excise taxes are scheduled to be paid quarterly. Direct Shippers must register with the Ohio Department of Taxation, Sales & Use Tax Division. Registering your business by telephone is recommended. Call 1-888-405-4089 and press #1 after the message. There is also the option of registering with the Department of Taxation by submitting Form UT-1000. State and county sales tax must be paid. The state sales tax is 5.5% and the county tax ranges from.25%-1.5%.
S Permit holders are required to report annually to the Division of Liquor Control. The annual report must include a copy of each wine shipment invoice and a record of the name, address and quantity of wine purchased by each consumer. The reporting form is not yet available. It is likely that the annual reporting due date will coincide with the S permit renewal date of October 1. For more information visit the Wine Institute website.
Link to Form UT-1000
Link to S Permit Application
Small producers tax credit
