Massachusetts DTC Applications – How to Get Started

As ShipCompliant reported earlier this week, the new Direct Wine Shipper License application and advisory were released over this past weekend. The new permit law replaces the existing unworkable direct shipping law in its entirety. See the previous post to read more about how the new laws, in effect starting January 1, 2015, apply to wineries.

It is expected to take approximately four weeks for applications to be approved. Wineries may NOT engage in any “sales activities” prior to January 1, 2015. (or their license is approved.) Both the Direct Wine Shipper License application and Direct Wine Shipper License Advisory are available on the Wine Institute, ShipCompliant, and Massachusetts Alcoholic Beverages Control Commission (ABCC) websites. Below please find instructions on how to complete the application process. Questions about the application requirements can be directed to Ralph Sacramone of the ABCC at 617-727-3040 ext. 731 or to Annie Bones at abones@wineinstitute.org.

MASSACHUSETTS NEW DIRECT WINE SHIPPER LICENSE APPLICATION INSTRUCTIONS
Step 1: Register with the Department of Revenue to Pay Sales and Excise Taxes

  • Go to MassTax Connect to Register and Pay Excise Taxes (note the date of registration as you will need to enter this on the DTC application.)

Step 2: Application for a Direct Shipper Wine License (effective 1/1/2015)
Part 1 – Applicant Information and Legal Structure

  • Attach vote by the Board of Directors or LLC Managers appointing a manager or principal representative
  • Articles of Organization as filed with the Secretary of State’s Office

Part 2 – Licenses to Manufacture and Export Wine

  • List and attach a copy of your California 02 Winegrower license

Part 3 – Federal Compliance

  • List and attach a copy of your TTB Basic Permit Number
  • List and attach a copy of your FDA Registration

Part 4 – Tax Registration

  • Enter the date that you registered with the MA Department of Revenue to pay sales and excise taxes

Part 5 – Interests in this License

  • All of the limited partners must be listed

Parts 6-8

  • Follow the application’s instructions and provide affidavit(s) if necessary

Part 9 – Previously Held Interests in Other Licenses

  • All of previously held interests must be listed

Part 10 – Transportation and Delivery

  • FedEx Ground should be listed. FedEx Express and UPS are not licensed to deliver DTC wine shipments to MA consumers at this time. The application can be updated by letter if FedEx Express, UPS or any other common carrier enters the market and intend to use their services.

Part 11 – Proof of Age for Sale to Consumers

  • The Code for Direct Shipping Guidelines (http://freethegrapes.org/code-for-direct-shipping) recommends that direct shippers verify the purchaser’s age at the point of online purchase using an approved age verification vendor, such as LexisNexis or IDology.

Part 12 – Proof of Age for Delivery to Consumers
FedEx Ground Control Processes for Alcohol Shipments: FedEx Ground requires Alcohol Shippers to sign a special contract addendum outlining labeling and information requirements

  • Shippers must use FedEx® ShipManager electronic shipping solutions or an approved third-party system
  • Shippers must enter a unique identifier – $AW, in the “Your Reference” field for all wine shipments
  • Shippers must select Adult Signature Service as a condition of delivery of the shipment
  • All wine packages must be labeled with a FedEx approved alcohol label
  • An Adult Signature Service “code” is embedded in the unique bar code tracking ID
  • Delivery scanners alert drivers of the adults signature requirement at point of delivery scan
  • If no eligible recipient is at the address, the scanner prompts driver to apply the proper status code and reattempt delivery at a later time/date
  • FedEx will obtain a signature from any person at least 21 years old (government-issued photo identification required) at the delivery address
  • Part 13

    • Follow the application’s instructions

    Step 3: Direct Wine Shipper License Application Checklist

    • Check payable to ABCC or Commonwealth of MA for $300
    • Transmittal Form
    • Completed Application
    • Articles of Organization as filed with the Secretary of State’s Office
    • Vote by the Board of Directors or LLC Managers appointing a manager or principal representative
    • A copy of your California 02 Winegrower license
    • A copy of your Federal Basic Permit
    • A copy of your FDA Registration

    Send to:
    Alcoholic Beverages Control Commission
    P.O. Box 3396
    Boston, MA 02241-3396

    Annie Bones, State Relations – Wine Institute

    New Direct Wine Shipper License Applications Now Available for Massachusetts


    As we discussed in a previous post, Massachusetts opening to direct shipping is probably the biggest change that we have seen in direct wine shipping since the Granholm Supreme Court decision of 2005. Over the weekend, the Massachusetts ABCC updated their website with a brief advisory on the new direct shipping law that summarizes the law and provides instructions on how to complete the permit process, and how to comply with the reporting requirements.

    Click here to download the Massachusetts direct shipping application (if you are having trouble downloading the application from the Massachusetts website, click here).

    Here’s a quick summary of the new law:

    • Only wineries that hold a TTB license and a license to produce in and export out of their state can qualify for the Direct Wine Shipper License
    • Each licensed direct shippers can ship up to 12 9-liter cases of wine to any one individual per calendar year
    • Direct shipping reports will be due on an annual basis
    • Sales tax is not due for wine products, but is due for any non-wine items such as merchandise
    • Excise taxes will be due on all shipments

    The 7-page application is fairly straightforward, but in addition to some of the usual information (like business and business owner information), you’ll need to answer a couple out-of-the ordinary questions. Note: We’re working to clarify how to answer a few of the questions with the ABCC, and will update this post once we have more information.

    • First, register with the Massachusetts Department of Revenue to pay sales and excise taxes. You’ll need to include the date you registered with the Massachusetts DOR on the application.
    • List all businesses (carriers) that will deliver wine on your behalf; carriers must hold a Winery Shipment Transportation Permit

      An early concern over the new Massachusetts wine shipping law was that it did not address the issue of common carriers having to license each and every truck that delivers wine. However, a bill to allow common carriers to obtain a fleet license for the delivery of alcohol is pending in the Massachusetts legislature. It seems somewhat unlikely that the fleet license bill will move this session. But, we believe that at least one of the common carriers will begin to license each of their trucks and therefore will be able to deliver wine to Massachusetts addresses as early as the beginning of February.

    • List your winery’s methods for proof of age for sale and delivery to consumers.

      See our informative post on 7 tips for better age verification, listing the different age verification methods for online wine purchases

    • Include with the application a copy of 1) the license(s) you hold which authorize manufacture and exportation of wine; 2) your TTB Permit; and 3) your FDA Registration
    • Finally, include a check for $300. Make the check out to the “Massachusetts ABCC” and denote the name of the licensee

    We expect Massachusetts will represent an extremely important opportunity for wineries. If is approved, a process that may take as long as four weeks, you can start taking orders as soon as January 1, 2015!

    Is Massachusetts the Most Important Change Since Granholm?

    The opening of Massachusetts for direct shipping is perhaps the most important change to the direct shipping market since the Granholm v. Heald Supreme Court decision in 2005. We estimate that within three years of opening for direct shipments on January 1, 2015, Massachusetts will easily vault into the top ten states by shipping revenue and represent over $60 million in additional revenue for wineries that ship.

    Let us explain.

    The value of opening up any given state for direct wine shippers is, we find, related to three primary factors:

    1. The state’s population
    2. The state’s proximity to an important wine producing state/region
    3. Per capita consumption of the state

    Massachusetts’ Population
    Massachusetts has a population of approximately 6.6 million people, just above the national average of 6 million people per state. It is similar in population size to Tennessee, Indiana, Arizona and Washington State. While not a hugely populated state, it is by no means sparsely populated.

    Massachusetts’ Proximity to a Wine Region
    Massachusetts has a very small wine industry. However, it borders New York, an important wine producing state and wine tourism venue. This bodes well not just for New York wineries, but it suggests that Massachusetts wine lovers will benefit from easy access to wines they have recently discovered on day trips and weekend excursions.

    Per Capita Wine Consumption in Massachusetts
    Only five states have a higher per capita wine consumption rate than Massachusetts. At 29 bottles of wine consumed per person annually, Bay Staters consume wine at more than a 50% greater rate than the average state. They like their wine.

    Given these factors, and looking at how similar states, in terms of consumption and location, rank in the direct-to-consumer shipping channel, we believe that Massachusetts wine lovers will have wine shipped to them at a significantly higher rate than the average state.

    For the overall winery-to-consumer shipping market, 0.213 bottles of wine per capita were shipped in 2013. However, the top 10 winery-to-consumer shipping states averaged 0.276 bottles per capita. We have every reason to believe that Massachusetts will hew closely to this average within three years after the state opens for shipments. In fact, we are confident is saying that by 2018, three years after Massachusetts finally opens for direct shipping, it will generate more than $73 million in wine shipments and rank #7 for value of shipments among all legal states. Sales for DTC By 2023, the value of the Massachusetts direct shipping market will be over $100 million per year.

    A number of people and organizations have worked very hard to open up Massachusetts for direct shipping and to give Massachusetts consumers the simple right to buy the domestic wines they desire, especially Coalition for Free Trade, Free the Grapes!, and Wine Institute. Many years, much lobbying, lawsuits, more lobbying, working the media and harnessing the power of the consumer finally brought it about. It’s not only long in coming and a sweet victory for everyone, but also a very profitable victory for wineries across the country.

    Direct Shipping To Massachusetts–Finally!

    massachusetts blog logo3Eight years after Massachusetts passed an unworkable and overly-restrictive direct shipping bill, and four years since the same law was ruled unconstitutional by a federal court, Bay State legislators finally passed a workable direct wine shipping law that will allow out-of-state and in-state wineries to ship wine directly to state residents. The new law was included in the 2014 budget bill (see page 257), and was signed by Governor Deval Patrick this morning. Set to go into effect on January 1, 2015, the new wine shipping law will make both wineries and Massachusetts wine lovers overjoyed.

    Massachusetts is ranked among the most important states that still had not passed winery direct shipping law. Massachusetts is particularly important given the size of its population and its residents’ love of wine. Only four states have higher per capita consumption rates for wine than Massachusetts.

    The new direct shipping law, passed as part of the 2015 fiscal year budget, provides the following conditions for shippers:

    • Only bonded wineries may apply for a direct shipping permit
    • Direct Shipping License Fee: $300/winery (separate permits required for each “affiliate, franchise or subsidiary”)
    • Direct Shipping License Annual Renewal Fee: $150
    • Shipments limited to twelve 9-liter cases per purchaser in a calendar year
    • Reports to the state must be remitted annually
    • Excise Taxes must be remitted on each sale

     

    Over the next six months, the Massachusetts Alcohol Beverage Control Commission will be responsible for creating and making available license applications for direct shippers. We will report here on those developments as well as any others that impact direct shippers.

    Will Massachusetts Lawmakers Finally Act?

    In January of 2010, the United States Court of Appeals for the First Circuit affirmed the judgment of the District Court in the case of Family Winemakers of California v. Jenkins. This ruling struck down the 30,000 gallon capacity cap, which excluded 98% of domestic wines from shipment to Massachusetts. Although this represented a big win for wineries, several problems remained, and it was up to the Massachusetts legislature to act.

    Almost four years later, Bay State lawmakers will once again try to craft a replacement law and move it through the legislature. The first and most important step is a public hearing on Direct Wine Shipping in Massachusetts to be held in Boston on Tuesday, November 12 at 1pm Eastern Time in the Joint Committee on Consumer Protection and Professional Licensure.

    Bill H.294, sponsored by Representative Ted Speliotis, is one of five bills related to direct shipping listed in the hearing schedule. It would allow wineries to ship up to 24 cases per year to individual consumers in Massachusetts, require annual volume reporting to the state and remittance of excise and sales taxes to the state.

    One key issue that must be addressed to make any direct shipping law effective is that of a “fleet permit” for common carriers. A fleet permit allows common carriers like FedEx and UPS to obtain a single permit for alcohol deliveries that covers all their trucks in the state, in contrast to regulations that require a permit be obtained for each and ever delivery truck. Without a fleet permit as part of a direct shipping bill, it is unlikely that the major common carriers would deliver wine into Massachusetts no matter how good the rest of the bill might be.

    Additionally, the current direct shipping law on the books has a “consumer aggregate” volume limit, which allows consumers to only receive a limited amount of wine within a calendar year from all sources. This kind of aggregate limit is mostly un-workable, as wineries have little idea what consumers have already received. The aggregate volume limit is not included in H.294.

    Behind Pennsylvania (population 12,702,379), Massachusetts (6,547,629) is the second largest of nine states that are currently off limits for wine shipments. The other states include Alabama (4,779,736), Kentucky (4,339,367), Oklahoma (3,751,351), Mississippi (2,967,297), Utah (2,763,885), Delaware (897,934), and South Dakota (814,180).

    Additional Resources:
    Free the Grapes! Press Release
    Huge win for wineries, but can I ship to Massachusetts now?
    Why Can’t I Have a Boston Wine Party?
    Massachusetts Remains Elusive for Direct Shippers

    2013 Wine Compliance Legislative Updates and a Virtual Seminar Invitation

    You may remember reading our posts highlighting what to look for in the legislative season back at the beginning of 2013. Now that many legislative sessions are starting to come to a close, here is a quick check-in on this year’s legislative changes, all of which will be addressed in detail at the ShipCompliant Direct Wine Sales Virtual Seminar, scheduled for October 17th. Reserve your spot today for a complete update on the 2013 wine direct shipping world.

    How did the Direct Shipping Bills Stack Up?

    Pennsylvania and Massachusetts were the headlining states this year once again when it comes to opening up new states to direct shipping. Although neither state passed a bill prior to the summer recess, legislatures are back in session in both states and direct shipping remains a possibility.

    Montana HB 402 will become law tomorrow (Tuesday October 1, 2013), effectively replacing the wine connoisseur’s license with a direct shipping “endorsement” available to Montana wineries and to out-of-state wineries holding a Foreign Winery License. Check out our previous blog post for more detailed information on obtaining this endorsement.

    Arkansas Act 483, originally HB 1749, opened up limited direct shipping to the “Natural State” for wineries. The state is still finalizing how they will regulate this new law, which took effect mid-August, but this previous post provides a detailed summary of the Act.

    Streamlined COLA Processing

    The TTB continues to revamp their website and accept feedback from the industry. Review the status of the COLA Streamlining Accomplishments and Long-term Initiatives on the TTB website.

    Existing Direct Shipping Laws, Reworked

    Nebraska LB 230 passed and became effective on September 6, 2013. We highlighted the details on the bill that adds new restrictions to the wine direct shipping process.

    North Dakota SB 2147 created two new licenses that will allow for wine direct shippers to utilize licensed common carriers and fulfillment houses. This bill took effect August 1, 2013.

    Product Registration Updates

    In Arkansas, HB 1480 became effective mid-August, and beginning October 15 suppliers will be able to register their products online under the new requirements outlined in this bill.

    Reserve your spot today for a complete legislative update and more during the ShipCompliant Direct Wine Sales Virtual Seminar!