Page 33 - Grapevine May-June 2020

In The Winery

for these smaller producers to reach a national Now Is the Time to Ensure Compliance
audience.
The risk of audits like those in Texas underscores
This growth also reflects consumer demand across the importance of closely adhering to the vari-
the economy for goods delivered directly to their ous laws and reporting requirements imposed by
doorsteps. Apps like Instacart and UberEats have states. That the regulations can vary among states
democratized delivery, and consumer expectations only adds to the complexity, whereas failure to
for quick and convenient delivery have never been comply may result in fines, loss of home state
higher. This presents a tremendous opportunity for or federal licenses, and even possible criminal
wine sellers to expand their reach, develop their charges.
customer base and increase their sales online.
Wineries have a number of ways to handle this.
The marketplace is also likely to get more com- Some are able to build in-house teams that can
petitive in the new decade. In 2019, the Supreme manage compliance, though this can be expensive.
Court paved a path for expanded DtC shipping of Others rely on outside consultants to manage their
wine by retailers in its ruling in Tennessee Wine & compliance needs. But of course, automating com-
Spirits Retailers Association v. Thomas. While only pliance processes is the easiest way to ensure audit
15 states currently allow some DtC wine shipping success, limit compliance risk and reduce the over-
by out-of-state retailers, many see this decision as all administrative burden on shippers as state-by-
an opportunity to challenge old laws to expand this state tax rules, rates and forms change.
market. Litigation is ongoing in several states that
seemingly discriminate against out-of-state retailers Shipping wine can be complicated, and compli-
in regards to their ability to ship wine DtC – notably ance will never be a task that anyone relishes.
Illinois, Michigan, and Missouri. Much in the same However, as the direct-to-consumer channel grows
way that Granholm prompted a wave of statutory in its importance to the industry, it’s vital that
reform, observers expect consumers and advo- producers shore up their compliance strategy now
cates to push legislative changes across the coun- before the next round of state audit notices goes
try. While it may take a number of years for these out.
changes to take effect, expanded retail shipping is
something everyone should be watching closely. About the Author:

In the meantime, regulators have a vested inter- Alex Koral, is Senior Regulatory Counsel with
est in making sure all sellers—whether package Sovos, ShipCompliant. He actively researches
stores, direct wine shippers or otherwise—are in beverage alcohol regulations and market devel-
compliance with the law. That means ensuring they opments in order to inform development of Sovos’
are properly licensed, collecting all applicable taxes, ShipCompliant product and help educate the indus-
not overselling to individuals and preventing sales try on compliance issues. Alex has worked with the
to minors. So if other states see the Texas audits company since 2015, after receiving his J.D. from
bring positive results, they are likely to follow suit the University of Colorado Law School.
to uncover gaps in their own systems.

Overall, the DtC wine shipping market is still
young and regulators are still figuring out how to
manage it. As the market grows, we can expect this
trend of closer attention being paid to DtC ship-
ping to continue at the state levels, making now
the best time for wine producers to firm up their
direct-to-consumer compliance processes and over-
all channel strategy.

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