Bear with me on this post...it is going to be a little long and convoluted, but it is very important for small wineries in the United States, and in particular, Virginia. Let's start with a primer from Tom Wark at Fermentation:
Every state will eventually have to deal with the issue of how wineries sell their wine. The U.S Supreme Court said that sales of wine must be equal for in-state and out of -state wineries. In most states wineries are allowed to sell direct to retailers (method 2), yet out of state wineries are prohibited from doing this. Recently a federal judge in Washington State confirmed that the U.S Supreme Court's 2005 ruling on the need for equality in direct to consumers sales also applies to sales to the trade (retailers and restaurateurs).
That is an excellent summary of the Supreme Court case. Tom also provides a breakdown of the costs involved in the different ways small wineries can get their wine to consumers. Needless to say, selling directly results in significantly higher profits than selling through a distributor.
This is important to this blog, because all of this is coming to head in Virginia this Tuesday with Virginia House Bill 1288. From the article:
Last spring, the Federal District Court in Richmond struck down the right of Virginia wineries to serve as their own distributor and deliver wine in their own vehicles. The constitutional problem stems from allowing the Virginia wineries a right that is unavailable to out-of-state wineries. Approximately 90 percent of Virginia’s farm wineries use self-distribution, even if they also use a wholesaler to get their wines to market.
"Some wineries rely almost totally on this right for their sales," Osl told Ruff. "This is an industry that has been thriving and growing recently. These court rulings are going to negatively impact the industry, and immediately."
Rob Bell, R-Charlottesville, has also introduced winery legislation in the form of House Bill 1353, which would allow Virginia ABC stores to sell in-state and out-of-state wines. This is an important market for Virginia wines, as about 20,000 cases per year were sold through ABC stores before the court case also struck down this practice.
The full text of the bill is here. Summary is below:
Alcoholic beverage control; small wine producer distribution license. Creates a new small producer distribution license that authorizes the licensee to sell and deliver or ship by common carrier the wine produced by the licensee, in accordance with Board regulations, in closed containers, to (i) persons licensed to sell the wine at retail for the purpose of resale, § 4.1-326 notwithstanding, (ii) the Board, and (iii) persons in Virginia to whom alcoholic beverages may be lawfully sold. The bill also provides that shipments of such wine by common carrier to a retail licensee shall be (a) made in containers marked “Contains Alcohol,” (b) paid by the retail licensee in advance of the shipment, and (c) accompanied by an invoice in a form prescribed by the Board and that is available for examination by the common carrier. All deliveries of such wine by the licensee to persons in Virginia to whom alcoholic beverages may be lawfully sold shall be performed by the owner, or any agent, director, shareholder or employee of the licensee. The bill provides that, for purposes of § 4.1-234 and Chapter 6 (§ 58.1-600 et seq.) of Title 58.1, each delivery or shipment of wine by such licensee to a consumer or a retail licensee shall constitute a sale in Virginia. Licensees are required to collect the taxes due to the Commonwealth and remit any excise taxes monthly to the Board and any sales tax to the Department of Taxation. The bill defines "small wine producer" as any winery located outside the Commonwealth and licensed as such in the state where the winery is located and that is eligible for the federal tax credit pursuant to 27 CFR 24.278. The bill also grants these same privileges to certain winery and farm winery licensees. The bill sets the state license tax for this new license and requires the ABC Board to adopt emergency regulations to implement the provisions of the bill.
The new law would allow small wineries, both in state and out of state, to sell wine directly to consumers, wine shops, and restaurants in Virginia. Large wineries would still have to go through distributors, and nothing would prevent small wineries from using distributors if they desire.
On the surface this seems like a no-brainer. But, as Tom also points out in his post, the Virginia Wine Wholesalers Association (no website) doesn't like this, so they have introduced a counter-bill through Representative Daivd Albo.
Fortunately, the Virginia Wineries Association has launched an all out offensive to get people to call their Representatives and encourage them to support HB 1288. Not only have they sent out mail, they have also encouraged Virginia wineries to mail their customers and I also got a message from the Virginia Wine of the Month Club. They also have a fact sheet (PDF) that explains the issues in easy to understand terms.
This is good, whether or not it will be enough to overcome the money the distributors have remains to be seen.
Every state will eventually have to deal with the issue of how wineries sell their wine. The U.S Supreme Court said that sales of wine must be equal for in-state and out of -state wineries. In most states wineries are allowed to sell direct to retailers (method 2), yet out of state wineries are prohibited from doing this. Recently a federal judge in Washington State confirmed that the U.S Supreme Court's 2005 ruling on the need for equality in direct to consumers sales also applies to sales to the trade (retailers and restaurateurs).
That is an excellent summary of the Supreme Court case. Tom also provides a breakdown of the costs involved in the different ways small wineries can get their wine to consumers. Needless to say, selling directly results in significantly higher profits than selling through a distributor.
This is important to this blog, because all of this is coming to head in Virginia this Tuesday with Virginia House Bill 1288. From the article:
Last spring, the Federal District Court in Richmond struck down the right of Virginia wineries to serve as their own distributor and deliver wine in their own vehicles. The constitutional problem stems from allowing the Virginia wineries a right that is unavailable to out-of-state wineries. Approximately 90 percent of Virginia’s farm wineries use self-distribution, even if they also use a wholesaler to get their wines to market.
"Some wineries rely almost totally on this right for their sales," Osl told Ruff. "This is an industry that has been thriving and growing recently. These court rulings are going to negatively impact the industry, and immediately."
Rob Bell, R-Charlottesville, has also introduced winery legislation in the form of House Bill 1353, which would allow Virginia ABC stores to sell in-state and out-of-state wines. This is an important market for Virginia wines, as about 20,000 cases per year were sold through ABC stores before the court case also struck down this practice.
The full text of the bill is here. Summary is below:
Alcoholic beverage control; small wine producer distribution license. Creates a new small producer distribution license that authorizes the licensee to sell and deliver or ship by common carrier the wine produced by the licensee, in accordance with Board regulations, in closed containers, to (i) persons licensed to sell the wine at retail for the purpose of resale, § 4.1-326 notwithstanding, (ii) the Board, and (iii) persons in Virginia to whom alcoholic beverages may be lawfully sold. The bill also provides that shipments of such wine by common carrier to a retail licensee shall be (a) made in containers marked “Contains Alcohol,” (b) paid by the retail licensee in advance of the shipment, and (c) accompanied by an invoice in a form prescribed by the Board and that is available for examination by the common carrier. All deliveries of such wine by the licensee to persons in Virginia to whom alcoholic beverages may be lawfully sold shall be performed by the owner, or any agent, director, shareholder or employee of the licensee. The bill provides that, for purposes of § 4.1-234 and Chapter 6 (§ 58.1-600 et seq.) of Title 58.1, each delivery or shipment of wine by such licensee to a consumer or a retail licensee shall constitute a sale in Virginia. Licensees are required to collect the taxes due to the Commonwealth and remit any excise taxes monthly to the Board and any sales tax to the Department of Taxation. The bill defines "small wine producer" as any winery located outside the Commonwealth and licensed as such in the state where the winery is located and that is eligible for the federal tax credit pursuant to 27 CFR 24.278. The bill also grants these same privileges to certain winery and farm winery licensees. The bill sets the state license tax for this new license and requires the ABC Board to adopt emergency regulations to implement the provisions of the bill.
The new law would allow small wineries, both in state and out of state, to sell wine directly to consumers, wine shops, and restaurants in Virginia. Large wineries would still have to go through distributors, and nothing would prevent small wineries from using distributors if they desire.
On the surface this seems like a no-brainer. But, as Tom also points out in his post, the Virginia Wine Wholesalers Association (no website) doesn't like this, so they have introduced a counter-bill through Representative Daivd Albo.
Fortunately, the Virginia Wineries Association has launched an all out offensive to get people to call their Representatives and encourage them to support HB 1288. Not only have they sent out mail, they have also encouraged Virginia wineries to mail their customers and I also got a message from the Virginia Wine of the Month Club. They also have a fact sheet (PDF) that explains the issues in easy to understand terms.
This is good, whether or not it will be enough to overcome the money the distributors have remains to be seen.
posted by allan at 12:11 AM
1 Comments:
Nice...
I interviewed Delegate Albo yesterday as well as the legislative aide Delegate Saxman who introduced 1288. It's amazing what money from the wholesaler lobby will do to your brain.
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