Strides in Compliance: Q&A with Matt Mann, Part I
One of the great challenges that comes with selling wine direct to the consumer is the maze of compliance laws that must be adhered to when shipping wine out of state. There has been much progress in the number of states that allow direct-to-consumer shipping. Recently, we spoke with our Director of Compliance/Legal Counsel, Matt Mann about changes in the wine shipping laws.
What are some of the most significant changes that have occurred in D2C compliance in the last 10 years?
The first and foremost is just the sheer number of states that make D2C shipping available now. There was a time where it was just a handful of states, certainly before Granholm v. Heald. Back in those days, wine shipping was based on reciprocity between states. You were looking at 10 or 12 states at that point. Then the Granholm case, which was a constitutional law case decided by the Supreme Court in 2005, opened up the playing field for us. Many states started writing laws that permitted out-of-state wineries to ship to that state’s consumers. From there, it's moved from a handful of states to 44 states in 2016 when South Dakota comes on board.
That's the biggest change. The other change is the automation of the reporting. That really falls on the state side of things. Regulatory agencies are moving more toward e-filing and e-payments systems. I think once people get used to these platforms, it will make the reporting aspect easier.
What is the most important development in the last 12 months?
The most tangible development is the opening of Massachusetts. It's important because it's a high per-capita consumption state, so it's a very desirable state for wineries to ship to from a demographic standpoint. And it's important for another reason too: they had previously put up barriers that on their face were fair but in actual practice discriminated against out-of-state wineries. Interestingly, a lot of consumer pressure was placed on the state legislature to make D2C shipping legal. That's significant because it shows a rise in consumer awareness of the issue.
What other states are looking promising right now in terms of changing their laws?
Certainly, the biggest state with the most realistic chance of change is Pennsylvania. It's a state with a large population and favorable demographics. There is a strong movement to radically overhaul and even privatize the alcohol distribution system, which is currently controlled by the state. Part and parcel, that change would allow D2C sales in the state.
Another likely candidate and one that's surprising is Utah. There is a pretty strong movement in Utah to change the liquor laws, and it's gotten some traction with the state legislature. Now, there's bound to be some pushback by forces within the state, but there's a strong consumer movement and a realistic possibility that the law could change within the next couple years.