January 14th, 2013
Since 2005 when the Granholm v. Heald Supreme Court decision opened the floodgates for direct wine shipping legislation, questions about whether direct shipping would harm local businesses, would hurt tax revenue and would lead to a significant increase in minors accessing alcohol have been posed. It has been rare that these and other questions are answered with official studies and reports.
Now we have one and the conclusions are very good for direct shippers, local businesses, the state and consumers.
A recently issued report by the Maryland Comptroller’s office that studied the first year of direct shipping in that state since passage of a law that opened Maryland for winery-to-consumer shipping reveals that direct shipping has not only been a success, but it has been beneficial to consumers, to wineries, to state tax coffers and has had no negative impact on local businesses.
We expect this new report will play a key role in the coming debate to open up other states for direct shipping, particularly Massachusetts and Pennsylvania.
Entitled “Study on the Impact of Direct Wine Shipment” and required under the legislation that legalized winery-to-consumer shipping in 2010, the Maryland Comptroller’s report covers 6 Issues:
- Permits issued
- Volume of wine shipped
- Impact on in-state sales
- Revenue from taxes and fees
- Administration costs
- Availability of wine to Maryland consumers
The report showed that by the end of fiscal year 2012, 629 direct shipping permits had been issued to wineries. Just over 20,756 cases of wine had been shipped to Maryland addresses according to the Comptrollers report. Taken together, the permit fees along with Sales and Use tax paid on the wine shipped accounted for $693,000 in state revenue.
By contrast, the Comptroller’s report estimates that at most $138,000 was incurred by the state to administer the direct shipping program and the Comptroller estimates that going forward the costs to administer the direct shipping program will decrease.
Another concern that came up during the direct shipping debate in 2010 was that wines shipped into Maryland would negatively impact local businesses. These concerns did not come to pass. According to the Comptroller’s report, wholesalers in Maryland actually increased the amount of wine sold in the state during the report’s period by 3.61% over the previous 12-month period.
The report also examined of the issue of wine availability in the wake of the direct shipping legislation and determined there was “a positive impact on product availability and consumer choice.”
The Comptroller compared used the 2011 Wine Spectator Top 100 wines as a measure of consumer access to wine. It found that of the 56 Top 100 wines that could be available to consumers (44 imported wines on the Top 100 list are not eligible to be shipped by domestic wineries) 53 were available, 13 of which would not have been available had direct shipping been prohibited.
The Comptroller ends his report with very good news:
There have been no incidents of access to underage persons reported to the Office of the Comptroller. Additionally, there have been no significant complaints specific to the law or its implementation from the industry, permit holders, or consumers in the 17 months since the law took effect which may be an indicator of its effectiveness.
This is the first major report issued by a state agency measuring the impact of a new direct shipment law and the results are both encouraging and a reminder of the positive impact that direct shipment can have not only for consumers, but also for the state and for businesses. We believe the Maryland Comptroller’s report on direct wine shipping will be widely shared and read, particularly in the upcoming Pennsylvania and Massachusetts legislative sessions.