Archive for May, 2011
Tennessee Bill Opens Entire State to Direct Wine Shipments
May 20th, 2011
Tennessee Governor Bill Haslam signed SB 1030 today, May 20, 2011, to open the entire state of Tennessee to direct wine shipments. Though officially Tennessee allowed wineries to apply for a license to ship wine into the state beginning July 1, 2009, licensed shippers have only been able to ship wine to some parts of the state. SB 1030 passed with no amendments and with little discussion on the floor.
Consumers and wineries alike can celebrate the passage of this bill that opens up an additional 65% of the state to direct wine shipments, while also eliminating confusion on which portions of the state allow it. The Tennessee General Assembly Fiscal Review Committee estimates that increased wine shipping will boost state revenue by $1.7 million and local revenue by $430,000 through tax collection alone.
Approximately 35% of wineries that ship wine direct are licensed to ship into Tennessee. The increased market access is likely to encourage additional wineries to add Tennessee to their direct shipping programs, meaning more consumer choice and increased state revenue. This new legislation goes into effect immediately.
The Old ‘Wine’ State: Maryland to Open to Direct Wine Shipments
May 10th, 2011
After years of repeated attempts to open the state to wine shipping, Maryland wine lovers will soon be able to have wine shipped directly to their doors. Signed by the Governor today, the new law makes Maryland the second state this year — after New Mexico — to pass new direct wine shipping permit legislation. This flurry of wine shipping legislation comes after no new states opened to direct shipping legislation in 2010.
Two important factors paved the path to the passage of direct shipping legislation in Maryland. First, a local citizens organization, “Marylanders for Better Beer and Wine Laws”, kept pressure on the Maryland legislature year after year even though earlier direct shipping bills were defeated. Second, the Maryland Comptroller’s office released a Direct Wine Shipment Report late last year debunking many of the claims made by opponents of wine shipping concerning minor access to wine and harm that might come to local business as a result of wine shipments.
Though retailers were included in original versions of the direct shipping legislation, they were left out of the final language, perhaps in part, because the Comptroller’s Report did not advocate for retail-to-consumer shipping.
The new law takes effect July 1, 2011 and allows wineries to obtain a Direct Wine Shipper’s Permit for $200 (renew annually). Each licensed winery will be allowed to ship up to 18 cases of wine to a single delivery address each year and will be responsible for quarterly reporting and payment of excise and sales taxes on all shipments made into the state. Potential shippers now await permit application and instruction forms from the Maryland Comptroller, which could be made available any time. We will keep you updated as more information becomes available.
The CARE Act is a solution looking for a problem
May 9th, 2011
Editor’s Note: The following is a guest post, written by Tom Wark of SWRA, in our series on the CARE Act of 2011.
So, what problem could possibly necessitate the radical solution of stripping every wine store in America of its Constitutional protection against discriminatory state-based laws? Make no doubt about it. H.R. 1161 does one simple, yet purely radical thing: It gives states the congressional and constitutional authority to discriminate against wine retailers for the sake of protecting in-state businesses against competition.
Again, what problem necessitates the kind of radical solution that has only been undertaken once in 220+ years?
According to the wholesalers that conceived and wrote the CARE Act, states need help to “defend a wide variety of laws that have been challenged, including physical presence requirements for retailers.”
“Physical presence requirements for retailers” is code for state laws that ban a state’s consumers from having wine shipped directly to them from out-of-state retailers of wine. These kinds of anti-consumer laws are discriminatory when the same state allows its own in-state retailer to ship to its residents and such laws exist around the country for a simple reason: To protect in-state wholesaler from competition from out-of-state retailers who are available to address consumer demand that wholesalers have not addressed, cannot address, don’t want to address and will not address.
Consider that in most states a wine store is required by law to purchase its inventory from wholesalers. This means that a local wine store may only sell those wines to consumers that they are offered by local wholesalers. If a wholesaler in a state doesn’t offer retailers a particular wine, then consumers will have no access to it—unless they are able to purchase it direct from another retailer in another state where the wine is available.
Wholesalers don’t like this option at all. When a consumer purchases a wine from a retailer in another state and has it shipped to them, local wholesalers make not a cent on that sale. The fact that the sale is made in the first place also exposes a significant and important problem of the state-based three tier system that wholesalers defend: Wholesalers in any given state only offer a tiny fraction of the wines that are actually available in the whole American marketplace.
Wholesalers like to say that the three-tier system offers consumers “tremendous excitement, choice and variety.” But that is only the case if consumers are able to access wines distributed in a variety of states. When they are forced to choose only from a selection of wines and beers wholesalers make available in their state, the choice represents a tiny fraction of what is actually available in the American marketplace. And wholesalers like it this way. The fewer wines and beers that wholesalers distribute, the more profitable their businesses are—as long as they don’t have to deal with competition from outside the state.
The CARE Act gives states free reign to actively and blatantly discriminate against out-of-state wine stores that seek to answer the growing consumer demand for product diversity that isn’t addressed by wholesalers. States pass these discriminatory laws for one single reason: to protect the politically connected wholesalers who are generous campaign contributors.
It is important to note that neither Congress nor the Supreme Court has ever endorsed the idea that a state may constitutionally discriminate against out-of-state wine stores the way the CARE Act would allow. Yet wholesalers suggest that lawsuits that challenge these protectionist laws are nothing more than “nuisance” lawsuits and that the CARE Act would protect states against lawsuits that seek to “deregulate alcohol sales.” In fact, wholesalers have made the audacious and completely false claim that “the current litigation status only will lead to states abandoning their powers to protect the public interest.”
The problem states have is not that they can’t effectively defend their alcohol laws from court challenges. Their problem is that they can’t effectively defend the protectionist, discriminatory and unconstitutional law the wholesalers foist upon them.
Wholesalers claim that states need the CARE Act’s congressional authority to discriminate against out-of-state retailers in order to “protect consumers and the public.” Yet in the same CARE Act, wholesalers have written language that assures wineries are protected against the very same kind of discrimination the bill authorizes against retailers.
What protections are offered to the consumer and public when a state’s in-state wineries, out-of-state wineries and in-state retailers are allowed to ship wine direct to the consumer, but out-of-state retailers are banned from doing the same thing? This is the case in a number of states and wholesalers will work to assure it is the case even more frequently if the CARE Act passes. The transaction that occurs when a consumer buys wine from an out-of-state winery is exactly the same as when a consumer buys wine from an out-of-state retailer.
There is no difference between these transactions. There is no public safety issue involved. There is no consumer protection issue involved. However, such discriminatory and anti-consumer laws do protect in-state wholesalers from competition, allowing them to continue guarantee consumer choice in wine is limited to the paltry selection they provide.
Keep in mind what consumers lose out on when wholesalers successfully convince states to ban wine lovers from buying wines from out-of-state wine stores. No French, Italian, German, Austrian, Spanish, New Zealand or any other non-domestic wines can be shipped into the state because these wines are only sold by retailers. Consumers have no access to wine-of-the-month clubs. Consumers have no access to auction house wines. And consumers have very limited access to the rare and collectible and small production wines that are most often available only from retailers. Yet, rest assured that the keeping these wines out of consumers’ hands and assuring wholesales are protected from competition protects the public interest and safety.
Finally, it must be acknowledged that the kind of state-based discriminatory laws that wholesalers seek to impose on wine retailers and consumers as a result of the CARE Act are exactly the type that the Constitution and its Commerce Clause were designed to prevent. When the Founders of the Constitution put the regulation of commerce between the states in the hands of the federal government and not the states, they did so because states made a habit of passing laws whose object was local economic protectionism. The practice caused animosity between the states and retarded economic progress. Wholesalers are at it again. Madison, Hamilton and Washington would shake their heads with dismay upon watching the wholesalers twist the laws to their own advantage and to the detriment of commerce and consumers.
No federal law prior to the 21st Amendment, not the 21st Amendment itself and no Supreme Court case since the passage of the 21st Amendment ever admitted that a state may blatantly discriminate against American wine retailers the way the CARE Act would allow. No rational reason has ever been offered as to why a state might need to ban wine shipments from out-of-state wine retailers, while shipment from in-state wineries and retailers and out-of-state wineries present no public policy concern. No lawsuit filed, won or lost by out-of-state wine retailers against states that discriminate has ever prevented states from effectively regulating the sale and distribution of wine, despite the claims made by the supporters of the CARE Act.
The CARE Act is fundamentally a solution looking for a problem. It appears the problem is wholesalers don’t feel they have enough protection against competition. This is hardly a reason to take the step of passing a radical bill that contradicts reason, dismisses sound Constitutional principles, impedes economic development, dissuades entrepreneurial activity, dismisses the legitimate desire among consumers for access to legal products, and punishes responsible American wine retailers in every state.
Tom Wark is executive director of the Specialty Wine Retailers Association, a national organization of brick and mortar and Internet retailers, wine clubs and auction houses that seek a alcohol regulatory environment that provides a level playing field for all stakeholders and and an emphasis on free trade.
Updated North Dakota DTC Reporting Requirements
May 9th, 2011
Effective July 1, 2011, North Dakota law will require that direct-to-consumer (DTC) shippers now be subject to the same $100 per day fee for the late filing of reports that is currently required of in-state wineries and other licensees. Additionally, the penalties for failure to pay or late payment of excise taxes by DTC shippers will now be the same as those covering in-state licensees. Similarly, the state tax commissioner will be granted the same authority it has over in-state wineries and other licenses to make an examination of the books and premises of direct shippers in determining full compliance of relevant state laws and rules.
The annual fee for a Direct Shipper’s license is $50 and must be paid within 30 days of making the initial shipment. Wineries with an approved license may ship up to 3 nine liter cases each month to a consumer. All shipments must originate from the address listed on the licensee’s permit. Applications and reporting information are available on Wine Institute’s website under State Shipping Laws.
by Sally Jefferson, Regional Government Affairs Manager, Wine Institute
