Archive for December, 2008
Kentucky On-Site Requirement Invalidated, but Questions Remain
December 31st, 2008
On December 24th, the US Court of Appeals for the Sixth Circuit affirmed, in the Cherry Hill case, the judgment of the district court, invalidating the on-site purchase requirement.
The district court ruled, pursuant to the Supreme Court’s decision in Granholm v. Heald, 544 U.S. 460 (2005), that the in-person purchase requirement in portions of Kentucky’s statutory scheme discriminated against interstate commerce by limiting the ability of out-of-state small farm wineries to sell and ship wine to Kentucky consumers.
Although this decision sets an important precedent, especially in light of a contradictory decision in Indiana, several questions remain unresolved. Despite the justifiably positive news in the press, direct shipping to Kentucky seems unlikely in the near term.
The biggest obstacle is the fact that the common carriers (FedEx and UPS) have not approved the state of Kentucky for direct shipping. Among other reasons for not yet opening up the Bluegrass State, the carriers are not thrilled about dealing with the 53 Dry and 16 Moist counties.
Furthermore, in spite of the recent victory in Massachusetts where the 30,000 gallon capacity cap was declared unconstitutional, the Cherry Hill challenge of the 50,000 gallon capacity cap in Kentucky was not successful. So, even if the carriers approved Kentucky for shipping, only “small farm” wineries would be eligible for a permit.
Corbin Houchins provided great analysis of the original district court ruling two years ago, and I recommend revisiting that post for more information on Cherry Hill. He highlighted an additional question about the two case “per visit” limit, and how that would apply given the unconstitutionality of the on-site visit requirement.
Happy Holidays
December 23rd, 2008
Happy Holidays from the ShipCompliant Team! Thank you so much for your continued support. This picture was taken recently from the rooftop of our office in Boulder, CO.
-Jim, Pawel, Luke, Jane, Kim, Manzi, Elizabeth, Barclay, Kent, Michael, Jason, Jeff, Trent, Sarah, David, Mike, Colin, Ryan and Robb (not pictured: Mackenzie and Jamie)
Tips for Making End of Year Reporting Easier
December 23rd, 2008
Scrooge asks: Do you have tracking numbers for all 2008 Missouri shipments? Are you ready with your TTB IDs for the products you shipped into New York? Are you aware of Wisconsin’s new electronic filing requirement? If so, will you go with the manual Free File of the XML file submission? Did all of your holiday orders ship in 2008, or will some get pushed to January?
Each year, January is a perfect storm of reporting with up to 79 different submissions for monthly, quarterly and annual tax and shipping reports, 50% more than a more typical monthly load of 53. This January brings up to 21 new (or significantly more complex) reports over last January, depending on the number of states (and cities) to which you ship. Some of these reports require extensive information that is not typically stored on an individual order basis and must be collected and tied to each shipment.
We put together a page full of tips and tricks for completing your end of year reporting as painlessly as possible. Click here to read our 5 Tips for Making End-of-Year Direct Shipping Reporting Easier.
Up and Running (So Far)
December 19th, 2008
Happily for the plaintiffs, Judge Zobel’s final judgment in Family Winemakers of California v. Jenkins took the path that seemed most likely from the tone and content of her memorandum and order of 19 November 2008 and leveled up. The judgment entered 18 December 2008 orders the state “to permit wineries of all sizes to apply for licenses under Mass. Gen. Laws ch. 138, § 19F(b),” which does not contain the § 19F(a) disqualification of wineries that have sold to a Massachusetts wholesaler within six months of applying for the license, formerly applicable to all 30,000-gallon-and-over wineries. In her November opinion, the judge had noted that the “choice” to use direct shipment only after abandoning all sales through wholesalers for six months was, in effect, prohibition.
Final judgment does not settle the issue of a possible stay of the injunction pending appeal. The state has 30 days from entry of the judgment to file notice of appeal, which would be a prerequisite to moving for a stay in the trial court and, if unsuccessful there, in the Court of Appeals.
By R. Corbin Houchins, Attorney at Law
Utah Allows Shipment of Wine? Well, Not Exactly
December 18th, 2008
In one of the most regulated and restricted states in the US, residents may now special-order alcohol online. The Utah Department of Alcoholic Beverage Control (DABC) announced that Utah residents may use an online Special Order Form to purchase alcohol that is otherwise unavailable in the State’s liquor stores. The alcohol would then be shipped to a DABC store location of the buyer’s choosing for pickup. Available since September of this year, the system was relatively unknown until recently due to limited exposure.
Residents of Utah may special order from any licensed vendor located in the United States, which includes producers, authorized agents, and wholesalers, among others. For Utahns ordering international products, they must order the product from a licensed US importer. All vendors, of domestic and international products alike, must be registered with the DABC. There is no cost associated with registration. For more information about what type of vendor to order from and how to register as a vendor refer to the website.
After deciding on the product and vendor from whom to purchase, the ordering process is very straightforward. Some important information required for ordering includes the product name, size and vintage and also the specific DABC store location and date desired for pickup. When ordering, Utahns should keep in mind that vendors may not ship products individually and be prepared to order by-the-case. Also, applicable sales taxes (state and local) are paid by the consumer.
Although the order form takes a relatively short amount of time to fill out, delivery takes much, much longer. The buyers should expect delivery 45 days after the DABC receives the price quotation, at the earliest. This is due, in part, to the custom nature of each order.
The fact that Utah, a heavily controlled state, created an easy-to-use order form for residents to purchase almost any alcoholic beverage available in the US (albeit with a lengthy transaction completion time line) is an acknowledgement of the importance of consumer access and choice. However, it is very important to note that the new special order form does not allow direct shipments to Utah residents because the products may only be picked up at a DABC store.
The Return of the Florida Wine Shipping Bill
December 12th, 2008
Wineries and consumers have enjoyed relatively unrestricted wine shipping into Florida since 2006. This could change if direct shipping legislation is passed this year. Florida is gearing up for another legislative session and direct wine shipment legislation is on the docket, once again. The Florida Senate’s regular session will convene on March 3rd, but an agreeable bill relating to direct wine shipments has already been filed with the Florida Senate. SB 0272, authored by Senator Paula Dockery, would allow for the direct shipment of wine by permitted wineries; retailers are not addressed in this bill. The bill is reportedly based off of the wine industry’s “model” direct shipping bill, which allows wineries to ship to residents with reasonable restrictions. This means that there are no proposed production volume caps (unlike the bills that were being considered last year). However, it is still possible that competing direct shipping bills may be filed before the legislative sessions begin. According to the Family Winemakers of California, “Wholesalers have been meeting, but there [is] no word yet on their approach to the 2009 session. Based on the past three years it isn’t unreasonable to expect them to oppose the bills supported by the wine industry and attempt to impose a production cap despite FWC’s recent court victory in Massachusetts.”
Some of the requirements that would be set forth if SB 0272 makes its way into law include: $100 annual fee, bond, per bottle volume limit, age verification, special shipping label, monthly reporting, excise tax, and sales tax (local taxes apply).
Hope Rests in Senate as Michigan House Passes Ban on Retail to Consumer Direct Shipments
December 11th, 2008
Michigan House Bill 6644 passed with 97 Yeas and 9 Nays on December 4, 2008. If passed by the Senate, HB 6644 would ban all retailers, in-state and out-of-state, from direct shipping wine to Michigan residents. In the last days of Michigan’s current legislative session, expected to adjourn soon, the failure or passage of this bill will either give new life to or end Michigan retail direct shipping.
Less than three months ago, Michigan Federal District Court Judge Denise Hood ruled unconstitutional a Michigan law that allowed in-state retailers to direct ship to consumers while denying out-of-state retailers the same right. However, before out-of-state retailers could even fancy direct shipping wine, Governor Granholm, the Michigan Beer and Wine Wholesalers Association (BWWA), and the Michigan Liquor Control Commission (LCC) filed an appeal, effectively suspending all attempts to open up the Michigan wine market in conformity with Judge Hood’s ruling. In the two short months following the stay from the appeal, Representatives Barbara Farrah and Chris Ward introduced HB 6644 to stop all retailers from competing with wholesalers.
The bill sponsors did little to hide their true objective in expediting the bill through Michigan’s Legislature. In its Legislative Analysis, the Committee on Regulatory Reform, which recommended the bill, repeatedly declares the need to protect the three-tier distribution system, citing how well it has served Michigan businesses and residents for 75 years. Among the other arguments in favor of the bill, the committee points to the supposed “untold amounts of revenue” that would be lost due to the lack of a “legal framework to license these out-of-state retail liquor establishments and to collect the same excise taxes and sales and use taxes levied on Michigan retailers and suppliers.” This argument assumes that the Michigan LCC is incapable of establishing new administrative procedures in the face of change, a reflection of an antiquated administration and not the feasibility of implementing new regulations. The bill sponsors, arguing arduously for the protection of the three-tier system, seem to overlook the very functional winery direct to consumer shipping market in Michigan which has had a regulatory system in place since April 2006. The SWRA proposes that the same rules and paperwork with which the Michigan LCC regulates direct shipping wineries can realistically be applied to retailers, thus increasing tax revenue, a straightforward process that the Michigan LCC and BWWA fail to acknowledge.
As expected, the Michigan LCC and the Michigan BWWA support the bill while the Michigan Restaurant Association (MRA) opposes it. The MRA recognizes that if the bill were to pass, members who hold retail beer and wine licenses would also be banned from serving those beverages at catered events, an important part of their business services.
Despite the disheartening speed and overwhelming majority with which the Michigan House passed the bill—it took three legislative days to go from introduction to vote—there are indications that the same will not occur in the Senate. Retailers interested in shipping wine to Michigan residents have ridden a roller coaster of legislation changes for several years; but the fate of retailer direct shipments could be set for the foreseeable future before the New Year rings in.
One Less Dry Town in New Hampshire
December 9th, 2008
Wineries with a valid direct-to-consumer shipping permit may now ship to consumers in Landaff, New Hampshire. The city of Landaff voted to end its status as a dry town effective immediately. Four dry cities remain in New Hampshire: Brookfield, Ellsworth, Monroe and Sharon. Wineries are prohibited from shipping wine to consumers in dry regions in New Hampshire. More information about shipping wine directly to New Hampshire consumers can be found by visiting the Wine Institute website.
Annie Bones, State Relations – Wine Institute
Wine Distribution Notes – Release 30
December 5th, 2008
Release 30 of Notes on Wine Distribution by R. Corbin Houchins is now available for viewing or downloading.
The Notes provide thoughtful insight on the state of direct shipping rules and valuable information on current litigation and legislation for each of the United States (plus DC), with changes from the preceding release indicated by highlighted headings. Some highlighted segments in the new release:
Direct Shipment by Retailers
Volume Caps
Family Winemakers of California v. Jenkins in Massachusetts
Siesta Village Market, LLC. v. Granholm in Michigan
As always, the most recent version of the notes is available on the ShipCompliant Blog, so check regularly for updates.
Face-to-Face Enforced in Indiana
December 4th, 2008
The Indiana Alcohol and Tobacco Commission is now enforcing the statutory citation concerning the initial face-to-face transaction requirement in Section 7.1-3-26-6. The face-to-face requirement originally became effective on July 1, 2006, but was later stayed by the Court on August 24, 2007. However, the stay has expired and it is recommended that direct shippers comply with face-to-face requirement. Indiana consumers may only receive off-site shipments if they have visited the winery and completed an on-site transaction. Indiana consumers who have not completed a face-to-face transaction with the direct shipper are no longer eligible to receive wine shipments. Additional information about direct-to-consumer shipping regulations can be found by visiting http://www.wineinstitute.org/initiatives/stateshippinglaws and clicking on the state of Indiana.
Annie Bones, State Relations – Wine Institute
An Unfortunate Direct Shipping License Clarification in Texas
December 4th, 2008
Wineries applying for a Texas Direct Wine Shipper’s Permit or renewing their existing permit must now pay a surcharge of $160 in addition to the $75 annual permit fee. Currently the Direct Shipper’s permit is renewed annually. However, beginning January 1, 2009 all Direct Shipper licenses will be valid for two years. Applicants will have to pay license fees and surcharges for 2 years totaling $470 when applying for a permit in 2009. The Texas Alcohol Beverage Commission added significant surcharges to a wide range of licenses affecting both in-state and out-of-state applicants.
Annie Bones, State Relations – Wine Institute
