In January of 2010, the United States Court of Appeals for the First Circuit affirmed the judgment of the District Court in the case of Family Winemakers of California v. Jenkins. This ruling struck down the 30,000 gallon capacity cap, which excluded 98% of domestic wines from shipment to Massachusetts. Although this represented a big win for wineries, several problems remained, and it was up to the Massachusetts legislature to act.
Almost four years later, Bay State lawmakers will once again try to craft a replacement law and move it through the legislature. The first and most important step is a public hearing on Direct Wine Shipping in Massachusetts to be held in Boston on Tuesday, November 12 at 1pm Eastern Time in the Joint Committee on Consumer Protection and Professional Licensure.
Bill H.294, sponsored by Representative Ted Speliotis, is one of five bills related to direct shipping listed in the hearing schedule. It would allow wineries to ship up to 24 cases per year to individual consumers in Massachusetts, require annual volume reporting to the state and remittance of excise and sales taxes to the state.
One key issue that must be addressed to make any direct shipping law effective is that of a “fleet permit” for common carriers. A fleet permit allows common carriers like FedEx and UPS to obtain a single permit for alcohol deliveries that covers all their trucks in the state, in contrast to regulations that require a permit be obtained for each and ever delivery truck. Without a fleet permit as part of a direct shipping bill, it is unlikely that the major common carriers would deliver wine into Massachusetts no matter how good the rest of the bill might be.
Additionally, the current direct shipping law on the books has a “consumer aggregate” volume limit, which allows consumers to only receive a limited amount of wine within a calendar year from all sources. This kind of aggregate limit is mostly un-workable, as wineries have little idea what consumers have already received. The aggregate volume limit is not included in H.294.
Behind Pennsylvania (population 12,702,379), Massachusetts (6,547,629) is the second largest of nine states that are currently off limits for wine shipments. The other states include Alabama (4,779,736), Kentucky (4,339,367), Oklahoma (3,751,351), Mississippi (2,967,297), Utah (2,763,885), Delaware (897,934), and South Dakota (814,180).
Free the Grapes! Press Release
Huge win for wineries, but can I ship to Massachusetts now?
Why Can’t I Have a Boston Wine Party?
Massachusetts Remains Elusive for Direct Shippers
You may remember reading our posts highlighting what to look for in the legislative season back at the beginning of 2013. Now that many legislative sessions are starting to come to a close, here is a quick check-in on this year’s legislative changes, all of which will be addressed in detail at the ShipCompliant Direct Wine Sales Virtual Seminar, scheduled for October 17th. Reserve your spot today for a complete update on the 2013 wine direct shipping world.
How did the Direct Shipping Bills Stack Up?
Pennsylvania and Massachusetts were the headlining states this year once again when it comes to opening up new states to direct shipping. Although neither state passed a bill prior to the summer recess, legislatures are back in session in both states and direct shipping remains a possibility.
Montana HB 402 will become law tomorrow (Tuesday October 1, 2013), effectively replacing the wine connoisseur’s license with a direct shipping “endorsement” available to Montana wineries and to out-of-state wineries holding a Foreign Winery License. Check out our previous blog post for more detailed information on obtaining this endorsement.
Arkansas Act 483, originally HB 1749, opened up limited direct shipping to the “Natural State” for wineries. The state is still finalizing how they will regulate this new law, which took effect mid-August, but this previous post provides a detailed summary of the Act.
Streamlined COLA Processing
The TTB continues to revamp their website and accept feedback from the industry. Review the status of the COLA Streamlining Accomplishments and Long-term Initiatives on the TTB website.
Existing Direct Shipping Laws, Reworked
Nebraska LB 230 passed and became effective on September 6, 2013. We highlighted the details on the bill that adds new restrictions to the wine direct shipping process.
North Dakota SB 2147 created two new licenses that will allow for wine direct shippers to utilize licensed common carriers and fulfillment houses. This bill took effect August 1, 2013.
Product Registration Updates
In Arkansas, HB 1480 became effective mid-August, and beginning October 15 suppliers will be able to register their products online under the new requirements outlined in this bill.
Reserve your spot today for a complete legislative update and more during the ShipCompliant Direct Wine Sales Virtual Seminar!
Montana’s new direct shipping law goes into effect October 1 and will replace the current “Wine Connoisseur’s License” process with a “Direct Shipping Endorsement” permit system. Applications for authorization to ship directly to consumers in Montana are now available. Overall, the new law and licensing process are fairly simple; the Endorsement fee will cost $50 and the winery will also have to pay the applicable Foreign Winery registration fee, depending on how many cases the winery expects to send into Montana. Effective Tuesday, October 1, wineries must have the Endorsement in order to ship to consumers in Montana.
Wineries that have been direct shipping wine via the now-obsolete “Wine Connoisseurs License” process, or wineries that have been selling to Montana distributors, will likely already have a Foreign Winery License. Wineries already holding the Foreign Winery License may submit an application for the new Direct Shipping Endorsement with the Foreign Winery’s 2013-2014 license renewal application, or if wineries have already renewed their Foreign Winery License or are Domestic Winery licensees, the Endorsement Application may be filed separately. Wineries that are not already licensed as a Foreign Winery will need to apply for the Foreign Winery License and “Direct Shipment Endorsement” box on the Foreign Winery License Registration form.
What else needs to be done to become compliant and licensed? Many of the specifics of the law change are noted in our previous blog post and in Montana’s 2013 Legislative Wrap-up. Below are some items wineries will need to know during the process of becoming licensed.
1. Fulfillment, Carrier and Distributor Notifications
- Direct Shippers must notify the Department of any fulfillment houses that will send shipments to Montana consumers on behalf of the licensed winery. Submit the name and the address of the fulfillment warehouse you will use with your Endorsement Application, or anytime you plan to begin using a fulfillment warehouse.
- Direct Shipper applicants must send a written statement acknowledging that they will only contract with common carriers that agree to deliver table wine only to consumers who are at least 21 years of age.
- Distributor agreements must be submitted along with the Foreign Winery Application. However, if the Foreign Winery applicant intends to ship only to onsumers in Montana, no distributors need to be noted in Section 6 of the application, and therefore no agreements need be included.
2. Label Registrations
- Foreign Winery applicants may register their labels via the paper application and must include copies of the COLAs that they will ship into the state. Approval of these labels must be received before shipping them into the state.
- Wineries already licensed as a Foreign Winery should register their products online through the Montana TaxPayer Access Point (TAP) system. Labels being sold both to wholesalers and to consumers in Montana only need to be registered once. There is no fee for registering labels.
The Wine Connoisseur’s License will remain effective until October 1 for any current connoisseur licensees who opted to renew their license for a shortened period of July 1 – September 30 of the 2013 year. After October 1, consumers in Montana purchasing wine will not need to obtain a connoisseur’s license, but will still need a connoisseur’s license to purchase beer if they wish to receive shipments from registered breweries, as beer was not included in the changes enacted by HB 402.
An update to North Dakota’s existing direct shipping law is going into effect today, August 1. Passed earlier this year, the new law maintains much of the existing law surrounding direct shipping, but also adds two new licenses, “Logistics Shipper License” and “Alcohol Carrier License”, in addition to new shipment reports.
Since April of 2010, fulfillment warehouses have been prohibited from shipping into the state on behalf of their winery or retailer clients. Effective today, a fulfillment warehouse can ship into the state once they apply and are approved for a “Logistics Shippers” license. Also effective today, an “Alcohol Carrier” license is required for any carriers shipping direct-to-consumer orders into the state; this includes common carriers such as FedEx and UPS. According to a recent newsletter sent out by North Dakota’s Office of the State Tax Commission,
“All direct shippers, logistics shippers, and alcohol carriers MUST be licensed BEFORE shipping… and must ensure the alcohol beverage is being shipped and delivered by licensed direct shippers, licensed logistics shippers and licensed alcohol carriers.”
No Logistics Shipper or Alcohol Carrier licenses have been issued as of yet. This means that, in effect, until carriers become licensed, direct shipments into North Dakota will not be compliant. Alcohol Carrier and Logistics Shipper licenses may take a week to be processed.
Licensees should also be aware of new shipment reports. The law now requires each of the three aforementioned types of licensees to electronically report shipments into the state. Each licensee must keep records and will be required to report the name and license number of the other licensees they used for each shipment. All licensees will be required to report the name and address of the recipient, the type and quantity of alcohol shipped, and tracking numbers. Direct shippers may file the existing annual electronic report for all 2013 shipments (“Schedule H” for sales of liquor and wine); the new direct shipper reporting requirements will go into effect beginning with the 2014 filing period. Alcohol Carriers and Logistics Shippers must report monthly. To ease the reporting burden, the Office of State Tax Commissioner publishes license names, numbers and addresses of licensees on their website.
ShipCompliant clients should note that we added “Carrier Prohibited” rules for FedEx and UPS to our database that will cause all shipments to North Dakota to be not compliant effective today. Once we receive confirmation that the carriers are licensed, we will remove each rule to allow shipments from approved Alcohol Carriers. Similarly, we applied a “Third Party Shipper Approval Required” rule to North Dakota that will cause shipments from non-approved fulfillment houses to fail compliance checks. Currently, no fulfillment houses are approved, but we will update this rule immediately after getting confirmation of each approved Logistics Shipper.
Alcohol Carrier License Application
Logistics Shipper License Application
Direct Shipping Permit Application
– $50/year Renewals will be sent out in November for the 2014 licensing period
All out-of-state wine and distilled spirits suppliers that sell to Kentucky distributors are now required to obtain an “Out-of-State Distilled Spirits/Wine Producer/Supplier License” following the passage of SB 13 in April. Before this bill became effective on June 25, 2013, suppliers still needed to register their brands with the ABC prior to selling to Kentucky distributors but did not need to obtain a license. In an informative fact sheet, Kentucky explains SB 13 was “…a much needed ‘clean up’ of existing statutory problems and inconsistencies that existed in Kentucky law without changing or expanding existing license privileges.” By now, most current out-of-state wine and spirits suppliers have received an application packet from the Kentucky Department of Alcoholic Beverage Control to apply for the new license, needed in order to continue selling to their Kentucky distributors.
SB 13, originally a bill to allow for sales of alcoholic beverages on election days, went through several amendments that also added changes to current law in regards to sampling allowances, elections of wet/dry location changes, and numerous updates to the alcoholic beverage licensing system. These added amendments included the creation of the Out-of-State Distilled Spirits/Wine Producer/Supplier Licenses and accompanying fees:
- “Out-of-state Distilled Spirits/Wine Producer/Supplier” – 50,000 gallons or more
produced imported annually. $1550/year or $3100/two years
- “Limited Out-of-State Distilled Spirits/Wine Producer/Supplier” – 2001 to 49,999 gallons
produced imported annually. $260/year or $520/two years
- “Micro Out-of-State Distilled Spirits/Wine Producer/Supplier” – 2000 gallons or less
produced imported annually. $10/year or $20/two years
If you are an out-of-state wine/spirits supplier that has not yet applied for the new license, or if you wish to begin selling to Kentucky distributors, fill out the application for an Out-of-State Distilled Spirits/Wine Producer/Supplier License and submit to the state, or contact the Kentucky ABC at (502) 564-4850 for further assistance.
UPDATE: License fees are based off of gallons imported into the state of Kentucky on an annual basis-not overall annual production.
On March 21, 2013, House Bill 1749 became Act 483, signifying its passage into law. Once enacted mid-August, the state of Arkansas will be added to the list of states that allow wineries to ship wine directly to consumers — but with many limitations.
Aside from the low cost of the license, the requirements under this new shipping law limit the abilities of licensed out-of-state wineries, arguably more than any other state that currently allows direct-to-consumer wine shipping. These limitations include requiring all shipments to be purchased in person at the winery, and affixing a special, ABC-provided, shipping label to each shipment.
For those wineries interested in navigating these one-of-a-kind requirements, Arkansas consumers will no doubt enjoy the ability to ship home a case of wine after visiting their favorite wineries. No license applications or information are available as of yet. Below is a breakdown of the licensing process, as well as the requirements and restrictions to operate, as stated in the new law:
Restrictions/Requirements (not limited to the following):
- Consumers must be physically present at the winery when purchasing the wine to be shipped to Arkansas consumers (onsite orders only)
- Every shipment must be affixed with a shipping label provided by the ABC, costing up to an additional $10 per label
- Collect and remit sales and excise tax, “as if the sale took place on the premises of a Arkansas Small Farm Winery”
- Ship only to a private residence – added difficulty, as shipments require an adult signature
- Customer volume limit of one case per customer, per quarter
- Registration with the Arkansas Department of Finance and Administration Alcoholic Beverage Control Division (ABC), including a $25 annual fee.
- Provide the ABC with a copy of the winery’s home-state license as well as the winery’s TTB Federal Basic Permit