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August 19th, 2008
When we make a post here on the ShipCompliant blog, we take the time to really understand an issue, research the facts involved, and make a substantive post that adds value to the issue that we are discussing. However, the ShipCompliant research team hears news and information from many different sources every day that may not necessarily end up as the subject of a post on this blog. Because of this, we recently started posting updates on Twitter to give you a heads up about articles or blog posts that we think are interesting in the world of wine compliance.
If you’re interested in learning more about wine compliance, please follow winecompliance on twitter! If you don’t yet have an account on twitter, we also added a sidebar widget that lists the five most recent updates on the bottom right of this page ->
7th Circuit Reverses Indiana Face to Face Ban
August 8th, 2008
The 7th Circuit Court of Appeals made an important decision yesterday regarding face-to-face transactions when shipping wine directly to Indiana consumers. After Indiana initially passed its direct shipping laws to comply with Granholm, the face-to-face requirement was successfully challenged in August of 2007. However, yesterday’s decision will eventually reverse the face-to-face clause.
None of the plaintiffs contends that Indiana’s law has led him to buy more wine from Indiana and less from other states. The law simply shifts sales from smaller wineries (in all states, including Indiana) to larger wineries (all of which are located outside Indiana). The Indiana Winegrowers Guild has filed a brief as amicus curiae opposing the face-to-face clause, which the Guild maintains has made it unduly difficult for its members to ship their wine direct to consumers. But if what the Guild says is
true, then the statute—although bad economically for Indiana’s wineries—must be sustained against a challenge under the commerce clause. Favoritism for large wineries over small wineries does not pose a constitutional problem, and the fact that all Indiana wineries are small does more to show that this law’s disparate impact cuts against in-state product than to show that Indiana has fenced out wine from other jurisdictions.The judgment of the district court with respect to the wholesale clause is affirmed, and with respect to the face-to-face clause is reversed. The case is remanded for the entry of a judgment consistent with this opinion.
We expect to receive clarification from the lower court or from the Indiana ABC on how current and future permit holders can comply with the existing statutes. We’ll update you here as we receive more information.
Google, WITS, and PCI Compliance
July 6th, 2008
There’s a very interesting article from the New York Times yesterday that analyzes the not so subtle addition of a new link on google.com. You can now see a tiny link on the word “Privacy” at the bottom of the Google homepage.
With that one word, the Web search giant heads off the growing controversy over whether its previous practice ran afoul of a California law, the California Online Privacy Protection Act of 2003, which requires the operator of a commercial Web site that collects personal information to link to its privacy policy from its home page.
Data security and privacy are issues that are too often overlooked in the wine industry. I can’t tell you how many times I’ve seen clear-text credit card numbers (with expiration dates), passwords (with usernames), and dates of birth in emails, spreadsheets, and faxes. Orders are very commonly taken over the web, but then transferred non-securely to a point of sale system or order management system for credit card processing. Privacy policies are more common now, but they are sometimes missing or insufficient in this industry. Age verification for shipping orders is a relatively new requirement on the books in three different states (Michigan, Ohio, and Georgia), and wineries and wine retailers are trying to figure out how to comply with the laws while still maintaining the privacy of their customers.
On July 15th, at the 4th annual Wine Industry Technology Symposium (WITS), I will moderate a session that will cover the topics of data security, privacy, and PCI compliance. The goal of the panel will be to familiarize you with these subjects, discuss the risks, and provide tips and best practices on compliance.
As a sponsor of the 2008 WITS, ShipCompliant would like to offer you a 10% discount off the initial registration. Keep in mind, you can also receive $50 off each additional registration thereafter. Click here to register and receive your 10% off: Preferred WITS Sign-Up
View a copy of the event agenda here:
Half-Year Hullabaloo: New Laws Take Effect in Three States Today
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.
TTB Expo 2008
June 17th, 2008
The ShipCompliant research team is attending the first annual TTB Expo at the Northern Kentucky Convention Center, just outside of Cincinnati, today and tomorrow. The turnout here is quite impressive. In the opening remarks, the TTB team said their original goal was to get about 300 attendees from across the country. They had over 650 pre-register, and it seems like the actual attendance today is more like 1,000.
The turnout from the wine industry is equally impressive. We’ve run into a number of friends and partners in the industry from across the country today.
John J. Manfreda, Administrator of the Alcohol and Tobacco Tax and Trade Bureau (TTB), gave an excellent keynote address this morning, stressing an open dialog between the TTB and key industry stakeholders. They seem genuinely committed to listening to the industry to improve the ease of compliance with TTB regulations. If you have any questions or topics that you would like to get answers to while we are here, please feel free to leave a comment on this post or to drop us a private email at blog (at) shipcompliant (dot) com.
Florida escapes capacity cap at the wire
May 4th, 2008
It came down to the wire, but the always heated battle in Florida ended with the legislative session closing on Friday with no bills making it out of the state congress. Multiple bills were considered for wine direct shipping, most of which included a “capacity cap” on annual production for wine shippers. The major winery associations opposed all bills that included a capacity cap, and were therefore mostly pleased when the final bell rang without the passage of a restrictive bill. This was a truly classic battle between winery associations and the powerful wine wholesaler lobby.
Lacking legislation that would have created a permit system, the Florida Department of Business and Professional Regulation (DBPR) will likely maintain the status quo, meaning that wineries can ship to Florida without a permit as long as they remit excise taxes and do not ship to dry counties.
The scene at the Direct to Consumer Symposium in Napa on Friday was very interesting. Many attendees were listening to the “state of the states” update on direct shipping legislation, while we simultaneously received updates on the status of the session in Florida. Much of the two day event covered the subject of capacity caps, which have become an extremely hot topic of late. The Family Winemakers of California are currently making their case against the State of Massachusetts that production caps are unconstitutional. The action heats up again at the end of July.
WSWA on Wine Shippers: “Flaunting their disdain”
March 9th, 2008
Just over a week ago, on the same day that the Specialty Wine Retailers Association held their first annual symposium, the Wine & Spirits Wholesalers of America issued a press release. This in itself was not remarkable - the WSWA has an active PR effort working to ensure their views are presented to the mainstream media and impact their lobbying efforts. However, this press release requires some attention. WSWA President and CEO Craig Wolf penned a letter that was sent out to regulators in all 50 states, calling on the state alcoholic beverage boards to step up their enforcement of alcohol shipping laws. Below are a few choice excerpts from the letter.
I write to call your attention to a serious and ongoing breach of state alcohol control laws. While the breach is alarming enough, almost as troubling is the brazen disregard the perpetrators continue to show for the rule of law and those appointed to enforce it.
I refer to the illegal transportation of alcohol via common carrier across state lines and into your jurisdiction. These shipments fall outside of the controlled distribution system mandated by state law. As you are well aware, the sidestepping of state-controlled alcohol distribution channels causes a host of negative effects—the inability to collect taxes, the absence of a face-to-face transaction that addresses myriad regulatory aims, and the very real possibility of introducing tainted or counterfeit product into your marketplace, to name but a few.
a growing number of interstate purveyors of beverage alcohol are flaunting their disdain for laws designed to prevent underage access and ensure accountability. They appear both utterly remorseless and resolute in their intention to keep breaking those laws, with little fear of retribution.
I have little doubt that as a respected enforcement agent of your state’s codes and statutes, you will bring your full attention to this rampant problem and help restore the rule of law to a highly sensitive area of commerce. If you have any further questions concerning any of the matters I have raised, please do not hesitate to contact me directly.
I was happy to be a part of the first SWRA symposium. Dean Kenneth Starr, the keynote speaker, presented a very positive outlook for wine retailers and their battles on the wine shipping litigation and legislation fronts. Tom Wark, Executive Director of the SWRA, began the day with the news of this press release and issued a call to retailers to join him in rising up to this challenge from the WSWA.
The first step towards success in reaching the goal of gaining access to more states for the direct shipment of wine is to simply demonstrate compliance with the laws of the states. We have been working with wineries for years, helping them comply with all of the laws of the states, so I know that they are up for the challenge. And I know wine retailers are up for this challenge as well, because I heard it at the symposium and could see that they are coming together effectively, through the hard work of the SWRA, to fight this battle as a group.
A call to action in Maryland
February 16th, 2008
Maryland is currently one of six states, including Utah, Arkansas, Mississippi, Alabama, and Pennsylvania, where all direct shipping is prohibited for both offsite and onsite sales. In fact, shipping wine into Maryland today can result in a felony.
But, that could all change soon. House Bill 1260 and its companion, Senate Bill 616, would establish a system where permitted wineries and wine retailers could ship directly to Maryland residents.
The bills are endorsed by Maryland consumers, Maryland wineries, out-of-state wineries, and out-of-state retailers. But, these groups need help and are calling for action because the wholesaler lobby will fight the bills fiercely. If you are interesting in supporting consumer choice in Maryland, you can get involved by following one or more of the steps below:
1) Visit Free the Grapes!, click on the link for Maryland consumers, and follow the instructions in the Action Alert
2) Share this post with all of the consumers that you know in Maryland
3) A hearing has been scheduled for HB 1260. The House Economic Matters Committee (House Office Building, Room 231) will begin the hearing on Monday, February 18, 2008 at 1pm. If you are able, or know anyone that is able, attend the hearing on Monday and voice your support.
(1) ENSURE THAT ALL CONTAINERS OF WINE SHIPPED DIRECTLY TO A RESIDENT IN THE STATE ARE CONSPICUOUSLY LABELED WITH THE WORDS “CONTAINS ALCOHOL; SIGNATURE OF PERSON AT LEAST AGE 21 YEARS OLD REQUIRED FOR DELIVERY”;
(2) REPORT TO THE OFFICE OF THE COMPTROLLER ANNUALLY THE TOTAL OF WINE, BY TYPE, SHIPPED IN THE STATE THE PRECEDING CALENDAR YEAR;
(3) PAY ANNUALLY TO THE OFFICE OF THE COMPTROLLER ALL SALES TAXES AND EXCISE TAXES DUE ON SALES TO RESIDENTS OF THE STATE IN THE PRECEDING CALENDAR YEAR, THE AMOUNT OF THE TAXES TO BE CALCULATED AS IF THE SALE WERE MADE AT THE DELIVERY LOCATION;
(4) ALLOW THE OFFICE OF THE COMPTROLLER TO PERFORM AN AUDIT OF THE DIRECT WINE SHIPPER’S RECORDS ON REQUEST; AND
(5) CONSENT TO THE JURISDICTION OF THE OFFICE OF THE COMPTROLLER OR OTHER STATE UNIT AND THE STATE COURTS CONCERNING ENFORCEMENT OF THIS SECTION AND ANY RELATED LAW.
(B) A DIRECT WINE SHIPPER MAY NOT:
(1) SHIP MORE THAN 24 9–LITER CASES OF WINE ANNUALLY TO ANY ONE INDIVIDUAL; OR
(2) SHIP WINE TO AN ADDRESS IN AN AREA IN WHICH THE BOARD OF LICENSE COMMISSIONERS FOR THAT AREA MAY NOT ISSUE A LICENSE AUTHORIZING THE SALE OF WINE.
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.
A setback for Costco
January 30th, 2008
A three-judge panel of the United States Court of Appeals for the Ninth Circuit ruled yesterday in the case of Costco Wholesale Corp. v. Hoen. The panel largely reversed the April, 2006 decision that declared much of Washington’s three-tier system to be unconstitutional.
Although the court did agree with Costco that the “post and hold” requirement that forces suppliers to post their prices and hold them unchanged for a period of time is unconstitutional, it disagreed with Costco on two main points. The first upheld the liquor board’s right to ban central warehousing, meaning that distributors must deliver product to each retail store instead of to a central warehouse owned by the retailer. This takes away a key advantage that Costco has in efficient distribution. The court also upheld the liquor board’s right to ban high-volume discounts to different retailers.
Both sides now have the option of appealing the court’s decision within two weeks. They could also appeal to the United States Supreme Court within three months. Costco has expressed disappointment in the decision, but it is not clear whether either side will appeal the ruling.
Retailers win one, lose one in Texas court
January 16th, 2008
Judge Sidney Fitzwater of the U.S. District Court for the Northern District of Texas handed down a very important decision on Monday. In the Siesta Village Market Opinion, Judge Fitzwater said the following
The court concludes that Texas’ ban on the sale and shipment of wine by out-of-state retailers to Texas residents is unconstitutional, but it also holds that the requirement that wine retailers——including out-of-state retailers——first purchase such wine from Texas-licensed wholesalers is constitutional.
We’ll have much more to say about this case in the future, but this opinion is important because, for the first time, Judge Fitzwater said effectively that the principals of Granholm v. Heald should apply not only to wine producers, but also to wine retailers. In other words, just as Texas must treat in-state and out-of-state wineries evenhandedly, it must also treat in-state and out-of-state retailers evenhandedly. The following sentence in the opinion highlights this claim.
Because the retailer-plaintiffs and in-state wine retailers are engaged in the same business——the sale of wine to retail consumers——and seek access to the same market——Texas consumers——they are potential competitors and are therefore similarly situated for purposes of dormant Commerce Clause analysis.
Unfortunately for retailers, the good news also came with a new twist. The decision upheld the constitutionality of the Texas requirement that both in-state and out-of-state retailers that wish to ship to Texas consumers first purchase the wine from a wholesaler licensed in the state of Texas. A California wine retailer, therefore, must first purchase wine from a licensed Texas wholesaler before shipping it to Texas consumers. Tom Wark, Executive Director of the Specialty Wine Retailers Association, had the following to say about the new twist.
Not only is it illegal under California law and other state’s law, but I believe it’s illegal under Texas law, Wark said. We won on everything but there’s that little unfortunate part the judge got wrong. I feel sorry for Lou Bright (who heads the Texas ABC). How is he going to implement this?
Prior to this decision, the parties had agreed to a preliminary injunction that allowed out-of-state retailers to ship wine into Texas without a permit. We’ll now wait for administrative guidance from the Texas ABC. In parallel, the decision will likely be appealed.
Welcome Alex Heckathorn
January 10th, 2008
We’re pleased to introduce our friend Alex Heckathorn as a guest blogger. Alex has been a principal in Compliance Services of America (CSA) for over 10 years. As an attorney for CSA, Alex advises and licenses wineries, brewpubs, importers, wholesalers, distillers and brand builders across the US.
Wine.com stings fellow retailers
January 7th, 2008
Wine.com is apparently not in the holiday spirit. They recently set up a number of sting operations by purchasing wine on their competitors’ sites and notifying state ABCs that illegal shipments were on the way. Vinography has the full scoop. Be sure to read the comments below the post as well to see a pretty heated discussion that includes the CEO of Wine.com. Not surprisingly, the Wine & Spirits Wholesalers of America applauded the move.
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
Reporting Madness
December 26th, 2007
Hello and happy holidays from the ShipCompliant team! We’ve been a little quiet as we prepare to help all of our winery and retailer partners prepare for the big storm of reports that come due in January. Wineries that ship to all of the possible states for direct shipping can owe over 500 reports each year, depending on their filing frequencies with the state ABCs and Departments of Revenue. In January, all but one (for some reason, one of the New York reports is filed on a non-standard quarterly basis that starts on December 1st) of the reports come due. So, all other monthly, quarterly, semi-annual, and annual reports come due in January.
Tasting room, wine club, accounting, and compliance managers all get very busy just after the first of the year preparing their data for the annual reporting rush. A key to making this endeavor a success is to collect and maintain good, clean data from all of your direct to consumer order sources, including eCommerce, wine club, tasting room, and administrative orders. Many of the reports require copies of invoices or schedules of shipments that list order details. Also, remember that the three states that have abbreviations that end in the letter I (HI, MI, and WI) also require dates of birth on their reports.
Here’s to a happy new year and a successful reporting rush!
Wine Shipping Permit System Passes via Badger Budget Bill
October 25th, 2007
Governor Jim Doyle is expected to sign into law Senate Bill 40, the Wisconsin Budget Bill that passed both chambers of the state congress on Tuesday. Within an amendment to the budget bill are provisions that would strike the existing reciprocal statutes for direct shipping and insert language that creates a permit system for wineries from any state. If signed by Governor Doyle (which could happen “within days“), the budget bill would take effect seven days later.
As of today, Wisconsin is one of only three states, including Iowa and New Mexico, that have reciprocity requirements for wine shipping. Oregon and Illinois also recently passed legislation that removes reciprocity and creates permit systems that will take effect on January 1st and June 1st, respectively. Wisconsin currently only has an official reciprocity arrangement with the state of California. Because of this, wineries in other states technically can not ship into Wisconsin.
The new law would establish an annual volume limit:
No individual in this state may receive more than 108 liters of wine annually shipped under authority of the section. Each individual shall be responsible for compliance with this annual limit.
and a tiered permit system:
(a) For a permittee that ships more than 90 liters of wine annually to individuals in this state, $100.
(b) For a permittee that ships not less than 27 liters nor more than 90 liters of wine annually to individuals in this state, $50.
(c) For a permittee that ships less than 27 liters of wine annually to individuals in this state, $10.
See our previous post for background on this bill. Key changes from the original version passed by the Senate make this bill much less onerous.
Is the retail to consumer shipping battle headed to the Supreme Court?
October 15th, 2007
The issue of direct shipments by retailers to consumers has become a very hot topic of late. As of today, retailers can ship to less than half of the number of states to which producing wineries can ship. The Specialty Wine Retailers Association is fighting hard with both legislative efforts and litigation to open more states for retail to consumer shipments. The heated battle in Illinois, where out-of-state retailers recently lost the ability to ship to consumers under HB 429, raised national awareness to this issue.
The fundamental question is whether the decision in Granholm v. Heald that said states must treat in-state and out-of-state wineries evenhandedly should also apply to in-state and out-of-state retailers. R. Corbin Houchins recently made two posts (September 18th and October 5th) that do an excellent job of highlighting the legal questions that come into play when attempting to extend Granholm to retailers. In his October 5th post, Mr. Houchins indicates his disagreement with the reasoning of the recent and important Arnold’s Wines v. Boyle opinion, which upheld discrimination against out-of-state retailers in New York.
There is a very interesting recent article, with substantial background materials for lawyers who do not practice in the subject area, on FindLaw.com titled “The Fight Over State Laws Favoring In-State Alcohol Purveyors: Do Such Laws Violate the Dormant Commerce Clause?” that also examines the important ruling in Arnold’s Wines. This article is definitely worth reading.
The Court has had to examine the intersection between the dormant Commerce Clause idea and the Twenty-First Amendment a number of times. Two years ago, in the seminal case of Granholm v. Heald, the Court appeared to send a message that while the Twenty-First Amendment may indeed empower states in some ways, it does not trump the anti-discrimination, anti-balkanization norm of the Commerce Clause.
The federal district judge in the recent Arnold case in New York properly acknowledged the importance of Granholm. Nevertheless, the judge held that Granholm’s ban on state discrimination against out-of-staters applied only to state laws regulating producers of alcohol, not laws (such as the one at issue in the recent New York case) that regulated wholesalers or retailers.
The New York judge’s interpretation of Granholm is, I believe, in error.
The Arnold’s Wines case will likely impact current (Texas, California) and future (Illinois?) cases in the battle over retail to consumer shipments and could possibly end up in the Supreme Court, where a favorable decision could potentially open the legislative floodgates for retailers as Granholm did for wineries in 2005.
Free the Grapes!: New Illinois Law to Expand Consumer Choice for Winery-to-Consumer Shipments from 5 to 50 States, But Corks Out-of-State Retailers
October 5th, 2007
From Free the Grapes!:
Illinois Governor Rod Blagojevich yesterday signed House Bill 429 which goes into effect June 1, 2008. The new law dramatically expands consumer choice for winery-to-consumer purchases made by Illinois wine consumers. Under the new law, wineries in all 50 states may purchase a permit to ship. Under the old law, wineries in just five states, including Illinois, were allowed to direct ship to Illinois consumers. The trading network of states with so-called ‘reciprocal’ wine shipping arrangements has decreased from a dozen to just five: New Mexico, Wisconsin, Iowa, Oregon (changes to permit law in January 2008) and Illinois (changes to permit law in June 2008).
“The new law is a boon for winery-to-consumer shipments, and long overdue, but unfortunately it corks out-of-state retailers. An amendment, widely supported by Illinois consumers and Free the Grapes! would have allowed out-of-state retailers the same privileges as wineries. It was defeated by powerful Illinois retailers and wholesalers,” said Jeremy Benson, executive director, Free the Grapes!, a winery-consumer grassroots coalition.
Illinois wine shipping bill signed by governor
October 4th, 2007
Governor Blagojevich signed HB 429 yesterday, temporarily ending an extremely tough battle to pass wine shipping legislation in Illinois. The new laws will not take effect until June 1st, 2008. Illinois will move from a reciprocal state to a permit state for winery direct shipping and will also enable limited self distribution for wineries that produce less than 25,000 gallons per year.
HB 429 will allow Illinois retailers to ship to consumers, but will prohibit out of state retailers from doing the same. This will almost certainly be challenged by the Specialty Wine Retailers Association, who will seek evenhanded access to shipping directly to Illinois consumers.
For more information on HB 429, please see our previous post.
Free the Grapes!: Ohio Wine Lovers to be Cut-off October 1
September 27th, 2007
Free the Grapes! just pushed a press release about Ohio that condemns the new laws and calls for consumer action. Below are a few excerpts.
A new law effective Monday, October 1 will prevent Ohio wine lovers from continuing to purchase wines directly from many popular mid-sized wineries, according to Free the Grapes!
During the closing stages of this year’s budget process, an amendment was slipped into the budget bill that prohibits medium and large wineries and wine companies whose total production exceeds 62,500 cases from shipping wine directly to Ohio consumers.
Additionally, the law creates a potentially unworkable system that may scare eligible wineries from shipping any wine to Ohio consumers. The bill sets a 24-case annual shipping limit per “family household,” rather than an annual limit per winery, per individual, as is common in most states.
Click here to read the full press release
