by Taylor Maggelet
DON’T panic, DO write your representative,
DO your part to keep direct to consumer shipping safe & legal
Paso Robles, CA- With the release of House of Representatives Bill 5034 late last week, a panic of sorts has gripped many wineries and retailers (or at least the bloggers of those industries) with what appears to be another attempted power play by the influential wholesale alcohol lobbying effort in Washington, DC. And while HR 5034 may indeed pass, this winery compliance specialist strongly feels that, in the end, it will be a much more watered down version of the currently proposed bill, and will not present a sweeping change to current state laws on out of state shipping of wine.
That said the industry should not sit on its laurels in response to this latest assault on fair interstate commerce. While recent legislation in many states has overwhelmingly supported direct to consumer sales, we must be diligent in continuing to advance our cause though communication with our representatives, adherence to the various states’ laws regarding licensing and taxation, and making a commitment to ensuring safe and legal direct sales wherever possible.
This bill, sponsored by the National Beer Wholesalers Association, is designed to (1) reaffirm the 21st Amendment, in which individual states, not the federal government, have the primary authority to regulate alcoholic beverage sales, and (2) recognize that alcohol is different than other consumer products (like sheet sets or books), and its sale should be regulated effectively. I don’t think anybody in the wine industry is arguing against the validity of either of these points. So why do we need another federal regulation emphasizing a law that is already on the books, and of which nobody is fighting against? Don’t our federal legislators have bigger issues on their plates these days? (Oh I don’t know…Wars in Iraq & Afghanistan…Healthcare…mid-term elections, for goodness sake!)
The main reason the wholesalers are pushing this bill is to keep litigation out of federal courts, where the U.S. Constitution is king, so laws regarding volume limits, production caps, and the ability of retailers to ship are decided at the state legislature. These types of state restrictions keep many large wine producers from reaching their consumers directly, thus keeping them dependant on the wholesaler to get to market. The Wine & Spirits Wholesalers of America have been quoted as not wanting to overturn current state law, but simply do not want to allow challenges to those laws. But if these laws scream “UNCONSTITUTIONAL”, I have a problem with being told they are above challenge.
The Granholm decision of 2005 stated that the Commerce Clause of the U.S. Constitution (which enforces the equal treatment of all businesses regarding trade) takes precedence over the 21st Amendment (which allows states to regulate their own alcohol sales). HR 5034 is attempting to switch that around, whereby the 21st trumps the Commerce Clause. States could legally discriminate against out of state wineries, even ban out of state shipping, and that ban could be upheld, when challenged, if the state can show, in even a slight way, that the ban will contribute positively to the “promotion of temperance, the establishment or maintenance of orderly alcoholic beverage markets, the collection of alcoholic beverage taxes, the structure of the state alcoholic beverage distribution system, or the restriction of access to alcoholic beverages by those under the legal drinking age.” It puts the burden of proof on the plaintiffs (the wineries or retailers), on some incredibly debatable, subjective issues.
It is very important that wineries and wine retailers make every effort to abide by the current laws set forth by the individual states, securing the necessary licenses, remitting sales/use and/or excise tax, and reporting in a timely fashion. The days of “no strings attached” reciprocal shipping are gone and wineries need to play by the rules of each state to which they choose to sell and ship. Excellent services and software tools exist to assist even the smallest winery or retailer in this compliance process (I admit, our only plug!). Furthermore, any business selling wine direct to consumer needs to make a concerted effort to ensure their wine is being sold to legal adults. Use of age verification software, age verification gateways on websites, and clearly labeling all shipped boxes as alcohol, coupled with compliant shipping and accurate tax payments, will go a long way to proving that the current system is in fact promoting “temperance, the establishment or maintenance of orderly alcoholic beverage markets, the collection of alcoholic beverage taxes, the structure of the state alcoholic beverage distribution system, or the restriction of access to alcoholic beverages by those under the legal drinking age.”
The bottom line is that 37 states, plus the District of Columbia, already have tried and true laws on the books allowing direct to consumer shipping to varying degrees. If this bill does pass into law, odds are that these established DTC laws will not change or be challenged. States where direct shipping legislation is pending, like New Jersey, Massachusetts and Maryland, may decide not to allow DTC shipping after all. In the few states that still don’t have a direct shipping law on the books, like Florida, we might see direct shipping banned under this proposed law. Unfortunately, wine retailers stand to lose the most, with only a handful of states currently allowing direct shipping, many states may choose not to extend that privilege to retailers if this bill successfully passes.
Ours is a progressive, socially responsible and organized industry that can present a united front to the legislature regarding non-discriminatory interstate trade and the responsible direct sale of wine to Americans in every state.
So what can be done? It is not too late to voice your opinion to your representative. Please call or email them today: http://www.capwiz.com/freegrapes/issues/alert/?alertid=14948676
By Sheri A. Robesky
In recent months several states have increased their rates for alcoholic beverage permits, liquor taxes, and brand registrations. Maryland recently doubled their fee for original and renewed Non-Resident Dealer permits. Illinois increased liquor taxes at various rates dependent upon the alcohol content of the beverage. And Connecticut doubled their brand registration fees, increased their winery permit fees by $65, and beer and spirits wholesalers license fees have increased by twenty five percent.