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Utah’s unusual twist on DTC wine subscriptions – Wacky Tax Wednesday

  • Oct 14, 2020 | Gail Cole

wine-bottle-in-a-box

Every year in October, I tell myself this is the year I’ll be on top of holiday gift giving. 

Wine subscriptions have saved my bacon. No longer do I regularly pay through the nose to get gifts delivered across the country in time for a holiday or special occasion, which given my past is inevitably the next day. I simply hop online, place an order, and sit back as far-flung family members receive email notifications of wine to come. Wine subscriptions are a procrastinator’s salvation — so long as recipients don’t live in Utah.

Utah prohibits direct-to-consumer (DTC) shipments of wine and other alcohol. However, earlier this year, the enactment of House Bill 157 loosened restrictions. A bit.

HB 157 doesn’t permit DTC wine shipments. Instead, it requires the Utah Department of Alcoholic Beverage Control (DABC) to establish and administer a wine subscription program that “shall permit an individual to subscribe to a wine subscription that a wine subscription business sells or offers for sale by enrolling in the wine subscription program in a manner the department prescribes.”

The new law allows individuals to:

  • Authorize the DABC to purchase a wine subscription in their name
  • Pay the DABC in a manner prescribed by the DABC
  • Designate the state store or package agency where the individual would prefer to collect the wine

After receiving such a request from an individual, the DABC would:

  • Purchase a wine subscription on behalf of the individual
  • Designate the department warehouse to which the wine subscription business sends the wine shipment
  • Deliver the purchased wine to the appropriate state store or package agency
  • Notify the individual when wine purchased through the subscription program is ready to be collected

The new system doesn’t offer the convenience of traditional wine clubs, which typically deliver wine to the recipient’s doorstep. Utah’s new process is unlikely to be quick. However, it does potentially bring Utah a step closer to allowing DTC wine sales.

During a hearing for the bill in February, Tyler Rudd of Wine Institute expressed concerns. Wine Institute supports DTC shipments and hopes Utah will eventually embrace the practice, as most states have, because it helps small wineries reach more consumers. Yet Rudd said small wineries were unlikely to participate in Utah’s system due to its cumbersome nature and high cost.

Utah imposes significant mandatory markups on sales of liquor in the state. Like other sales of wine in Utah, the markup for wine sold through the department’s subscription program will be “not less than 88% above the landed case cost to the department.” According to Rudd, the 88% markup would make many bottles cost prohibitive. In fact, he said a similar program in Pennsylvania was a bust; consumers didn’t use it because of the high costs associated with it.

Despite Rudd’s reservations, HB 157 has been enacted. During the February hearing, lawmakers said it offers an “initial foray” into wine clubs, giving Utahns an opportunity to obtain wine that isn’t generally available in DABC stores. 

Presumably, once the program is up and running, an out-of-state individual could purchase a wine subscription from the DABC on behalf of a Utah resident. However, that’s not specified in HB 157, and I could find nothing about the new wine subscription program on the DABC website.

Bringing alcohol into Utah

HB 157 also removes the requirement for a person moving to Utah from outside the state to obtain DABC approval before moving any liquor into the state and paying the department “a reasonable administrative handling fee.”

And it removes the requirement that a person who inherits liquor located outside of Utah obtain DABC approval before bringing it into the state.

With the holidays approaching, I’m starting to think about sending wine to friends and family far and wide. If you’re like me, you may want to know which states allow breweries, distilleries, and wineries to ship directly to consumers. Take my advice, and don’t wait too long.

Cheers.


Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Gail Cole
Avalara Author Gail Cole
Gail Cole is a Senior Writer at Avalara. She’s on a mission to uncover unusual tax facts and make complex laws and legislation more digestible for accounting and business professionals.