No matter how a winery files them, direct-shipping reports have become a way of life for those who count on direct-to-consumer sales to aid the bottom line. Since the U.S. Supreme Court’s Granholm vs. Heald decision in 2005, many states have opened to direct-to-consumer (DtC) shipping, and in turn they have required permits, reports and taxes (sometimes both excise and sales tax) due on a regular basis.

More automation (in the form of software or a third-party service that can assist/do filings for wineries) saves time but comes with additional costs. Wineries can file everything themselves, but can they do it without tying up too much of their winery personnel’s time? Ultimately, winery owners want to be able to serve their consumers in the best possible way while staying compliant within the guidelines of the various states’ laws.

First of all, you have to really look at how much of the winery’s business will be (or already is) direct to consumer (as well as which states current customers reside in and which states the winery wants to target). Then, the winery should look at costs. Do the costs of licensing, software, etc., make sense when looking at the business you would generate from being able to ship to any state? Keep in mind, it’s not gross revenue, it is the net that should determine your business decision.

Also, keep in mind that the winery will have to file a state’s sales tax reports and fees as well as excise tax reports and fees. Many states require a winery to be licensed to ship to wholesalers before they will grant a DtC permit. Some states have production limits to qualify for a DtC permit. In addition, many states require you to file “zero” reports (in other words, if you do not have sales for that reporting period, the winery may still have to file a report, even with all zeros) and possibly register labels. If, after looking at all of this, it makes sense to go full steam ahead and apply for a DtC permit in a state, a good resource for contact information and forms is the Wine Institute website (wineinstitute.org; from the home page, click on the “state shipping laws” box on the left side of the page).

So, now your winery is on the path to obtaining a DtC permit in the state(s) of your choosing. A winery can do the process on its own or use a winery compliance company. For some wineries, using a compliance services company is another tool in their arsenal of compliance solutions. “We chose to outsource our compliance reporting and licensing, knowing that this company has the resources to keep up with the constantly changing regulations in the various states, and keeping us on track with proper and timely filings,” said Mary Pat Sullivan with Chappellet Winery in
St. Helena, Calif.

The big advantage is that many of these firms have been doing this for a long time and are familiar with the most efficient ways to get the job done. Of course, this also comes at a price, but it is usually a fair price, so the winery has to weigh the best use of its own people and their time vs. the compliance company’s fees.

Choosing a compliance company
Here are three pointers for choosing a compliance company:

1) Schedule an appointment with a couple of these companies and talk with them. You need to find the best fit for the needs of your winery, just like you need a label printer that can best handle your wine label needs and a grower that best fits your grape needs. A long-term relationship that helps the winery grow
its business is beneficial for both parties.

2) Know that any relationship a winery has with a compliance company is dependent on the winery providing accurate and timely information about shipments, etc., to the compliance company. To put it another way, they won’t know by osmosis what you are shipping.

3) Find out how the compliance company does the reporting (if they file paper reports and use specific software) as well as what fees are associated with getting the permits and filing the reports.

If you want to be a little more hands on and do your winery’s compliance reporting in-house, but like the idea of software to help guide the way, that is an option as well. Many companies find that with the large number of labels and states to track, they want to have their own staff do the reporting and licensing, to make sure they feel the pulse of what is needed. Joan Maxwell, chief financial officer at Paul Hobbs Winery and Paul Hobbs Imports in Sebastopol, Calif., says that due to the complexity and volume at Hobbs Winery (18,000 cases annually), it “makes more sense to own the whole process, so we can have the best control of all the steps along the way.”

Some software packages install on the winery’s computer system. Others (more and more) are hosted by the software provider and give each winery a secure login. This is sometimes referred to as “cloud ware.” A lot of the same principles apply when considering a software company. Does it meet your needs, both short term and long term? Is their company a good fit to work with yours? Is their company reliable in case you need support? And so forth. Many of the software packages have wine club modules as well, so integration of this information can be a real plus. Once again, though, the winery personnel will be inputting information, so the software will only work as well as the data going in.

Software providers
Here are capsule descriptions of what five leading compliance software/services companies offer:

eCompli The Compli Beverage firm developed web-based software that can be used by wineries and compliance companies alike. eCompli can track wholesale as well as DtC orders, do product registrations, out-of-state licensing and a host of other items. eCompli offers an online demo at compli-beverage.com/demo.

ShipCompliant Web-based ShipCompliant offers a host of services, from DtC to wholesale to licensing. For direct shipments, a winery can do all manner of reporting (shipping reports, excise and sales tax), brand and label registrations as well as licensing with the main website, shipcompliant.com. Wholesale needs can be handled through shipcompliant.com/wholesale; tackle permit needs at easywinelicensing.com. ShipCompliant works with Wine Institute, so its members have access to ShipCompliant expertise.

WineCompliancePro Automated services include reporting and taxes. WineCompliancePro also integrates with several other software systems such as QuickBooks, Microwork and WineWeb. The website winecompliancepro.com has an ROI calculator to figure costs based on having an employee doing what the automated system does.

eWinery Solutions Web-based and geared to wine club management, eWinery Solutions can be integrated with compliance information to streamline records management. eWinery also offers an online demo at its home page, ewinerysolutions.com.

Missing Link Networks–eCellar Launched more than 10 years ago, eCellar is web-based, providing direct selling modules such as compliance and shipping, wine club management, payment, blog and campaign management. At missinglink.net, wineries can explore the different module information.

A number of other software packages abound, and many use ShipCompliant for their compliance checks and reporting (this includes VinNOW, Submerce Winery Solutions, Nexternal Solutions and WineWare Software). This does not make any one company better or worse than another, just different. The key, once again, is finding the best fit for your winery’s needs. A key step is to find out how any software company does their updates and how often. A winery that tells a state agency “the software wasn’t updated” will be the one facing a problem with its permit, not the software company.

Any compliance system should be like a well-tended vine. Put in the work to establish a good system, and it can grow into something beautiful and powerful. If left untended, it will grow in all sorts of unintended and usually poor directions. “The myriad of details involved in wine compliance is not the reason individuals get into the wine industry,” related Drea Helfer, owner, founder and lead compliance consultant of DH Wine Compliance in Windsor, Calif. “Often times winery owners get bogged down in the details while trying to wear multiple business-owner hats. Compliance isn’t brain surgery, but one must be well versed in the ins and outs to navigate the requirements efficiently. Outside compliance firms have a wide variety of clients and therefore are well equipped to tackle the day-to-day compliance operations.”

In the end, each winery must decide the best solution for its needs in terms of financial responsibility, efficiency and ease of mind. The best balance will give the maximum return to the winery on all of these. You have to look at it as a tool. And, like any tool in the hands of the right person, it can be powerful: In this case as a means to constructing an efficient system for reporting direct-to-consumer winery operations.

David Sandri has spent more than 23 years in the wine industry, focusing in recent years on regulatory aspects. Based in Sonoma County, Calif., he teaches, judges and writes about wine as well. Reach him at winetopics@gmail.com.