Limited to On-site Sales, Arkansas Passes Bill to Allow Direct Shipping

On March 21, 2013, House Bill 1749 became Act 483, signifying its passage into law. Once enacted mid-August, the state of Arkansas will be added to the list of states that allow wineries to ship wine directly to consumers — but with many limitations.

Aside from the low cost of the license, the requirements under this new shipping law limit the abilities of licensed out-of-state wineries, arguably more than any other state that currently allows direct-to-consumer wine shipping. These limitations include requiring all shipments to be purchased in person at the winery, and affixing a special, ABC-provided, shipping label to each shipment.

For those wineries interested in navigating these one-of-a-kind requirements, Arkansas consumers will no doubt enjoy the ability to ship home a case of wine after visiting their favorite wineries. No license applications or information are available as of yet. Below is a breakdown of the licensing process, as well as the requirements and restrictions to operate, as stated in the new law:

Restrictions/Requirements (not limited to the following):

  • Consumers must be physically present at the winery when purchasing the wine to be shipped to Arkansas consumers (onsite orders only)
  • Every shipment must be affixed with a shipping label provided by the ABC, costing up to an additional $10 per label
  • Collect and remit sales and excise tax, “as if the sale took place on the premises of a Arkansas Small Farm Winery”
  • Ship only to a private residence – added difficulty, as shipments require an adult signature
  • Customer volume limit of one case per customer, per quarter

Licensing Process

  • Registration with the Arkansas Department of Finance and Administration Alcoholic Beverage Control Division (ABC), including a $25 annual fee.
  • Provide the ABC with a copy of the winery’s home-state license as well as the winery’s TTB Federal Basic Permit

Your DIRECT source of Wine Shipping Information

The ShipCompliant Blog brings you a steady flow of legislative updates, regulatory changes and other important news impacting wine shippers. If you find this information valuable, you won’t want to miss DIRECT 2013, ShipCompliant’s 8th annual Direct Sales and Shipping Seminar taking place June 13, 2013, in Napa, California.

This full-day seminar will feature multiple breakout sessions to discuss, in detail, some of the most important issues to wine direct shippers today, including:

  • Regulatory Roulette: A Discussion of Key Regulatory Issues Impacting Your Business
  • Integrating a Mobile Marketing Strategy into Your Sales Efforts
  • Third-Party Marketing: The Regulatory Landscape You Need to Know
  • Best Practices for Managing your Fulfillment Efforts in the Age of Amazon
  • Shipping Analytics: How Do You Measure Up?
  • ShipCompliant Support Lab: 1-on-1 Training
  • ShipCompliant University (three tracks)
    • Back to Basics: ShipCompliant 101
    • Compliance Made Easy
    • From Sale to Shipment

You’ll also get to hear from best-selling author and keynote speaker, Dr. Joseph Michelli, as he shares his share his extensive, in-depth research into key differentiators that define the success of companies like Starbucks, Zappos, and The Ritz-Carlton Hotel Company. And more importantly, how wineries can incorporate these strategies to create their own “creaveable” brands.

Wine Institute Director of State Relations, Steve Gross, will give a detailed state-by-state overview of recent and upcoming changes affecting wine direct shippers. Pat Kohler, Director of the Washington State Liquor Control Board, and Deputy Director Rick Garza will provide insight on recent changes in Washington state that have industry-wide impacts.

Seating is limited, so register today to confirm your seat at this eighth-annual exciting and informative conference.

Is the Marketplace Fairness Act Fair for Wineries?


In short, yes, for a couple of reasons:

1. Wineries already pay sales tax in most states
2. The vast majority of wineries will likely be exempt from the law

So what is it, exactly?

Senate Bill S. 743, more commonly known as the “Marketplace Fairness Act“, is a pretty simple bill that would give states the ability to require out of state businesses that have “remote sales” in excess of $1 million annually to remit sales taxes. Each state would be able to opt in to the Act, but only after they have simplified their tax structure, either by joining the Streamlined Sales and Use Tax Agreement or to follow the steps outlined in the bill to simplify their sales tax requirements.

Will it pass?

With broad bi-partisan support, S. 743 passed out of the Senate with a vote of 69 to 27. However, a tough battle is expected in the House, and therefore the Marketplace Fairness Act has a long way to go before it is enacted with a signature from President Obama. Amazon.com is supporting the bill (presumably because they would like to move forward with their plans to build warehouses in each state to support same-day shipping), while eBay is one of the main voices in opposition.

What will it mean for wineries?

A lot hinges on the definition of “remote sales”. Keep in mind the fact that state legislation to allow wine shipments typically includes a provision that also requires wineries to register for and pay sales tax. As it stands in the Senate version, and based on our interpretation of the current language, sales by wineries to states where they are already required to pay sales tax would not be counted when considering the $1 million threshold for remote sales.

Based on some quick analysis, there are a few hundred wineries in the US that ship more than $1 million worth of wine to consumers each year. BUT, if you include sales only to those states (Alaska, Colorado, D.C., Florida, Iowa, Kansas, Minnesota, Missouri, New Hampshire, Oregon, and Wyoming) that do not require wineries to pay sales tax, then we estimate that less than 25 wineries would exceed the $1 million cap. In other words, the vast majority of the 7,000+ wineries in the US would be exempt from this law.

Wineries are already accustomed to calculating, collecting, and remitting sales taxes in most states. So, for those wineries that would not be exempt from this law, it would probably not be that big of a deal to add a few more states (initially the states of Iowa, Kansas, Minnesota, and Wyoming) to the list of states to which they would be required to remit sales tax. They already have the technology and processes to do so.

The bill would take effect, at the earliest, on October 1st, 2013. Once effective, the 22 “Streamlined” sales tax states would begin requiring sales tax for remote sellers with over $1 million in sales. After that, each of the remaining 28 states would choose whether to opt in to the Act and start requiring sales tax from remote sellers.

Nebraska Tightens up Existing Direct Shipping Law

LB 230 passed Nebraska’s unicameral legislature and was signed by the Governor on April 24, 2013. The new law will go into effect on September 6, 2013. Nebraska is currently open to direct shipping from wineries and retailers (although there was some debate recently as to whether retailers should qualify under the current law), with easy-to-navigate regulations. The new law introduces several new restrictions that Nebraska direct shippers should be aware of before the new law goes into effect.

Though the bill’s statement of intent indicated that only manufacturers (wineries) would be able to obtain a license, after amendments to the bill, retailers were added back in and will be eligible for the Nebraska direct shipping license. So, at the end of the day (following a confusing set of hearings and deliberations) currently licensed wineries and retailers will both be able to continue to ship to Nebraska consumers, but with added complexity and requirements.

Direct shippers will see several marked changes to rules and licensing processes. Here’s a quick breakdown of these and other requirements in the new law – additional descriptions follow below:


Item Before
Sept. 6
After
September 6
Nexus status Not required In addition to requiring sales tax payments (common for direct shipping law), the potential to trigger additional tax obligations exists
Brand identification Not required Retailers and manufacturers may "only ship the brands of alcoholic liquor identified on the application
Distributor notification Not required Manufacturers (but not retailers) must notify Nebraska distributors carrying the identified brands, of the manufacturer’s intent to apply for a direct shipping license.
Notification of any violations Not required “…the applicant agrees to notify the commission of any violations in the state in which he or she is domiciled and any violations of the direct shipping laws of any other states…”
Non-sellable products Not required Required. Shippers may “…not ship any alcoholic liquor products that the manufacturers or wholesalers licensed in Nebraska have voluntarily agreed not to bring into Nebraska at the request of the commission;”
Excise tax Annual filing Monthly filing
Common carrier approval Not required Required

Under current regulations, it was somewhat unclear whether or not direct shippers were required to register to pay sales taxes, though most direct shippers did. The establishment of nexus under the new law could also mean that, in addition to requiring sales tax registration (common for direct shipping law), there is a potential to trigger additional tax obligations. Brand listings will be required as part of the licensing process, and wineries (but not retailers) must notify their Nebraska distributors carrying the listed brands of the manufacturer’s intent to apply for a direct shipping license. If a Nebraska manufacturer or wholesaler volunteers not to sell certain products within Nebraska’s borders, direct shippers would also not be allowed to sell those products under the new law. Furthermore, direct shipper applicants will have to notify the Nebraska Liquor Control Commission of any violations of direct shipping laws of any other states and any violations in the state in which the shipper is domiciled.

Many of the new laws will require clarification as to how currently licensed direct shippers should proceed in order to remain licensed and compliant – for example, will existing licensees have to notify distributors of their existing direct shipping license on Sept 6, or will this new requirement take effect once their current license expires in April? As we get closer to the September effective date, we will notify our clients and readers of any published guidelines or additional information.

October 1st Brings New Direct Wine Shipping Regulations to Montana

Montana House Bill 402 was signed by Governor Bullock on April 12, 2013 and creates workable direct wine shipping laws in the state. The new law, effective on October 1, 2013, will replace the flawed consumer licensing system presently in place for wine shipping in Montana.

Current regulations require that out-of-state wineries ship only to residents who hold a “Connoisseur’s License“; proof of the consumer license and a special sticker to affix to the shipping box must be provided to the winery before the shipment can be made. The new regulations will require out-of-state wineries to:

  • Register as a Foreign Winery or Importer. Many wineries already hold this license as it allows a winery to sell to a Montana distributor (cost of license is $0 to $400 annually, depending on volume sold in Montana; no-cost product registrations are required as part of becoming licensed)
  • Apply for a $50 annual direct shipping endorsement
  • Supply to Montana the name and address of any utilized fulfillment warehouses
  • Submit written acknowledgement of contracting only with common carriers that agree to deliver wine only to individuals who are of age and who provide a signature upon delivery
  • Ship no more than 18 cases of wine annually to an individual consumer (up from 12 cases/year)
  • Submit excise tax and shipment reports by the 15th of every month

While Montana’s regulations for direct wine shipments are changing, the connoisseur’s licensing system remains in place for shipments of beer from out-of-state breweries. UPS and FedEx, however, do not accept shipments of beer or spirits for delivery to consumers.

We will keep you informed of any updates from the Montana Liquor Control Division regarding the endorsement process once the details become available.

The 2013 Direct Shipping Report: How Will It Change Your Strategy?


Every year, ShipCompliant teams with Wines & Vines to report on the state of the direct-to-consumer wine market. The 2013 Direct Shipping Report is now available! If you are feeling antsy, feel free to click here to download the report! If you’ve got a few minutes, we’ve provided some summary highlights below.

The model, built to project the totality of winery direct-to-consumer shipments, provides a vivid picture of this important distribution channel.The report is based on millions of anonymized transactions in our ShipCompliant Direct software that ultimately led to direct shipments from January 2012 through December 2012. Using the comprehensive Wines & Vines database of all 7,400+ wineries across the United States, these transactions are the basis to project total shipments from all United States wineries using multiple stratifications including location of winery, annual production of winery and destination of shipment.

1. Direct shipping is growing (in volume and value)
According to our data, American wineries have been shipping more wine every year. Direct-to-consumer orders reached a new high of over 3.1 million cases in 2012, representing a 7.7% increase from 2011, and a 17.7% increase from 2010. That equates to over 72 bottles sold per minute, or 1.2 bottles sold every second! It’s not just the volume that’s growing; the average price of a bottle of directly-shipped wine has also risen over 5% in the past two years, which leads us to record sales of over $1.465 billion in 2012.

These figures show that the direct shipping market is quickly becoming a more important (and more profitable) distribution channel for wineries than in years past.

Expand your direct shipping footprint; order licenses for new states here!

2. Direct shipping is outpacing other sales channels

If we compare the annual sales of the direct shipping market to the U.S. Export figures released in February by the Wine Institute, we find that the 2012 value of domestic direct shipping ($1.465 Billion) exceeded the value of wines exported from the United States to Europe, Asia and the rest of the world. In addition, the average price of a direct shipped wine is 26% more than the average bottle of wine exported from the the U.S.

3. More reliance on the fall and winter seasons

The fall and winter rush at wineries is showing no signs of slowing down. Our data from 2012 shows a remarkable skew towards the last four months of the year, and is approaching a level of dependence that usually is only seen by the inflatable Santa Claus lawn ornament industry.

Our research has also shown that the last quarter of the year saw 37% of total sales in 2012, and September sales of direct wine jumped 26% year over year. This should be a call to action for your business– if you aren’t focusing the majority of your energy into fall and holiday season, you should be.

This is just a sample of our findings. We’ll be analyzing additional elements of the report in the coming days. In the meantime, check out the entire report by clicking the link below.

Click here to download the 2013 Direct Shipping Report today!