Posts from the Oregon Category
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.
Wine Distribution Notes – Release 28
May 21st, 2008
The latest version of Notes on Wine Distribution by R. Corbin Houchins is now available for viewing or downloading. Release 28 highlights changes in the following categories: Age & Identity Verification, Rethinking Reciprocity and State Notes, specifically Arizona, Florida, Georgia, Maine, Ohio, Oregon and Pennsylvania. Headings of sections with substantial changes since the preceding release (published in early April, 2008) are highlighted, so that you can easily find the updated sections.
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.
Oregon – The Next Round is Just Starting
January 10th, 2008
With a new law allowing out-of-state wineries to sell directly to Oregon retailers, effective January 1, Oregon looked like a bright star in the winery self-distribution field. Oregon had chosen to level up, allowing both domestic and out-of-state wineries to sell direct to retailers. It seemed as if free trade in wine had arrived.
But, in a preemptive strike just before the New Year, the Oregon wholesalers decided that the new law was the perfect vehicle to attack central warehousing by Oregon chain retailers.
In an e-mail circulated in late December, the wholesalers told chain retailers operating in Oregon that “the central warehousing of wine by a retailer” was no longer allowed and that a “retail license does not allow the retailer to transport wine or beer from one licensed location to another, even if the two locations are owned by the same entity.”
Retailers, who had for years used Oregon wholesalers to import wine and then have it delivered to the retailer’s central warehouse for the retailer to transport it to their retail locations, found themselves scrambling when wholesalers refused to deliver wine to their warehouses, even before the new law took effect. This was not wine purchased in a direct sale between the out-of-state winery and the retailer, but wines imported by, and purchased from, the Oregon wholesaler, as had been done for years.
The regular readers of the ShipCompliant blog may recall that the issue of central warehousing by Oregon retailers was discussed extensively in a prior blog post titled “An Exchange on Central Warehousing”. While Oregon had no statute prohibiting the practice, the OLCC had enunciated the position that central warehousing was not consistent with its regulations. However, the blog post carefully analyzed the Commission’s position and found it unsupported by law or logic.
For retailers in Oregon, the OLCC’s position was strange because many of the chain retailers had been receiving wine into their central warehouses and delivering to their own stores for YEARS. Some of them had letters from the Commission specifically approving the practice. The Commission took no steps to revoke these prior letters and let the practice continue.
So the wholesalers took it upon themselves to see if they could end retailers’ practice of central warehousing. While not articulated directly, the wholesalers are apparently relying on the provisions of the new wine self-distribution law to claim the practice is now outlawed. First, the new law does require that wine purchased direct from a winery must be received at a premise with a license endorsed to receive direct sales. [Section 2.(5) of HB 2677.]
But does that mean that the wine, during transit, must always stop at a licensed location? Could the wine be stored and transported from an unlicensed location, such as a central warehouse, before coming to the premises with the license with the proper endorsement?
Second, the new law in Section 2b contains provisions relating to who may ship wine under this new permit. Apparently the wholesalers believe that since retailers are not mentioned as one of the licensees who may transport direct sales wine in this section, retailers may no longer transport or ship wine at ANY TIME, even between their own stores, a practice that had been allowed for years. Again, it is not clear that the new law dealing specifically with direct sales by wineries to retailers was designed to limit retailers’ rights to transport or ship their own inventories of wine. Apparently the struggle to define who can ship wine, and under what circumstances is now open for debate.
The OLCC has just convened a rule advisory committee this week to help draft the final regulations to implement the both Wine Direct Shipper and Wine Self-Distribution permits, with formal rulemaking to follow this spring. We can expect round two to be exciting as the wholesalers decided to open it with a quick punch before the bell.
New Oregon rules are live – reminder to get the new permit
January 3rd, 2008
Just a quick reminder that the new permit system took effect in Oregon on January 1st. Even if you previously had a reciprocal shipping permit to ship into Oregon, you now need their new permit to continue direct shipping. For wineries in states that were not considered to be “reciprocal” with Oregon, you can now apply for the new permit. Each permitted winery can ship up to two nine-liter cases per Oregon individual per month. Please see our previous posts below for more information and steps for applying for the direct shipping and self-distribution permits.
Oregon Direct Shipper Permit Applications Available
Indiana and Oregon – starkly different paths to wine shipping laws
Oregon to end reciprocity – permitted retailers and wineries can ship on January 1st
Oregon Direct Shipper Permit Applications Available
November 15th, 2007
On January 1, 2008 the legislation replacing Oregon’s reciprocity law with a permit system for the sale and shipment of wine directly from wineries will become effective. The new law requires wineries have a Direct Shipper Permit, pay an annual license fee of $50 and maintain a bond of at least $1000. Wineries with approved Direct Shipper Permits may ship up to two nine liter cases per month directly to an Oregon resident who is at least 21 years of age, must pay excise taxes and file monthly reports with the Privilege Tax Department. Wineries will be mailed monthly report forms within in 30 days of being issued a permit. The permit application and instructions on how to apply for a bond are currently available on the Wine Institute website.
Wineries may also apply for an Oregon Self-Distribution Permit at this time. Beginning January 1, 2008 Self-Distribution permit holders may ship directly to retailers in OR. In order to obtain the permit applicants must have an Oregon Certificate of Approval, pay a $100 fee and maintain a bond of at least $1000. There are additional reporting and tax requirements. More information about the Self-Distribution application process can be found on the OR Liquor Commission’s website.
Wineries applying for a Direct Shipper Permit and Self-Distribution Permit should keep the application processes separate. For example, an applicant will need to obtain one bond for the Direct Shipper permit and a second bond for the Self-Distribution permit. Should you have any questions please contact Annie Bones in Wine Institute’s State Relations Department at abones@wineinstitute.org.
Annie Bones, Wine Institute
