Due to lax enforcement and a lack of widespread understanding of the law, for years companies have been skirting the interstate wine shipping laws in many states. Recently, those rules have come to the forefront as industry associations, state legislators and shipping companies have begun taking a closer look at direct-to-consumer sales, which represent a small (but growing) percentage of industry revenue.
Wholesalers are most impacted by whether these laws are enforced, since DTC sales are sometimes used to bypass the three-tier system and cut distributors out of the process. Below is a sample of stories from around the country that provide an update on where the law stands, where it’s being enforced, and where the future is headed.
Wines are No Longer Free to Travel Across State Lines (New York Times)
For a golden moment, motivated wine lovers could rely on high-speed internet as a sort of national wine shop. A consumer in Little Rock, Ark., for example, unable to find particular bottles locally, could order them from a shop in New York. It required only a willingness to pay shipping costs.
Those days are no more. In the last year or so, carriers like United Parcel Service and FedEx have told retailers that they will no longer accept out-of-state shipments of alcoholic beverages unless they are bound for one of 14 states (along with Washington, D.C.) that explicitly permit such interstate commerce.
New York is not one of those 14 states, as The New York Times’s wine panel learned to its chagrin in the last year.
Interstate Sales Ban Hurts Local Wine Merchants (Crain’s Chicago)
Some 15 years ago, as internet shopping began to catch hold of consumers around the U.S., local wine stores were quick to jump on the bandwagon, promoting prices and brands to customers in far-flung markets. Internet commerce was still in its infancy when Sam’s Wines & Spirits in Chicago was pulling in more than $5 million in sales annually from out of state.
That early enthusiasm for the internet evaporated after an Illinois law went into effect Jan. 1 that prohibits interstate shipping of liquor by retailers. It’s now a Class 4 felony for merchants to cross the state lines (stalking and aggravated assault are also in that class of felony). In recent weeks the market began to shut down further as both FedEx and UPS, out of fear of prosecution, announced they would no longer accept wine or alcohol shipments of any kind to most states.
Lawsuits Take Aim at Interstate Shipping (Wine-Searcher)
Here’s some good news for wine lovers in middle America: lawsuits have been filed in three states that could allow wine lovers to order wines from any state. And not just by any law firm – it’s the same lawyers who opened up the country to direct shipping from wineries.
Currently residents of only 13 states and the District of Columbia can legally order wine online from an out-of-state retail store. This is a big contrast to ordering from a winery: residents of 42 states can order wine from out-of-state wineries.
Three of the largest states that don’t allow interstate wine shipments from retailers are Illinois, Michigan and Missouri. Two Indianapolis-based attorneys, Bob Epstein and Alex Tanford, have filed suits in each of these states challenging the laws. They’re looking at filing lawsuits in other states as well, and they hope eventually the US Supreme Court will rule on the issue – which would have an impact nationwide.
Some U.S. States are Cracking Down on Interstate DTC Wine Shipping (Forbes)
According to ShipCompliant by Sovos, at over $2 billion in 2016 sales, the more than 5 million cases of wine shipped Direct-to-Consumer (DtC) is fast making it an important segment of the wine business . DtC has finally attracted larger wineries, whose shipments from 2015 to 2016 increased by 183 percent. The tax revenue for wine shipments is in the tens of millions of dollars for states, but shipping wine can still be fraught.
While U.S. trade representatives complain about unfair wine trade practices in neighboring Canada, it seems ironic that U.S. wineries and wine retailers need a compliance service to keep up with the ever-evolving legalities behind shipping beverage alcohol across state lines within their own country, but they do.
Thanks to the 21st Amendment to the U.S. Constitution—Repeal of Prohibition—out-of-state wineries could not ship wine direct to a consumer’s door because states were given the right to intervene in the sale of beverage alcohol and the overwhelming majority prohibited DtC. In a 2005 Supreme Court decision prohibiting DtC interstate wine shipping was ruled unconstitutional. The court said the only way a state could prohibit shipments from out-of-state wineries was to also prevent in-state wineries from shipping DtC. The decision was narrow; it gave out-of-state wineries the nod to ship but said nothing about alcohol retailers.