Posts from the Missouri Category
Missouri: Beware the yellow highlighter!
February 5th, 2008
The Missouri Division of Alcohol & Tobacco Control is being extremely thorough in enforcing accurate reporting and excise tax payments. We’ve heard from a number of wineries that filed the Wine Direct Shipper Annual Report and Tax Computation report with the associated Sales to Missouri Residents by Wine Direct Shipper (form 40) schedule on time, but had the report rejected by the ATC for errors or omissions.
Missouri moved from a reciprocal state (with no reporting) to a permit state on August 28th, 2007. Wineries that now have a permit to ship to consumers in Missouri must file the annual report and schedule. Because the permit requirement went into effect in August 2007, only shipments made between August 28th and December 31st needed to be reported on the 2007 annual report.
As do most state ABCs, the Missouri ATC receives reports from the common carriers (FedEx and UPS) that detail all of the wine shipments that are delivered directly to Missouri residents. They use this data from the carriers to reconcile the data on the reports that are submitted by the licensed wine direct shippers. On the Missouri annual report, wineries are required to list the name and address of the purchaser, the name and address of the recipient, the date of shipment, the invoice number, the name of the direct shipper (FedEx and UPS are the only licensed carriers), the direct shipper’s Missouri license number (170979 for UPS, 168093 for Federal Express, and 168217 for FedEx Ground), and the FedEx or UPS tracking number for all shipments. The Missouri ATC literally took out a yellow highlighter and highlighted any errors or omissions on the report including a missing Form 40, any failure to calculate or pay the $.12 per gallon tax, a missing or invalid shipper name, or an incorrect or missing tracking number. All shippers that received this notification are required to file an amended return by mail or fax to the Missouri ATC by February 15th.
New Missouri Law Takes Effect Today
August 28th, 2007
Just a reminder… Effective today, August 28, 2007, Missouri is requiring all wineries to have an approved direct shipping permit. There is no fee and the application is only 1 page! Wineries must have the application notarized and provide copies of its current state alcoholic beverage license and a copy of its winery license from the Alcohol and Tobacco Tax and Trade Bureau. Excise taxes must be paid annually. The excise tax report and taxes are due by January 31 of each year and should report the total amount of wine shipped into the state during the preceding year. The excise tax reporting form will be posted on the Wine Institute website once it becomes available. In addition the direct shipping volume limit has increased. Wineries may now ship up to 2 cases to a consumer each month.
Free the Grapes! Legislation and Litigation Update
August 8th, 2007
From Jeremy Benson at Free the Grapes! :
Free the Grapes! Media Update
August 2007
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.
Highlights:
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.
Wins:
- 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.
Losses:
- 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.
LEGISLATIVE UPDATE
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.
Additional States
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.
LITIGATION UPDATE
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.
Missouri Direct Wine Shipper Applications Available
July 25th, 2007
The Governor of Missouri has signed SB 299 transitioning Missouri from a reciprocal state to a permit state. As of August 28, 2007 wineries will be required to have a Direct Wine Shipper’s Permit issued by the Missouri Division of Alcohol and Tobacco Control (ATC) and pay excise taxes in order to ship to MO consumers. The permit applications and instructions are now available on the Wine Institute website.
The application must be notarized and applicants must attach a current copy of the alcohol beverage license issued by their state of residence and a copy of the winery license from the TTB. There is no application fee. The Direct Wine Shipper’s Permit allows wineries to ship up to two cases of wine each month to a consumer. Direct Wine Shippers must submit a report by January 31 of each year stating the total amount of wine shipped into the state the preceding year and pay excise taxes. The permit does not require wineries to pay sales tax.
Completed applications should be mailed to Liquor Control Division, P.O. Box 837, Jefferson City, MO 65102. The ATC expects to begin processing applications the week before the new law goes into effect. Approved permits will be mailed to the applicants. As of August 28, 2007 wineries should not ship to MO consumers until they have received their approved permit. Should you have any questions please contact Annie Bones at the Wine Institute at 415-356-7530.
Update: The Direct Wine Shipper’s Application posted on the Missouri Division of Alcohol and Tobacco and Wine Institute websites earlier this week is being revised. Wineries should disregard the application originally posted. Wineries will be notified as soon as the updated application becomes available.
Missouri ATC Updates Direct Shipper Information
July 24th, 2007
The Missouri ATC updated its website yesterday with its interpretation of SB 299. As noted in our previous post, SB 299 changes Missouri’s shipping status from a reciprocal shipping state to a limited/direct shipping state for wineries. After August 28th, there will remain only five winery reciprocal states (OR, NM, IA, IL, and WI). Oregon will also move into the limited direct category effective January 1st, 2008 if the new legislation is signed by the Governor.
According to the Missouri ATC, all wineries, regardless of their location, will be allowed to ship directly to Missouri consumers until August 28th, 2007 when the law takes effect. However, “beginning August 28th, 2007, wine manufacturers will be required to have a license to ship wine directly to consumers, only ship wine using licensed alcohol carriers and pay excise taxes on wine shipments to consumers.”
An interesting aspect of the new Missouri law is its interpretation of reciprocity for out-of-state retailers. In effects, the new law continues to allow:
Missouri retailers to ship wine directly to consumers. Section 311.462, RSMo, provides that a holder of a retailer alcoholic beverage license in this state may ship wine, for personal use and not for resale, to any adult resident in this state. However, the following restrictions are in place: 1. May ship no more than two cases of wine annually to adult consumers. 2. The shipping container shall be clearly labeled to indicate that the package cannot be delivered to a person under the age of twenty-one years or to an intoxicated person. 3. Prohibits soliciting and advertising of wine shipments
But, the ATC interpretation states:
It remains illegal for out-of-state retailers to ship directly to consumers from any state other then reciprocal states per Section 311.462, RSMo. However, as of August 28, 2007, no other state affords Missouri retailers shipping privileges without permits or excise taxes due. Therefore, shipping by out-of-state retailers into the state of Missouri is not allowed.
Finally, the electronic application as it stands is all but unworkable. There are multiple steps in the process each more confusing than the last and prone to errors. We will have more information on simplifying this process in the next day or two.
Update: The ATC just removed the link to the Word document with direct shipping information. They also removed the electronic application for wine shippers. Stay tuned…
Missouri to end reciprocity on August 28th
July 20th, 2007
On July 13th, Missouri Governor Matt Blunt signed into law SB 299. SB 299 changes Missouri’s current status as a reciprocal shipping state to a limited/direct shipping state. Beginning August 28th, 2007, in-state and out-of-state wineries may obtain a Direct Shipper’s permit and ship up to 2 cases per month, up from the previous 2 cases per year limit.
Wineries will be required to renew the Direct Shipping permit annually, remit excise and sales tax, and file reports of all transactions. Common carriers will also be required to obtain a license to carry and deliver alcoholic beverages.
SB 299 also continues to allow in-state retailers and retailers from reciprocal states to ship directly to consumers at the previous limit of 2 cases per year.
The Missouri ABC is currently drafting its Direct Shippers permit application and reporting requirements. These documents should become available sometime later this month. We will provide updates on the permit documents, tax rates, etc, as they become available. Check back soon.
Update: The Missouri LCD confirmed that sales tax will not be required for out of state wine shippers with no nexus in MO (see the strike-through in the post above).
Free The Grapes! legislative update
March 19th, 2007
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.
LEGISLATIVE UPDATE
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.
LITIGATION UPDATE
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.
Direct shipping bill passes West Virginia Congress
March 14th, 2007
In May of 2005, in the case of Granholm v. Heald, the United States Supreme Court effectively invalidated the practice of reciprocity because it discriminates against wineries in non-reciprocal states. At that time, there were 13 reciprocity states. Today, there are only seven reciprocity states left (Oregon, New Mexico, Iowa, Missouri, Wisconsin, Illinois, and West Virginia), and at the end of 2007 there may be only two as Oregon, New Mexico, Missouri, Illinois, and West Virginia have legislation pending that would move their states into the “limited direct”, or permit state category.
West Virginia may be the first reciprocal state to change in 2007. Senate Bill 712 recently passed the West Virginia Congress and is expected to be signed by the Governor. This bill would create a permit system where in-state and out-of-state wineries can apply for and receive a license to ship up to two cases of wine per month directly to adult residents. Permitted wineries would be responsible for reporting monthly excise tax (beginning July 1, 2007), sales tax, and a schedule of shipments made in the previous month. The permit would cost “One hundred fifty dollars per year for a direct shipper’s license for a licensee who sells and ships only wine and two hundred fifty dollars for a direct shipper’s license who ships and sells wine, nonfortified dessert wine, port, sherry or Madeira wines” plus a brand registration fee of $100 per brand for three years. Common carriers shipping into WV would be required to collect an adult signature upon delivery of wine packages.
One thing to note about this bill is that it would level-down on self-distribution, meaning that in-state wineries would lose their privilege to ship wine directly to retailers. There are also some requirements that are a bit gray as they are written, but will hopefully be sorted out and clarified after the bill is signed by the Governor and the rules are promulgated by the Alcohol Beverage Control Commissioner.
A response to the Family Winemakers lawsuit
September 24th, 2006
Doug Caskey, from the Colorado Wine Industry Development Board, responded to our post about the lawsuit in Massachusetts with a lengthy comment. I wanted to republish it in a new post because it is well worth reading.
At the risk of sounding like a traitor to the cause of wine, free trade and the American Way, I would like to challenge the premises that underlie Mr. Kronenberg’s lawsuit against the revised wine shipping statutes in Kentucky. As a representative of the very small wineries in Colorado, the last thing I want to do is “protect and perpetuate a wholesaler monopoly at the expense of wineries seeking market opportunities,” as Mr. Kronenberg accuses the Kentucky legislature of doing. Yet, I take exception to his comment that we are “one national economic market.” As recent court rulings in Virginia and Michigan have shown, the local implementation of the three-tier system was reinforced, not invalidated by the Granholm decision, as long as the implementation is not discriminatory or preferential. States still have the right to regulate alcohol in a meaningful way that suits the “needs and desires” of their residents, as the language of the Colorado Liquor Code requires.
If a state chooses to impose size limits on certain privileges for liquor distribution or market access, that state may well be doing so because it has determined that small wineries have more difficulty getting their products through the three-tier system than large wineries with sales teams and marketing budgets. That state could be saying that it values small businesses that stimulate agriculture, and it should not have to defend that position against the legal whims of wineries that produce more wine in a year than the entire state. While the Family Winemakers of California represents the “smaller” wineries in that state, I doubt if many of Mr. Kronenberg’s members produce less than the entire state of Kentucky or Colorado or both states combined.
We should remember that prior to Prohibition and the 21st Amendment, the beverage alcohol industry was made up of small, local breweries and wineries in almost every community. The advent of the mega-breweries and corporate wineries was something that happened as a result of Prohibition. The 21st Amendment was designed to protect states against the liquor monopolies spawned in the void created by Prohibition. The framers of that amendment wanted to return to the alcohol industry model of the late 19th and early 20th Centuries. It is easy to accuse the wholesale industry of being monopolistic because a handful of companies dominate the market in every state. But the same can be said of the large wineries in California.
The grape growing industry did not disappear in California and New York as a result of Prohibition the way it did in most other states, such as Colorado. Our vineyards were replanted to peach trees. Consequently, California wineries, and certain breweries in St. Louis and Golden, were able to capitalized on the demise of the local wine industries and recover more quickly than those in the rest of the county. The wine industries in states other than New York, California and Washington are just now coming back from Prohibition.
So at this point in history when California’s wine industry, which has been growing nicely for 40-50 years, complains that states are discriminating in favor of small wineries, it is in truth asking the courts for special protections. In effect, the 40-50 year advantage that California has over wine industries in the rest of the country, during which time small wineries enjoyed special protections and privileges from the California government, makes them the monopoly now. Under the guise of “equal protection” as spelled out in the Granholm decision, their legal actions have the impact of squelching the advantages that state governments want to give small agribusinesses like wineries.
The economic reality is that large wineries can afford to navigate the spiffs and expenditures of the three-tier system. Just because few states have wineries that produce more than 20,000 gallons annually, or whatever number a state uses to define a small winery, imposing size limits on direct shipment or self-distribution is not an attempt to inhibit trade. It is an acknowledgement we are not starting with a level playing field.
To my friends (and I hope we remain friends, as this is a friendly debate) Paul, at the Family Winemakers, and Steve, at the Wine Institute, I call on you to recognize the historic disparity between where your industry is and where the industries are in Colorado, Kentucky, Missouri and other states. You have a big economic head start on the rest of us. Our attempts to limit how the “big boys” play in our states are not attempts to keep you out. They are the implementation of each state’s right to define the rules for the three-tier system within our state, to identify who is small enough to need help and who doesn’t. This is the American Way.
Summary of changing states
April 24th, 2006
Wow, there have been a lot of changes to direct shipping laws this year and we are not even at the six month mark! Many reciprocal and prohibited states are becoming permit states. This is good news for wineries and consumers, but it is hard to keep track of all the changes. There are several states that have passed direct shipping legislation this year that is not yet effective. Here is a brief summary of states that will change to permit systems later this year. Colorado, effective July 1, 2006: A permit is required, but there is no fee. Wineries can ship an unlimited amount to consumers and must pay excise tax. Sales tax is not required. Idaho, effective July 1, 2006: A $25 permit is required. Wineries may ship up to 24 cases to a consumer annually. Sales and excise tax must be paid by the winery. Indiana, awaiting promulgation of rules: Wineries eligible for the $100 permit must have sales under 500,000 gallons with no Indiana wholesaler. The initial sale must be an on-site transaction. There is a 24 case consumer aggregate total and 3,000 case winery total. Sales and Excise tax must be paid by the winery. Massachusetts, awaiting promulgation of rules: The direct shipper�s permit will cost $100. Any winery under 30,000 gallons may obtain a direct-to-consumer and self-distribution permit. Any out-of-state winery over 30,000 gallons who has no wholesaler may apply for a direct-to-consumer permit only. Households will be limited to 26 cases per year. Excise tax is required. In addition, there are some very complex common carrier requirements that could prevent the use of permits even for wineries that qualify. There is one piece of good news, if a winery manages to overcome all of these obstacles it will not be responsible for paying sales tax. Washington, effective June 7, 2006: The cost of a permit $100. Wineries can ship an unlimited amount to consumers and are responsible for paying sales and excise tax. The new laws will not be posted on the Wine Institute website until their effective date, but direct wine shipper applications and tax registration forms will be posted as soon as they are available. I am especially excited about the unlimited shipment amounts in Colorado and Washington. I wonder just how many wine clubs my friends at ShipCompliant will join?
