Page 31 - Grapevine May-June 2020

In The Winery

it is little surprise that this increased scrutiny has
come to the DtC wine shipping channel. States have
a vested interest in making sure they collect the full
balance of tax money they are due and that their
laws are followed to the letter. As Texas’s audits
proceed, they could well represent a harbinger of
what’s to come for DtC wine shippers, making it
important to understand how and why regulators
are examining this market.

Even the Audits Are Bigger in Texas

In May 2005, Texas Governor Rick Perry signed
into law Senate Bill 877, a transformative reform of
the state’s Alcoholic Beverage Code that smashed
open the door for wineries to ship directly to con-
sumers in the state. Since then, wine enthusiasts
in Texas have been able to purchase wine directly
from out-of-state wineries, provided those wineries
obtain the necessary sales tax and Winery Direct
Shipper’s permits.

The state’s timing was no coincidence. Just one
week after Gov. Perry signed the new bill into law,
the Supreme Court held in Granholm v. Heald that
the states’ ability to control their internal alcohol In addition to order data and invoice copies, the
markets under the 21st Amendment did not super- TABC has requested information regarding licens-
sede the general prohibition on discriminating ees’ business structures, including copies of their
against out-of-state interests under the Commerce state and federal permits, and lists of corporate
Clause. officers and directors. Contracts or other agree-
ments that licensees have made with fulfillment
Under the decision, states could no longer prohib- houses and similar service providers have also been
it direct-to-consumer wine shipping if they allowed sought.
in-state shipping. In the years following Granholm,
a wave of reforms flowed across the country. But Finally, the TABC is looking into the specific wines
Texas was one of the first to update its wine ship- that licensees have shipped to Texas consumers.
ping laws. And today, the state lives up to its out- Texas’s DtC statutes prohibit licensees from selling
sized reputation by being the second-biggest recip- wines that the licensee does not personally pro-
ient state for direct-to-consumer wine shipping, duce or bottle. As such, the TABC has requested
according to Sovos ShipCompliant data. licensees provide Certificates of Label Approval
(COLAs) and production records for wines shipped
So what are Texas regulators seeking to achieve to Texas consumers.
with this wave of audits? The goal appears to
be ensuring wine shippers are properly licensed, These past requests, though, are subject to
paying excise taxes, reporting shipments, and not change at any time and any DtC wine shipper that
exceeding limits on how much they can send to does receive an audit notice should ensure they
individual Texans. The TABC has asked licensees for comply with the specific requests on their notice.
the sales data used to produce their Texas Excise
Tax returns, including requests for copies of certain This heightened review by the state of Texas
invoices

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