The Return of the Florida Wine Shipping Bill

Wineries and consumers have enjoyed relatively unrestricted wine shipping into Florida since 2006. This could change if direct shipping legislation is passed this year. Florida is gearing up for another legislative session and direct wine shipment legislation is on the docket, once again. The Florida Senate’s regular session will convene on March 3rd, but an agreeable bill relating to direct wine shipments has already been filed with the Florida Senate. SB 0272, authored by Senator Paula Dockery, would allow for the direct shipment of wine by permitted wineries; retailers are not addressed in this bill. The bill is reportedly based off of the wine industry’s “model” direct shipping bill, which allows wineries to ship to residents with reasonable restrictions. This means that there are no proposed production volume caps (unlike the bills that were being considered last year). However, it is still possible that competing direct shipping bills may be filed before the legislative sessions begin. According to the Family Winemakers of California, “Wholesalers have been meeting, but there [is] no word yet on their approach to the 2009 session. Based on the past three years it isn’t unreasonable to expect them to oppose the bills supported by the wine industry and attempt to impose a production cap despite FWC’s recent court victory in Massachusetts.”

Some of the requirements that would be set forth if SB 0272 makes its way into law include: $100 annual fee, bond, per bottle volume limit, age verification, special shipping label, monthly reporting, excise tax, and sales tax (local taxes apply).

Wine Distribution Notes – Release 28

The latest version of Notes on Wine Distribution by R. Corbin Houchins is now available for viewing or downloading. Release 28 highlights changes in the following categories: Age & Identity Verification, Rethinking Reciprocity and State Notes, specifically Arizona, Florida, Georgia, Maine, Ohio, Oregon and Pennsylvania. Headings of sections with substantial changes since the preceding release (published in early April, 2008) are highlighted, so that you can easily find the updated sections.

You can always view the most current version of Houchins’s Notes on Wine Distribution by visiting ShipCompliantBlog.com and clicking on the “Wine Distribution Notes” link under “Compliance Resources” on the right-hand side of the page.

Florida escapes capacity cap at the wire

It came down to the wire, but the always heated battle in Florida ended with the legislative session closing on Friday with no bills making it out of the state congress. Multiple bills were considered for wine direct shipping, most of which included a “capacity cap” on annual production for wine shippers. The major winery associations opposed all bills that included a capacity cap, and were therefore mostly pleased when the final bell rang without the passage of a restrictive bill. This was a truly classic battle between winery associations and the powerful wine wholesaler lobby.

Lacking legislation that would have created a permit system, the Florida Department of Business and Professional Regulation (DBPR) will likely maintain the status quo, meaning that wineries can ship to Florida without a permit as long as they remit excise taxes and do not ship to dry counties.

The scene at the Direct to Consumer Symposium in Napa on Friday was very interesting. Many attendees were listening to the “state of the states” update on direct shipping legislation, while we simultaneously received updates on the status of the session in Florida. Much of the two day event covered the subject of capacity caps, which have become an extremely hot topic of late. The Family Winemakers of California are currently making their case against the State of Massachusetts that production caps are unconstitutional. The action heats up again at the end of July.

Wine Distribution Notes – Release 26

Release 26 of Notes on Wine Distribution by R. Corbin Houchins is now available for viewing.

These notes are a great resource for keeping up to date with developing trends in direct shipping and direct distribution. As always, you can find the most recent version of these notes at the ShipCompliant Blog by clicking on the “Wine Distribution Notes” link under “Compliance Resources” on the right hand side of the page.
Each new release shows green highlighting on sections with changes from the preceding release. Release 26 highlights changes from the last two releases: highlights from release 25 include updates to Alaska, Maryland, New Mexico and Tennessee. Highlights from release 26 include updates to Florida, Indiana, and others. Read the notes to find out what else is new.

Three New Florida Bills: Not the Ducks or the Bucks, but the Winery Shipper Ones

The Regular session of the Florida Legislature will convene on March 4, 2008. During the 60 days following, legislators should decide on one of three winery shipping bills that could be introduced into Florida law. I say should, hoping that last year’s unsuccessful passage will not be repeated. Since 2006, wineries have been able to send relatively unrestricted shipments to Florida consumers. Back in 2006, the Florida Department of Business and Professional Regulation (DBPR) decided to become compliant with Granholm; because of this they have allowed shipments, hoping legislation would be passed. In 2007, many thought they might take this allowance away after all three bills failed to pass into law.

The 2008 winery shipping legislation contestants have several things in common. The bills would require a $1000 – $5000 bond, a $250 permit (the annual application and registration fee for Florida Farm wineries is $100), varied annual shipment quantity limitations per household, reporting and payment of sales and excise taxes, and applicants must produce less than 250,000 gallons of wine annually.

HB 693 (Bogdanoff) – In 2007, the only bill that did not have a capacity cap was authored by Bogdanoff. Unfortunately, this year the cap is set to 250,000 gallons just like the other two bills. Other restrictions that stand out: Fingerprinting of applicants; consumers may not purchase more than 18 cases of wine per household; Age verification (receiving a copy, electronic or otherwise, of a purchaser’s driver’s license; or asking for and recording all purchasers’ names, ages, and dates of birth); if the applicant is owned by a winery that sells more than 250,000 gallons of wine, the division may not issue a license.

SB 1736 (Geller) – Geller was also an author of a competing 2007 bill. The 2008 version looks pretty much the same: The applicant must produce less than 250,000 gallons of wine annually; brand registration is required for all wine shipped; the Winery Shipper must require the person to state that he or she is 21 years of age or older, ship no more than 15 cases per household per year; the Winery Shipper shall offer the brands of wine shipped under this section to license distributors; knowingly and intentionally shipping wine to a person under 21 is a 3rd degree felony.

Of the three bills in 2008, it seems SB 1096 (Margolis) is the one wine lovers and makers will be rooting for the least. Without focusing too much on the regular restrictions, let’s just note the more shocking ones:

Legislative intent

“The Legislature finds that the importation, distribution, and sale of alcoholic beverages require strict regulation in order to promote temperance by discouraging consumption by underage persons… fiscal health of the state… these purposes are best achieved through the state’s comprehensive system of licensing and regulation, including the three-tier system of alcohol distribution which has been the law of this state since the repeal of Prohibition.”

— Confusing distributor language: “The division may not issue or renew a license under this section if the applicant or licensee has appointed a distributor in this state, unless the applicant provides to the division a copy of a written notice sent to the distributor of intent to obtain a winery shipper’s license 1 year before applying for a winery shipper’s license under this section” (if passed, this would go into effect 4 months from now making it hard to give 1 year notice before the license becomes available.) However, it is later stated that “A licensed winery shipper must offer to its distributor for purchase and sale per calendar year the same brands and quantities of wine shipped per calendar year under this section”

— Licensees may not ship more than 4 cases per year per household. In addition to the licensee restriction, consumers may not purchase more than 4 cases per household per year. For common carriers, the signature form must inform the recipient that the wine is for personal or household consumption only, and not for resale. Wineries must have a written contract with the common carrier saying that the common carrier will do this.

— Knowingly and intentionally shipping wine to a person under 21 is a 3rd degree felony.

Since 2006, wineries and wine lovers have enjoyed relative freedom when shipping wine directly to Florida consumers. Florida is ranked #2 in table wine consumption, which accounts for a big chunk of addressable market share of direct shipments. If any of these bills pass as is, it might feel like you’re living with your parents again; you can go to the party, but you can’t stay out past 8:00. Maybe if we keep putting the pressure on the lawmakers, we’ll at least be able to stay out past midnight.

Free the Grapes! Legislation and Litigation Update

From Jeremy Benson at Free the Grapes! :

Free the Grapes! Media Update
August 2007

Now that we’re at the end of most state legislative sessions, we thought it timely to provide an update on direct-to-consumer (DTC) wine direct shipping as of month-end July 2007. Here are some highlights, followed by a more detailed description.

Highlights:

o DTC legislation was considered in 23 states;
o Two states transitioned from reciprocal to a DTC permit system (MO, WV) with additional states pending (OR, IL).
o The legal direct shipping states for wineries represent 78% of wine consumption in the U.S., although retailers can reach far fewer states.

Wins:

  • Florida: the third largest state for wine enjoyment, remains a legal state for winery shipments after a fierce defense of the court order that allowed shipping;
  • Hawaii: a concerted effort to reduce quantity limits failed;
  • Missouri: transitioned from reciprocal to permit status (no fee);
  • North Dakota: increased shipping quantity limits;
  • Virginia: now allows Internet retailers without a physical presence to direct ship;
  • West Virginia: replaced reciprocal status with permit bill.

Losses:

  • Arkansas: DTC permit bill failed in committee;
  • New Mexico: reciprocal transition bill failed due largely to opposition by wholesalers and the beer lobby;
  • Georgia: effort to replace cumbersome law with permit bill failed;
  • Texas: passed a law limiting DTC shipping from in-state retailers outside their particular county;
  • Ohio: passed potentially unworkable permit system for DTC shipments, including capacity cap of 150,000 gallons;
  • Legal rulings supported the on-site sale requirement in ME, and opposed a challenge to TN’s shipping prohibition.

LEGISLATIVE UPDATE
Wine Institute provided significant input to the following summary of state activity this year.

States with Legislation Under Consideration

Wisconsin – For 20 years, Wisconsin has been a reciprocal state, allowing its consumers to purchase wine directly from wineries as well as in-state wine retailers. But consumers will lose these privileges if the Budget Bill passes as it is currently written. Anti-consumer provisions were slipped into the Senate version of the 384-page, $66 billion, two-year Budget Bill in mid-July. The conference committee will now reconcile differences in the Senate and Assembly versions of the budget bill.

Illinois – House Bill 429 passed both House and Senate and is before the governor for signature. It creates a winery-only DTC shipping permit that replaces the existing reciprocity law. The Specialty Wine Retailers Association was unsuccessful in securing an amendment continuing shipments from out-of-state retailers, although in-state retailers were successful at maintaining their in-state shipping privilege.

Additional States

Alaska –House Bill 34 (Ledoux) would specifically allow in-state wineries to make DTC shipments to AK consumers, with a 5-gallon per shipment limit. Status: passed House and Senate, and was signed by the Governor on 5/31/07.

Arkansas – Senate Bill 592 (Whitaker), a positive bill that would have created a DTC shippers permit for wineries, died in House Rules Committee March 30.

Connecticut — Senate Bill 1204 was passed into law and changes the time period specified in the DTC shipping statute from 60 days to 2 months for the 5 gallon limit.

Florida – Shipping into FL is continues to be legal after competing bills—with and without discriminatory capacity caps—were considered but ultimately died in committees.

Georgia – House Bill 159 (Willard) and its companion Senate Bill 56 (Untermann) would have replaced the state’s convoluted shipping law with a DTC shipping license for all wineries (and retailers in SB56). The bills died in committee. Wholesaler-supported House Bill 393 (Stephens) sought to create new “domestic farm winery” and national “farm winery” categories with discriminatory capacity caps. The bill died in committee.

Hawaii – House Bill 1093 (Say) and Senate Bill 1019 (Taniguchi) sought to reduce consumer choice by limiting shipments under the existing DTC shipping permit from six cases per winery per consumer per year, to six cases per household per year. Both bills died in committee.

Idaho – House Bill 11 would have modified the permit legislation passed in 2006 to allow wholesalers and retailers in Idaho and other states to ship wine directly to consumers. Bill died in committee.

Maine – Senate Bill 54 (Bromley) would have created a DTC shippers permit for wine & beer. The bill passed the Senate on 6/12/07, but was killed in the house later that week.

Missouri — The Governor of Missouri signed SB 299 transitioning Missouri from a reciprocal state to a permit state effective August 28, 2007. The new permit law requires all wineries to obtain a direct shipping permit (no fee), limit shipments to two cases per consumer per month, submit an annual report by January 31, and pay excise taxes. The direct shipping permit application and instructions are available on the Wine Institute website at www.wineinstitute.org/programs/shipwine.

Nebraska – L441 (Mcdonald) will allocate funds raised by the existing $500 DTC shipper license fee paid by all wineries to be deposited to the NE Winery and Grape Producers Promotional Fund. The bill was signed by the Governor on May 30, 2007.

New Mexico – House Bill 1018 (Silva) passed the House, but was killed in the Senate after intense pressure from wholesalers and the beer lobby. It would have replaced reciprocity with a DTC shipping permit for wineries and retailers.

North Dakota – Senate Bill 2135 was signed into law and makes favorable changes to existing DTC shipping provisions, including: increased quantity limit from one to three cases per month, removed “reciprocal” provision passed in 2005 but never implemented, and removed vague language.

Ohio – During closing stages of budget process an amendment was adopted that will create a potentially unworkable permit system for DTC shipments into Ohio. The law has a capacity cap of 150,000 gallons, along with “per family household” aggregate limit that may prevent wineries from being able to ship even if they qualify for the permit. The bill was signed by the Governor on June 30 and becomes effective October 1, 2007.

Oklahoma – Several bills in the House and Senate were introduced, including a voter referendum to allow OK consumers to receive DTC shipments from out-of-state wineries, but a permit system has not been outlined. All bills died in committee.

Oregon – House Bill 2171 (Minnis) would transition state from a reciprocal DTC to a permit system for wineries and retailers. Status: The bill passed the House & Senate, and was sent to the Governor for signature in June.

Pennsylvania – House Bill 255 (Godshall) and Senate Bill 293 (Ferlo) are positive DTC shipping permit bills with a $100 registration fee, two cases per month to any individual. Taxes collected. Status: Both bills remain in Committee.

Tennessee – House Bill 1850 (Todd) creates a DTC shipping permit for 2 cases annually. Provisions: $100 fee, annual reports, annual excise and sales tax payments (companion bill was SB 1977, Stanley). Both bills died in Committee.

Texas – Senate Bill 1229 (Gallegos) was signed by the governor May 5, and limits the ability of TX retailers to use common carriers for DTC delivery outside their particular county. The bill was aimed at pending litigation spearheaded by the Specialty Wine Retailers Association seeking statewide sales via common carrier.

Virginia – House Bill 1784 (Cosgrove) and Senate Bill 1289 (Watkins) augmented current direct shipper permit to clarify that those shipments are by common carrier only, and created separate allowance for any legal shipper to make deliveries of up to 4 cases of wine to a consumer in their own vehicle. Additionally, Senate Bill 984 (Edwards) also became law, creating an “internet wine retailer license” to allow sales by a retailer having no physical premise.

West Virginia – Senate Bill 712 (Kessler) was signed by the governor and, among many other provisions, replaced reciprocity with a DTC permit bill for wineries, wholesalers and retailers.

LITIGATION UPDATE

Maine – As previously reported elsewhere, on March 5, U.S. District Court Judge Carter adopted the magistrate’s report and recommendation issued three months ago in the Cherry Hill (Tanford/Epstein) suit. This ruling supports an on-site sale requirement for any sales to consumers, contrary to an opinion rendered in December 2006 in KY ruling that on-site provisions were unconstitutional.

Tennessee – As previously reported elsewhere, the U.S. District Court in Tennessee ruled in favor of the state regarding what most thought was an ill-advised lawsuit (Jelovsek v. Bresden). The plaintiffs alleged that consumers faced a greater burden in traveling to another state to purchase wine in person at a winery than they faced in buying wine directly from a TN winery tasting room. The judge was not convinced, and the wholesalers have promoted their “victory” to bolster arguments for the preeminence of the 3-tier system in all matters.

Texas – All summary judgment motions have been filed. Oral arguments are scheduled for September 21 in Dallas. Wholesalers claim that passage of Senate Bill 1229 moots this lawsuit (see Texas paragraph under legislation, above).

Massachusetts — Motions for summary judgment are expected this winter in the case that seeks to overturn the 30,000 gallon production cap in the DTC law. Family Winemakers of California is the lead plaintiff.