The West Virginia Alcohol Beverage Control Administration recently posted a “Direct Shippers Q&A” document on their website. Though somewhat helpful, the answers in the document are mostly a copy and paste from the new statutes. A few questions remain about some specifics on the permit process as well as the audit requirements. We will post detailed instructions about the rules as soon as we receive more information.
West Virginia will be the next state to move from the “reciprocal” category to the “limited-direct” category. Senate Bill 712 passed on March 10th and was signed by the Governor on April 4th. The bill states that it will take effect ninety days from passage, which is June 8th, 2007. However, wineries will likely have until at least July 1st to complete the permit process.
The Department of Tax and Revenue Alcohol Beverage Control Administration recently posted the Direct Shippers Licensing Packet. We will follow this post in a few days with much more detail about the steps in the permit process, but we encourage wineries to start the process of applying for the new permit as soon as possible to ensure continuous compliance.
One of the stipulations in the new rules is the prohibition of shipments to dry areas. See this document for a list of the 13 dry or partially dry counties. Some of the dry counties listed contain wet cities and towns that allow direct shipping, and some of the counties listed are wet with the exception of a few dry cities and towns:
County – Dry Areas
Brooke – Only the Town of Bethany
Calhoun – Entire county
Grant – Entire county, except the City of Petersburg
Hampshire – Only the Town of Capon Bridge
Jackson – Entire county, except the Cities of Ripley and Ravenswood
Kanawha – Only the Town of East Bank
Lincoln – Entire county, except Town of Hamlin
Marion – Only the Town of Worthington
Pocahontas – Entire county, except the Town of Durbin and City of Marlington
Roane – Entire county, except the City of Spencer
Uspshur – Entire county, except the City of Buckhannon
Wayne – Only the Towns of Wayne and Fort Gay
Wetzel – Entire county, except the City of New Martinsville and the Town of Hundred
More information to follow early next week…
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.
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.
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.
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.