I had the pleasure of writing a guest post at Hinman and Carmichael’s Booze Rules blog called Michigan: Canary in the DtC Coal Mine? I hope you can check it out and let me know your thoughts.
To me, the timeline that I outlined at the top of the piece was a very interesting confluence of events. The fact that Michigan got sued for a third time on DtC legislation is pretty fascinating on it’s own. However what’s really interesting to me is that the events in Michigan followed almost exactly the events that occurred shortly before in Illinois.
Illinois wholesalers had taken matters into their own hands, and then forced more involvement by the Illinois Liquor Control Commission. That was followed by much more restrictive legislation (including potential felony penalties), which led to a lawsuit against the state. Sound familiar?
So, is this a pattern? Should we expect similar events to play out in additional states? It seems like it. As we speak, Minnesota is considering similarly restrictive legislation. Wineries, retailers, third party providers, and fulfillment houses that operate in the DtC wine world should be sure to stay on top of all of these changes and step up their compliance game.
In Michigan, the legislation seemed to be enabled significantly by the “Wine Direct Shipping Research and Analysis” report out out by the Michigan wholesalers. I’d like to take a closer look at this report in a future post. Some of the methodology, assumptions, and conclusions in the report need a closer review in my opinion.
Check out the piece and let me know what you think!
Minnesota is currently one of three states that allows wineries to make direct shipments from off-site sales without a permit, along with Alaska and Florida. That would change under Minnesota HF 791 (and companion bill MN SF 1418), which is currently being reviewed by the Committee on Commerce and Regulatory Reform.
The new bill would create a standard permit system for wineries begging on July 1, 2017 and would also introduce several new provisions that wineries must comply with, including:
- 2 case per calendar year volume limit
- Wineries must submit all of the addresses from which shipments will originate (including winery warehouses and fulfillment houses)
- Wineries must provide a list of all Third Party Providers (TPPs) that they will be working with. Presumably this refers to fulfillment houses (aka third partly logistics – 3PL) companies, but it’s not perfectly clear in the bill text
- Annual license renewal by January 1st of each year
- Restricts shipments to wines of the “winery’s own production”
- Any TPP that is operating on behalf of wineries must first verify that the winery is properly permitted in Minnesota. TPPs must also submit a monthly report of shipments into Minnesota, “unless the direct ship winery has supplied the required statement to the commissioner”
- Wineries must collect gross receipts tax, sales and use tax, and a monthly report to the commissioner detailing each wine shipment
- Restricts common carriers (FedEx and UPS, for example) from making shipments unless the carrier confirms that the winery is properly licensed. The commissioner is required to provide a list to the common carriers and the TPPs on a monthly basis of all licensed wineries.
Our Take: This bill isn’t written very well in its current form. Many of the provisions seem insufficiently crafted or thought-through. However, otherwise it seems like a fairly standard direct shipping bill that allows wineries to ship with a permit including volume limits and taxes, but prohibits retailers from doing the same. The common carrier and TPP provisions are more and more becoming standard fare in new wine shipping bills.