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.

If you are at all interested in the shipping and distribution of wine, this is an excellent resource that is well worth reading.  You can view the most recent version of the document anytime by visiting the ShipCompliant Blog and clicking the link located under “Compliance Resources”, or by visiting CorbinCounsel.com and clicking on the home page link, “Notes on Wine Distribution.”

Click Here to View NWD Release 32

Once wineries have received their Retailer’s Certificate they can submit their completed direct shipper application to the Liquor Licensing and Inspections Unit, along with a copy of their federal basic permit and application fee. The direct shipper application must also be notarized. Once wineries receive their direct shipping permit they will be responsible for paying excise tax to the Department of Public Safety and sales tax to Revenue Services. In addition, a direct shipping report must be filed twice a year. Reporting forms will be posted on the Wine Institute website once they become available. Should you have any questions please contact Annie Bones in Wine Institute’s State Relations Department at abones@wineinstitute.org.

Annie Bones, State Relations – Wine Institute

-Annie Bones, State Relations – Wine Institute

After the Bureau of Liquor Enforcement adopts regulations and licensing procedures, the law will permit out-of-state and Maine farm wineries alike to ship wine (but not wine coolers!) directly to consumers by common carrier, subject to the same taxes as if sold locally. Meanwhile, the on-site provisions summarized in previous releases of Notes on Wine Distribution appear to remain available.

by R. Corbin Houchins, CorbinCounsel.com

If passed, H 696 would provide for a direct shipping permit, which would allow wineries to ship up to 12 cases of wine per year to the doorsteps of Maine consumers over the age of 21. As with any direct shipping bill, the freedom to deliver wine to a consumer’s home comes with a few restrictions, but none are overly burdensome. Some specific requirements include:

• Collection and payment of sales tax
• Quarterly reporting and payment of excise tax
• $200 license fee; $50 renewal fee
• Photo ID verification and signature of recipient upon delivery
• Licensees may not ship wine in a container smaller than 750 mL
• Licensees may not ship to local option areas or areas identified as a prohibited shipping area

The expeditious passage of H 696 through the Maine Senate is a welcome event for wineries across the country. A bill that would allow winery-to-consumer shipping in Tennessee is also waiting for a signature from their governor. If both of these measures are signed into law, Maine and Tennessee will join Kansas in the ranks of previously prohibited states who have adopted favorable direct shipping laws in 2009.

UPDATE: The Senate introduced an amendment that addresses some carrier issues as proposed in Committee Amendment “A”. The bill must again be read (date set for 6/3/2009) by the House before being considered for passage into Law.

UPDATE 6/5/2009: The Maine legislature passed the bill to be enacted on June 5th, 2009 with a carrier amendment. The bill is now ready to be sent to the governor. Once received by Governor Baldacci, he has 10 days (not including Sundays) to take action, otherwise the bill becomes law without his signature.

If passed, H 696 would provide for a direct shipping permit, which would allow wineries to ship up to 12 cases of wine per year to the doorsteps of Maine consumers over the age of 21. As with any direct shipping bill, the freedom to deliver wine to a consumer’s home comes with a few restrictions, but none are overly burdensome. Some specific requirements include:

• Collection and payment of sales tax
• Quarterly reporting and payment of excise tax
• $200 license fee; $50 renewal fee
• Photo ID verification and signature of recipient upon delivery
• Licensees may not ship wine in a container smaller than 750 mL
• Licensees may not ship to local option areas or areas identified as a prohibited shipping area

The expeditious passage of H 696 through the Maine Senate is a welcome event for wineries across the country. A bill that would allow winery-to-consumer shipping in Tennessee is also waiting for a signature from their governor. If both of these measures are signed into law, Maine and Tennessee will join Kansas in the ranks of previously prohibited states who have adopted favorable direct shipping laws in 2009.

UPDATE: The Senate introduced an amendment that addresses some carrier issues as proposed in Committee Amendment “A”. The bill must again be read (date set for 6/3/2009) by the House before being considered for passage into Law.

UPDATE 6/5/2009: The Maine legislature passed the bill to be enacted on June 5th, 2009 with a carrier amendment. The bill is now ready to be sent to the governor. Once received by Governor Baldacci, he has 10 days (not including Sundays) to take action, otherwise the bill becomes law without his signature.

Genesen’s speech analogized her role in the industry to a “court of last resort” when legislative means are unsuccessful in remedying protectionist state laws that have remained in effect despite the Granholm ruling in 2005. Granholm resolved many instances of differential treatment by the states and was extended to apply to self-distribution in the Costco ruling. However, Genesen revealed that the post-Granholm time of prosperity has given way to another host of problems. For example, states like Maine and Arkansas, in which direct shipping markets do not exist, have level playing fields; however, treating everyone the same by not allowing anyone to ship is a detriment to the wine industry. In addition, courts are struggling to deal with retail-to-consumer shipping laws in many states. Challenges to these laws have produced interesting results, like the “funky remedy” by a district court judge in a Texas lawsuit which declared that Granholm applied to retailers, but that retailers must first buy wine through Texas-licensed wholesalers. Wholesalers have also maintained their grip on states like Massachusetts by crafting legislation that is beneficial to them but also facially neutral. The 30,000 gallon capacity cap in Massachusetts exemplifies such economic protectionism and is the contention in the Family Winemakers of California case. Oral arguments in the case took place on July 29^th in Boston and the decision is expected sometime this fall.

Many thanks to Tracy Genesen for sharing her insights into the current legal atmosphere of the industry. To view Genesen’s speech in its entirety or that of any of the other speakers at the conference, please see the 2008 Users Conference Simulcast. More information on the cases in Massachusetts and Texas is also available on the ShipCompliant Blog.

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.

• Containers of wine shipped cannot be smaller than 750 mL
• Report and pay sales and excise taxes
• The bureau may adopt rules requiring specific labeling and registration requirements for direct shippers
• “The direct shipper or 3rd party carrier contracted by the direct shipper… check for a valid form of identification demonstrating proof of age.” Common carriers register with the state of Maine.

LD 1987 went far in its legislative journey before failing in the House. The bill would have been a step forward for Maine consumers and offered wine producers, retailers, and wholesalers alike an equal opportunity to ship wine directly to eager consumers.