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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 End of Winery Reciprocity. New Mexico Passes Direct Shipping Legislation
April 8th, 2011
New Mexico’s Governor signed SB 445, which creates a wine shipping permit for out-of-state wineries, an important move both symbolically and for wineries seeking to serve customers in that state. Now, wineries from all US states can apply for a permit to ship wine to consumers.
New Mexico will be the last state to change from reciprocity to permit status for winery shipping since it was the last state that had a reciprocity law still on the books for wineries. The move from reciprocity laws to state permit laws was instigated by the 2005 Granholm v. Heald Supreme Court decision. That landmark ruling not only held discriminatory shipping laws to be unconstitutional but also noted a constitutional problem with reciprocity agreements when Justice Anthony Kennedy, writing for the majority, proclaimed that “States should not be compelled to negotiate with each other regarding favored or disfavored status for their own citizens.”
It should be noted that in changing its wine shipping laws, New Mexico has left in place “reciprocity” arrangements for retailer-to-consumer shipping.
The New Mexico Wine Shipping Permit goes into effect on July 1, 2011. It’s provisions include:
Cost of Permit: $50 per year
Bond requirements: None
Limits on Amount of Wine Shipped: 2 cases per individual per year month
Taxes: Sales and Gross Receipts tax must be paid by the direct wine shipping permit holder
Reporting: Due annually
Direct Shipping Legislation Heats Up Across the Country
March 25th, 2011
This time of year always brings a flurry of legislative activity, and 2011 is no exception. The Granholm v. Heald Supreme Court ruling from 2005 is still having its impact on many states. 27 states are currently considering some form of direct shipping legislation, and at least 44 more have considered some sort of tax bill that would affect wineries. While legislation can change quickly and no outcome guaranteed, what follows is a summary of the most important direct shipping legislation as it stands as of today.
Maryland
Marylanders have long awaited a bill that would allow direct wine shipments into the Old Line State. This past Tuesday, both the Senate and the House acted on all three direct shipping bills proposed in the current session. The Economic Matters Committee both withdrew HB 234 and passed as favorable, HB 1175. SB 248, the counterpart to HB 234 (introduced not long after the Direct Wine Shipment Report by Maryland’s Comptroller, in support of winery direct shipping), was also passed as favorable, but includes amendments, touted as a “compromise”, which removed in-state and out-of-state retailers’ ability to ship direct to consumers. Additionally, the customer volume limits are now set to 18 liters per household per year (down from the original 24 cases per individual per year, as was initially introduced), the permit cost has increased to $200.00 per year, and the bond security increased to $1000.00. As introduced, HB 1175 also made no allowances for direct shipments from retailers. The Senate and House bills are scheduled to be presented for a third reading today on the floor of the House. Amendments concerning a new study on retailer shipping and the ability of Maryland retailers to ship Kosher wines to Marylanders will likely be introduced on the House floor.
New Jersey
If direct shipping legislation passes this year, New Jersey could open up to wineries for direct shipments for the first time. S 766 and counterpart A 1702 would allow permitted wineries to ship up to 24 cases annually. S 766 passed the Senate on 2/4/2010. The Assembly bill remains in the Regulatory Oversight and Gaming Committee, which is chaired by the bill’s lead sponsor, Assemblyman John J. Burzichelli. Burzichelli is also the lead sponsor of another, less desirable, direct shipping bill (A 3897) that would impose a capacity cap of 250,000 gallons on direct shippers. A3897 is also waiting for a vote in Committee. It remains to be seen if the recent Freeman decision will complicate the bills that are on the table.
Florida
Florida is currently open to direct shipments from wineries. The state’s previous direct shipping legislation was found to be unconstitutional under Granholm and was overturned in a 2005 court ruling under Bainbridge, et al. v. Turner. For the fifth time in six years, direct shipping legislation is being considered in Florida (no bills were considered last year). As introduced, HB 837 and counterpart SB 854 would allow wineries (not retailers) to ship directly to consumers. The bill contains severely onerous restrictions that would prevent most wineries from obtaining a permit or shipping into the state, including a 250,000 gallon production volume cap (capacity cap), bond, and a mandate to give wholesalers a year’s notice that the winery plans to direct ship.
HB 837 was voted on and determined “favorable” by the Business & Consumer Affairs Subcommittee on March 22, 2011, and is now in the Government Operations Appropriations Subcommittee.
Massachusetts
There are several problems with Massachusetts’ existing unworkable direct shipping laws. The 30,000 capacity cap restriction was found to be unconstitutional by the First Circuit Court in 2010, but other statutes regarding customer aggregate volume limits and carrier licensing remain in effect, and need to be updated in order to truly open the state to direct shipping. HB 1029 and HB 1883 would address these issues and would allow permitted wineries to ship wine to consumers. Both bills were referred to the Joint Committee on Consumer Protection and Professional Licensure in February, and still have a ways to go before becoming law.
Indiana
Currently, only wineries that have not had a relationship with a distributor in the past 120 days can obtain an Indiana direct shipping permit, and wine can only be shipped to Indiana residents who have previously visited the winery in person. Two bills in the current legislative session aim to remove these restrictions and open up direct shipments in Indiana to many wineries that are currently unable to get a permit. HB 1081 would remove the requirement for an initial face-to-face transaction, as well as remove the restrictive wholesaler relationship provision in the law. A similar bill, HB 1132, was also introduced in January of 2011, but has been amended to become a study “concerning the viability and efficacy of instituting a policy to permit the direct shipment of wine to consumers in Indiana.”
Rhode Island
Rhode Island remains closed to offsite direct wine shipments. SB 170 would create a direct shipping permit and allow shipments of up to 24 cases of wine per year, per resident from permittees. On March 23, 2011 the Senate Special Legislation Committee recommended the measure be held for further study.
Tennessee
Pending legislation in Tennessee would open up the entire state to direct wine shipments, eliminating the “dry” areas of the state that wineries are not allowed to ship wine into. The bill is currently on the calendar in both the Senate and the House.
Pennsylvania
At a hearing on March 22, 2011, the Liquor Control Board asked that the legislature “modernize” the liquor code. As part of the modernization, the PLCB asked that direct wine shipments to consumers’ doorsteps be allowed. Pending legislation (HB 110) would allow for a workable permit system. Thus far, the bill has yet to move out of the House.
All Eyes on Washington (State) as Voters Consider Privatization
November 1st, 2010
On November 2, 2010 citizens of The Evergreen State will see two separate measures on the ballot concerning the distribution of liquor. Both initiatives represent a big change to the current liquor distribution system. The Washington State Liquor Control Board currently regulates the sale of all liquor (wine, beer and spirits) and maintains total control over distribution and retail sale of spirits. Washington is one of the nineteen control states, and is one of three control states, along with North Carolina and Virginia, that took a hard look at privatization in this election year.
Initiatives 1100 and 1105 would privatize liquor sales, completely removing the state’s involvement from the sale of liquor. However, the state would retain its involvement in the enforcement and regulation of liquor products sold within the state. The measures could significantly decrease the amount of tax collected from liquor sales; initiatives 1100 and 1105 would both discontinue some portion of the current taxes collected on liquor, and both seek to replace the lost revenue with alternate collection methods. A loss in revenue is one of the main concerns with both initiatives, particularly I-1105.
Initiative 1100 is sponsored, in part, by Costco and Wal-Mart, large retailers who stand to receive significant benefits from its passage. If the initiative is adopted, retailers would no longer be required to to purchase liquor from a wholesale distributor; retailers could purchase spirits, wine and beer directly from the manufacturer. Additionally, retailers could negotiate volume discounts, a practice currently banned for wine, beer and spirits. Lower prices for retailers means lower prices to consumers, but some producers fear that they will not be able to compete with the low prices that large producers may be able to offer. Several other important changes would also occur, including adding the ability for retailers to charge liquor suppliers for shelf space (slotting fees) and eliminating Cash on Delivery (COD) requirements.
Like I-1100, I-1105 would remove the state’s presence from the selling of liquor, however, there are few other similarities. I-1105 is sponsored, in part, by the Washington Beer and Wine Wholesalers two Washington wholesalers, Odom Southern Holdings and Young’s Market Company. If the measure passes, state distribution centers would be forced to close by April 2012. Volume discounts would be permitted for spirit products only; not for beer or wine. Additionally, with passage of I-1105, spirit products could be sold at retail stores alongside beer and wine.
If I-1100 passes, state retail stores would be required to close, and state distribution centers could not purchase any new products effective December 1, 2011. Spirit-only distribution centers would be able to apply for a spirit distribution license as early as December 2, 2010, while new liquor permits to distribute any combination of liquor products would become available in January 2011. Liquor retailers’ licenses would be made available in June, 2011.
If I-1105 passes, operation of state liquor stores would cease, and state distribution centers would have to sell all assets by April 1, 2012. Newly licensed spirits retailers would be allowed to commence sales on November 1, 2011. Newly licensed spirit distributors would be able to begin distributing spirits on October 1, 2011.
A ballot poll from mid-October suggests that neither initiative has emphatic support, but of the two, I-1100 is in the lead. Though it is unlikely, if both initiatives pass, the common provisions of both initiatives would become effective, leaving the state legislature to sort out conflicting language. Any decision (or lack thereof) made by the state legislature could be challenged in court.
For more details on the specifics of Initiative 1100, please view the full text of the initiative or view the Senate summary. For more specific details on Initiative 1105, read the Senate summary, or view the full text of the measure. For further information and a detailed comparison of each initiative, a suggested account is Sean Sullivan’s four-part series in the Washington Wine Report. Brief summaries, quoted from the Senate summaries linked above, are provided below.
I-1100 Brief Summary:
Initiative 1100 (I-1100) amends state laws regarding the manufacture, distribution, and sale of liquor in Washington. There are two main components to the initiative. The first component changes the way the state regulates the distribution and sale of beer and wine. Washington has a three-tiered system of beer and wine regulation: a manufacturing tier, a distribution tier, and a retail tier. Beer and wine must generally move through each tier before it can be purchased by a consumer. A number of laws regulating the relationships and business transactions between and among the tiers are repealed by I-1100, including uniform pricing requirements and restrictions on financial interest, quantity discounts, and moneys’ worth.
The second component changes the way spirits, also known as hard liquor, are sold in Washington. Washington is a control state, meaning the state has exclusive control over the distribution and retail sale of spirits in the original package. I-1100 eliminates the state’s exclusivity and privatizes the distribution and sale of spirits.
I-1105 Brief Summary:
Initiative 1105 (I-1105) amends state laws regarding the distribution and sale of spirits in Washington. Washington is a control state, meaning the state has exclusive control over the
distribution of spirits and the retail sale of spirits in the original package. I-1105 eliminates the
state’s exclusivity and privatizes the distribution and sale of spirits (hard liquor).
A Step in the Right Direction: Florida Offers Online Label Registration and Quick Approval Times
October 21st, 2010
Online instant processing of Florida label registrations is now available for any supplier of alcoholic beverages. Products sold to distributors must be registered before shipping into the state, however, direct wine shipments remain exempt from registration requirements. Florida’s new system has been up and running since July 15, 2010.
Suppliers who are licensed to sell alcohol in Florida must first register to use the system. The specifics of this licensee registration process are detailed in the first 24 pages of Florida’s lengthy step-by-step instructions.
After the supplier is set-up to use the system, they may log in to begin registering labels. The registration process of the labels themselves is fairly straight-forward—Florida’s online system asks for limited information about your label (product type, TTB ID, and label name). Based off of the TTB ID number that you provide, Florida then has the ability to obtain additional label information (label images, for example) from your TTB COLA.
The fee for registration remains the same: $30 for malt and spirits labels and $15 for wine labels, all of which should be renewed annually by June 30. Once registration fees are paid (via electronic check or credit card), the label is registered and the product can be shipped to Florida.
The paper registration form can still be filed as a substitute to online filing, avoiding the somewhat cumbersome licensee registration process, but there are several reasons why it makes sense to utilize the new online registration process instead of paper filing. Online label registration takes only a couple of minutes; no one likes to spend time hand-writing paper registrations. Perhaps the biggest benefit of online filing is that confirmation of the online registration is immediate; paper registrations can take up to 90 days to be approved.
More and more states continue to trend toward electronic services for convenience and efficiency (for taxes, reporting, license applications, product registrations, etc.). Florida’s online registration system is a step in the right direction; however, as new systems are made available, users must become acquainted with each individual online process. Still, after successfully navigating the process, this label entry system has the ability to make life easier for those registering labels in Florida.
