INFOGRAPHIC: Simplifying a Complex Compliance Environment
At first glance, shipping wine direct to consumers can be a daunting prospect: 51 jurisdictions, 51 sets of rules. Throw in licenses, fees, reports and taxes and a winery manager might be tempted to question the ROI for undertaking a consumer direct strategy. Such thinking would be a mistake, as a deeper look shows the regulatory landscape for direct shipments to consumers is not as frightening as it first appears, especially when set against the tremendous potential benefits of shipping direct to consumer.
The number of states allowing DTC shipments has climbed to 41, representing nearly 90% of U.S. wine consumption, with Massachusetts set to join those states at the beginning of 2015. Per capita consumption has increased 16.6% since 2005 to 13.78 bottles per person by 2012 , while DTC sales have grown 18.6% from January 2011 to January 2014, reaching a total of $1,584 million .
More importantly, accessing these states is becoming easier. While many active DTC states require licenses of some type, not all do. Six jurisdictions (AK, DC, FL, MN, MO, and NC) either have no license requirement or do not charge a fee for the license. The costs for many of the others are not too steep, ranging from $25 - $200 annually in 20 of the remaining 35 states.
The rules of the road to stay compliant are also not as complex as they appear initially. It’s true a few states have some quirky rules. Indiana requires an initial “face-to-face” appearance in the winery tasting room to verify the age of the purchaser before future shipments can be made to that person. For the most part however, the laws are actually more consistent than they are different. Nearly all have a volume limit on the amount a consumer can receive, restrict shipments to adults over 21, require an adult signature upon delivery and a label on the package stating such, and the filing of sales tax and excise tax reports periodically.
As importantly, there are technological tools available to assist wineries in navigating the rules and reporting. WineDirect Compliance provides “real-time” order compliance checks at the ecommerce or POS check-out to verify the order is in compliance with all rules in any particular state before it ships. It will calculate the proper sales tax rate down to the local level for states requiring payment of sales tax. Even the reporting burden is minimized by automated report forms for sales tax, excise tax, and shipment volume reports required by all of the states.
By using a reliable compliance software platform, with 41 DTC states the prospects are many and the costs of entry and ongoing administration of a DTC marketing strategy are not nearly as onerous as one might believe. When held up to the potential ROI of sales direct to consumers at full retail prices with higher margins over cost, a well-constructed DTC strategy utilizing selected state access to maximize consumer market reach is too valuable of a business opportunity to pass up.
i. Wine Institute
ii. Wines & Vines, Wine Industry Metrics, July 2, 2014