In 2021, I wrote a Wine Shipping State of the Union, in which I broke out the 50 states and the District of Columbia into seven tiers based on the cost and convenience for a winery to ship to that state's consumers. If this isn't something you follow, you might be surprised that it can vary so much from state to state, but blame the 21st Amendment, which repealed Prohibition. That Amendment, intended so that states that wished to remain "dry" could do so, gives states broad leeway to regulate the sale of alcohol within their borders, and this has meant that no two states are alike in the licensing, fees, reporting, and restrictions that they've put in place.1
Each winery makes a different calculation as to which states are worth the costs of doing business there. Some smaller wineries only ship to their home state, but most wineries with significant direct-to-consumer business ship to most of the 33 states that I put in my tiers I - III. There are another 12 states (my tiers IV - VI) in which shipping is possible for most wineries, if they're willing to absorb the costs and jump through the right hoops, and 6 to which it's essentially prohibited (my tier VII). At the time, we shipped to 8 of those 12 in tiers IV - VI. I am pleased to announce that we've done the work to add two more shipping states to our list: Connecticut and South Dakota. Our new shipping map:
What do South Dakota and Connecticut have in common? They're both states with label registration requirements. You might think that the federal label registration that we have to go through to sell our wines in America would be enough, but these two states have seen a potential revenue opportunity, and ask any winery that wants to sell its wines in that state to individually register each label with the state government. For South Dakota, it's $25/year for registering the first label and $17.50 for each subsequent label, paid to the South Dakota Secretary of Revenue. For Connecticut, it's $200/label, with each registration lasting three years and being transferrable across vintages, as long as you don't change the varietal mix or need a new federal label approval.
A quick look at our online order form will show our challenge: we currently list 34 different wines, and if you count different sizes and vintages there are a total of 51 different products listed. Each vintage of our blends is a little different, and we believe that it is important that our labels reflect that. All that leads to a lot of additional expense and hassle for the states which require us to register labels. The biggest reason that we haven't worked with those two states to date has been our worry that something will slip through the cracks and we'll get in trouble for sending wine we aren't registered to sell, as well as the burden this places on our back-office team. But I'm generally a believer that we need to do everything we reasonably can to make our wines available to the customers who want to buy them, even if the costs of doing so are high. So, we've jumped through these hoops2 and I'm pleased to announce that customers from Connecticut and South Dakota who wish to order wine or sign up for one of our wine clubs can now do so.
That said, I still hope that these two states see reason and realize that the amount of revenue that these registration requirements bring in is a drop in the bucket of their state's budget. I don't know how it compares to the amount that they have to pay staff to administer the programs, but I'm guessing it's a wash. And like most state protectionism, it's ultimately the state's citizens who lose by paying higher prices and having less selection.
The next state in our sights is Alabama. The state legislature there passed a shipping law in 2021, but it included some unworkable provisions that needed to be ironed out by the state ABC board, mostly owner citizenship and residency requirements that were unworkable for wineries with foreign partners like us. It appears that's been done. Stay tuned. Meanwhile we've at least found a work-around for Alabamans: while we can't ship to private homes or businesses yet, we can ship orders to a state ABC store for pickup. If this is something you'd like to try, please give us a call.
Every time I dive into the arcana that is our alcohol regulatory framework, it drives home the wisdom of the founding fathers in including the Commerce Clause into the US Constitution. This clause prohibits state interference in interstate commerce, which means that the producers of most products don't have to hire compliance companies or dedicate staff members to making sure that all the different licenses, reports, and remissions are done properly. That clause is probably most eloquently explained in the 1949 Supreme Court decision H.P. Hood & Sons vs. Du Mond:
"Our system, fostered by the Commerce Clause, is that every farmer and every craftsman shall be encouraged to produce by the certainty that he will have free access to every market in the Nation… Neither the power to tax nor the police power may be used by the state of destination with the aim and effect of establishing an economic barrier against competition with the products of another state or the labor of its residents."
We may not be close to "free access to every market in the Nation"... but at least we've increased the number of those markets from 41 to 43. Number 44 is on the horizon. That's something to celebrate.
- If you'd like to get involved in the push for more open direct shipping laws, the nonprofit Free the Grapes, on whose board of directors I serve, has information, resources, and templates for contacting state representatives.
- Thank you to the Wine Institute for intervening with Connecticut to help us overcome the largest hurdle: that because we sell our wine wholesale through Vineyard Brands (an importer with a wholesaler network in all 50 states) instead of directly to a wholesaler there, the state needed to make accommodation for the same winery to have its labels registered by two different companies. Until recently, this wasn't possible.