Posts from the Michigan Category
Direct Shipping Licensing Updates
March 4th, 2010
Michigan
Direct shipping permits for Michigan are renewable on May 1. The annual renewal cost for the Michigan Permit is $100; the same as the initial permit fee. For those wineries that do not have a direct shipping permit for MI now is good time to consider applying. Licenses are valid from May 1 – April 30 and the $100 fee is not prorated. The permit allows wineries to ship up to 1,500 9-liter cases to Michigan consumers. Brand registration is required. This can be completed through the MLCC’s online label registration program for no fee. Sales tax and excise tax must be paid and reports must be filed.
New Hampshire
New Hampshire has updated its direct shipping permit application. The updated application is now available on Wine Institute’s website along with the instructions. Please be sure to complete the application in its entirety and attach all required documents. Incomplete applications will be returned. Applicants will be happy to note that there is no permit fee. Approved shippers are allowed to ship up to 60 containers of not more than 1 liter each to each consumer during a calendar year. Monthly reports and tax payments are required.
Tennessee
The Tennessee Alcohol Beverage Commission has updated their ”Direct Shipper Application Requirements – ABC” document posted on the TN ABC and Wine Institute websites. The original version of the document did not include the “Wholesale Gallonage Letter” requirement. The Wholesale Gallonage letter is one of 2 documents issued by the TN Department of Revenue that wineries must submit with their application. The second document is the “Certificate of Registration for Sales and Use Tax.” While the application on the TN Department of Revenue website says a bond is required, a bond is not required for wineries. For the TN DOR wholesale gallonage and sales and use tax application form, go to: http://www.state.tn.us/revenue/forms/general/f13005_1.pdf. Licenses are valid 1 year from the date issued and the annual license fee is $150.00. There is also a 1 time non-refundable application fee of $300. Additional information about the application process is available on the Wine Institute website. Wineries may also contact Sharon Loveall at the TN Alcoholic Beverage Commission with any questions about winery direct shipping permits at 615.741.1602, ext. 141
By Annie Bones, State Relations – Wine Institute
Hidden Costs of Direct Shipping Licensing
March 3rd, 2010
Before jumping into a direct shipping program in a new state, wineries should consider their current prospect list, market potential, shipping difficulty and costs. When it comes to calculating start-up costs to enter a new state, there is often more than meets the eye. In addition to license fees, wineries may need to budget for a number of “hidden” fees including bonds, label registration fees and other application fees.
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.
Michigan Direct-To-Consumer Rules Clarified
January 28th, 2009
Many questions have resulted from a new law prohibiting wine retailers from shipping to consumers in Michigan that recently went into effect. The new law specifically bans common carriers (FedEx and UPS) from delivering retailer wine shipments to Michigan consumers. This law does not affect the existing regulations for wineries shipping to consumers under the permit structure. Wineries with an approved Direct Shipping License may continue to ship to Michigan consumers via FedEx and UPS. Information about how to obtain Michigan Direct Shipping License can be found on the Wine Institute website http://www.wineinstitute.org/initiatives/stateshippinglaws.
Annie Bones, State Relations – Wine Institute
Michigan Levels Down on Wine Retailers
January 13th, 2009
In just five legislative days, Michigan House Bill 6644 was introduced, edited, voted upon, and enrolled. In a disappointing turn of events, the Michigan Senate passed HB 6644, with substitutions, by a count of 36 Yeas and just 2 Nays on December 18, 2008. The bill then returned to the House for a final vote on concurrence, the result of which was 98 Yeas and 4 Nays, subsequently, HB 6644 was ordered enrolled. Governor Granholm approved the bill on January 9, 2009, now called Public Act 474’08 2008 Addenda.
While the original bill would have banned all retail to consumer direct shipping, the Senate made substitutions that provide a very small opening for retailer direct shipments. This comes after Michigan retailers, who count catering as a significant source of income, raised concerns over the potential loss of revenue. In the bill that was approved by the Senate, House, and signed by Governor Granholm last Friday, retailers are allowed to deliver to consumers if they adhere to these restrictive criteria:
- obtain a specially designated merchant license issued by Michigan, or another state’s equivalent for out-of-state retailers;
- only deliver its products through the hands of their own employees and NOT by an agent or a third party delivery service while also verifying the age of the recipient, (the only situation in which retailers may use a third-party service is if the municipality is surrounded by water and does not have road access);
- have the employees who deliver their products receive alcohol server training through a Michigan Liquor Control Commission approved server training program.
These substitutions provide relief for those lucky Michigan retailers who do not have state-wide wine shipping aspirations. Caterers who obtain the specially designated merchant license (and their own means of transportation) should find the bill satisfactory. But for those retailers who hoped to serve consumers across the state of Michigan, this bill is a blow to their direct shipping business. Although the Senate prevented the outright ban of retail-to-consumer direct shipments, there is little for retailers to smile about because they still face an indirect ban: the restriction on the use of third-party delivery services. Tom Wark, Executive Director of the Specialty Wine Retailers had this to say on the matter.
Our view of Michigan’s HB 6644 is that it is equally unconstitutional as the law that was just overturned in the District Court. However, this doesn’t surprise us as the goal of this legislation was always to do whatever was necessary to prevent Michigan consumers from legally accessing the wines they want and to protect in-state wholesalers. HB 6644 may appear to be facially neutral, but the law is unquestionably discriminatory in its effect and in its intent.
When Judge Hood’s September 30th, 2008 ruling on Siesta Village Market LLC v. Granholm effectively ordered Michigan to allow out-of-state retailers to direct ship wine to Michigan consumers, hopes were high. It was thought that the case would establish a precedent for future retail direct shipping litigation. But in November, with the prospect of having to comply with Judge Hood’s ruling–to allow out-of-state retailers to direct ship to Michigan consumers–looming, Michigan wine wholesalers and the state Liquor Commission organized to introduce HB 6644 in the most discrete manner. The organized efforts of Michigan wholesalers enabled this legislation to pass with surprising speed and support and without public discussion, tactics that prevented retailers and consumers from organizing in protest.
In the strange world of Michigan wine legislation, it is possible to allow one licensed wine vendor to direct ship, while preventing another licensed wine vendor from doing the same, while restricting the needs of wine enthusiasts and consumers. An appeal inSiesta Village Market is still possible, but for now retailers are out of luck in Michigan.
Hope Rests in Senate as Michigan House Passes Ban on Retail to Consumer Direct Shipments
December 11th, 2008
Michigan House Bill 6644 passed with 97 Yeas and 9 Nays on December 4, 2008. If passed by the Senate, HB 6644 would ban all retailers, in-state and out-of-state, from direct shipping wine to Michigan residents. In the last days of Michigan’s current legislative session, expected to adjourn soon, the failure or passage of this bill will either give new life to or end Michigan retail direct shipping.
Less than three months ago, Michigan Federal District Court Judge Denise Hood ruled unconstitutional a Michigan law that allowed in-state retailers to direct ship to consumers while denying out-of-state retailers the same right. However, before out-of-state retailers could even fancy direct shipping wine, Governor Granholm, the Michigan Beer and Wine Wholesalers Association (BWWA), and the Michigan Liquor Control Commission (LCC) filed an appeal, effectively suspending all attempts to open up the Michigan wine market in conformity with Judge Hood’s ruling. In the two short months following the stay from the appeal, Representatives Barbara Farrah and Chris Ward introduced HB 6644 to stop all retailers from competing with wholesalers.
The bill sponsors did little to hide their true objective in expediting the bill through Michigan’s Legislature. In its Legislative Analysis, the Committee on Regulatory Reform, which recommended the bill, repeatedly declares the need to protect the three-tier distribution system, citing how well it has served Michigan businesses and residents for 75 years. Among the other arguments in favor of the bill, the committee points to the supposed “untold amounts of revenue” that would be lost due to the lack of a “legal framework to license these out-of-state retail liquor establishments and to collect the same excise taxes and sales and use taxes levied on Michigan retailers and suppliers.” This argument assumes that the Michigan LCC is incapable of establishing new administrative procedures in the face of change, a reflection of an antiquated administration and not the feasibility of implementing new regulations. The bill sponsors, arguing arduously for the protection of the three-tier system, seem to overlook the very functional winery direct to consumer shipping market in Michigan which has had a regulatory system in place since April 2006. The SWRA proposes that the same rules and paperwork with which the Michigan LCC regulates direct shipping wineries can realistically be applied to retailers, thus increasing tax revenue, a straightforward process that the Michigan LCC and BWWA fail to acknowledge.
As expected, the Michigan LCC and the Michigan BWWA support the bill while the Michigan Restaurant Association (MRA) opposes it. The MRA recognizes that if the bill were to pass, members who hold retail beer and wine licenses would also be banned from serving those beverages at catered events, an important part of their business services.
Despite the disheartening speed and overwhelming majority with which the Michigan House passed the bill—it took three legislative days to go from introduction to vote—there are indications that the same will not occur in the Senate. Retailers interested in shipping wine to Michigan residents have ridden a roller coaster of legislation changes for several years; but the fate of retailer direct shipments could be set for the foreseeable future before the New Year rings in.
