Archive for February, 2008
Another Rowe to Hoe
February 25th, 2008
There’s been a lot of silliness lately about the Maine cigarette case, with some observers declaring that the recent Supreme Court opinion in Rowe v. New Hampshire Motor Transport Ass’n prevents states from regulating carrier deliveries of interstate wine shipments. Whether honest mistake or disinformation, that assertion might seem plausible from a superficial reading of news reports on the decision, so it’s worth looking into.
This Rowe is a straightforward federal preemption case, affirming a Court of Appeals decision (itself based on a well-known 1992 Supreme Court decision) that a federal statute with a specific preemption clause does just what it says. Enacted in 1994, the motor carrier statute provides: “[A] State . . . may not enact or enforce a law . . . related to a price, route, or service of any motor carrier . . . with respect to the transportation of property.” The Maine law struck down as inconsistent with the federal statute attempted to prevent shippers from using interstate motor carriers lacking controls to prevent delivering cigarettes to minors, an objective the justices found worthy, but within the exclusive province of the federal congress.
Why doesn’t that knock out state laws restricting delivery of wine to minors? In the first place, there is a more specific federal statute dealing with alcoholic beverages, which provides: “The shipment or transportation … of any … intoxicating liquor … from one State … into any other State … intended … to be received … in violation of any law of such State … is prohibited.” In other words, federal law specifically authorizes state laws regulating deliveries of wine and adds federal weight to their enforcement. One cannot argue that the liquor statute, passed in 1935, is impliedly repealed by the 1994 motor freight legislation, because they do not exhibit the kind of irreconcilable conflict that evinces congressional intent to repeal the older statute. Well-settled principles of statutory construction in cases of conflict prohibit implied repeal if reconciliation is possible and provide that facially conflicting statutes can be reconciled by allowing the more specific to govern over the general in its particular subject area. Thus, if we had only the two statutes to consider, rules of statutory construction would require that the 1935 act remain in force as a subject matter exception to the more general 1994 enactment. One could quibble about the extent to which states are authorized to dispense with an intent requirement, but there’s no doubt that the federal statutory scheme leaves room for state laws controlling wine deliveries.
It is not, however, merely a matter of two statutes. The second problem with the Chicken Little reading of Rowe is a clincher. The U.S. Constitution states, “The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.” There is no need to resort to implied congressional intent. The Supremacy Clause says that the U.S. Constitution itself and the laws of the United States shall be the supreme law of the land, a provision that is interpreted to mean, “in that order.” Thus, the same clause that underlies preemption of the Maine cigarette delivery law by a federal statute absolutely prevents preemption of a state wine delivery law by that congressional enactment, provided the state law does not violate some other constitutional provision, e.g., by discriminating against wine produced by persons of a certain race or religion –or by a winery outside the state.
Three New Florida Bills: Not the Ducks or the Bucks, but the Winery Shipper Ones
February 24th, 2008
The Regular session of the Florida Legislature will convene on March 4, 2008. During the 60 days following, legislators should decide on one of three winery shipping bills that could be introduced into Florida law. I say should, hoping that last year’s unsuccessful passage will not be repeated. Since 2006, wineries have been able to send relatively unrestricted shipments to Florida consumers. Back in 2006, the Florida Department of Business and Professional Regulation (DBPR) decided to become compliant with Granholm; because of this they have allowed shipments, hoping legislation would be passed. In 2007, many thought they might take this allowance away after all three bills failed to pass into law.
The 2008 winery shipping legislation contestants have several things in common. The bills would require a $1000 - $5000 bond, a $250 permit (the annual application and registration fee for Florida Farm wineries is $100), varied annual shipment quantity limitations per household, reporting and payment of sales and excise taxes, and applicants must produce less than 250,000 gallons of wine annually.
HB 693 (Bogdanoff) - In 2007, the only bill that did not have a capacity cap was authored by Bogdanoff. Unfortunately, this year the cap is set to 250,000 gallons just like the other two bills. Other restrictions that stand out: Fingerprinting of applicants; consumers may not purchase more than 18 cases of wine per household; Age verification (receiving a copy, electronic or otherwise, of a purchaser’s driver’s license; or asking for and recording all purchasers’ names, ages, and dates of birth); if the applicant is owned by a winery that sells more than 250,000 gallons of wine, the division may not issue a license.
SB 1736 (Geller) - Geller was also an author of a competing 2007 bill. The 2008 version looks pretty much the same: The applicant must produce less than 250,000 gallons of wine annually; brand registration is required for all wine shipped; the Winery Shipper must require the person to state that he or she is 21 years of age or older, ship no more than 15 cases per household per year; the Winery Shipper shall offer the brands of wine shipped under this section to license distributors; knowingly and intentionally shipping wine to a person under 21 is a 3rd degree felony.
Of the three bills in 2008, it seems SB 1096 (Margolis) is the one wine lovers and makers will be rooting for the least. Without focusing too much on the regular restrictions, let’s just note the more shocking ones:
Legislative intent
“The Legislature finds that the importation, distribution, and sale of alcoholic beverages require strict regulation in order to promote temperance by discouraging consumption by underage persons… fiscal health of the state… these purposes are best achieved through the state’s comprehensive system of licensing and regulation, including the three-tier system of alcohol distribution which has been the law of this state since the repeal of Prohibition.”
– Confusing distributor language: “The division may not issue or renew a license under this section if the applicant or licensee has appointed a distributor in this state, unless the applicant provides to the division a copy of a written notice sent to the distributor of intent to obtain a winery shipper’s license 1 year before applying for a winery shipper’s license under this section” (if passed, this would go into effect 4 months from now making it hard to give 1 year notice before the license becomes available.) However, it is later stated that “A licensed winery shipper must offer to its distributor for purchase and sale per calendar year the same brands and quantities of wine shipped per calendar year under this section”
– Licensees may not ship more than 4 cases per year per household. In addition to the licensee restriction, consumers may not purchase more than 4 cases per household per year. For common carriers, the signature form must inform the recipient that the wine is for personal or household consumption only, and not for resale. Wineries must have a written contract with the common carrier saying that the common carrier will do this.
– Knowingly and intentionally shipping wine to a person under 21 is a 3rd degree felony.
Since 2006, wineries and wine lovers have enjoyed relative freedom when shipping wine directly to Florida consumers. Florida is ranked #2 in table wine consumption, which accounts for a big chunk of addressable market share of direct shipments. If any of these bills pass as is, it might feel like you’re living with your parents again; you can go to the party, but you can’t stay out past 8:00. Maybe if we keep putting the pressure on the lawmakers, we’ll at least be able to stay out past midnight.
Costco Asks Court of Appeals to Think Again
February 21st, 2008
On February 19, 2008, Costco Wholesale filed a petition for rehearing in the Ninth Circuit Court of Appeals, asking the original panel to reconsider a three-judge panel’s decision of January 29th, which upheld the ruling of a federal district court in Seattle that Washington’s price posting requirement is invalid under federal antitrust law, but reinstated other parts of the price posting statute the district court had struck down as part of the invalid statutory scheme, as well as the ban on central warehousing. The petition also asks that the entire appeals court hear the case if the original panel does not grant Costco’s request, in view of the importance of the antitrust issues, the inconsistency of the result with those in an earlier Ninth Circuit case and a recent Fourth Circuit case, and the necessity to interpret a leading Supreme Court opinion. The petition offers a clue to how an appeal to the Supreme Court might be structured.
Reciprocity Lives (well, at least in New Mexico)
February 18th, 2008
With all the support SB59 received, it seemed hopeful that another reciprocal state would move from yellow to blue. The new bill would have replaced the existing reciprocal wine shipping law with a permit system for both wineries and retailers. Regrettably, it did not reach the New Mexico House floor before the session ended last Friday. As reported by Free The Grapes, SB59 received favorable testimony from The New Mexico Restaurant Association, New Mexico winemakers, and the New Mexico Retailers Association, and was endorsed by New Mexico Wine Growers Association. The bill went through most of the legislative process, encouraging the hopeful inception all the more; it passed the Senate Finance Committee on February 8th and was passed by the Senate on February 9th, but there was not enough time left for it to be passed by the House.
The bill would have allowed in- and out-of-state wineries and retailers to apply for a “Direct Wine Shipment Permit,” for a fee, with some of the regular limitations. New Mexico would have been the 11th out of 13 states to change from a reciprocal status since the Granholm decision outlawed discriminatory practices for out-of-stater’s in 2005. Not all changes since Granholm have been 100% non-discriminatory. As many will tell you (see this SWRA blog post for some background info), retailers and wineries are not always treated the same, but this bill would have been good for both.
A call to action in Maryland
February 16th, 2008
Maryland is currently one of six states, including Utah, Arkansas, Mississippi, Alabama, and Pennsylvania, where all direct shipping is prohibited for both offsite and onsite sales. In fact, shipping wine into Maryland today can result in a felony.
But, that could all change soon. House Bill 1260 and its companion, Senate Bill 616, would establish a system where permitted wineries and wine retailers could ship directly to Maryland residents.
The bills are endorsed by Maryland consumers, Maryland wineries, out-of-state wineries, and out-of-state retailers. But, these groups need help and are calling for action because the wholesaler lobby will fight the bills fiercely. If you are interesting in supporting consumer choice in Maryland, you can get involved by following one or more of the steps below:
1) Visit Free the Grapes!, click on the link for Maryland consumers, and follow the instructions in the Action Alert
2) Share this post with all of the consumers that you know in Maryland
3) A hearing has been scheduled for HB 1260. The House Economic Matters Committee (House Office Building, Room 231) will begin the hearing on Monday, February 18, 2008 at 1pm. If you are able, or know anyone that is able, attend the hearing on Monday and voice your support.
(1) ENSURE THAT ALL CONTAINERS OF WINE SHIPPED DIRECTLY TO A RESIDENT IN THE STATE ARE CONSPICUOUSLY LABELED WITH THE WORDS “CONTAINS ALCOHOL; SIGNATURE OF PERSON AT LEAST AGE 21 YEARS OLD REQUIRED FOR DELIVERY”;
(2) REPORT TO THE OFFICE OF THE COMPTROLLER ANNUALLY THE TOTAL OF WINE, BY TYPE, SHIPPED IN THE STATE THE PRECEDING CALENDAR YEAR;
(3) PAY ANNUALLY TO THE OFFICE OF THE COMPTROLLER ALL SALES TAXES AND EXCISE TAXES DUE ON SALES TO RESIDENTS OF THE STATE IN THE PRECEDING CALENDAR YEAR, THE AMOUNT OF THE TAXES TO BE CALCULATED AS IF THE SALE WERE MADE AT THE DELIVERY LOCATION;
(4) ALLOW THE OFFICE OF THE COMPTROLLER TO PERFORM AN AUDIT OF THE DIRECT WINE SHIPPER’S RECORDS ON REQUEST; AND
(5) CONSENT TO THE JURISDICTION OF THE OFFICE OF THE COMPTROLLER OR OTHER STATE UNIT AND THE STATE COURTS CONCERNING ENFORCEMENT OF THIS SECTION AND ANY RELATED LAW.
(B) A DIRECT WINE SHIPPER MAY NOT:
(1) SHIP MORE THAN 24 9–LITER CASES OF WINE ANNUALLY TO ANY ONE INDIVIDUAL; OR
(2) SHIP WINE TO AN ADDRESS IN AN AREA IN WHICH THE BOARD OF LICENSE COMMISSIONERS FOR THAT AREA MAY NOT ISSUE A LICENSE AUTHORIZING THE SALE OF WINE.
Seeing Double: Ship Your West Virginia Report Twice
February 7th, 2008
We’ve received many questions about what West Virginia requires as far as reporting is concerned, so we contacted the ABCA to clear all confusion of the matter. On the West Virginia Direct Shipper’s Report it says, “Prepare this report in duplicate, mail the original and payment of taxes to the WV State Tax Department… and a copy to Alcohol Beverage Control Administration…” We found that, statutorily, the Direct Shipper also needs to submit invoices along with the report to both West Virginia entities, even though it is not explicitly stated on the report. Additionally, the copy that needs to be sent to the ABCA should include A) a copy of the return B) a copy of the invoices; and C) a copy of payment to the Tax Department (to submit a copy of payment, just photocopy the check that you send to the Tax Department before you send it out). These requirements can be time consuming and require a lot of paper, but are necessary to comply with the ABCA’s regulations.
Nebraska License Requirements Clarified
February 5th, 2008
It has come to my attention that information concerning Nebraska’s direct-to-consumer shipping regulations on the Wine Institute website was misleading. The “Direct Shipping License Required” Rule was not listed as a requirement for on-site shipments to Nebraska consumers. The website has been updated to show that a direct shipping license is required for on-site and off-site shipments to NE consumers. There are no exceptions to the license required rule. The direct shipper permit application and reporting forms for NE are available on the Wine Institute website.
Missouri: Beware the yellow highlighter!
February 5th, 2008
The Missouri Division of Alcohol & Tobacco Control is being extremely thorough in enforcing accurate reporting and excise tax payments. We’ve heard from a number of wineries that filed the Wine Direct Shipper Annual Report and Tax Computation report with the associated Sales to Missouri Residents by Wine Direct Shipper (form 40) schedule on time, but had the report rejected by the ATC for errors or omissions.
Missouri moved from a reciprocal state (with no reporting) to a permit state on August 28th, 2007. Wineries that now have a permit to ship to consumers in Missouri must file the annual report and schedule. Because the permit requirement went into effect in August 2007, only shipments made between August 28th and December 31st needed to be reported on the 2007 annual report.
As do most state ABCs, the Missouri ATC receives reports from the common carriers (FedEx and UPS) that detail all of the wine shipments that are delivered directly to Missouri residents. They use this data from the carriers to reconcile the data on the reports that are submitted by the licensed wine direct shippers. On the Missouri annual report, wineries are required to list the name and address of the purchaser, the name and address of the recipient, the date of shipment, the invoice number, the name of the direct shipper (FedEx and UPS are the only licensed carriers), the direct shipper’s Missouri license number (170979 for UPS, 168093 for Federal Express, and 168217 for FedEx Ground), and the FedEx or UPS tracking number for all shipments. The Missouri ATC literally took out a yellow highlighter and highlighted any errors or omissions on the report including a missing Form 40, any failure to calculate or pay the $.12 per gallon tax, a missing or invalid shipper name, or an incorrect or missing tracking number. All shippers that received this notification are required to file an amended return by mail or fax to the Missouri ATC by February 15th.
