Direct Shipment of Wine to Massachusetts Set to Begin in 2015

Saturday, July 12, 2014


Well, the day we thought would never come may have finally arrived: Governor Patrick signed the FY2015 Massachusetts budget and it includes provisions to allow the direct shipment of wine from out of state wineries to Massachusetts residents.


If all goes well, shipments are scheduled to be allowed starting as early as January 1st, 2015.

But if you've been a Red Sox fan prior to 2004 you know not to count a victory until it's a done deal. Direct shipment will only be a reality when we're able to successfully order wine from out of state wineries and have it show up at our home or office without incident.

What needs to happen in order for that to actually occur? A few more things.


Permits


First, the state needs to set up the system whereby wineries obtain shipping permits.

One area of concern as this legislation was being discussed is that the permitting costs and application/reporting requirements would be so onerous that small wineries (that is to say: the ones we care about because they're not distributed here) wouldn't go through the hassle of obtaining a permit.

Those fears appear unfounded. The application fee is $300 and the annual fee is $150 which is a little high, but not out of line with other states. Keep in mind that wineries have to pay these fees for each and every state they ship into.

We haven't seen the application yet but the annual reporting requirement (as opposed to monthly) is quite reasonable.

Taxation


I believe the legislation was designed to tax shipments at the current prevailing rates. Right now, that means wineries would need to remit excise tax but not sales tax since wine sold at retail is currently excluded from sales tax. That means that no sales tax needs to be collected on shipments.

This is favorable for wineries and wine enthusiasts on two fronts.

First, the current excise tax on table wine is $0.55 per gallon. That's about $0.10 per 750ml bottle which is peanuts. If things stay this way, Massachusetts will go from being one of the least friendly states for receiving wine to one of the most friendly.

Second, some states effectively charge an import tax on wine. If Massachusetts followed New Hampshire's model, wine shipments direct to consumers would be taxed (whereas wine purchases from the state stores are not taxed). We'll keep an eye on this aspect of the issue as things firm up.


FedEx/UPS Fleet Licensing


Perhaps the biggest remaining question is FedEx/UPS fleet licensure. Currently, some small out of state wineries that aren't distributed here already have permits to ship. But in practice they can't because FedEx/UPS won't accept shipments here. They won't accept shipments here because they have to get a $200 permit for every truck that transports alcohol.

A Boston Globe editorial picked up on this issue and notes that legislators are considering addressing this issue concurrent with the passage of the direct shipping. Worst case, FedEx and UPS would have to pay the per-truck fees which would mean higher shipping costs. It would seem that they'd be incented to get the permits one way or another since the potential market for shipments is likely going to be much more compelling for them now.

HB 3154 is the one to watch.

Retailer Shipments


The biggest remaining limitation is the lack of inclusion in out of state retailers in the direct shipping provisions. As wine enthusiasts we'll still be barred from gaining access to imported wines since the laws only allow bonded wineries to ship direct.

Hopefully this can be considered in future legislation since it would seem discriminatory that Massachusetts retailers and wineries from any state can ship to Massachusetts residents yet out of state retailers cannot. Strange, right?


Other Remaining Issues


Other questions remain. What about craft beer and spirits? Will we see improved access to these products which are as regionally specific and artisinal as wine?

What about Massachusetts retailers who are still barred from shipping out of state? And are they really permitted to ship in-state? Or is that just something that's been allowed for a while without it being officially on the books so as to prevent a commerce clause violation?

What about Massachusetts wine collectors who are still barred from shipping to out of state auction houses?

Hopefully these issues can be reviewed with fresh eyes in light of this winery direct shipment progress.

Conclusion


For Massachusetts wine enthusiasts this is a day to celebrate. These changes should allow us to purchase wines from out of state wineries large and small that we have interest in for exploration or recurring sales.

It should also mean that when we're travelling and visiting a tasting room it shouldn't be an issue shipping wine home.

And when someone wants to send a bottle of wine as a thank you from a special winery that shouldn't be an issue either.

This is great progress.

But issues remain and I hope they can be considered in the coming years. For now let's take a moment to acknowledge the hard work of those that made this possible. And look forward to making a closer connection with the wineries across the country we want to get to know better.

Soon, we'll move on to complaining about the high costs of shipping. :)

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