January 11th, 2012
Late Monday night, in the final action of a marathon legislative session that closed out the year, the New Jersey Assembly passed S3172, a bill that, among other things, opens up the state for direct-to-consumer shipments. If signed by Governor Chris Christie as expected, it will allow wineries producing up to 250,000 gallons of wine annually to apply for licenses to ship wine directly to New Jersey consumers.
The bill also allows for both in- and out-of-state winery self-distribution and tasting rooms, two issues that New Jersey was compelled to address due to a 2010 lawsuit (Freeman v. Corzine) that ruled the state was acting unconstitutionally by allowing in-state wineries to sell wine through distribution methods unavailable to out-of-state wineries.
Direct Shipping Details:
Once S3172 is signed by the Governor, New Jersey, a state that has prohibited direct wine shipments, will join 38 other states in allowing limited amounts of wine to be shipped to its residents. The bill gives licensed Farm and Plenary wineries the ability to ship, and allows out-of-state wineries producing less than 250,000 gallons per year to apply for an “Out-of-State Winery License”. The fee for the Out-of-State Winery License is one of the most expensive direct shipping licenses in the country at $938 per year (the same annual fee paid by in-state wineries). All licensed wineries may ship up to twelve nine-liter cases to a New Jersey consumer per year. Sales and excise taxes must be paid.
For an additional fee, New Jersey Farm, Plenary, and Out-of-State Winery licensees may self-distribute (sell wine directly to New Jersey retailers). After recent amendments to the bill, however, wineries are restricted from shipping to retailers via common carrier. It is yet unclear what this means for the self-distribution privilege, specifically for wineries that are not in close proximity to the state. The additional fee for self-distribution ranges from $100 to $1000 per year, depending on the production volume of the winery.
Tasting Room Details:
S3172 will allow out-of-state wineries to operate tasting rooms within New Jersey. Out-of-state wineries may operate up to 16 tasting rooms, while in-state wineries may operate up to 15 tasting rooms in addition to their licensed premise; Farm, Plenary, and Out-of-State Winery licensees must pay a $250 fee for each tasting room location. New Jersey wineries are currently able to operate tasting rooms and joint tasting rooms. The bill, however, removes the ability for wineries to operate joint tasting rooms, which is a disadvantage for out-of-state wineries.
The opening of New Jersey to direct wine shipments is a major accomplishment and will open up one of the last significant marketplaces that prohibit direct shipment of wine. Both New Jersey and out-of-state wineries are expected to benefit from the change in the law, as well as New Jersey wine consumers. If signed by the Governor, the law would go into effect on the first day of the fourth month following enactment (May 1, if enacted in January). When specific regulations concerning license applications and reporting are issued, ShipCompliant will notify its clients and the industry.