June 30, 2008 | Matthew Mann
About this time of year I like to raise my head up out of the detail of direct shipping compliance and survey the landscape. At the beginning of the year I anticipated many developments would occur to further brighten the future of direct shipment of wine within the United States. Some developments happened, others did not. Overall its been a positive first half of 2008.
Illinois, and soon Wisconsin, joined the ranks of permit states. Georgia eased restrictions on permits and increased the customer aggregate volume to 12 cases per year. Attempts to end reciprocity in both New Mexico and Iowa failed. A restrictive bill in Florida failed as well. Its easy to argue that lack of legislative action can be a good thing when you are looking at a bad law. The net result is that Florida remains open to direct shipping until the legislature comes up with a solution. Since it has one of the highest per capita wine consumption rates, keeping Florida open for direct shipping is definitely a plus.
In the courts, the highly anticipated Costco decision was handed down by the 9th Circuit Court of Appeals, overturning the district court’s decision that Washington state’s regulatory powers were invalid under federal anti-trust laws. In Texas, the Siesta Village Market decision set an interesting precedent when the federal district court opened direct shipment of wine to consumers by out-of-state retailers. While the decision included an extremely limiting restriction that the retailer must purchase the wine from a Texas wholesaler, the important aspect is that the Granholm rationale applies to retailers. This decision will no doubt be used as ammunition in attempts to open other states to retailer direct shipments to consumers. Finally, an ongoing case is the Family Winemakers suit in Massachusetts to remove the 30,000 gallon production cap for wineries seeking a permit to ship to Massachusetts consumers. A motion for summary judgment was recently filed by FWC so a decision could come soon.
Here is a list of developments in key states since the beginning of the year:
Florida: Open to direct shipping due to a 2005 court injunction on FL authorities from enforcing exisiting statutes. The legislature has continued to fail to pass a new direct shipping statute in 2008 and the DPBR did not promulgate new regulations. As a result, FL remains a legal state for winery shipments.
Illinois: As of June 1, 2008 dropped reciprocity and joined the ranks of permit states. Wineries can ship up to 12 cases of wine per year to Illinois consumers. The cost of the permit is $150 for wineries producing less than 150,000 gallons annually. It also permits direct distribution rights for wineries producing less than 25,000 gallons per year.
Washington: Beginning July 1, 2008, requires “destination-based” payment of sales tax, meaning the local tax must be paid based on where the wine is shipped to rather than where the shipment originated. While this will not impact non-Washington wineries who must already pay the tax on a destination basis, it will affect Washington wineries shipping to Washington consumers.
Ohio: Effective July 1, 2008, raised the production cap for wineries eligible for a Direct Shipper License from 150,000 gallons to 250,000.
Oregon: Reciprocity repealed effective 1/1/2008. Permit required for wineries and retailers allowing shipment of up to 2 cases per month per consumer. The permit costs $50 and a $1,000 bond is required. A separate permit also creates a direct distribution right for wineries to Oregon retailers with endorsements from the OLCC.
Wisconsin: Effective October 1, 2008, Wisconsin will drop reciprocity and join the list of permit states. The permit fee is $100 and allows the permitted winery to ship up to 108 liters to a Wisconsin consumer per year. Sales and excise tax reports and payments must be filed quarterly.
Iowa: No significant regulatory changes in 2008. Attempts to drop reciprocity in favor of a permit system failed in the legislature.
New Mexico: No significant regulatory changes in 2008. Attempts to drop reciprocity in favor of a permit system failed in the legislature.
Arizona: No significant regulatory changes in 2008 however an administrative interpretation that a visitor to a winery may pre-order up to volume limit of 2 cases annually, including wine club membership. Still, a new visit is required each year.
Georgia: Effective July 1, 2008, Georgia has changed some key elements of the rules for direct shipments. A direct shipper applicant may have a relationship with a Georgia distributor. Also, the per person customer aggregate volume limit has been increased to 12 cases per year. A permit holder must now collect and remit GA sales tax, excise tax and comply with reporting requirements.
While this is not an exhaustive list, it provides a look a changes in key states in a constantly changing landscape. Part of my job is to monitor those changes to ensure that the REthink Compliance web tool is always up to date. You can find all of the state shipping laws at www.rethinkcompliance.com. When the rules change, REthink Compliance is your key resource to view those changes to help you stay compliant.