Kentucky Election Day Bill Creates New License for Out-of-State Wine and Spirits Suppliers

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.

Limited to On-site Sales, Arkansas Passes Bill to Allow Direct Shipping

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

Licensing Process

  • 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

Is the Marketplace Fairness Act Fair for Wineries?


In short, yes, for a couple of reasons:

1. Wineries already pay sales tax in most states
2. The vast majority of wineries will likely be exempt from the law

So what is it, exactly?

Senate Bill S. 743, more commonly known as the “Marketplace Fairness Act“, is a pretty simple bill that would give states the ability to require out of state businesses that have “remote sales” in excess of $1 million annually to remit sales taxes. Each state would be able to opt in to the Act, but only after they have simplified their tax structure, either by joining the Streamlined Sales and Use Tax Agreement or to follow the steps outlined in the bill to simplify their sales tax requirements.

Will it pass?

With broad bi-partisan support, S. 743 passed out of the Senate with a vote of 69 to 27. However, a tough battle is expected in the House, and therefore the Marketplace Fairness Act has a long way to go before it is enacted with a signature from President Obama. Amazon.com is supporting the bill (presumably because they would like to move forward with their plans to build warehouses in each state to support same-day shipping), while eBay is one of the main voices in opposition.

What will it mean for wineries?

A lot hinges on the definition of “remote sales”. Keep in mind the fact that state legislation to allow wine shipments typically includes a provision that also requires wineries to register for and pay sales tax. As it stands in the Senate version, and based on our interpretation of the current language, sales by wineries to states where they are already required to pay sales tax would not be counted when considering the $1 million threshold for remote sales.

Based on some quick analysis, there are a few hundred wineries in the US that ship more than $1 million worth of wine to consumers each year. BUT, if you include sales only to those states (Alaska, Colorado, D.C., Florida, Iowa, Kansas, Minnesota, Missouri, New Hampshire, Oregon, and Wyoming) that do not require wineries to pay sales tax, then we estimate that less than 25 wineries would exceed the $1 million cap. In other words, the vast majority of the 7,000+ wineries in the US would be exempt from this law.

Wineries are already accustomed to calculating, collecting, and remitting sales taxes in most states. So, for those wineries that would not be exempt from this law, it would probably not be that big of a deal to add a few more states (initially the states of Iowa, Kansas, Minnesota, and Wyoming) to the list of states to which they would be required to remit sales tax. They already have the technology and processes to do so.

The bill would take effect, at the earliest, on October 1st, 2013. Once effective, the 22 “Streamlined” sales tax states would begin requiring sales tax for remote sellers with over $1 million in sales. After that, each of the remaining 28 states would choose whether to opt in to the Act and start requiring sales tax from remote sellers.

Nebraska Tightens up Existing Direct Shipping Law

LB 230 passed Nebraska’s unicameral legislature and was signed by the Governor on April 24, 2013. The new law will go into effect on September 6, 2013. Nebraska is currently open to direct shipping from wineries and retailers (although there was some debate recently as to whether retailers should qualify under the current law), with easy-to-navigate regulations. The new law introduces several new restrictions that Nebraska direct shippers should be aware of before the new law goes into effect.

Though the bill’s statement of intent indicated that only manufacturers (wineries) would be able to obtain a license, after amendments to the bill, retailers were added back in and will be eligible for the Nebraska direct shipping license. So, at the end of the day (following a confusing set of hearings and deliberations) currently licensed wineries and retailers will both be able to continue to ship to Nebraska consumers, but with added complexity and requirements.

Direct shippers will see several marked changes to rules and licensing processes. Here’s a quick breakdown of these and other requirements in the new law – additional descriptions follow below:


Item Before
Sept. 6
After
September 6
Nexus status Not required In addition to requiring sales tax payments (common for direct shipping law), the potential to trigger additional tax obligations exists
Brand identification Not required Retailers and manufacturers may "only ship the brands of alcoholic liquor identified on the application
Distributor notification Not required Manufacturers (but not retailers) must notify Nebraska distributors carrying the identified brands, of the manufacturer’s intent to apply for a direct shipping license.
Notification of any violations Not required “…the applicant agrees to notify the commission of any violations in the state in which he or she is domiciled and any violations of the direct shipping laws of any other states…”
Non-sellable products Not required Required. Shippers may “…not ship any alcoholic liquor products that the manufacturers or wholesalers licensed in Nebraska have voluntarily agreed not to bring into Nebraska at the request of the commission;”
Excise tax Annual filing Monthly filing
Common carrier approval Not required Required

Under current regulations, it was somewhat unclear whether or not direct shippers were required to register to pay sales taxes, though most direct shippers did. The establishment of nexus under the new law could also mean that, in addition to requiring sales tax registration (common for direct shipping law), there is a potential to trigger additional tax obligations. Brand listings will be required as part of the licensing process, and wineries (but not retailers) must notify their Nebraska distributors carrying the listed brands of the manufacturer’s intent to apply for a direct shipping license. If a Nebraska manufacturer or wholesaler volunteers not to sell certain products within Nebraska’s borders, direct shippers would also not be allowed to sell those products under the new law. Furthermore, direct shipper applicants will have to notify the Nebraska Liquor Control Commission of any violations of direct shipping laws of any other states and any violations in the state in which the shipper is domiciled.

Many of the new laws will require clarification as to how currently licensed direct shippers should proceed in order to remain licensed and compliant – for example, will existing licensees have to notify distributors of their existing direct shipping license on Sept 6, or will this new requirement take effect once their current license expires in April? As we get closer to the September effective date, we will notify our clients and readers of any published guidelines or additional information.

October 1st Brings New Direct Wine Shipping Regulations to Montana

Montana House Bill 402 was signed by Governor Bullock on April 12, 2013 and creates workable direct wine shipping laws in the state. The new law, effective on October 1, 2013, will replace the flawed consumer licensing system presently in place for wine shipping in Montana.

Current regulations require that out-of-state wineries ship only to residents who hold a “Connoisseur’s License“; proof of the consumer license and a special sticker to affix to the shipping box must be provided to the winery before the shipment can be made. The new regulations will require out-of-state wineries to:

  • Register as a Foreign Winery or Importer. Many wineries already hold this license as it allows a winery to sell to a Montana distributor (cost of license is $0 to $400 annually, depending on volume sold in Montana; no-cost product registrations are required as part of becoming licensed)
  • Apply for a $50 annual direct shipping endorsement
  • Supply to Montana the name and address of any utilized fulfillment warehouses
  • Submit written acknowledgement of contracting only with common carriers that agree to deliver wine only to individuals who are of age and who provide a signature upon delivery
  • Ship no more than 18 cases of wine annually to an individual consumer (up from 12 cases/year)
  • Submit excise tax and shipment reports by the 15th of every month

While Montana’s regulations for direct wine shipments are changing, the connoisseur’s licensing system remains in place for shipments of beer from out-of-state breweries. UPS and FedEx, however, do not accept shipments of beer or spirits for delivery to consumers.

We will keep you informed of any updates from the Montana Liquor Control Division regarding the endorsement process once the details become available.

North Dakota Makes Direct Shipping Easier for Wineries and Retailers

North Dakota legislature has passed, and its Governor has signed into law on April 1, new legislation that will allow wine orders to be shipped from any fulfillment house that obtains a North Dakota “logistics shipper” license, require licensure of common carriers, and make other related changes to the state’s direct shipping law. These new requirements will take effect on August 1, 2013.

North Dakota notified direct shippers that wine shipments could only be shipped from the licensee’s premises back in April of 2010. Fulfillment houses, from which almost half of all direct shipments originate, were not allowed to ship on behalf of the licensee, despite the fact that California considers fulfillment houses with public warehouse licenses (Type 14) to be an extension of the winery’s premises. With the passage of this bill, licensed wineries and retailers will once again be able to use this much valued function of wine shipping.

North Dakota isn’t the only state to restrict the use of third party and shipping services —

  • Virginia imposed restrictions on shipments from fulfillment houses in 2009, but established regulations to allow it last November. Virginia now requires out-of-state fulfillment houses to become approved, submit signed winery-fulfillment house contracts to the state, and remit periodic shipment reports.
  • New Hampshire enacted a bill in 2011 that not only created a common carrier license, but also created a “black list” of unauthorized shippers from which FedEx and UPS cannot deliver without penalty.

New regulations and laws in New Hampshire, Virginia and North Dakota give these states additional resources and tools to track shipments, enforce direct shipping rules and collect tax on all shipments.

In addition to becoming licensed, fulfillment houses and common carriers wishing to ship wine into North Dakota will be required to report shipments on a monthly basis and will be subject to penalties if they fulfill and/or ship orders from unlicensed warehouses or suppliers. Also, licensed direct shippers will be required to report their use of fulfillment houses in preparing direct shipments. The Alcohol Tax Section of the North Dakota Office of the State Tax Commissioner has already begun drafting license application and reporting forms and plans to make these available ahead of the August 1 effective date in order to give potential licensees time to review the new requirements.

Until the new law takes effect, out-of-state direct wine shippers should continue to ship from their licensed premises. As the August 1 date gets closer, we will keep our clients and readers informed of specifics related to the new regulations.