Posts from the Enforcement Category
Virginia ABC Offers Interim Solutions for Wineries Shipping Through Third Party Service Providers
December 4th, 2009
On November 19, Terri Beirne, Wine Institute’s Eastern Counsel, met with the Virginia ABC Board, their Director, and representatives of Wine America and the Virginia wineries to continue discussions about the July Circular Letter 09-05 prohibiting direct shippers from using any third party service providers. Despite earlier indications, the Board has no plans to issue additional circulars on this issue. They suggested that a statutory change is essential to reinstate use of pick and pack/fulfillment warehouse and other third party service providers by Virginia licensees. They also offered to work with industry to craft legislation for the 2010 Virginia General Assembly Session which starts on 1/13/10 and concludes on 3/13/10.
However, the VA ABC offered two interim solutions for Wine Institute members until the law can be changed. Nothing in Virginia law currently prevents direct shipper licensees from obtaining two (2) direct shipper licenses with two different addresses, even though a second location is not owned or controlled by the licensee. Therefore, if a winery sends wine from BOTH their tasting room and a fulfillment warehouse, it can keep a current direct shipper license intact and secure a second one with the address of their fulfillment facility, from where wine can also be shipped. The Virginia direct shipper license application fee is $65 and the annual license fee is $65. Separate tax payments and reports associated with each licenses would have to be filed.
Additionally, if the winery sends ALL wine shipments into Virginia from a pick and pack warehouse with NO shipments originating in their tasting room, the winery’s Virginia direct shippers license could be changed to list the address of the warehouse from which ALL wine will be shipped. Wineries may make such an amendment to a current license by sending a letter on winery letterhead explaining the reason for the change and including the old and new addresses to Dallas “Burnie” Gaskill, VA ABC Licensing Technician at P.O. Box 1597, Spotsylvania, VA 22553-1597. Burnie can be reached by phone at (540) 538-7838 or e-mail at dallas.gaskill@abc.virginia.gov with questions. Such letter MUST include a copy of the state license issued to the warehouse making shipments on the winery’s behalf. The letter must also contain an e-mail address for the winery, where the amended license will be sent in an electronic format.
Members can contact Annie Bones at abones@wineinstitute.org or at (415) 356-7530 with additional questions. Terri would also be pleased to talk more about this situation and can be reached at (804) 301-5505 or tbeirne@wineinstitute.org.
-Terri Cofer Beirne, Eastern Counsel, Wine Institute
Montana: No Federal Onsite Shipments, Please
October 6th, 2009
The Montana Dept. of Revenue, Liquor Control Division recently confirmed that consumers in Montana are prohibited from receiving direct wine shipments under the Federal Onsite provision (sec. 11022 of Public Law 107-273). Montana law only allows consumers with a connoisseur’s license to receive direct wine shipments. However, the common carriers, FedEx and UPS, have NOT approved Montana for shipment of direct-to-consumer sales, because Montana law requires a consumer to obtain a license to receive such direct shipments.
Wine Institute Working To Clarify Impact Of VA ABC Circular 09-05
August 7th, 2009
Wine Institute and other industry representatives met with the Virginia ABC this week concerning their July 22, 2009 circular No. 09-05 governing use of third party service providers in direct shipments. The ABC staff was well aware of the concerns nationwide that their recent opinion has generated, but remained firm in their position that such entities cannot participate in direct shipments into the Commonwealth under current Virginia law. They rely primarily on the portions below of Va. Code sections 4.1-209.1 and at 4.1-203.
§ 4.1-209.1. Direct shipment of wine and beer; shipper’s license.
Any winery or farm winery located within or outside the Commonwealth may apply to the Board for issuance of a wine shipper’s license that shall authorize the shipment of brands of wine and farm wine identified in such application…..Any person located within or outside the Commonwealth who is authorized to sell wine or beer at retail in their state of domicile and who is not a winery, farm winery, or brewery may nevertheless apply for a wine or beer shipper’s license, or both, if such person satisfies the requirements of this section.
§ 4.1-203. Separate license for each place of business; transfer or amendment; posting; expiration; carriers.
A. Each license granted by the Board shall designate the place where the business of the licensee will be carried on. ….a separate license shall be required for each separate place of business……
In summary, the position of the Virginia ABC is that ONLY wineries and retailers licensed by their home states are eligible to receive a Virginia direct shippers’ license which permits the conduct of business (aka the shipment of wine into Virginia) ONLY at and from the business address listed on their license.
Because of widespread industry concerns, however, the Virginia ABC staff is willing to consider drafting a clarifying circular. While they are not expected to change their interpretation of current law, as part of this clarifying circular, they are willing to consider delaying the effective date of this ruling until April 1, 2010. By this time, the Virginia Legislature will have had an opportunity to change the law to resolve this problem for wine shippers nationwide. The Virginia ABC has suggested they will support the legislative change necessary to enable certain, but not all, third party providers to participate in the direct shipments of retailers and wineries to Virginia consumers.
Update: We will keep you posted as we continue to work with the Virginia ABC on this matter. Please consider their current circular in effect until another one is issued.
Terri Cofer Beirne, Eastern Counsel, Wine Institute
Virginia Goes Circular on Third Party Shippers
August 4th, 2009
If you are licensed to ship wine into the Commonwealth of Virginia, you likely received the following letter last week from the Virginia ABC.
TO: All Virginia Licensed Shippers
FROM: Francis J. Monahan, Director, Bureau of Law Enforcement
SUBJECT: UNAUTHORIZED PRACTICES
DATE: July 22nd, 2009In state and out of state Virginia shipper licensees may only sell and ship authorized alcoholic beverages from their licensed address through approved common carriers. Licensees may not contract with third parties such as fulfillment warehouses, marketing companies, or other businesses to receive or ship orders for them.
All orders must be received directly by the licensed shipper, at their licensed location, by their employees. Orders must be shipped through approved common carriers from their licensed location, by their employees.
Any licensee in violation is subject to being fined and/or having their license suspended or revoked.
If you have any questions you may direct them to: Enforcement@abc.virginia.gov.
Common practice for wineries in many states is to contract with third party shippers that are also known as "fulfillment houses" and "third party logistics" (3PL) providers. This memo has caused a minor panic in the industry because many wineries, especially in California, use fulfillment houses to pack and ship wine based on orders that winery employees receive. The circular would suggest that such practice is in violation of Virginia law even if orders are taken legitimately by employees of licensees, at their licensed location, and shipped through approved common carriers.
The circular also recommends that licensees not contract with “marketing companies, or other businesses to receive or ship orders for them”. According to the memo, “all orders must be received directly by the licensed shipper, at their licensed location”.
Wine industry representatives are working with the Virginia ABC to get further clarification on the recent circular. Please stay tuned, and we will update you as we learn more.
CA: ABC Issues Industry Advisory on Outsourcing Marketing, Compliance and Logistics
June 8th, 2009
On Friday, CA ABC issued an advisory to respond generally to the explosion of service providers that enable wineries to outsource one or more components of their D2C and D2T channels.
Activities Requiring Licenses: The Department describes when third party providers require a license. In CA a license is required when a business sells (transfers title), solicits a sale or delivers alcohol pursuant to an order. (B&P Code 23025) If interpreted according to its plain language, the definition of sale would require the following types of businesses to obtain licenses to sell wine: delivery companies, credit card companies that offer wine to certain cardholders, banks with loyalty programs, florists that offer wine through retail partners, airlines, and many more. To avoid opening Pandora’s box, ABC offers some exceptions. ABC allows a delivery company under the express direction of a licensee to operate without a license. The Advisory does not offer the same exception for a website that makes an offer to sell at the direction of a licensee. However, if a website merely publishes an offer made by a winery this would not be a solicitation by the web provider. If ABC were to hold otherwise, every media publication in California accepting winery advertisements would require a license. The Advisory does make clear that when selecting a marketing service provider, the winery or licensee must retain control of business decisions and core operations such as pricing, making offers, transferring title and directing delivery.
Tied House Risks: Beyond the cautions on unlicensed sales, ABC reminds wineries that they cannot pay retailers for advertising. Wineries cannot pay online storefronts licensed to sell as retailers for loading content, posting any material, or any advertising whatsoever. The retailer only can receive money from its markup and sale of the wine products. In some instances, the winery can pay for additional services such as age verification and compliance services.
Nothing is Free: ABC reminds industry that no free goods or premiums may be provided in connection with the marketing and sale of alcoholic beverages. This includes free shipping. Shipping may be included the price but it cannot be offered as free shipping.
Consignment Sales: Federal and state beverage alcohol laws prohibit consignment sales. Attempts to improve inventory management through just in time logistics can be problematic for innovative service companies. A licensee must sell alcoholic beverages to which they have title. Inventory cannot be returned if unsold. Any just in time delivery solutions should be carefully examined to ensure that the transaction is not a disguised consignment sale.
The web of federal and CA law is full of traps for the unwary. ABC’s advisory identifies many of the traps without offering solutions. Businesses must examine the totality of the circumstances and ensure that the essential elements of each transaction and control of these elements rest with licensees.
This analysis was authored by Susan Cagann, Special Counsel at Farella Braun + Martel LLP. Susan will be speaking on the subject of marketing and retail agents at ShipCompliant’s Compliance Seminar and Users Conference June 11th in Napa, CA.
Tennessee keeps the ball rolling on direct shipping
June 5th, 2009
Governor Phil Bredesen signed Senate Bill 166 into law today. With the passage of the bill, Tennessee will legally open its doors to winery direct shipping on July 1, 2009. Tennessee prohibited direct shipments from out-of-state wineries long before the landmark Granholm case. Even onsite shipments of wine were disallowed when the Attorney General issued an opinion on the matter in February 2009. Attempts to pass direct shipping legislation in the past years have failed, unaided by a Tennessee wholesaler campaign against the bills during the 2008 legislative session. However, with the Governor’s signature, in-state and out-of-state wineries alike now have access to Tennessee wine consumers. Direct shippers can expect to pay an annual license fee of $150 (an initial application fee of $300 is required for new applicants) and remit monthly sales and gallonage taxes. Some less positive aspects of the new laws include a 3 case annual shipping limit from a winery to a consumer and restrictions on who can obtain the direct shipper’s license—retailers, unfortunately, are among the excluded.
Although retailers will not be among those celebrating on July 1, the passage of SB 166 is a huge victory for many direct shippers. Governor Bredesen’s signature signals a radical change in the state’s stance on wine sold through the direct shipping channel: Tennessee is the first state to reverse its stance on direct shipments for wine since Vermont in 2006. The effective date of this legislation is less than a month away, however, there is no word, yet, on when all necessary forms will be available, so stay tuned.
Wine Freedom in the South? Tennessee Direct Shipping Bill Passes the Senate
April 27th, 2009
Tennessee, one of 13 states that still bans direct-to-consumer shipping, took steps towards ending that association on April 13, 2009 when the Senate-approved Senate Bill 166, which allows direct shipments of wine. Currently, anyone who transports wine into Tennessee by bypassing the three-tier system is committing a felony (see Section 57-3-401.b of the Tennessee Code) an act that bill sponsor Senator Paul Stanley says is already widely committed. Due to this continuous violation of existing law, Senator Stanley calls SB 166 a “common-sense bill.” Senate Bill 166 requires out-of-state wineries to obtain a $300 license non-refundable application fee and $150 annual permit fee and also sets a shipping limit of 3 cases per calendar year per individual consumer.
During the Senate Committee hearings, there was lengthy questioning regarding enforcement mechanisms to ensure out-of-state wineries are in compliance. Senator Tim Burchett also voiced concerns about the lack of jurisdiction that the Tennessee Alcohol Beverage Commission has over out-of-state wineries, to which committee chair Senator Bill Ketron responded with a quote from Section 1.C.2 of the bill, which states that applicants must, “execute a consent to jurisdiction and venue of all actions… in the state of Tennessee.” Senator Ketron also noted other enforcement mechanisms such as a clause that makes direct shipping without a permit a Class (E) Felony. Primary Sponsor Senator Stanley addressed the doubts about enforcement and compliance by pointing to many other states that have successfully instituted and enforced direct shipping laws. In addition to mentioning the success of other direct-shipping states, bill supporters also noted that SB166 could bring in an estimated $10 million in additional annual revenue.
The approved version of the bill was passed in the Senate by a 22-8 margin with two amendments, imposed by the Senate Finance, Ways and Means committee. The first amendment reduced the total annual wine shipments allowed to one resident to 27-Liters from the original 108 Liters per year, with a one case per month limit. The second amendment was apparently inserted with no specific purpose except to appease the three-tier distribution system by stating that nothing in the direct shipping bill is meant to “diminish the three-tiered scheme.” The Senate-approved version of SB 166 also requires wineries to report the appropriate sales and gallonage taxes, and direct shippers must keep records of all shipments in case the Tennessee Alcoholic Beverage Commission requests such information. Now that the bill has moved through the Senate, it awaits discussion and approval by the House Government Operations Committee.
In February, Tennessee’s Attorney General chose to level-down by banning all direct-to-consumer shipments and transports of wine for personal use. Only two months later, however, the passage of SB 166 in the Senate demonstrates willingness to accommodate consumer demand by opening up the state to direct shipping.
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
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
Good News from Texas
August 20th, 2008
On September 1, 2008 Texas will begin requiring direct shipping reports to be submitted on a quarterly basis. Reports will be due within 15 days of the completion of every 3 month quarter. Currently, direct shippers must file a report and pay taxes every month. The new report will no longer require direct shippers to report the common carrier tracking number for each shipment, the name of the common carrier will be sufficient.
All permit holders have been mailed a copy of the Quarterly Direct Shipper’s Report by the Texas Alcohol Beverage Commission and the form will soon be available on the TABC and Wine Institute website. The last monthly reporting period is August 2008. Shipments sent on or after September 1, 2008 should be included in the quarterly report.
Annie Bones, State Relations – Wine Institute
Another Paper Return Bites the Dust: Required Electronic Filing in New York (Due July 15th)
July 10th, 2008
On July 1st, 2008, New York announced that their semi-annual “New York Wine Manufacturer’s Report of All Wine Directly Sold and Shipped” is required to be filed online. Shipments made from January 1, 2008 to June 30, 2008 must be reported to the New York Liquor Authority by July 15th, 2008. Online submission of the report consists of emailing data files, in a .csv or .xls format to Direct.Shipment@abc.state.ny.us.
Even though the new reporting format was forced upon direct shippers rather abruptly, for many, filing the Wine Manufacturer’s Report electronically is a much more reasonable request than the old paper format. Because the old paper format contained only twelve rows per page on which to report detailed order information (one product per row, per shipment), the report was sometimes more than 500 pages long! That’s some serious paper waste.
Information that is reported in the new electronic format is very similar to the information reported in the old paper format. Among details to be reported via the data file: product name, COLA numbers for each product shipped, quantity shipped, price paid by the purchaser, the name and address of the purchaser, and the name and address of the common carrier.
You can view further information on the new requirement and New York’s instructions for submission on the New York State Liquor Authority’s website. Remember, the use of paper forms to submit the required information is no longer permitted. All reports containing the required information must be submitted by way of a computer data file.
TTB Expo 2008
June 17th, 2008
The ShipCompliant research team is attending the first annual TTB Expo at the Northern Kentucky Convention Center, just outside of Cincinnati, today and tomorrow. The turnout here is quite impressive. In the opening remarks, the TTB team said their original goal was to get about 300 attendees from across the country. They had over 650 pre-register, and it seems like the actual attendance today is more like 1,000.
The turnout from the wine industry is equally impressive. We’ve run into a number of friends and partners in the industry from across the country today.
John J. Manfreda, Administrator of the Alcohol and Tobacco Tax and Trade Bureau (TTB), gave an excellent keynote address this morning, stressing an open dialog between the TTB and key industry stakeholders. They seem genuinely committed to listening to the industry to improve the ease of compliance with TTB regulations. If you have any questions or topics that you would like to get answers to while we are here, please feel free to leave a comment on this post or to drop us a private email at blog (at) shipcompliant (dot) com.
