Direct Shipping Laws Outlined by State

Expert from Wine Institute clarifies new regulations about consumer shipments

by Paul Franson
state direct shipping laws
This map provided by the Wine Institute shows the disparity of uniform laws for direct-to-consumer wine shipments.
Napa, Calif.—Speaking at ShipCompliant’s seventh annual Direct Sales Seminar, Wine Institute director of state relations Steve Gross provided an update about recent state actions that affect shipping wine to consumers.

The subject's importance to wineries is underscored by the Alcohol, Tobacco Tax and Trade Bureau's insistance that compliance with state laws and regulations is a condition of maintaining a Federal Basic Permit.

The information applies to wineries with full licenses, in California Type 02. It generally doesn’t apply to retailers or “virtual wineries” that hold only Type 17 and 20 licenses. They don’t hold Federal Basic Permits as wineries. Other states have similar “custom crush” or “negoçiant” licensees that are also considered retailers.

Retailers can ship to fewer states than wineries. With restrictions, their legal states currently include AK, CA*, DC, ID*, LA, MO*, ND, NE, NH, NM*, NV, OR, VA, WV, WY (* states with reciprocal privilege only.)

A few states are still covered by the Federal On-Site Provision implemented after the Sept. 11, 2001, terrorist attacks:
Delaware: No limit (consumer pays excise taxes)
Oklahoma: Up to 1 liter
South Dakota: Up to 1 gallon
• Removed since 2010: Maine, Montana, New Jersey and Tennessee

To avoid problems, Gross recommends on-site sales procedures that include keeping proof of face-to-face transactions, a copy of the customer’s license, original signature and other required documentation as well as ensuring it is a one-time-only sale. This provision does not allow buyers to join a wine club.

What happened in 2011?
After a court ruling opened the state in August 2005, Florida began allowing unlimited shipping to consumers, but wineries must file monthly shipment reports to the Florida Department of Business and Professional Regulation along with monthly excise taxes. Consumers must file sales/use tax. Five dry counties in the state prohibit shipments. A legislative effort to restrict shipments was defeated again in 2011.

Indiana became a permit state in 2006, with an aggregate limit of 24 cases per household per year and a maximum per-winery total of 3,000 cases shipped to in-state consumers. Despite some changes, Indiana still excludes wineries that have had an Indiana wholesaler in the 120 days prior to application. A $100 permit is required along with sales and excise taxes, plus a $1,000 bond is required for corporations and LLCs. An initial on-site visit is required; (this stipulation was originally struck down by courts, but reinstated following appeal.)

The state of Indiana has clarified its aggregate rules to state that wineries must obtain “representation” from the consumer at time of purchase. A study issued in the fall supported removal of on-site requirement but ignored the wholesaler exclusion.

In 2008 Louisiana clarified that wineries with a wholesaler may still get a permit and ship unlisted wines directly to off-site consumers. For consumers visiting the tasting room, all labels may be shipped provided the winery has a $150 annual permit. The limit is 12 cases per consumer per year (up from four.) The state has an application on its website for sales tax, and as of Jan. 1 it began requiring quarterly reports and taxes.

In-state retailers are included in the law, but they must get a $1,500 permit.

Maryland: Wineries may ship up to 18 cases annually to a single Maryland delivery address. Permits cost $200. A $1,000 bond is required, but it may be waived after three years of timely tax filing. Quarterly reporting, sales tax and excise payments are required, and shippers must use approved carriers.

New Jersey
now has an annual fee of $938 and a 250,000-gallon maximum capacity cap for wineries. They can ship 12 cases per consumer per year. Sales and excise taxes are required and must be maintained for 3 years. Wineries can also operate 16 salesrooms with a permit of $250 per salesroom. They can also self-distribute to New Jersey retailers using their own vehicles with scaled fees of $100 to $1,000 based on production.

The governor signed New Mexico’s permit bill. It requires a $50 annual permit, and wineries can ship two cases per month per consumer but must pay the annual excise tax and a monthly gross receipts (sales) tax. Retailers are included but remain under the old reciprocity statute under the new law.

New York
updated its laws to permit 36 cases annually from a winery to a consumer (reciprocity requirement), but it has a complex permit system with three types of permits (sales tax, direct shipper’s permit and “distributors” permit) and two separate tax filings (quarterly sales tax and monthly or annual excise tax. The semi-annual shipment report was dropped.) Wineries must maintain shipment records for three years. All filings must be done electronically. Efforts to keep reciprocity recognition for out-of-state wineries were successful.

Tennessee now has a $300 nonrefundable one-time fee; renewal costs $150. Wineries can ship up to three cases per winery per consumer per year. Annual sales and excise tax collection and reports must be filed. Legislation making the entire state “wet” for wine shipments was signed by the governor and is now in effect.

What’s happening in 2012?
now allows wineries to ship 5 gallons per consumer every two months, replacing the 60-day rolling rule. The initial permit fee rose to $315 from $250, with a $100 one -time application fee for wineries of all sizes. Label registration is $200 per label and is good for 3 years. Surety bond is required: $500 for up to 100,000 gallons; $2,000 for more than 100,000 gallons. Wineries pay excise tax monthly and 6% sales tax monthly on all consumer shipments. Online advertisements and emails must include liquor permit number.

Maine allows wineries to ship 12 cases annually per consumer after obtaining the initial $200 license, plus $100 on-time application fee and $50 renewal.

Sales and excise taxes must be paid annually starting in fall 2012. (Previously they were paid quarterly.) This program is being audited from the outset.

New Jersey:
Registration triggers income tax of $500 to $2,000 for corporations and partnership fees of $150 per partner. Maine requires a copy of every license held by the winery in the United States.

Pending bills: Massachusetts has passed H1029, and Pennsylvania has amended and passed legislation.

What’s next for state DTC?
The Wine Institute and its partners will continue to try and open new states and protect existing states, deal with third-party and fulfillment issues and continue to “improve” existing shipping laws to remove on-site and capacity caps, remove onerous paperwork requirements, simplify reporting and frequency of reports and streamline permitting and registration procedures. It will also work with carriers and states to insure reporting procedures work.

Gross mentioned that some potential issues could have a big impact, including the privatization occurring in some states, actions of common carriers, packaging issues like bottle deposit laws and solid waste mitigation fees.

The effort by wholesalers to gut direct shipping seems to have ended for now, but future litigation could overturn the Granholm decision that opened direct shipping to many states.

Gross noted the states that don’t allow any direct-to-consumer shipments (other than three-tier) as of June 14:
• Alabama
• Arkansas
• Kentucky (no carriers)
• Massachusetts (no carriers)
• Mississippi
• Montana (consumer permit only, no FedEx)
• Pennsylvania
• Utah

Posted on 06.28.2012 - 11:57:51 PST
I'm not sure about the other prohibited states but I do know that you can ship wine into Alabama by filling out a form from the state and shipping the wine to a state controlled store. The employees at the store will confirm that the order is accurate and call the recipient and notify them that the order is ready to pick up. When you pick up the order there is a fee of about 50 cents a liter +/- and it is all legal. My son lived in Huntsville and we did this on a regular basis.