New States Open to Wine Shipping
Montana and Arkansas join list of states accepting direct-to-consumer shipments from out-of-state wineries
South San Francisco, Calif.—Arkansas and Montana joined the list of states open to direct shipments of wine in 2013, Steve Gross, director of state relations for the San Francisco, Calif.-based Wine Institute, told an audience this morning at the Direct to Consumer Wine Symposium held at the South San Francisco Convention Center.
States opening to DtC wine shipments
Montana law transitioned to allow DtC wine shipments during 2013, Gross said. Registered wineries must get a $50 endorsement to ship wine into the state, and wineries already participating in the three-tier system are considered “registered.”
Montana consumers are allowed to receive 18 cases of wine per year, and wineries must inform the state if they are using a fulfillment house. “If you change fulfillment houses, you must notify the state,” Gross clarified.
A handful of Indian reservations in Montana are considered “dry” areas, and wine shipments to those areas will be blocked once the state provides those ZIP codes. Gross does not expect the exemption will affect many wine sales.
While “Montana opened with a good bill,” Gross said, “Arkansas opened with a bill that is going to be somewhat of a challenge.”
The wine-shipping law in Arkansas became effective Aug. 16, 2013, but the state did not supply Wine Institute with an application for DtC shipping until today. Gross said this application comes with a $25 permit fee and appears to be straightforward, although wineries will be required to get applications notarized.
One provision of the Arkansas law is that residents must be visiting the winery at the time of purchase (they cannot order from home), and wine can only be shipped to residences (no businesses). Excise and sales taxes are also required for shipments to the state.
With Arkansas and Montana now open to DtC wine sales, "The 41 legal states for winery-to-consumer shipping account for 90% of U.S. wine consumption," said Jeremy Benson, executive director of Free the Grapes.
After two years of being closed to fulfillment houses, North Dakota is once again open to DtC wine sales utilizing these third-party providers. “They came around, but they have unique requirements for carriers,” Gross said. Because of this, FedEx is not delivering wine in North Dakota, while UPS is.
An update from Massachusetts
Those who attended the Direct to Consumer Wine Symposium in 2013 might remember Gross asking wineries to contact their customers in Massachusetts and encourage them to engage with state lawmakers. For their part, Gross and Wine Institute partnered with Free the Grapes to enlist the help of former New England Patriots quarterback Drew Bledsoe to get through to consumers and the Massachusetts state legislature. (Bledsoe co-owns Walla Walla, Wash.-based Doubleback Winery with a friend.)
“He became a registered lobbyist for the Wine Institute for a short amount of time,” Gross said, adding. “He was the best spokesman we could have ever asked for. He knew his subject. He was able to convey it quickly and eloquently.”
The publicity gained from Bledsoe’s involvement (he conducted a full day of interviews with various media outlets in Boston, Mass.) equated to $250,000 worth of paid media, according to Gross. A legislative hearing about DtC wine shipment was held Nov. 12, and committee votes will follow this spring in Boston.
No ‘free shipping’
Under California law, wineries are not able to use the phrase “free shipping” in advertising. “You could say ‘shipping costs included,’ but you cannot use the term ‘free’ anywhere in sales material,” Gross said. The same goes for other sales platforms such as flash resellers offering California wines. “Make sure the terminology they’re using is correct,” he said.
Third-party provider debate
Legislators from several states including Nebraska and Maryland took aim at the Amazon wine marketplace during 2013, furthering the perception that the DtC wine debate is about similarly large third-party providers such as UPS and FedEx rather than “the little wine guys,” several hundred of whom came out to hear Gross’s speech. “The opponents of direct shipping have come in and said, ‘Is this (the third-party provider) the sore thumb that we can hammer?’” Gross told the audience.
Gross clarified that no third-party provider can pull a license on behalf of a winery and deliver wine to a state where the winery itself does not have a license. The attack on Amazon provided Wine Institute the opportunity to work with lobbyists from the company and successfully defeat legislation in the states where it was raised. “It was an instance where we were able to lobby with a new company and prevail,” Gross said.
What’s ahead for 2014?
Delaware and South Dakota introduced unsuccessful bills that would open those states up to DtC shipping in 2013. Going into 2014, Gross said he is most encouraged about passing such legislation in South Dakota. “I think we have the best chance,” he said of the state.
The push to privatize or modernize the liquor-control system in Pennsylvania is continuing into 2014. A proposal on the books would allow wineries to obtain a $100 direct-shipping permit to sell wines directly to consumers in the state, and Wine Institute is currently working to lower proposed tax rates (18% flood tax + 6% sales tax) to a more manageable 12% to 15% total tax rate.
Currently New Jersey is the only state where DtC wine shipping is subject to corporate tax. Gross said Wine Institute was waiting until after the divisive gubernatorial election to find legislators on both sides of the aisle to co-sponsor a bill abolishing the corporate tax on wine shipments, but the current political climate in that state may mean 2014 is not an ideal time for such a move. Wineries producing more than 250,000 gallons cannot be permitted for DtC wine sales in New Jersey.
Also in 2014, Wine Institute will continue to push states with monthly compliance requirements to allow annual filings. And the Institute will encourage states to discontinue notarization requirements, as it did successfully in Nebraska.