Herein lies the abridged history of wine shipping regulations gone mad. This is best read with a glass of your favorite varietal in hand.
In the beginning (1919), there was Prohibition (18th amendment to the U.S. Constitution). Alcoholic beverages weren’t shipped legally, except for a few million bottles of sacramental wine and some low-alcohol beer. Then there was the repeal of Prohibition (1933, 21st amendment), which, unfortunately, also clearly gave power to regulate alcoholic beverages back to the states.
Many states, at the urging of powerful, well-funded wholesalers, instituted a three-tier system of alcohol distribution. For instance, to sell California wine in Massachusetts, the wine needed to be sold to a wholesaler, who sold it to a retailer, who sold it to customers, with no direct sales or shipments to consumers from outside the state.
Some states let wineries within the state ship wine to customers within the state but prohibited wine shipments from outside the state directly to customers within the state. This seemed to be a violation of the Dormant Commerce Clause, which implies that states don’t have the power to enact anticompetitive laws that discriminate against sellers in other states. Lawsuits were filed. Eventually, the U.S. Supreme Court agreed (Granholm v. Heald, 2005).
Did this solve the direct shipping problem? No. Some states simply prohibited all wine shipments directly to consumers. Others adopted a series of differing regulations, license fees, excise taxes, use taxes, sales taxes and reporting forms guaranteed to make your head spin.
How bad is it? It’s illegal for individuals to ship wine. The Postal Service won’t accept wine under any circumstances. FedEx and UPS don’t accept wine shipments from individuals. They only ship for licensed alcohol retailers and wineries, with signed agreements about the type of packaging and, more important, stating the retailers and wineries are responsible for having proper state permits.
Oh, those state laws! Take Arizona. Direct shipments of wine are allowed, but only if the recipient has physically visited the winery. There’s also a limit of two cases annually, per person. “If Arizona consumers wish to have additional wine shipped to themselves in subsequent years, they’ll need to physically visit the winery each and every year and pay for all shipments at the winery.” (Source: Wine Institute). Smaller wineries (less than 20,000 gallon production annually) can apply for a direct-to-consumer permit allowing unlimited shipments but requiring payment of sales and excise taxes.
Texas requires wineries to obtain a direct shipping permit (fee plus surcharge is $526) plus a Texas Sales Tax Permit. Wineries must submit a “Texas Nexus Questionnaire”—no kidding. Taxes must be collected. Tax forms must be filed. A $5,000 bond is required.
Maryland requires an annual permit fee of $200, a $1,000 bond, copies of state and federal licenses, payment of sales and excise taxes and filing of reporting forms.
Oregon requires a Direct Shipper Permit, annual license fee of $60, a $1,000 bond, payment of excise taxes and monthly reports to be filed with the Privilege Tax Department.
Utah? It’s referred to as a “felony state.” Enough said.
Hawaii requires wineries to obtain a Direct Wine Shipper’s Permit issued by a local island commission, registration with the Hawaii Department of Taxation, and separate applications (and application fees) for each of four counties. The annual fee for Kauai, Maui and Hawaii is $48 for each island, but the fee for Honolulu County (on Oahu) is $120. Wineries that ship there must pay general excise and gallonage taxes, must complete the State of Hawaii Basic Business Application and must file monthly and annual reporting forms.
Alaska doesn’t limit or tax wine shipments into the state, but it does let communities ban or restrict sales and shipments by local vote. You can go online and see how various communities voted. For instance, the community of Akiachak banned sale, importation and even possession of alcohol by a vote of 40 to 13. FedEx keeps track by zip code of where it can ship in Alaska.
Now take these various rules and multiply them for the 38 states to which California wineries can ship. One owner of a small winery stated flatly, “If you’re absolutely compliant with all rules and regulations, it’s cost-prohibitive.” Another wine shipping professional said, “If we followed the laws exactly, we’d never get anything done and we’d never make money.”
Direct wine sales to consumers—and direct shipping to consumers—are very important for the profitability of most wineries. Big wineries have the resources to comply with all these regulations, but small wineries usually don’t. As one employee of a major wine company told me, “It behooves us to stay in compliance, so we cross-check every wine shipment to make sure we have the right permits and have paid the right fees.” But it takes highly specialized compliance software and personnel time to file myriad reports and tax returns, and to pay annual permit fees plus use, sales and excise taxes. For this one big winery with four customers in West Virginia, it means filing two monthly reports (whether or not there were shipments) and one annual report, and paying taxes that are sometimes only $0.45. I asked this employee which were the toughest states. She said, “New York has high sales and use taxes and seems to get you at every point, and New Hampshire is a state you never mess with. It’s on the ball.”
As confirmation, a small winery owner told me, “Much of our shipping is illegal. We only pay attention when an individual state sends us a heads up. For instance, I shipped a case of wine to a couple from New Hampshire who visited the winery. The head of New Hampshire’s alcohol department called me and said I’d committed a felony. And that it was equally a felony for the couple to ship wine to themselves. You have to get a license, collect state sales tax and file monthly reports.”
It could be worse. A friend from Toronto brought some wine home from France. The Liquor Control Board of Ontario let him bring the wine in after payment of a tax equal to 102 percent of the wine’s value.
