February 2015 Issue of Wines & Vines
 
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With Massachusetts Now Open, 90% of U.S. Consumers Can Buy Wine Direct

 
by Paul Franson
 
 
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DTC Shipping by Wineries as of January 2015.
San Francisco, Calif.—With Massachusetts, the nation’s seventh largest market for wine, open for direct shipping, 90% of the American population located in 42 states can, with some limitations, receive direct shipments of wine from bonded wineries.

ShipCompliant estimates that outside wineries will ship $73 million in wine to The Bay State by 2018, rising to nearly $105 million by 2023.

The only large market remaining is Pennsylvania, home to 4.5% of the U.S. population. Steve J. Gross, vice president-state relations for the Wine Institute, spoke Jan. 15 at the Direct to Consumer Wine Symposium in Concord, Calif., and is optimistic about moving bills to open Pennsylvania, South Dakota and Delaware this spring.

The Wine Institute, Free the Grapes! and other organizations affected also are working on bills to correct problems with laws in Indiana and other states.

Gross’ other priorities this year are to:

• Continue to try and open new states and protect existing states.

• Continue to “improve” existing shipping laws.

• Remove on-site and capacity caps.

• Remove onerous paperwork requirements.

• Simplify reporting and frequency of reports.

• Streamline permitting and registration procedures.

• Work with carriers and states to ensure reporting procedures work.

At present, all direct shipments of wine are prohibited to Alabama, Kentucky, Mississippi, Pennsylvania and Utah, while shipments are only allowed for orders placed in person at wineries to Arkansas, Delaware, Oklahoma, Rhode Island and South Dakota.

Most states still prohibit shipments from retailers and others that don’t have winery licenses, including so-called “virtual” wineries in California that actually have wholesaler’s licenses and buy from bonded wineries. Twenty of the 42 states that allow direct shipping now require licenses for carriers.

Gross admits that DtC laws in some states such as Utah will probably be impossible to change.

He warned, however, that states are paying closer attention to carrier reporting requirements and requiring common carriers to file reports. “More emphasis is being put on reviewing these reports,” he said.

Massachusetts Gov. Deval Patrick signed the state’s budget conference report that includes direct-to-consumer wine shipping language July 11, and the law took effect Jan. 1.

The move brings to a close years of effort by Wine Institute and Free the Grapes! to reconcile the state’s DtC shipping statutes with court rulings on FWC v. Jenkins.

The FWC v. Jenkins case contended the DtC shipping statutes in Massachusetts had capacity-cap provisions that discriminated against “larger wineries.”

The statutes only allowed wineries producing 30,000 gallons of wine or less to obtain a permit to sell wines in Massachusetts—and only in one of three ways: directly to consumers, through wholesalers or through retailers.

Larger wineries had to choose between using a wholesaler and obtaining a permit to direct ship to Massachusetts consumers. They could not use both methods, cutting them off from the important wholesale market.

They also could not sell wines directly to retailers.

All of Massachusetts’ wineries are smaller than 30,000 gallons, and the law effectively blocked most wine produced out of state.

The U.S. District Court in 2008 and the U.S First Circuit Court of Appeals in 2010 declared that these statutes violated the Commerce Clause of the U.S. Constitution.

In addition to accepting direct shipping, the new law eliminated the unworkable “consumer aggregate” quantity limit that had been preventing even smaller wineries from making shipments. Previously, each household could be shipped a quantity limit of 26 cases annually from all sources, which prevented wineries from shipping because they could not determine how much wine a household had received.

The new regulations limit shipments from each winery to 12 cases annually, which is easy for the wineries to monitor.

Under the new provisions of the bill, a winery holding a federal basic permit may obtain a Direct Wine Shipper License shipping permit for an initial fee of $300, with subsequent renewals costing $150 annually. DtC licensees may ship up to 12 cases of wine annually to each adult resident of Massachusetts. Annual reporting is required online using MassTaxConnect, as is payment of excise taxes but not sales tax.

An early concern with the new Massachusetts wine-shipping law was that it required common carriers to license each and every truck that delivers wine. A bill to allow common carriers to obtain a fleet license for the delivery of alcohol is pending in the Massachusetts legislature, but Federal Express has licensed trucks to start delivering wine in Massachusetts starting Feb. 1.

Wine Institute’s long effort to open the state included on-the-ground legislative advocacy driven by Wine Institute northeastern counsel Carol Martel and local lobbyist Bob Rodophele under Steve Gross’ direction. Jeremy Benson and the team at Free the Grapes! orchestrated an effective publicity campaign to support the effort.

Former New England Patriots quarterback Drew Bledsoe, who now owns Doubleback Winery in Washington state, contributed significantly to the effort.

 
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