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Category archives for “Direct Shipping”

Selling Alcohol to California Consumers Online

September 4th, 2014

Traditionally a customer wanting a bottle of alcohol in California would go to their local package or grocery store to get it or, if they were lucky enough to be in wine country, directly to a winery. In recent years, with consumers actively experimenting and looking for more variety, and with the boom in online shopping generally, consumers have a lot more options to find that elusive boutique wine, craft beer or small batch spirit brand that they have heard about and have been looking for. All of this means that consumers are turning more and more to the internet to find the alcohol that they want to serve at home. A quick Google search of internet alcohol sales in California yields more than 10 million results.

SPIRITS: Only a California Type 21 off-sale general licensee can sell a bottle of distilled spirits direct to consumer (DTC). Although a distiller can host a customer at the distillery to taste the products that are made there, a distiller cannot sell a bottle of spirits to a customer to take home.

BEER: There is a bit more leeway for beer with brewers being able to offer tastings and sell beer to customers. The CA law was revised just this year to make it very clear that a brewer can only sell its own beer to customers, and not beer made by other brewers, unless it gets a retail license. As a matter of policy, the ABC will allow a beer manufacturer to also make an online sale of its beer to a consumer. An on-premises retailer like a restaurant or a bar can also sell beer to customers to take home, and by the same ABC policy can sell online.  Off-sale retailers like grocery stores can sell beer to consumers online.

WINE: As with other alcohol, wine can be sold DTC by off-sale retailers. An on-sale retailer can also sell wine online, under ABC policy allowing online sales by retailers. A winery can also sell wine DTC, both at the winery and online, including through wine clubs. The state also offers two opportunities for the online retail sale of wine without a traditional brick and mortar store. The first of these is with a 17/20 wholesale and retail combination, or a 9/17/20 import/wholesale/retail combination. In both cases, wine can be sold online to customers and indeed can only be sold by direct mail, telephone or the internet from a location which is not open to the public. The license combination is often located right at the warehouse, enabling the licensee to easily pick and pack and ship out customer orders. The 17/20 combination allows the holder to sell directly to retailers as well as consumers and, with the addition of the type 9, the licensee can bring in wine from out-of-state and get it all the way to a consumer without passing through any other licensee’s hands. The second option is more recent and consists of a type 85 license, which gives the licensee the ability to sell wine at retail without the added wholesale or import rights. The chief distinction between the 85 and the 17/20 combination is that the 17/20 licensees have a wholesale license so they are required to make sales to retailers in addition to consumers, whereas the type 85 licensee sells only to consumers.

OUT-OF-STATE SELLERS: If you are a seller of alcohol located out-of-state, only wine can be sold DTC to California consumers and only under certain circumstances. A licensed winery in another U.S. state can get a direct shipper’s permit to sell DTC. For a licensed retailer in another state, the laws are murkier. California has a “reciprocity” statute which only permits out-of-state retail sales from states which allow a California retailer to ship to that state’s consumers. Currently, only thirteen states and the District of Columbia allow such sales. However, the concept of “reciprocity” was criticized by the Supreme Court in its 2005 decision in Granholm v. Heald, 544 U.S. 460, with specific reference to this California law. The law itself has not been challenged and thus the limitation remains on the books.

If you are interested in learning more about direct shipping laws in California or elsewhere, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·

Wine Liberty for All (Adults) in Massachusetts

July 17th, 2014

Massachusetts wine consumers will soon have equal access to Napa Cabs, Oregon Pinot Noirs, and New York Rieslings, as the commonwealth finally joins the ranks of direct shipping states with the passage of House Bill 294. Effective January 1, 2015, the bill will allow the Massachusetts Alcoholic Beverages Control Commission to issue licenses allowing out-of-state and in-state wineries to ship a limited amount of wine, by common carrier, directly to Massachusetts residents.

Prior to the passage of HB 294, out of state wineries were effectively shut out by the Massachusetts direct shipping law, which purported to allow direct shipping, but included so many restrictions and limitations that it was unworkable. Despite a successful court challenge to the existing law, in which the 1st Circuit Court of Appeals ruled that Massachusetts shipping law was discriminatory, the legislators have been unable until now to pass replacement legislation. In 2013, House Representative Theodore Speliotis introduced HB 294, and with the help of fellow lawmakers and a celebrity endorsement from New England Patriots quarterback-turned-Washington state vintner Drew Bledsoe, the measure was approved and has now been signed by the governor July 11th 2014. Under the new law, all U.S. wineries with a federal basic permit and home state winery license may obtain a license to ship up to 24 cases of wine per year to a Massachusetts resident 21 years of age or older. Like most direct shipper licenses, the Massachusetts license will also require the winery to submit a yearly report to the Commission and Department of Revenue detailing the total gallons of wine shipped, as well as require taxes be paid on all products shipped. The initial license fee will be $300.00 per winery, with a $150 annual renewal fee.

Common carriers delivering in the state are required to have a fleet permit and each vehicle transporting alcohol under the permit must have a certified copy of it in the vehicle, at a cost of $50 per certified copy.

The new law has drawn some criticism because it permits shipments only from U.S. wineries, effectively prohibiting direct shipment of imported wines to Massachusetts consumers. The Massachusetts law is not alone in this restriction; importers and retailers are excluded by the direct shipping laws of some other states, as well. But the law nonetheless represents another step forward in direct to consumer wine sales. Only eight states continue to have a complete ban on winery shipments direct to consumer. If you are interested in learning more about direct shipping law in Massachusetts or elsewhere, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·

Dan Kramer Featured in The San Francisco Examiner!

February 3rd, 2014

Strike & Techel’s own Dan Kramer was featured in an article in Sunday’s San Francisco Examiner. Dan was interviewed for the article “Want to be in the booze business in SF? Better know the law” in which he discusses his experience in the alcoholic beverage industry, including the complications and expenses of obtaining a retail license in San Francisco, California promotional issues, as well as distribution and direct shipping. As Dan pointed out, alcoholic beverage legal issues can not only be complicated, but they are often not on people’s radar as they venture into the industry. If you’re just getting started in the industry or have any questions about retail licensing, distribution, direct shipping, or just about anything else in the industry, call Dan or one of the other attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved

Winery Direct Shipping Coming Soon to Montana

August 26th, 2013

Starting October 1, 2013, Montana will allow the direct shipment of wine to Montana residents by wineries that hold a Direct Shipment Endorsement. Holders of a Direct Shipment Endorsement may sell and directly ship up to 18 nine-liter cases of wine annually to an individual in Montana who is at least 21 years of age. Any in-state or out-of-state winery that is already registered with the Montana Department of Revenue must pay $50 and file associated paperwork to receive a Direct Shipment Endorsement, and wineries not already registered with the state will be able to simultaneously register with the state and apply for a Direct Shipper Endorsement. Applicants must submit a signed affidavit that they will contract only with common carriers that agree that wine will be delivered only to an individual in Montana who is at least 21 years old and who signs upon receipt of the wine. Records may be due every month and every quarter, and must be held for state inspection for up to three years. All taxes must be paid quarterly and tax records submitted monthly (by the 15th date of the following month) to the Department of Revenue. If a holder of a Direct Shipment Endorsement uses a bonded wine warehouse for fulfillment purposes, the endorsement holder must file a written notice that includes the name and address of the warehouse. The state also requires pre-approval of all wine labels to be shipped into the state. Stay tuned as Montana will likely issue regulations and step-by-step instructions in the coming months.

If you have any questions about shipping wine directly to Montana residents, or residents of any other state, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·

Kentucky Changes Alcohol Beverage Laws – Requires Out of State Shipper’s Licenses for Wine and Spirits

August 14th, 2013

With the passage of Senate Bill 13 (“SB 13”), effective June 25, 2013, Kentucky modernized its alcoholic beverage laws in an effort to make them more effective and efficient for manufacturers, distributors and retailers alike.  This modernization included consolidating licenses, simplifying the licensing process, and most importantly for out of state wine and spirits suppliers, it created an out of state shipper permit.  Prior to the revisions, beer suppliers were required to hold a license to ship to Kentucky distributors but suppliers of distilled spirits and wine were not.

The new Out-of-State Distilled Spirits/Wine Producers/Supplier license application is available here:  http://abc.ky.gov/License%20Applications%202013/outofstate.pdf

Three classes of the new Out-of-State Distilled Spirits/Wine Producers/Supplier license are available:

-  Out of State Producer/Supplier for 50,000 gallons or more ($1,550 a year/$3,100 for 2 years);
-  Limited Producer/Supplier for 2,001 to 49,999 gallons ($260 a year/$520 for 2 years); and
-  Micro-Producer/Supplier for 2,000 gallons or less ($10 a year/$20 for 2 years).

Below are some of the other key changes ushered in by the passage of SB 13:

-  Consolidates 88 different license types into 44, changing the names of the licenses and fees associated with each, but keeping unchanged the privileges afforded to the licensees.  A few examples:  A “Vintner” license is now a “Winery” license, a “Blender’s” license was eliminated and its privileges consolidated into the “Rectifier’s” license.
-  Allows a two-year license term renewal for manufacturers and wholesalers, in addition to a one-year license option.
-  Bundles together several non-quota retail-drink licenses.
-  Creates a Transporter license, consolidating six former transportation-related licenses into one.
-  Eliminates bond requirements for many license types
-  Changes the licensing structure for microbreweries.

For more information on the changes to Kentucky’s alcohol beverage laws, visit the Kentucky Liquor Control’s information page at http://www.klc.org/UserFiles/files/KACOinfosheet.pdf

And of course, you can always call one of the attorneys at Strike & Techel if you have any questions about any of the changes to Kentucky’s alcohol beverage laws, or if you have any general questions about shipping to distributors in any state.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·


Texas ABC Releases Advisory on Third Party Marketers

June 23rd, 2013

The Texas Alcoholic Beverage Commission (“TABC”) just released Marketing Practices Advisory MPA056, available here, which addresses the use of third party advertisers and payment processors by out-of-state wineries that hold permits to ship direct to Texas consumers (“Direct Shippers”). The Advisory provides similar guidelines to those provided by the California ABC in its 2011 Industry Advisory, which we commented on here. The use of third party providers by wineries has been a hot topic since the release of the California advisory, but few states have provided guidance on the issue. Now that Texas has weighed in, it will be interesting to see if other states follow suit.

The TABC’s Advisory allows Direct Shippers to use third party service providers provided that certain conditions are met. As in California, the TABC’s touchstone is that the Direct Shippers remain in control. Key points include:

-        Direct Shippers are always responsible for compliance with the TABC code and regulations, payment of taxes, and must remain “in control of the product and every stage of the transaction.”

-        A third party provider may advertise wines and prices for a Direct Shipper.

-        A third party provider may process an order for wine placed by a Texas consumer by redirecting the order to a Direct Shipper. The Direct Shipper may then accept or reject the order.

-        Fulfillment should be managed by the Direct Shipper, and single packages containing bottles from multiple Direct Shippers are not allowed. Note: the TABC disfavors models where a third party provider acts as both an advertiser or payment processor and a warehouseman.

-        A third party provider may collect payment once an order is accepted by the Direct Shipper, but the Direct Shipper must maintain control over the funds.

-        There should be a written agreement between all Direct Shippers and their third party providers in order to demonstrate that the Direct Shipper remains in control. The TABC will ask a Direct Shipper for a copy of its agreement in the event that it has reason to investigate an arrangement with a third party provider.

We’ll keep you posted on any further developments on third party providers in Texas and other states. Call one of the attorneys at Strike & Techel if you have any questions about direct shipping or the use of third party providers.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·

Bill Passes Senate Allowing USPS to Ship Beer, Wine, and Spirits

May 24th, 2012

As the U.S. government looks for ways to save the U.S. Postal Service, a recent bill passed the senate that includes provisions allowing the USPS to ship wine, beer, and spirits.  Private carriers have been shipping wine for decades, but the USPS has been banned from doing so for over one hundred years.  18 U.S.C. § 1716(f), the 1909 law that prohibits the USPS from shipping “all spirituous, vinous, malted, fermented or other intoxicating liquors of any kind” remains on the books.  That law pre-dates prohibition by ten years, and has never been repealed.  That would change if Senate Bill 1789 becomes law.  The bill was passed in the senate on April 25, 2012, and Section 405 provides that wine, beer, and distilled spirits are considered “mailable” by the USPS as long as a) it is consistent with the laws of the states where the shipment is initiated and where delivery is to be made, b) the addressee is at least 21 years of age, and c) the addressee provides a signature and a valid government-issued photo identification upon delivery.

In order to become law, Senate Bill 1789 still needs to pass through the House of Representatives.  The bill was designed to address the moratorium on post office closures that expired on May 15, 2012, which had already been delayed from an original deadline of last December.  Since no law was passed by the May 15 deadline, the USPS is moving forward with a modified plan for post office closures.  48 post offices are currently scheduled to close in August, 2012, 92 in 2013, and another 89 in 2014.  The impending August closures put pressure on the House to pass a bill as soon as possible if they are going to save those post offices.  We’ll keep you posted on their progress and whether permitting the USPS to ship alcohol remains a part of the proposed legislation.

Apply Now! Direct Wine Shipping Opens in New Jersey

May 7th, 2012

At long last, as of May 1, 2012, applications for Out-of-State Winery licenses are being accepted in New Jersey, which will permit out-of-state wineries to ship wine directly to New Jersey consumers.  As discussed in earlier posts, including here, New Jersey’s law was passed early in 2012, and makes New Jersey the 39th state to allow winery direct shipping.  The law permits wineries producing no more than 250,000 gallons of wine per year to ship wine directly to consumers in the state.  License holders may ship no more than 12 cases of wine each year per consumer for personal use.  The license also includes limited privileges for holders to sell wine directly to retailers, and for tasting room privileges within New Jersey.

No regulations were promulgated to go along with the direct shipping statute, but earlier this week, the New Jersey Division of Alcoholic Beverage Control released instructions and application forms for Out-of-State Winery licenses that provide more information about direct shipping, and which can be found here.  First, the Out-of-State Winery license will be the most expensive direct shipping license in the county, with tiered pricing depending on the amount of wine produced, but costing $938 annually for wineries producing between 50,000 and 250,000 each year.   Additionally, the instructions clarify that wine shipped must be manufactured by the Out-of-State Winery license holder.  Other details of interest to potential applicants include: a) all applicants must register with the Secretary of state; b) a bond is required; c) all applicants must register with the Division of Taxation; and d) all brands must be registered before they can be shipped into the state. Each of these requirements comes with additional fees, so wineries should make sure the anticipated sales volumes warrant the costs of getting set-up.

Please feel free to contact one of our attorneys if you are interested in more information about direct winery shipping in New Jersey.

Out-of-State Wine Sales: Going Beyond Direct Shipping

February 6th, 2012

In 2005, when Granholm v. Heald was decided by the Supreme Court, the doors to direct shipping wine to consumers opened wider than ever before. But the principles behind Granholm may open more than just the direct shipping avenue. Recently, a California winery stepped down this expanded path by opening a tasting room in Pennsylvania. Several states allow licensed wineries to operate satellite tasting rooms within the state. In Pennsylvania, limited wineries may operate, separately or in conjunction with other limited wineries, up to five additional tasting and off-premises sales locations within the state. No production or bottling is required at those five separate facilities. 47 Pa. Cons. Stat. § 5-505.2(a)(3). Virginia has a similar provision allowing licensed farm wineries to sell wine for on- and off-premises consumption at up to five additional retail locations. Va. Code Ann. § 4.1-207(5).

In order to become a licensed limited winery in Pennsylvania a winery must be producing wine from agricultural products grown in Pennsylvania. While this requirement seems to preclude an out-of-state winery from opening a tasting room in Pennsylvania, the Granholm court addressed this issue when it examined New York’s former requirement that only farm wineries, which can only produce wine from agricultural products grown in New York, were allowed the most direct avenue to ship wine to New York consumers. Granholm v. Heald, 544 U.S. 460, 476 (2005). In its decision the Court stated, “States may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state business.” Id. at 472. Thus, predicating the ability to open a tasting facility where direct sales are allowed on the production of wine solely from in-state grown agricultural products violates the principles of Granholm. In 2010 this exact issue came to heard in New Jersey when a law that allowed in-state wineries to sell directly to consumers from up to six salesrooms apart from the winery premises, while prohibiting out-of-state wineries from similar direct sales activities, was found to violate the dormant Commerce Clause. Freeman v. Corzine, 629 F. 3d 146, 159 (2010). While opening up facilities in other states is a large investment of time and capital that likely would not suit many wineries, it may be a viable strategy for some. Given the rapid changes over the last few years in new paths to consumers, keeping an open mind about ways to grow sales is always a good idea.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·

New Jersey Moves One Step Closer to Direct Wine Shipping

January 11th, 2012

Late Monday night, on the last day of New Jersey’s legislative session, the state Assembly voted 51-18-4 in favor of Bill A-4336, New Jersey’s wine direct shipping bill.  The companion bill, S-3172, passed the New Jersey Senate last month, and now only the governor’s approval stands in the way of New Jersey becoming the 39th state to allow some form of direct shipping.  Under the bill, New Jersey Farm Wineries, New Jersey Plenary Wineries that produce 250,000 gallons or less of wine a year, and out-of-state wineries that produce 250,000 gallons of wine or less each year and that obtain an out-of-state shipping license will be able to ship up to 12 cases of wine per year to any New Jersey consumer.  If the bill is signed by New Jersey Governor Christie as expected, the law will go into effect in May, 2012.  To see our earlier posts on this topic, check here and here.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·