Category archives for “Direct Shipping”

Illinois SB 2989: Unlicensed Direct Wine Shippers Beware

September 01, 2016

On Friday, August 26, 2016, Illinois Governor Bruce Rauner signed Senate Bill 2989 (“SB 2989”) into law. SB 2989 amends various sections of the Illinois Liquor Control Act that affect direct wine shipping into Illinois as well as use of third party providers (“TPPs”). This post summarizes the changes made by SB 2989, which take effect on January 1, 2017. The higher license fees, described below, take effect immediately.

Harsher Penalties for Direct Wine Shipping Violations

SB 2989 imposes tougher penalties on direct wine shipping violations. Any person, including wineries, importers, and retailers, who distributes or sells 108 liters or more of wine (144 bottles of wine), 45 liters or more of spirits (5 12/750 cases), or 118 liters or more of beer (more than 28 12-packs of beer) without a license is guilty of a Class 4 felony for each offense, which has a minimum sentence of 1 year. Prior to SB 2989, the first offense was a business offense with a fine of not more than $1,000, and any subsequent offense was a Class 4 felony. For illegal shipments of less than 108 liters of wine, less than 45 liters of spirits, or less than 118 liters of beer, the penalty for the first offense is still classified as a business offense with a fine of not more than $1,000, and the penalty for subsequent offenses remains a Class 4 felony. Furthermore, any person who has already been issued a cease and desist notice from the State Commission could face the same felony charges.

New Disclosure Requirements for Winery Shipper’s Licensees and Reporting Requirements for TPPs

For new and renewing applicants of an Illinois winery shipper’s license, SB 2989 requires disclosure of all third parties authorized to ship the licensee’s wine, excluding common carriers, to the Illinois Liquor Control Commission (“ILCC”). Licensees must submit each third party’s name and address and file a copy of the written appointment of the TPP with the ILCC. SB 2989 provides that a TPP, other than a common carrier, shipping wine on behalf of a winery shipper’s licensee is the agent of the licensee, and that the licensee is responsible for the acts and omissions of the TPP. In turn, SB 2989 requires that each TPP consent to the jurisdiction of Illinois and the ILCC. Furthermore, SB 2989 imposes a new audit requirement on any appointed TPP, which will be required to file with the ILCC, by February 1 of each calendar year, a statement detailing each shipment made to an Illinois resident. The ILCC also has the power to deny any third party appointment if the TPP previously violated the Liquor Control Act.

Higher License Fees

Across the board, SB 2989 increases license fees for manufacturers, wholesalers, and retailers. The fees for a winery shipper’s license for a winery producing under 250,000 gallons annually have been increased from $150 to $350 for the initial application and $200 for an online renewal. The fees for a winery shipper’s license for a winery producing over 250,000 gallons, but under 500,000 gallons annually have been increased from $500 to $1,000 for the initial application and $750 for an online renewal. The fees for a winery shipper’s license for a winery producing 500,000 gallons or more annually have been increased from $1,000 to $1,500 for the initial application and $1,200 for an online renewal.

For more information about the changes to the Illinois direct shipping laws, contact an attorney at Strike & Techel.


Nevada Signals Intention to More Actively Monitor Trade Practices

March 05, 2014

Almost three years ago now, as reported on Imbiblog here, the TTB accepted its largest set of offers in compromise ever, for trade practices violations. Some of the biggest names in the business agreed to pay hundreds of thousands of dollars to the TTB even though they denied violating any laws or regulations. The allegations of trade practice violations came from participation by the companies in the 2008-2009 Harrah’s Nationwide Beverage Program. Unlike notable earlier trade practice investigations by the TTB, where there was state participation and a parallel investigation, there were no allegations made against retailers involved in the program, and no fines or penalties assessed against retailers (see for example the 2004-2009 joint investigation by Illinois and TTB into payments made by suppliers and wholesalers to Sam’s Wine & Spirits, Inc., then the largest wine retailer in the country, and its captive third party marketing organization Skyline Marketing, Inc.). The 2011 settlement by TTB was acknowledged to result from a retailer-initiated promotional program. Given that the TTB has extremely limited jurisdiction over alcohol retailers, however, the agency was unable to enforce any allegations against Harrah’s for the promotion. Had the State of Nevada participated in the investigation, it is more likely that charges could have been brought.

Now, the Office of the Attorney-General in Nevada has come out with an open letter to retailers, wholesalers and suppliers of liquor in Nevada in what appears to signal an intention to focus more attention on trade practice issues in the State. The advice contained in the letter is phrased as a “reminder” to the industry of prohibited and restricted activities. It covers the following issues:

- No loans from wholesalers to retailers of money or other thing of value, no investments by a wholesaler in a retailer, no complimentary furnishing of premises or equipment, and no joint operation of a retail business;

- Adherence to strict payment terms, with no preference accorded by wholesalers to certain retailers, and with a cessation of sales and monthly service charges in case of delinquency;

- No substitution of brands without consent, and no delivery of unwanted or unnecessary inventory;

- No required boycotts of other suppliers;

- No price fixing down the supply chain by suppliers imposing resale prices on wholesalers, and no profit splitting with the supplier getting a specified portion of the wholesaler’s profit margin;

- No excessive marketing contributions being required by suppliers of their wholesalers, for promotions outside the wholesaler’s market or beyond the terms agreed by the parties;

- Strict adherence to the quoted price from suppliers to wholesalers;

- No discrimination by suppliers among wholesalers (note that Nevada has a franchise law meaning that this refers to discrimination between wholesalers in different parts of the state as only one wholesaler can be appointed in any given market); and,

- No deceptive trade practices.

The letter refers to concerns with illegal terms or incentives by industry members looking for a competitive edge in the market. It notes that the Attorney General has jurisdiction over these issues and is required by law to take appropriate legal action to enforce the provisions of law setting forth the restrictions above. The Attorney General’s office recognizes in the letter its duty to investigate and prosecute deceptive trade practices in Nevada. Should the type of circumstances in the TTB’s investigation in 2011 arise again, it will be very interesting to see what action is taken by the state in light of this clear signal that it is unlikely to sit by if unlawful trade practices occur in Nevada.

If you have any questions about trade practice issues, in Nevada 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 © 2014 · All Rights Reserved ·


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

August 14, 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 23, 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 24, 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 07, 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.


New Jersey Moves One Step Closer to Direct Wine Shipping

January 11, 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 ·


UPDATE: New Jersey Senate Passes Direct Shipping Bill

December 19, 2011

Updating our post of late last week, the New Jersey Senate last Thursday voted 23 to 13 in favor of Bill S-3172, permitting wineries to ship directly to New Jersey consumers. Now that it has passed the Senate, the New Jersey Assembly has to vote on the bill by January 9, 2012, the last day of the legislative session. 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 would be able to ship up to 12 cases of wine per year to any New Jersey consumer. If passed, New Jersey would become the 39th state to allow direct shipping. Check back in early 2012 for an update!

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2011 · All Rights Reserved ·


New Jersey to Vote on Winery Direct Shipping

December 14, 2011

The New Jersey Senate will vote on a direct shipping bill this Thursday, December 15, 2011, called S-3172 in its current form. If passed into law, 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 would be able to ship up to 12 cases of wine per year to any New Jersey consumer. With passage of the bill, New Jersey would join the 38 states that currently allow direct wine shipping to consumers in some form, including Maryland and New Mexico as of earlier this year. However, the “capacity cap” for out-of-state wineries of 250,000 gallons per year remains a point of contention, as that limit would preclude the majority of California wineries from shipping to New Jersey consumers. Stay tuned to find out how the New Jersey Senate votes!

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2011 · All Rights Reserved ·


State Legislative Update

March 24, 2011

As mentioned earlier this week, there has been a lot of action on the alcoholic beverage industry legislative scene over the last few weeks without even considering the direct shipping related legislation that has been on the scene in Florida, Maryland, Massachusetts, and New Jersey (for a summary of such legislation see freethegrapes.org). Below is a look at some of the major pieces of state proposed legislation.

Georgia, SB 10 – On March 16, 2011, the Georgia Senate passed SB 10, which would allow for take-away sales of wine and beer on Sundays from 12:30 p.m. to 11:30 p.m. at eligible retailers. Connecticut, Indiana, and Georgia are the only three states that still have complete bans on all alcohol sales from off-premises retailers on Sundays. More frequently States ban sales of distilled spirits and/or wine on Sundays, if there is a ban at all. If the Bill passes, such alcohol sales would be determined on a local level rather than the state issued ban.

Washington, I-1157, SB 5111 – Privatization efforts are back in full swing in Washington State, which sells distilled spirits only through state run liquor stores. On March 18, 2011, Stefan Scharkansky filed Initiative 1157, the text of which is available here. The Initiative is extensive but overall, it would allow stores that currently sell beer and wine and have no record of safety violations to sell liquor as well. The bill’s author purports that Initiative 1157 is better than Initiatives 1100 (which Scharkansky helped author) and 1105, which were voted down last November, because it would require tighter control of liquor sales than the prior initiatives and also maintain tax revenues. Mr. Scharkansky is not the only one dipping his toes into the waters of Washington privatization. Tom Luce, a business consultant has floated the idea of a private-state partnership where a private company takes over the distribution piece of the liquor business and the state maintains the retail portion. All this action is on top of Senate Bill 5111, introduced by Senators Sheldon, Rockefeller, King, Hobbs, and Litzow, which we covered previously.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010-2011 · All Rights Reserved ·


United States Supreme Court Asked to Hear Case on Retailer Direct Shipping

November 27, 2010

A petition for writ of certiorari was filed with the United States Supreme Court earlier this week asking the court to determine

“Whether, notwithstanding Granholm v. Heald, 544 U.S. 460 (2005), the Twenty-first Amendment overrides the Commerce Clause and allows States to discriminate against out-of-state businesses in the sale of alcoholic beverages.”

In the seminal Granholm case, the Supreme Court ruled that states cannot permit in-state wineries to ship direct to consumers within the state, while prohibiting out of state wineries from doing the same. The question of whether the same rationale applies to retailers remains unresolved. The current petition to the Supreme Court is based on a dispute in Texas as to whether out-of-state alcoholic beverage retailers should be allowed to ship to Texas consumers under the same rules applied to in-state alcoholic beverage retailers. The case was originally brought in 2006 by Siesta Village Market and several other retainers against the Texas Alcoholic Beverage Commission. Siesta Village has dropped its appeal but K& L Wine Merchants and other notable retailers remain. A couple of large Texas distributors (Glazer’s and Republic) joined as intervenors in order to protect their position in the three-tier distribution system. The case was appealed to the Fifth Circuit on various issues and has now worked its way through to the final appeal – the U.S. Supreme Court. The Supreme Court accepts very few cases for review – typically accepting only those cases involving a substantial federal interest or a conflict between two or more Circuit Courts of Appeals. Statistically, the case stands little chance of being accepted, but the scope of the Granholm decision and its applicability to retailers (as opposed to only wineries) may be ripe for further judicial instruction. The State has until December 22 to file its response. The Court will decide whether or not to hear the case within a few months.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010 · All Rights Reserved ·


CLOSE

Browse posts by category: