October 14th, 2010

Ohio

Permit Required

	Producers	Retailers
Onsite
Offsite

Complexity: Hard

Summary	Direct shipping and self-distribution are open to wineries that produce less than 250,000 gallons per year. Customer volume limits, sales tax and excise taxes apply for direct-to-consumer sales. Electronic filing is mandatory for sales tax as of 2009. Labels must be registered for all direct shipments.
Approved & Active Carriers	FedEx and UPS are both approved carriers for this state.
Shipping Rules	Tax:  Both sales and excise taxes are required for on-site and off-site shipments. Direct shippers must pay the state tax of 5.5%, and local tax, which ranges from 0.5% to 2.25%. An excise tax rate of $0.02 per gallon is also required.
	Permit:  Direct shipping to Ohio consumers is permitted for licensed wineries that produce less than 250,000 gallons per year. The Direct Shipper must make a “bona fide” effort to ensure that the customer is over 21 years old.
	Customer Volume Limit:  Family households may receive up to 24 cases of wine per year from an aggregate of permitted wineries. If the limit of 24 cases is exceeded, the consumer is responsible for any penalties unless more than 24 cases were shipped from one winery; in such a case the winery will be held responsible by the state for exceeding the case limit.
License Requirements	An S Permit is required to ship direct to consumers. A license is required for both off-site and on-site sales. Wineries that produce less than 250,000 gallons are also eligible to register for a B-2a Permit, which allows wineries to sell wine directly to retailers. The cost for both the S and B-2A permits is $25.00, and they expire October 1st of every year. To access applications for either permit, visit Ohio’s Direct Shipping Information page. In addition to either of these permits, out-of-state suppliers must also submit a Supplier (S-5) Application, and include an application fee of $100. Producers must register all labels being shipped within the state. The cost is $50.00 per label; once a label is registered it does not need to be renewed. Background checks and copies of applicants’ *fingerprints are required for all liquor permits. *UPDATE: fingerprinting is not required for applicants located out-of-state
History	In 1933, Ohio repealed the prohibition amendment in the Ohio Constitution and became a control state in order to fund government programs. In the 1990′s the state-while maintaining control over liquor- relinquished its ownership over liquor stores and began commissioning private contractors to make the actual sales. In 2005, producers were temporarily given unrestricted freedom to ship into the state due to a court ordered injunction. In October, 2007, the enactment of a new permit system introduced shipping restrictions, including a 150,000 gallons per year production capacity cap. In 2008, SB 150 was enacted, finalizing the regulations that we are familiar with today (see “Shipping Rules”), including increasing the gallonage cap to the current 250,000 gallon limit.
Litigation / Legislation	N/A

 

Editors note: This is the first in a series of posts we will have focused on highlighting states’ direct shipping rules and regulations.

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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.

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August 29th, 2008

For eligible wineries, SB 150 has created quite a bit of change to the existing direct shipping law. Since the dawn of Ohio’s direct shipping regulations, in order to be eligible for the “S Permit”, which allows wine manufacturers to ship wine directly to Ohio consumers, the wine manufacturer must produce less than a certain number of gallons per year. As was reported in June, SB 150 increased the maximum production requirement from 150,000 gallons to 250,000 gallons (the maximum production requirement described for S permit holders is also true for wine manufacturer’s that hold a “B-2a permit”, allowing for shipments of wine directly to retailers, a.k.a. self-distribution). SB 150 also lowered the excise tax rate for direct shippers and added a costly label registration requirement, which may further deter wine manufacturers from shipping into Ohio.

First the good news.

There are now only two types of excise taxes that must be paid by B2a and S permit holders, instead of three: taxes levied by a county for sports facilities (e.g. Cuyahoga County tax); and a $.02/gallon tax on wine and sparkling wine, levied by the state of Ohio to encourage Ohio grape industries. These taxes are not due until the end of the year; updated tax forms are not yet available.

Now, the not so good news.

Effective Monday, September 1st, label registration of all wine products sold in Ohio is required from all direct shippers. The registration fee is $50 per new label. Direct shippers should submit registrations for all products shipped into Ohio via the Application for Label Registration with a copy of the TTB COLA. If the direct shipper already sells products through an Ohio distributor, they only need to register additional products that have not already been registered. S permit holders should submit the applications for label registration form prior to the October 1, 2008 permit renewal deadline. B-2a permit holders should submit applications for label registration as soon as possible, as this requirement goes into effect September 1st, 2008.

As of September 1st, S permit holders must also register as “S-5″ wine suppliers. This is a new requirement, however if the S permit holder also ships to Ohio distributors, this registration will have already taken place. For those that have not already registered as a wine supplier in Ohio, the initial processing fee for this registration is $100. In addition to the processing fee, the Supplier Registration costs $300, however the $300 fee is waived for wineries that only hold an S permit and do not have a distributor relationship in Ohio. The Supplier Registration form requires notarization.

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July 1st, 2008

Just a quick reminder of the legislative changes that take effect today, July 1st, 2008.

• Georgia’s new permit system takes effect. All wineries can now apply for a permit, regardless of distributor representation. Click here to see how to apply for a direct shipping permit.
• Ohio is increasing their capacity cap, making it possible for wineries that produce under 250,000 gallons annually to apply for a direct shipping permit.
• Washington is implementing a destination-based sales tax for all in-state entities.

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June 23rd, 2008

On June 2nd, Governor Strickland signed an emergency measure that upped the capacity cap from 150,000 gallons to 250,000 gallons. The measure goes into effect on July 1, 2008 and amends Section 4301.10(A)(8)(c) of the Ohio Revised Code.

The 100,000 gallon increase results in benefits for wineries and consumers alike. Now wineries producing between 150,000 and 250,000 gallons annually will be able to get a direct shipper’s permit and have access to the state which, in turn, provides Ohio residents with a wider selection of wines from which to choose. However, the cap is still in place, and until Ohio joins the ranks of states which have no capacity caps, both wineries and consumers will suffer.

Wineries that produce between 150,000 gallons and 250,000 must apply for the B-2a and/or S permits with new application forms, however, as of June 23, 2008 Ohio has not yet updated their permit applications to reflect the increased capacity cap. To obtain general information on obtaining a B-2a and/or S permit, visit the Ohio Division of Liquor, and click on “Direct Shipping Information”. To check for updated applications, click on “Agency Operations Section (Liquor Agencies, Spirituous Liquor)”.

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