Bonds

Some states require wineries to obtain a bond in order to secure a direct shipping license. A bond is a written guaranty, purchased from a bonding company (usually an insurance firm or a surety company), to guarantee that all taxes due will be paid to the state. If there is a failure to pay, the bonding company will make good up to the amount of the bond.

Bonds for direct shippers range from $500-$1500 depending on the state, but premiums, or out-of-pocket costs, to wineries typically average around 10% of the total bond price, or $50-$180 out-of-pocket on an annual or biannual basis. Different bonding agents may quote different rates, so it pays to shop around.

Connecticut, Idaho, Illinois, Indiana, Kansas, Texas and Wisconsin all require that wineries secure a bond before submitting your license application. For wineries that ship 40,000 gallons or more annually, Oregon issues a bond document after the license application has been received but before the license is issued. Wineries that ship less than 40,000 gallons to Oregon annually can apply for a bond wavier.

Label Registration

Several states require brand or label registrations for direct shipping. Ohio, a state that 26% of direct shippers have in their program, requires wineries to register all the labels that will be shipped into the state for a one-time registration fee of $50 per label.

If that sounds pricey to you, consider Connecticut who charges $200 per label and requires labels to be re-registered every 3 years if they are still actively shipped into the state.

Georgia, Michigan, New York, North Carolina and Virginia do not charge a fee though label or brand registration is required in these states.

Application Fees

Some states may require business, Secretary of State or tax registration, or other one-time application fees. This varies from state to state and depends on how your business is structured. Wineries that start shipping to Arizona, Connecticut, Hawaii, Kansas, Maine, Michigan, North Carolina, Ohio, Tennessee, Virginia or Wisconsin may encounter one or more of these fees.

License, bond, label registration and application fees all factor into the true break-even costs of shipping to a new state. The key to ensuring a profitable direct shipping program is to research thoroughly in order to avoid getting caught off-guard with unexpected costs.

A Direct Shipping Permit is required for all off-site shipments to a Georgia address. All bonded wineries are eligible to apply for a GA permit. The holder of a Direct Shipping Permit may ship up to 12 cases of wine sold off-site to a GA address annually. Direct Shippers with an approved Direct Shipper’s Permit are required to report, pay state and local sales tax, and excise tax on off-site direct-to-consumer shipments. On-site shipments do not count against the 12 case volume limit and should not be included in any direct shipping reports.

For example, if a GA consumer visits a winery the winery may ship up to 5 cases of wine to the GA consumer’s address as long as the 5 cases of wine were purchased on-site. The same consumer returns to GA and decides he would like to join the winery’s wine club. If the winery holds a direct shipping permit the winery may ship up to 12 additional cases of wine to the GA consumer’s address during the same year. If the winery does not have a direct shipping permit the consumer cannot join the wine club or receive off-site direct-to-consumer shipments. Should you have any additional questions please contact Wine Institute’s State Relations Department at 415-356-7530.

Annie Bones, State Relations – Wine Institute

• Georgia’s new permit system takes effect. All wineries can now apply for a permit, regardless of distributor representation. Click here to see how to apply for a direct shipping permit.
• Ohio is increasing their capacity cap, making it possible for wineries that produce under 250,000 gallons annually to apply for a direct shipping permit.
• Washington is implementing a destination-based sales tax for all in-state entities.

The amended application has a license fee of $50 and must be submitted with a completed sales tax registration application and brands registration form. Direct shippers will be required to pay state and local sales tax, pay excise tax and file reports. In addition, direct shippers must obtain a copy of the consumer’s government issued id or use an online age verification service at the time of purchase. Applicants will be mailed their wine special order shipping licenses along with reporting forms and instructions for paying taxes. Wineries currently holding special order licenses issued prior to July 1, 2008 do not have to complete the amended application and should expect to receive reporting forms and tax payment information in the mail. Should you have any questions please contact Annie Bones in the State Relations Department at 415-356-7530 or abones@wineinstitute.org.

Following is the list of required forms. Click here for a printable checklist.

• Notice: To Wineries with Valid Federal Basic Manufacturing Permits
• Form CRF–002 State Sales Tax Registration Application
• Form CRF–004 Additional Ownership/Relationship Application (If Applicable)
• Form ATT-6 State Alcohol License Application (“Winery Special Order Shipping”)
• Form ATT-104 Brands/Brand Labels Registration Application
• Form ATT–17 State Beverage Alcohol Personnel Statement
• Form RD-1061 Power of Attorney (If Applicable)

Annie Bones, State Relations – Wine Institute

The New Application will be posted on the Wine Institute website as soon as it becomes available. Permits issued to wineries without distributors in 2008 will continue to be valid after 7/1/08. Should you have any questions please contact Wine Institute’s State Relations Department at 415-356-7530.

Annie Bones, State Relations – Wine Institute

For expedient processing, an applicant should submit a copy of its state liquor license along with the Out-of-State Winery Shipper’s License application. An applicant must also submit the brand registration form (for brands not already registered with the state) prior to, or simultaneously to the submission of the application. In addition, a winery must register for sales and excise tax. An accelerated tax permit approval process is available for those wineries which have a distributor in state. In any event, and with time running out, electronic submissions will be approved faster than those send via conventional mail. See our previous post for more detailed instructions and a checklist for the application process with links to forms.

Also, as a reminder, Georgia will open up on July 1st, and Wisconsin will begin their new permit system on October 1st. We’ll have the full details of the application process in both states as they become available.

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.

As we mentioned in a previous post, House Bill 1061 had passed in the House and has since passed in the Senate. It made its way onto the Governor’s table on April 15th, and Georgia Governor Sonny Perdue signed it into law yesterday. The long-awaited bill amends Code Sections 3-6-31 and 3-6-20, a source of problems for many wineries. Before the bill passed, Georgia’s direct shipping laws were very restrictive, only allowing direct shipment by wineries without a distributor relationship in Georgia and by all wineries for onsite purchases. Onsite shipments were limited to five cases per consumer or per household.

However, the passage of the bill effected many favorable changes to Georgia’s direct shipment law. The statutory amendments eliminate the problematic provision which prohibited wineries from shipping offsite orders to Georgia residents if the wineries were represented by a distributor in Georgia. This significantly opens up the state to both in- and out-of-state wineries that were not previously permitted to ship offsite sales directly to consumers.

Furthermore, the amendments added a definition of “winery” to the statute, defining it as “any maker or producer of wine whether in this state or in any other state, who holds a valid federal basic wine manufacturing permit.” (Section 3-6-31(a)).

Another noteworthy change is the addition of the age verification requirement found in Section 3-6-20(d)(4):

“Before accepting an order from a consumer in this state, the holder of a special order shipping license shall require that the person placing the order state affirmatively that he or she is of the age required by Code Section 3-3-23 and shall verify the age of such person placing the order either by the physical examination of an approved government issued form of identification or by utilizing an Internet based age and identification service;”

The new age verification requirement strengthens the affirmative statement of age provision (as was required prior to the amendments), working to assuage the fears of those who believe direct shipping creates an unreasonable risk of online ordering by underage individuals.

The bill also introduces a few minor changes. A winery no longer has to post a bond, designate sales territories, or name a wholesaler in each territory (thereby taking a conflicting law off the books). Wineries are also prohibited from shipping to licensed premises and are required pay excise taxes and state and local sales taxes from every sale shipped to a consumer in Georgia. In addition, of-age individuals can now purchase up to 12 cases of wine from each licensee per year (up from 5 cases per household pre-HB 1061).

Overall, although wineries must still obtain a special order shipping license and brands must still be registered in order to ship into the state, HB 1061 is going to live up to expectations and prove itself a valuable step for proponents of direct shipping. More wineries can now direct ship to Georgia and reach more consumers, benefiting both Georgians and non-Georgians alike.

The bill takes effect July 1st, 2008. Stay tuned for more details and permit requirements.

As we mentioned in a previous post, House Bill 1061 had passed in the House and has since passed in the Senate. It made its way onto the Governor’s table on April 15th, and Georgia Governor Sonny Perdue signed it into law yesterday. The long-awaited bill amends Code Sections 3-6-31 and 3-6-20, a source of problems for many wineries. Before the bill passed, Georgia’s direct shipping laws were very restrictive, only allowing direct shipment by wineries without a distributor relationship in Georgia and by all wineries for onsite purchases. Onsite shipments were limited to five cases per consumer or per household.

However, the passage of the bill effected many favorable changes to Georgia’s direct shipment law. The statutory amendments eliminate the problematic provision which prohibited wineries from shipping offsite orders to Georgia residents if the wineries were represented by a distributor in Georgia. This significantly opens up the state to both in- and out-of-state wineries that were not previously permitted to ship offsite sales directly to consumers.

Furthermore, the amendments added a definition of “winery” to the statute, defining it as “any maker or producer of wine whether in this state or in any other state, who holds a valid federal basic wine manufacturing permit.” (Section 3-6-31(a)).

Another noteworthy change is the addition of the age verification requirement found in Section 3-6-20(d)(4):

“Before accepting an order from a consumer in this state, the holder of a special order shipping license shall require that the person placing the order state affirmatively that he or she is of the age required by Code Section 3-3-23 and shall verify the age of such person placing the order either by the physical examination of an approved government issued form of identification or by utilizing an Internet based age and identification service;”

The new age verification requirement strengthens the affirmative statement of age provision (as was required prior to the amendments), working to assuage the fears of those who believe direct shipping creates an unreasonable risk of online ordering by underage individuals.

The bill also introduces a few minor changes. A winery no longer has to post a bond, designate sales territories, or name a wholesaler in each territory (thereby taking a conflicting law off the books). Wineries are also prohibited from shipping to licensed premises and are required pay excise taxes and state and local sales taxes from every sale shipped to a consumer in Georgia. In addition, of-age individuals can now purchase up to 12 cases of wine from each licensee per year (up from 5 cases per household pre-HB 1061).

Overall, although wineries must still obtain a special order shipping license and brands must still be registered in order to ship into the state, HB 1061 is going to live up to expectations and prove itself a valuable step for proponents of direct shipping. More wineries can now direct ship to Georgia and reach more consumers, benefiting both Georgians and non-Georgians alike.

The bill takes effect July 1st, 2008. Stay tuned for more details and permit requirements.

3-6-31.(c)(4)No holder of a special order shipping license shall accept any order for any wine that is otherwise registered and designated pursuant to this title or from a person who is licensed under this title;

That little paragraph causes big problems for many wineries. House Bill 1061 would eliminate the distributor restriction, and would introduce a few more minor changes:

• a winery would no longer have to pay a bond, designate sales territories, or name a wholesaler in each territory (a conflicting law);
• brands must still be registered;
• the person placing the order must state affirmatively that he or she is of age before the order can be processed;
• of-age individuals are limited to 12 cases of wine from each licensee per year (up from 5 cases per household); and
• it is explicitly stated that wineries may not ship to licensed premises,that sales and excise taxes must be paid and that a shipper must be a winery.

House Bill 1061 has already been approved by the house and was read and referred to a committee on February 28th by the Senate. All in all it’s not a bad bill: More wineries can ship to Georgia, the law makes more sense, and Georgia gets more money.