Multistate direct sales: A guide for wineries
Direct-to-consumer (DTC) shipping has become a critical sales channel for many wine producers. If you’re not already selling wine directly to consumers in multiple states, here’s what you need to know about shipping DTC and how to get started.
What is DTC shipping?
Direct-to-consumer wine shipping typically refers to sales of wine ordered online, by mail, or by phone. This blog post focuses on interstate DTC shipments, though wineries can and often do ship directly to consumers in their home state.
DTC shipping does not refer to the delivery of alcohol to consumers, by a producer or retailer, in the seller’s own vehicle or a vehicle owned by an employee or a third-party delivery service (for example, the kind of sales that took off during the COVID-19 pandemic, when states loosened restrictions on cocktails to go).
To make DTC shipments, you must:
Have the appropriate state’s direct-shipping license
Use a common carrier (FedEx, UPS) for delivery
Pay tax in the destination state
It’s also necessary to verify that you have the licenses and permits required by your home state and the Federal Alcohol and Tobacco Tax and Trade Bureau (TTB).
Where can wineries make DTC sales?
Currently, 48 states permit out-of-state wineries to ship direct to consumers in the state, as does the District of Columbia. DTC wine shipments are not permitted in Mississippi and Utah.
There’s a caveat in three of the 48 states mentioned above: Arkansas, Delaware, and Rhode Island allow wine shipments only if the customer ordered the wine on-site — for example, while visiting a winery in California. This is called on-site shipping. Consumers in these states cannot order wine for delivery by mail, phone, or online. More details can be found by clicking on the links provided above.
Additional restrictions may be in effect in other states. For example, New Jersey has a production cap on DTC sales; some states have reciprocal agreements; and there are dry areas in several states where all beverage alcohol sales are prohibited.
Why ship DTC?
While some consumers are content with the wine choices available at local markets, a growing number of wine drinkers are drawn to the greater selection of wine available online.
Of course, the pandemic also encouraged adoption of online shopping. Beverage alcohol ecommerce grew by more than 40% in 2020, according to drinks market analysis firm IWSR, and DTC wine sales made up much of that growth. In fact, online wine sales increased from about $1 billion in 2018 to more than $3 billion in 2021.
Such astronomical growth is hard to maintain, and indeed, preliminary data from IWSR suggests the total wine category by volume declined by about 2% year-over-year in 2022. However, the value of total wine sales over that same period grew by 1%, and sales of premium-and-above wine grew by 6%.
There’s potentially another perk of selling online: “Six in 10 online shoppers say they spend more on alcohol online than in-store,” according to IWSR research, and “46% of American consumers say they’re likely to treat themselves to better quality drinks at home.”
Wineries that tap into the online market therefore stand to gain, provided they comply with all necessary requirements. So, it’s good to understand what you’re getting into before you embark on selling DTC.
Once you’ve determined you can make DTC wine shipments into a state, consider the following before you start shipping direct to consumers in other states:
✓ Licensing requirements
✓ Volume and product limitations
✓ Tax requirements
Get the license you need to ship DTC
A license or permit is required to ship direct to consumers in most states; some states call them licenses, others refer to them as permits. Licenses are typically issued by the state department of alcohol beverage control (ABC), though in some states, like Georgia, licenses are issued by the department of revenue (DOR), or equivalent agencies.
Most states have a specific license for DTC wine shipments, but some, like Nevada, have the same license for wholesale shipments and direct-to-consumer shipments.
It’s also important to check whether, and how often, you need to renew your DTC wine shipping license. Licenses are renewed automatically in some states (for businesses in good standing). In other states, licensees must submit a license renewal request 30 or even 60 days before the license expires.
Determine how much — and what — wine you can ship into each state
Many states restrict the amount of wine one producer can ship to consumers in the state. For example:
In New York, wineries can ship up to 36 cases per person per calendar year
In Texas, wineries can ship up to nine gallons per person during a calendar month, not to exceed 36 gallons during any 12-month period, or 35,000 gallons in aggregate
In Vermont, wineries can ship up to 12 cases per person annually
Additionally, some states only permit DTC shipments of wine produced or solely owned by the licensee.
In Alabama, a direct wine shipper licensee may only ship wine:
“(i) produced by the direct wine shipper licensee;
(ii) produced by or for the direct wine shipper licensee under written contract, existing at the time of shipment, with another manufacturer of wine that holds a federal basic wine manufacturing permit; or
(iii) exclusively produced and bottled for the direct wine shipper licensee by a manufacturer of wine that holds a federal basic wine manufacturing permit ... ”
Kentucky’s requirements are slightly more relaxed: “A manufacturer applicant can only ship alcoholic beverages that are sold under a brand name owned or exclusively licensed to the manufacturer, and the beverages must be 1) produced by the manufacturer, 2) produced for the manufacturer under a written contract with another manufacturer, or 3) bottled for or by the manufacturer.”
The USPS isn’t allowed to ship alcohol, so wine is usually shipped through common carriers like FedEx or UPS.
Register for, collect, and remit the necessary taxes
Every state has some kind of tax on DTC shipments, and many impose multiple taxes on direct wine shipments:
Excise tax is based on volume (e.g., a gallon of wine, a liter of spirits). Some states require the seller to collect it from the end consumer; others prohibit the seller from passing it on to the end consumer.
Sales tax is applied at a specific rate based on the location of the consumer.
Markup taxes or fees on alcohol sales can vary, and go by many names (e.g., liquor enforcement fees, direct shipper fees), and can be in addition to a sales or excise tax, or in place of a sales or excise tax. Markup fees are typically passed on to the consumers, though that may not be required.
You generally need to get a tax permit before you can collect and remit taxes in a state.
Direct wine sellers often have to navigate a host of additional requirements, including:
Registering the business with the secretary of state
Registering products with the state
Paying a bond
Remitting a shipment report (a summary of invoices shipped within a certain reporting period)
Wine producers that rely on fulfillment houses to store and ship their products may also need to report which fulfillment houses they use. A growing number of states, including Louisiana and Tennessee, are implementing new obligations for fulfillment houses and/or the wineries that use them.
It’s critical for direct wine shippers to keep records that can be easily accessed in the event of an audit. Important information includes:
Tax payment records
Certificate of label approvals (COLAs)
Product registration records (federal and state)
Automating beverage alcohol compliance can help ensure you comply with licensing requirements and collect and remit applicable taxes in the states where you sell. Compliance software is particularly helpful for businesses that sell into more than five states (or plan to).
Interested in learning more? Watch our on-demand webinar, DTC compliance basics for any winery.
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