A bill is being considered in Georgia that could potentially open up the state to all wineries for direct shipping. The permit system that is in place right now works pretty well for eligible wineries, but the major issue is that some funky language makes it so that wineries cannot ship offsite orders to Georgia residents if the winery is represented by a distributor in Georgia.
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.
From Jeremy Benson at Free the Grapes! :
Free the Grapes! Media Update
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.
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.
- 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.
- 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.
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.
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.
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.
Free the Grapes! recently provided an update on direct to consumer shipping legislation and litigation for 2007. As you can see below, many changes are likely to come this year.
Wine Institute provided the following summary of direct shipping legislation around the country.
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 2/14/07 and moves to Senate Community and Regional Affairs and to Senate Labor and Commerce.
Arkansas – Senate Bill 592 (Whitaker), a positive bill, creates a DTC shippers permit for wineries. Provisions include: 24 cases annually, $10 permit application fee, sales and excise tax payments annually. Status: Introduced.
Connecticut — Senate Bill 1204 (Joint Committee on General Law) makes a change to the time period specified in the DTC shipping statute from 60 days to 2 months for the 5 gallon limit. Status: Passed out of General Law on 2/27/07.
Florida – Shipping into FL is currently legal. Senate Bill 126 (Saunders) and SB 2282 (Geller) would implement a version of the industry’s model direct shipping bill, but both bills include a discriminatory 250,000 gallon capacity cap opposed by consumers and wineries. Alternatively, House Bill 1217 (Bogdanoff) does not include a cap.
Georgia – House Bill 159 (Willard) and its companion Senate Bill 56 (Untermann) create a DTC shipping license for all wineries (and retailers in SB56), repealing existing law which prohibits wineries with a wholesaler from obtaining a license. Other provisions: $100 permit fee, 24-case annual limit, sales and excise taxes to be collected. This bill is getting industry support.
The wholesaler’s House Bill 393 (Stephens) includes a discriminatory 100,000 gallon capacity cap, creates a new “domestic farm winery” using at least 50% GA grapes, and a national “farm winery” definition of a winery under 100,000 gallons that uses at least 40% grapes from its state of domicile. Such wineries can obtain a DTC shipping permit to ship up to 20 cases of wine per consumer annually. Status: Favorably reported out of House Regulated Industries Committee on 2/21/07.
Hawaii – Two bills, House Bill 1093 (Say) and Senate bill 1019 (Taniguchi), appear to be dead in committee. They would have reduced consumer choice by limiting shipments under the existing DTC shipping permit to 6 cases annually per household from an aggregate of wineries (current system is 6 cases per winery).
Idaho – House Bill 11 would modify the permit legislation passed in 2006 to allow wholesalers and retailers in Idaho and other states to ship wine directly to consumers. Status: Referred to House Revenue and Taxation on 1/22/07.
Illinois – House Bill 429 (Acevedo) is similar to last year’s transition bill that creates a winery-only DTC shipping permit to replace the existing reciprocity law. Provisions include a tiered permit fee based on size of the winery from $150 to $1,000, 12 cases annually, with sales and excise tax collection. Free the Grapes! is encouraging inclusion of retailers in the bill. Status: Passed from House Consumer Protection Committee on 2/20/07 by vote of 11-0. There is also a similar bill in the Senate (SB123, Silverstein).
Iowa – ABC hearings were held on 2/24/07. The ABC recommended to legislators that the reciprocity statute be replaced with a DTC shipping permit system. Other proposals addressed at the hearing include changing the local winery preferential tax rate, changes in Iowa wine labeling rules for IA wineries, and changes to existing designation of 5% of wine tax revenues to Iowa Wine Development Board. Status: Awaiting action by legislature.
Maine – Senate Bill 54 (Bromley) creates DTC shippers permit for wine & beer. Winery or retailer obtains a COA and nonresident shipper’s license ($100 fee). Annual sales and excise tax payments required. Status: Introduced.
Missouri – House Bill 944 (Cooper) creates a DTC permit for wineries to ship 2 cases per month, and requires permit and tax collection. Carriers must obtain permit. Amendment to add retailers drafted on 2/26/07. Status: Introduced.
Montana – Senate Bill 524 (Wanzenried) proposes changes such as adding “purposely, knowingly or negligently” language to the connoisseur’s license, which does not currently work for consumers or wineries. Status: Reported “Do Pass” from Senate Business, Labor and Economic Affairs on 2/21/07.
New Mexico – House Bill 1018 (Silva) creates DTC shipping permit for wineries and retailers to replace reciprocity. Provisions: $50 fee, pay excise and Gross Receipts Tax, 24 cases annually. Status: Passed favorably on 9-1 vote from House Business & Industries Committee on 2/25/07. Companion bill is Senate Bill 1047 (Taylor).
New York – Interestingly, Assembly Bill 4345 (Destito) replicates the wine DTC shipping program for beer manufacturers and beer wholesalers. Free the Grapes! has no activities or campaigns concerning this bill because it deals with beer and not wine. Status: Introduced.
North Dakota – Senate Bill 2135 (Senate Finance and Taxation Committee) makes changes to existing DTC shipping statute. Provisions: increases amount of shipments to 3 cases per month (currently 1 case per month), removes “reciprocal” provision passed in 2005 but never implemented. Removed vague language that could have been interpreted to allow an in-state winery to also hold a wholesalers license – clarifies no self-distribution, which was believed to be the case by in-state industry at this time anyway. Status: Passed Senate 1/23/07 and now to House Finance and Taxation.
Oklahoma – Several bills in the House and Senate have been introduced, several of which request a voter referendum to allow OK consumers to receive DTC shipments from out-of-state wineries, but a permit system has not been outlined.
Oregon – House Bill 2171 (Minnis) transitions OR from a reciprocal DTC to a permit system. Would cover wineries only. Status: Introduced. This is the OLCC bill. House Bill 2488 (House Business and Labor Committee) is similar, allowing wineries, retailers and “associations” to obtain permits. $50 fee. Excise taxes to be paid. Unlimited shipments. Status: Introduced.
Pennsylvania – House Bill 255 (Godshall) is a positive DTC shipping permit bill with a $100 registration fee, 2 cases per month to any individual. Taxes collected. Status: Introduced.
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. Status: Introduced. Companion bill in Senate (1977, Stanley).
Virginia – Senate Bill 984 (Edwards) creates an “internet wine retailer license” to allow sales by a retailer having no physical premise. Status: Passed both House and Senate and sent to Governor on 2/22/07.
West Virginia – Senate Bill 712 (Kessler) is an omnibus liquor bill, that among many provisions, includes creation of a DTC shipping permit for wineries, wholesalers and retailers. Provisions include: $150 permit fee, 2 cases per month, sales and excise tax payments. Removes self distribution privilege for instate wineries. Original 50% tax increase has been removed. Creates a “wine spa” license, a wine B&B license, and a “mini” winery license to replace farm winery permits.
Texas — The Specialty Wine Retailers Association (SWRA, www.specialtywineretailers.org) litigation in Texas to address that state’s discriminatory stance between in-state and out-of-state retailers is in its discovery phase. Until the case is decided, out-of-state retailers may continue to ship to Texas consumers.
Massachusetts — The Family Winemakers of California reports that its lawsuit against the State of Massachusetts seeking to overturn the 30,000 gallon production cap in the DTC law is still in the discovery phase. Once discovery is complete both sides will be preparing motions for summary judgment for later in the year.
A few weeks ago, Annie mentioned that wineries shipping directly to Georgia that do not otherwise have a nexus in Georgia are not required to collect sales tax. We have had a number of questions about this issue, mostly related to the fact that different people have received different answers to this question in the past from Georgia. A few months ago, a representative from the Georgia Department of Revenue gave clear guidance on this in a pair of emails. Responding to the question of whether a winery with no wholesaler in Georgia has to collect sales tax, the representative wrote the following
The simple answer to your question is that the Special Order Shipping License is not conditioned on licencees paying sales tax to the State of Georgia. There is no general requirement saying that these licencees must collect and pay Georgia sales tax on sales. Whether a Special Order Shipping Licensee is subject to sales tax collection requirements must be analyzed on a case by case basis taking into account whether the licensee has a nexus with the State. Relevant questions in the analysis of nexus would include, but not be limited to, whether the licensee has a physical presence in the State such as having an office or having salespeople that are based in the State.
When asked for further clarification on whether the Special Order Shipping License creates a nexus in Georgia by a winery that does not have any presence in Georgia, the winery received the response below
A Special Order Shipping License alone, without any other conditions that would establish a nexus with Georgia, does not establish a nexus. The Georgia law that created the Special Order Shipping License was effective July 1, 2000, not in 2006. The information listed on the Georgia Department of Revenue site www.etax.dor.ga.gov/salestax/salestax_genlinfo.shtml is correct. Tangible personal property (in this case wine) purchased by a Georgia resident via the Internet and delivered to a Georgia address is subject to Georgia sales and use tax regardless of where the vendor is located. The Georgia resident would report and remit Use Tax on Form ST-3USE. The tax rate is based on the county where delivery takes place. You have asked if the consumer does not pay the tax themselves on the purchase of your wine, could this fall back on your winery? Lacking nexus, you would not be required to collect and remit the sales tax; nor would you be required to remit the consumer’s use tax. However, a company that charges and collects the Georgia sales tax must remit that tax to the State of Georgia.
To summarize, any winery can make onsite shipments into Georgia. Only wineries without a distributor in Georgia can receive a Special Order Shipping License and make offsite shipments (as well as onsite shipments). In both cases, the winery is not required to collect or pay sales tax.
The enforcement and interpretation of various state laws for Direct-to-Consumer wine shipments continue to evolve. Following are three recent updates that wineries should be aware of.
Connecticut: Wineries of any size are eligible to apply for an Out-of- State Shippers Permit in CT. The cost of the permit is $250 and there is a $100 filing fee. Wineries producing 100,000 gallons a year or less that have an approved Out-of- State Shippers Permit are allowed self-distribution privileges in addition to shipping direct-to-consumers.
Georgia: Wineries shipping direct-to-consumers in Georgia are not required to pay sales tax, unless they have a nexus (an office or employees) within the state. The Special Order Direct Shipping License in GA does not trigger a sales tax requirement.
North Carolina: Wineries that have an approved Direct Shippers Permit for NC are allowed to ship direct-to-consumers throughout the entire state, including dry counties. Direct-to-consumer shipments are legal in the 4 dry counties because the transaction is not taking place outside of the restricted area.