Free the Grapes! April 2020 Winery Update

LEGISLATIVE UPDATES

Even with the Coronavirus pandemic dominating the news, and state legislatures, there is still news to report on wine direct shipping.

KENTUCKY BECOMES 46TH LEGAL STATE FOR WINERY DTC SHIPPING

As reported by Wine Institute, April 8:
Kentucky’s New DTC Shipping Rules Become Law
Kentucky’s new law to allow for the direct-to-consumer (DTC) shipping of wine, beer and spirits by producers became law on April 7, 2020. The effective date of the law is yet to be determined, as it will be 90 days from the date the legislature officially adjourns, which is expected to happen sometime next week. While we wait for the Act to take effect, we will work with the KY ABC and revenue agencies as they begin to put together the regulations, applications and coordinate the procedures for tax payments and reporting.

When the law becomes effective and producers have secured the required $100 annual permits, they will be able to ship in the following manner:
• Producers of wine and beer may ship up to 10 cases per consumer, per month.
• Distillers may ship up to 10 liters per consumer, per month.
• The products shipped must be produced by the manufacturer; produced for or by the manufacturer under a written contract with another manufacturer; or produced and bottled for the manufacturer.
• Products must be shipped from the producers “licensed premise” – we will be working with the ABC in an effort to include in the definition of a premise their shipments from a licensed fulfilment house in California.
• Age verification at both the time of order and delivery are required, and the consumer faces penalties if they place orders for delivery into a dry area of Kentucky.
• Out-of-state producers must pay Kentucky excise, sales and any local taxes. Since Kentucky currently has an 11% “wholesale tax” on wines sold through the three-tier system, DTC shippers will collect and pay an equivalent wholesale tax (which is to be calculated based on 70% of the retail price).
• All applicable taxes are to be itemized on a consumer’s invoice.

We will provide further information as the rules are promulgated and information and applications become available.

From Free the Grapes!: Once the state has promulgated its rules, and wineries can apply for licenses, we will update our map!

OTHER LEGISLATIVE UPDATES

Alaska: To provide more precise winery DTC regulations, the wine industry’s permit bill passed the Senate in February and the House Committee on Labor and Commerce on March 18. Now it needs to pass the House Committee on Finance to get out of the House.

Delaware: We are awaiting vote on Senate Bill 49, our permit bill, which carried over from 2019.

Illinois: Senate Bill 3830 is the National Association of Wine Retailers (NAWR) bill to allow retailer DTC and would replace the current 12-case limit by wineries with an unlimited quantity for both wineries and retailers. The legislature is not in session and passage seems unlikely.

Indiana: Our bill to remove the wholesaler exclusion, Senate Bill 11, died as the state legislature adjourned for the year.

Kansas: Senate Bill 32, promoted by the wholesalers, would change the DTC report filing frequency from annually to quarterly, and allow for electronic filing among other provisions. Wine Institute opposes the bill.

Maryland: Senate Bill 1068 died in committee upon adjournment and would have allowed shipments from fulfillment houses.

Wisconsin: Wine Institute opposes a bottle bill that would also apply to DTC shippers, which are exempt from similar laws in other states.

Minnesota: The local grape council has introduced a bottle bill to include DTC shippers, with license fees supporting the state’s winery promotions.

Mississippi: Senate Bill 2534, a favorable permit bill, passed successfully out of the Senate but was amended to include retailers, resulting in a defeat on the floor, 13-32, on March 13.

New Jersey: Our two favorable bills from the 2018-19 session, which would replace the 250,000 gallon capacity cap, still exist and are awaiting return of the legislators. It is not clear if legislators will consider non virus-related bills in the upcoming (2-year) session.

Oklahoma: House Bill 3162, a bill promoted by the in-state wholesalers, would require common carriers to report the quantity of wine delivered to each consignee, which their technology cannot manage. The bill has passed the House and is being considered in the Senate.

Rhode Island: House bill 7585, our model direct shipping bill, is in the House Committee on Finance.

Utah: House Bill 157 passed the House and Senate and is with the Governor for signature. Unfortunately, it is not a workable DTC bill. It would require consumers to sign-up with the state for a subscription wine club, with shipments sent through the state, delivered to a local retail store for pickup by the consumer. It would require wineries to sell to the state at FOB pricing, and require an 88% markup plus delivery fees.