After the U.S. Supreme Court’s Granholm v. Heald decision in 2005, which relaxed the restrictions on the ability of out-of-state wineries to ship directly to consumers, many wineries have enjoyed an expanded reach in consumer relations as well as a growing source of profit through wine clubs. Direct-to-consumer sales through wine clubs can include those made on-site (shipments made to an out-of-state consumer who is placing the order while visiting the winery’s tasting room) or off-site, which include shipments to a consumer who placed the order via phone, fax, or Internet.
While the laws have been relaxed to allow direct-to-consumer sales, they are no less confusing since each state has its own rules regulating alcohol. Within these rules governing alcohol are the shipping laws that impact how and whether a winery may ship wine to consumers residing within each state. Some states are much more lenient in their shipping laws and others prohibit it completely, considering the shipment of wine to their residents a felony. Generally, the states that allow direct-to-consumer shipments of wine to their residents require a permit that requires the winery to first be licensed to ship to wholesalers, the payment of taxes (both excise and sales tax), and shipping limits.
For instance, to ship wine into California, an out-of-state winery must obtain a Wine Direct Shipper permit for $10, which is a Type 82 license and is renewable annually. The Board of Equalization will then require a Certificate of Use Tax. If the winery fails to report their sales, the Board of Equalization will notify the Department of Alcoholic Beverage Control for further action. There are no volume limits, but shipments are required to have special labeling that indicates that the package cannot be delivered to a minor or intoxicated person. Compliance records of direct shipping are also required in case of audit, and must be kept for at least three years from the date of sale. However, California wineries do not need to obtain a permit or pay the $10 fee because shipping directly to California residents is a basic privilege for a California Winegrower Licensee (Type 02).
Similar to California, New York requires a permit and the payment of taxes, but its permit fee is $125 per year and is only issued for a three-year term. New York also has a restriction on volume, which is 36 cases per person, per winery, per year. Although Kentucky allows shipments to “wet” counties with a permit for wineries that produce 50,000 gallons or less, it is considered a felony to ship to “dry” counties. And because it is difficult to track which counties are “wet” versus “dry,” neither FEDEX nor UPS will deliver wine to residents in Kentucky out of fear of the felony statues that apply to the “dry” counties. The whole state of Utah prohibits the shipment of wine to its residents and considers it a felony.
These are just a few of the shipping laws that vary state-to-state. Wine Institute is an excellent resource for additional information regarding state shipping laws and also has a state control directory. Ultimately, the winery owner will need to determine, on a state-by-state basis, whether the costs associated with shipping and compliance is worth making its wine club/direct-to-consumer sales shipments available to residents of specific states. Ensuring compliance with each state’s shipping laws can be arduous, but there are different types of software and compliance companies that can help with the management of these.