Ship Compliant Wine Blog

Subscribe to Ship Compliant Wine Blog feed
Updated: 9 hours 48 min ago

Christmas in July: Wineries Can Avoid UPS Holiday Surcharge With Early Direct-to-Consumer Sales

Tue, 07/18/2017 - 11:00

Wineries shipping direct-to-consumer via UPS may be affected by a new holiday shipping surcharge.

For Direct to Consumer (DtC) wineries, the hot summer months trend to slower sales. Instead, it is the cooler and more festive winter months when DtC sales really peak. However, a recent announcement by UPS regarding a plan to add delivery surcharges this November and December may affect how wineries should plan for the holiday season.

What Did UPS Announce?

According to the June announcement, these shipping surcharges will apply:

  • November 19 — December 2: an additional $0.27 will be applied to packages shipped through UPS Ground Residential.
  • December 17 — 23: a $0.27 surcharge will again be applied on UPS Ground shipments; an additional $0.97 on both UPS 2nd Day and 3rd Day Air shipments; and an additional $0.81 charge on UPS Next Day Air.

The additional charges will also apply on all Large Packages and packages that exceed maximum size limits from November 19 through December 23.

According to the announcement, these additional rates are designed to mitigate the extra costs that the shipping company assumes during the holiday season. In 2016, UPS had an average daily volume of over 30 million packages during the holiday season. This is compared with an average daily volume of around 19 million packages the rest of the year.

To accommodate this significant increase in daily shipping, UPS hires about 95,000 seasonal employees. The surcharges, therefore, more reflect the great success of the online retail industry as much as the very real costs of home deliveries.

Towards the end of June FedEx announced that it does not have any current plans to institute a similar holiday surcharge. However, FedEx faces the same pressure as UPS to meet the holiday surge in shipping, resulting in much greater operational costs. So it is possible that FedEx may change its mind between now and the holidays and establish surcharges.

What Does This Mean For DtC Wineries?

Since these surcharges won’t apply until much later this year, there is plenty of time to anticipate and plan for their effects. The biggest consideration, really, is how much these surcharges may affect your bottom line. The answer depends on how you charge for shipping costs.

If you charge customers with the actual cost of shipping, then they’ll see a slight bump for shipments in November and December. Shipping costs for DtC wine are generally on the more expensive side (because of the weight of wine), so a 27 or 97 cent bump may not be too noticeable.

If you provide a flat fee for shipping, you may choose to absorb the extra costs. Or, you may decide to raise that fee for certain weeks later this year.

Direct-to-consumer wineries are largely prohibited from offering any free incentives to customers, which includes free shipping. But many wineries still do offer vastly reduced or merely nominal shipping charges. In which case the concern of whether the winery will take on the cost of the surcharge itself would apply.

Alternatively, encouraging customers to make their holiday purchases earlier in the year — say in October — could be the best way to go all around. Everyone would avoid the surcharge fee, consumers could assure that they’ll get their holiday wine in time, and UPS would benefit by having a reduced package load at what is otherwise a very busy time of year.

 

Download the 2017 DtC Wine Shipping Report for a comprehensive view of the direct-to-consumer wine shipping market.

The post Christmas in July: Wineries Can Avoid UPS Holiday Surcharge With Early Direct-to-Consumer Sales appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

BevAlc Roundup | U.S. Distillers Brace For Possible EU Backlash Against Bourbon, Amazon Isn’t Developing Its Own Wine…Yet, and “The Sideways Effect”

Mon, 07/17/2017 - 14:00

Today’s roundup covers U.S. distillers brace for possible EU backlash against bourbon, Amazon isn’t developing its own wine…yet, and ‘The Sideways Effect’: how a wine-obsessed film reshaped the industry. Enjoy!

 

LegislativeUpdate

 

Approaches to Spirits Direct Shipping | Today nearly every state—plus the District of Columbia—allows wineries to ship wine across state lines directly to in-state consumers. The same cannot be said for spirits. Alcohol Law Advisor

U.S. Distillers Brace For Possible EU Backlash Against Bourbon | American distillers say they are concerned about potential EU tariffs against bourbon, if the U.S. imposes a tariff on steel. NPR

Advocates See a Chance to Raise Mass. Alcohol Tax | As Massachusetts lawmakers debates new taxes on marijuana of anywhere from 8 to 28 percent, public health advocates say there’s another drug that needs a tax hike: alcohol. Boston Globe

 

IndustryUp

 

New Brewer Seal Helps Craft Beer Stand Out From The Crowd | Craft brewers can better distinguish their products from major producers’ with the new Independent Craft Brewer Seal. ShipCompliant

Amazon Isn’t Developing its Own Wines…Yet | Amazon’s role is to give wineries, like King Estate, “an innovative format to launch new brands and reach more customers,” they said. TechCrunch

The Companies Want to Help You Discover (and Afford) Craft Wine | Boutique wineries across the country are producing small batches of everything from pinot noir to chardonnay, but it can be difficult for us twenty-somethings to find – let alone afford – those wines . . . Online platforms like Winestyr and Glassful are trying to change that. CNN

 

JustFun

 

‘The Sideways Effect’: How A Wine-Obsessed Film Reshaped The Industry | A dozen years after Sideways, pinot noir has become a mainstay of the California wine industry, and winemakers credit the film with bringing deserved attention to the varietal, calling it “The Sideways Effect.” NPR

Whisky-Fueled Car Makes First Journey | The world’s first car running on a bio-fuel made from whisky residue has had its first successful test drive. BBC

How Ancient Humans Got Drunk | New book recreates the world’s oldest known beers and wines, and argues being tipsy played a key part in developing language, art and religion. Daily Mail

The post BevAlc Roundup | U.S. Distillers Brace For Possible EU Backlash Against Bourbon, Amazon Isn’t Developing Its Own Wine…Yet, and “The Sideways Effect” appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

New Brewer Seal Helps Craft Beer Stand Out From The Crowd

Wed, 07/12/2017 - 07:00

Craft brewers can better distinguish their products from major producers’ with the new Independent Craft Brewer Seal.

A funny scene played out for me last week, as I was buying beer for a 4th of July party: a couple were having trouble deciding what beer to buy. One of them picked up a six-pack only for the other to reject it — it wasn’t a craft beer, as they wanted; it was produced by one of the major beer makers. They moved on to the next cooler and found an acceptable choice. As they walked away, I just silently shook my head and chuckled — that choice too was owned by one of the major beer conglomerates.

I could see why they were confused. The brand was an established craft brewer, but it had been purchased recently and was no longer independently owned. There was nothing on the label to indicate that it wasn’t craft — unless you were engrained in the beer industry, you’d likely never know.

This kind of confusion may soon be a thing of the past. In late June, the Brewer’s Association (BA) announced the release of a brand new Independent Craft Brewer Seal. Qualifying brewers will be able to attach a sticker to their bottles and cans to certify the provenance of their beer. The seal depicts an upside down beer bottle and the words “Independent Craft.”

The seal is currently freely available to all qualifying brewers. To qualify, a brewer must:

  1. have a valid Brewer’s Notice from the Trade & Tax Bureau (TTB)
  2. meet the Brewer Association’s definition of a craft brewer*
  3. sign a licensing agreement with the BA.

Membership with the BA is not a requirement, though the BA has indicated that a nominal fee to use the seal may be applied to non-members in the future.

Notably, the BA has received written confirmation from the TTB that a revised Certificate of Label Approval (COLA) is not required when the only substantive change to a beer label is the addition of the Independent Craft Brewer Seal.

The intent behind this new seal is to provide clarity for consumers as they navigate increasingly complicated beer aisles.  Craft brewers will benefit from using the seal by having their products more easily distinguishable from the large producers.  According to the BA, there are well over 5,000 craft breweries currently in operation, each producing several brands. The confusion only increases when a major producer purchases an established craft brand.

By using the seal, craft brewers can better distinguish their products from major producers’ and benefit from the potential increased sales they’ll receive from craft-friendly customers.

This appears to have happened to those two customers who were unaware that a brand they enjoyed was no now longer deemed an independent craft brewer according to the BA. If they so valued buying from an independent craft brewer, that brewer likely would have benefited from having this seal available.

*According to the BA, a “craft brewer” is “small, independent, and traditional.” Meaning, it produces 6 million barrels or less annually; no more than 25% of the ownership or controlling stake in the business is held by a beverage alcohol industry member who is not itself a craft brewer; and it derives the flavors for its beer from the fermentation of traditional or innovative ingredients (i.e. is not a fermented malt beverage).

 

Want a better understanding of how beer can be sold in specific states? Take a look at our Brewer’s Guide to Compliance!

The post New Brewer Seal Helps Craft Beer Stand Out From The Crowd appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

Colorado Continues to Update Its Reporting Requirements for DtC Sales

Wed, 07/05/2017 - 12:00

Starting July 1, 2017, every sale made to a Colorado resident must be accompanied by a notice indicating the Colorado resident’s obligation to pay the tax due.

New notice and reporting requirements for Colorado sales and use tax were set to come into effect on July 1, 2017, which could have a big impact on wineries making Direct to Consumer (DtC) sales into the state. This post from last year provides some background on the issue.

To briefly summarize, Colorado passed a rule in 2010 requiring any business making retail sales into the state who were not also collecting and remitting sales tax to instead issue

  1. a notice to their customers indicating the customer may owe use tax on the order
  2. an annual reminder notice to their customers reminding them of purchases they made, and
  3. an annual report to the Colorado Department of Revenue (DOR) indicating all sales the business made to Colorado residents.

The rule was held up by challenges in court until last year when the 10th Circuit Court ruled it was valid, allowing the DOR to enforce the rule.

An Update on the DtC Exemption

Last year, when we first reported on this rule, there was a big open question about how to approach sales made at the wholesale level. This was a critical question because the rules contain an exception for businesses that make less than $100,000 in annual sales into Colorado.

The DOR is still drafting final rules, which should include a definitive definition of which sales count towards the notice and reporting requirement. However, in a set of emergency rules published on June 30, the DOR has indicated that only final, retail sales made to an end consumer are affected by this rule. Though this is not yet a finalized set of rules, this does signal how the DOR intends to interpret the rule.

For a winery, this means that only its DtC sales will count towards the $100,000 threshold. Any sales made to a Colorado distributor within the three-tier system are entirely outside of the scope of this notice and reporting rule. We have requested that the DOR clearly spells this out in their final rule-making so that DtC wineries can remove all doubt on this issue.

What Does This Mean For Me?

If you made less than $100,000 in DtC sales last year, and reasonably expect to make less than $100,000 in DtC sales in this year (and future years — your expected sales should be reassessed annually), you fall into the exception area, and will not trigger the notice and reporting requirements.

If you are making over $100,000 in DtC sales in Colorado, the next consideration will be to weigh your options. These notices and reports are only required on businesses that are not themselves collecting and remitting sales tax to the state. This is notable for wineries selling DtC, as Colorado is one of the few states that does not make collecting and remitting sales tax a responsibility under your DtC license.

Wineries may want to consider becoming a sales tax collector for Colorado sales[CS1] . The process for collecting and remitting sales tax may be much less onerous than that for issuing all the notices and reports (remember, you will need to send out reports to your Colorado purchasers who bought more than $500 in goods annually). Plus, assuming this responsibility would relieve your Colorado consumers of their burden to pay use tax.

Becoming a sales tax collector will require registering with the state (you can apply for a “Retailer’s Use Tax Account” as an out of state seller), and filing the DR 0173 Retailer Use Tax Return. ShipCompliant clients already have the required Colorado sales and use tax return available in their account.

If you choose not to become a sales tax collector in Colorado, you will need to comply with the notice and report requirements. The DOR has not yet released exact details on what the reports will look like. But the annual report to Colorado purchasers will be due by January 31, 2018 and the annual report to the DOR will be due by March 1, 2018.

Starting July 1, 2017, every sale made to a Colorado resident must be accompanied by a notice indicating the Colorado resident’s obligation to pay the tax due. This notice must be presented to the purchaser at the time of purchase — though the DOR is still considering whether just including the notice with an invoice is allowable.

This notice must contain notice that:

  •       you have not collected sales tax;
  •       the purchase is not exempt merely for being a remote sale;
  •       the purchaser then has the duty to report and pay tax to the DOR;
  •       you will provide them with an annual summary of their purchases;
  •       they should go to the DOR’s website for more information; and
  •       you will be reporting to the DOR on the total dollar amount of their purchases.

More information about this notice can be found on the Colorado Department of Revenue website, including a copy of the emergency rules here.  We will continue to post updates on these and other states’ rules changes on the ShipCompliant blog.

 

All these state requirements bogging you down? Take ShipCompliant for a test drive with a free demo.

The post Colorado Continues to Update Its Reporting Requirements for DtC Sales appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

BevAlc Roundup | Pennsylvania to Require Quarterly DTC Reporting, Craft Fights Back Against “Big Beer” With Independent Seal, and UB40 Is Now Selling Wine … Red Red Wine

Mon, 07/03/2017 - 15:00

Today’s roundup covers Pennsylvania’ new DTC reporting requirement, craft beer’s independent seal, and the band UB40 is now selling wine … red red wine. Have a great July 4th holiday!

LegislativeUpdate

Pennsylvania To Require Quarterly Reporting for Winery DtC Starting July 31 | On June 7, 2017 the Pennsylvania Liquor Control Board (PLCB) sent out notices to Direct Wine Shipper licensees informing them of upcoming quarterly reporting requirements. ShipCompliant

FDA Begins Winery Inspections | Wine law specialists have warned since 2011 that the U.S. Food & Drug Administration (FDA) would eventually start inspecting wineries for compliance with the Food Safety Modernization Act. This spring those inspections started in earnest. Wines & Vines

Craft Brewers Fear Last-Minute Regulations in Budget | Wisconsin’s craft brewers and wineries are banding together to head off a plan they fear could force them out of business by prohibiting them from selling their beer and wine where it is made. Milwaukee Journal Sentinel

Texas Wine Industry Debates Labeling Laws | State law in Texas requires just 75% for state appellation labeling, but lawmakers had introduced legislation that would have changed that to 100% effective Sept. 1. Wines & Vines

Like a Lot of Washington, Beer Industry’s Bill on Hold Until Bigger Pieces Are Moved | The beer industry, from the smallest craft brewers to the giant Anheuser-Busch InBev, is behind a long-awaited rewrite of the federal tax code on beer. St. Louis Dispatch

If 3.2 Beer Disappears From Grocery Stores, Utah Liquor Stores Couldn’t Carry Lost Brands | What happens in two years, if the availability of 3.2 percent beer decreases and only higher-alcohol beers are available from big brands like Anheuser-Busch and MillerCoors. The Salt Lake Tribune

IndustryUp

DtC Sales Extend National Reach | Direct-to-consumer (DtC) shipments continue to rise on the back of steady growth in overall U.S. wine sales, with Napa Valley continuing to be a dominant player in the channel. Wines & Vines

Smaller Brewers Relied on RateBeer.com. Now Bud’s Maker Owns a Stake | The constant worry of being crowded out by the big brands, like Anheuser-Busch InBev, the world’s largest brewer, intensified this month when it was revealed that ZX Ventures, an incubator operated by A.B.I., had purchased a minority stake in a popular beer review website, RateBeer.com. The New York Times

Craft Fights Back Against “Big Beer” With Independent Seal | The US Brewer’s Association (BA) has introduced a new seal to indicate craft beers that have been brewerd by independent brewers in response to the number of big beer owners snapping up craft breweries and releasing their own “craft beer” brands. The Drink Business

Poll Findings Show “Independent/Independently Owned” Matters in Craft Beer Purchase Decisions | Does independence matter? You bet it does. A recent survey firmly illustrates this point. Brewers Association

 

JustFun

That “Local” Beer Might Be Made In Another State — or Country | Consumers all over the world are having a hard time knowing where their beer is brewed. Market Watch

Today’s Whiskey Is Not Yesterday’s – Thank Goodness | Whiskey-makers and their public relations companies regularly boast of the ancient heritage of their whiskies. . . . Baloney. American Spectator

The Band UB40 Is Now Selling Wine … Red Red Wine | When reggae band UB40, they of the 70 million records sold, ask if you’d like to taste their Red Red Wine, the answer is obviously/immediately/hilariously yes. LA Weekly

The post BevAlc Roundup | Pennsylvania to Require Quarterly DTC Reporting, Craft Fights Back Against “Big Beer” With Independent Seal, and UB40 Is Now Selling Wine … Red Red Wine appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

Direct-to-Consumer Wineries Must Provide More Specifics On Wines Shipped Into Maryland

Wed, 06/28/2017 - 11:31

Wineries that sell direct to consumer (DtC) into Maryland will have a new requirement for new and renewed applications starting July 1, 2017.

As a result of a bill signed by Governor Larry Hogan on May 4, 2017, wineries must now submit a list of every wine they intend to sell DtC. Maryland has updated its application form for new and renewing DtC wine applicants, which now asks for an attached list of wines to be shipped into Maryland. On the form, it asks for each wine to be identified by brand name and type of wine.

This list must be included with every new and renewed license application. Failing to include such a list will result in a rejected application. Licenses must be renewed every year, so if you intend to renew your license after July 1, but fail to include a list of wines you will sell, that could result in a gap in your license. This in turn would make it impermissible to sell wine DtC.

When submitting a new or renewed license application, the list should only include wines that the winery is currently capable of selling, and not those that the winery intends to sell at a later time in the year. Wines that come up for sale later in the year should be submitted to the state liquor board at that time as an amended list.

That is, if you intend to bottle and sell a 2016 vintage later this year, but at the time of submitting your license application only the 2015 vintage is available, you should only list the 2015 vintage. When the 2016 vintage does become available for sale, then you will be required to submit an updated list that includes the 2016 vintage.

 

Not using ShipCompliant yet? Take a test drive with a free demo.

The post Direct-to-Consumer Wineries Must Provide More Specifics On Wines Shipped Into Maryland appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

Pennsylvania To Require Quarterly Reporting for Winery DtC Starting July 31

Tue, 06/27/2017 - 15:27

Wineries shipping direct-to-consumer must now file quarterly reports.

On June 7, 2017 the Pennsylvania Liquor Control Board (PLCB) sent out notices to Direct Wine Shipper licensees informing them of upcoming quarterly reporting requirements. Under their license, Direct Wine Shippers are required to file in the PLCB+ system quarterly reports describing their sales of wine direct to Pennsylvania residents in the previous quarter.

The reports are due on the last day of the month following each quarter. Two separate reports must be filed:

  1. Sales by Product report, detailing total sales of each separate product sold into Pennsylvania in a quarter (note, the PLCB states that each individual label, vintage, and size would be considered a separate product) and
  2. Sales by ZIP code report, detailing total sales of all wine products sold in each individual ZIP code area.

The first due date for these reports is July 31st. This first report, however, is unique, in that the PLCB is requiring Direct Wine Shippers to report all sales from each previous quarter in which they had sales. That is, a winery may have been making sales since September 2016; reports of these sales must be entered by July 31st. Thereafter, only sales from the previous quarter will be required.

Pennsylvania has made it imperative to file all data for the previous year’s sales. Failing to fully comply with the reporting requirement may result in the state rejecting your renewal application.

ShipCompliant customers can now access these quarterly reports in their account.  Stay tuned for more detailed updates about this and other state requirements.

 

All these state requirements bogging you down? Take ShipCompliant for a test drive with a free demo.

The post Pennsylvania To Require Quarterly Reporting for Winery DtC Starting July 31 appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

BevAlc Roundup | Massachusetts Sales Tax, Wine Summit Recap, and The Next Big Beer Style

Mon, 06/19/2017 - 16:00

Today’s roundup covers what’s next for Massachusetts sales tax, The ShipCompliant Wine Summit recap, and the next big beer style, according to brewers. Have a great week!

LegislativeUpdate

TTB Newsletter | Top news includes the appointment of Karen Welch as the new director of our International Affairs Division, an overview of TTB’s organizational structure, and a reminder to complete the TTB’s 2017 satisfaction survey. TTB

Alabama ABC Board Approves Increase in Liquor Markup | The Alcoholic Beverage Control Board approved an increase of 5 percentage points in the markup on liquo, a move that will add about a dollar to the price of a $30 bottle. AIL.com

Illinois Court Scores One for Three-Tier System | A judge for the US DIstrict Court of Illinois sided with the state and its wholesalers in dismissing a case that challenged the state’s direct-to-consumer shipping laws. Dram Shop Expert

Leave Cookies? Pay Sales Tax, Says Massachusetts | Massachusetts just devised a fairly brilliant scheme for collecting sales tax from out-of-state sellers. Obsequium

Small Beer Makers Say Bill Creates “Extortion Fee” As They Seek Abbott’s Veto | Craft brewers want Gov. Greg Abbott to veto a bill that would put limits on some regulatory relief that benefits them. Texas Tribute

IndustryUp

Most Consumers Judge a Craft Beer By Its Packaging, Nielsen Finds | The craft beer shelf is getting more crowded with 1,800 new product launches in the category last year, making packaging and labeling one of the primary purchase influencers for craft beer consumers, according to Nielsen. BeverageDaily.com

Wine Summit Re-cap: Direct-to-Consumer State Updates and Industry Trends | Change was in the air last week at the 2017 GCS-Wine Summit (formerly known as DIRECT), and not merely because it was held for the first time in the Sonoma Valley. Among all of the presentations, there was a common thread that the Direct to Consumer (DtC) wine market is maturing and facing new risks — but is also presented with new rewards. ShipCompliant

Slow and Steady Wins the Direct Shipping Map | When it comes to direct-to-consumer (DtC) shipping news, opening Pennsylvania to wine deliveries is a tough act to follow. But a variety of speakers used ShipCompliant’s annual conference, held Thursday at the DoubleTree Sonoma in Rohnert Park, to update wine sales and compliance specialists on the progress of this and other DtC initiatives. Wines & Vines

Why Beer Taxes Are $1.29 in Tennessee but Just 2 Cents in Wyoming | Taxes are the single-largest component of beer’s cost, sometimes reaching up to 40%, according to the Beer Institute, a trade group. Money

DtC Sales Extend National Reach | Direct-to-consumer (DtC) shipments continue to rise on the back of steady growth in overall U.S. wine sales, with Napa Valley continuing to be a dominant player in the channel. Wines & Vines

JustFun

Wine Labels are Tricking You Into Spending More on Wine | A new study from researchers at the University of Adelaide found that vivid, elaborate descriptions make us enjoy cracking into a bottle more than we do when they’re absent. ShortList

Scientists Use Glowing Dyes to Spot Fake Whiskey | This technique can even identify the drink’s origin, blend, age, and taste. Popular Science

We Asked 13 Brewers: What’s the Next Big Style? | When it comes to craft beer, there’s no getting around the fact that IPAs reign supreme. But what’s next? Vinepair

The post BevAlc Roundup | Massachusetts Sales Tax, Wine Summit Recap, and The Next Big Beer Style appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

Wine Summit Re-cap: Direct-to-Consumer State Updates and Industry Trends

Wed, 06/14/2017 - 16:26

Change was in the air last week at the 2017 GCS-Wine Summit (formerly known as DIRECT), and not merely because it was held for the first time in the Sonoma Valley. Among all of the presentations, there was a common thread that the Direct to Consumer (DtC) wine market is maturing and facing new risks — but is also presented with new rewards.

Before I continue with a review of the presentations and key takeaways from the conference, I want to extend a huge thank you from Sovos (and from me personally) to all of the attendees and presenters. It’s always hugely gratifying to see the community engagement that this industry engenders.

Building on 2016’s Success

The day started with a broad, market wide overview from VP of Marketing for Sovos, Eric Olson. Eric remarked on the banner year that the DtC market enjoyed in 2016, but how that continuing success brings with it certain dangers. These dangers aren’t just limited to increased regulatory scrutiny and complaints from market competitors, but also the general stagnation that success can bring.

Eric anchored his speech around Darwin Smith, a former executive of Kimberly-Clark, who transformed the paper company through a vision of strategic dynamism that required rethinking the company’s basic business model. The willingness to shed old ideas and embrace new models is a requirement for industries on the move. This is certainly true of the wine industry. Eric noted that while change may be difficult and require hard decisions, taking advantage of the resources available eases the process, and can lead to even bigger and better opportunities.

Steve Gross’s Annual State of the Wine Industry

Following Eric was the State of the Wine Industry regulatory update by the inimitable Steve Gross of the Wine Institute. There were big changes to report, keystoned by a review from Pennsylvania, a new DtC state in 2016.

At last year’s DIRECT conference, it was late breaking news that Pennsylvania had passed legislation to allow DtC wine sales. By now we’ve seen the state rapidly become a major player in the market — but there was still news, as the state announced upcoming reporting requirements wineries will need to comply with.

Regulators Keeping Their Eye on States

While a new market, Oklahoma, was announced this year, its revelation was tempered by a far-off beginning date (October 2018) and some kinks that need to be worked out. However, the rest of Steve’s presentation was largely focused on the maturation of the market and the changes it will bring.

With a few exceptions, DtC wine has seemingly conquered the American landscape. This raises cries for review and even retrenchment. Regulators are looking at the market, and want to better ensure that it is compliant; certain businesses, responding to the wine industry’s DtC success, seek new restrictions.

Steve noted that we see this in states creating new reporting requirements, like South Dakota needing tracking numbers; in states imposing restrictions on third party providers, like in Illinois; and in a number of states that are looking to burden common carriers with new reports and threats of fines and felony charges for improper shipments.

The restrictions on third parties was especially prevalent, as there appears to be a growing concern among states regarding non-licensed entities participating in the DtC market. The fight is on to ensure that both bad actors get threshed out, while the restrictions imposed don’t improperly hamper the good actors as well.

It was not all doom and gloom either. Arizona removing its production cap on DtC wineries was clearly a positive move. And Michigan earlier this year relaxed some particularly onerous package labeling rules. Delaware made positive moves to allow DtC wine sales, an effort that will continue in 2018. Even Mississippi and Alabama’s DtC bills received some positive attention (though they both failed to get far past committees in the states’ respective legislatures).

Through his presentation, Steve’s message was that change is inevitable but not inhibiting. There are opportunities to grow as the market flexes, and services like the Wine Institute to guide wineries through the dynamic regulatory scene. Even as slightly strange requirements come into effect, such as Colorado’s rule regarding sales tax reporting (we will also provide an update on this rule soon), change mostly reflects that DtC wine is coming into its own. After all, the opposite of change is stagnation — and what we like to see is an active market.

 

Learn more about direct-to-consumer trends. Download the 2016 DtC Report.

The post Wine Summit Re-cap: Direct-to-Consumer State Updates and Industry Trends appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

Top Questions (and Answers) From “Getting Real About DTC Shipping: Issues Wineries Need to Consider” Webinar

Tue, 06/06/2017 - 16:00

Alex Heckathorn and Dyana Nedra from Compliance Services of America (CSA) joined me for our recent webinar, “Getting Real About DTC Shipping.”  We discussed some of the issues wineries should consider before they launch in the Direct-to-Consumer market, including changing state regulations and the licensing process. We received some great questions from the audience and have put together some answers here. If you missed the webinar, you can watch it on-demand here

Q:  We’ve had recent trouble with orders shipped from our warehouse being flagged as non-compliant by states. How can I prevent this and ensure that my orders are compliant when they’re being fulfilled from a location that’s not indicated on my license?

A: There are a number of reasons the states will flag a shipment as being non-compliant, but based on your question we assume it was because the shipping address did not match the address on your license. Some states, like Virginia, Wisconsin and North Dakota require that the fulfillment warehouses be licensed as well as the winery, so this could be your problem if your fulfillment service is not licensed.

Other states, like South Dakota, audit common carriers’ incoming shipments of wine and try to match the names of the senders to their list of licensees. When the sender is an unlicensed warehouse, they can’t confirm the shipment is covered by the proper license. They have recently instituted a system using tracking numbers on winery shipping reports to allow them to match up licensees with shipments coming from unlicensed fulfillment houses. We suggest reaching out to the states that are flagging your shipments to see why they are non-compliant.

Q:  What options are there for importers and other non-wine producers to get engage in the DTC market? As an importer or other non-producer, can I work with wineries to market and sell wine DtC?

A: For importers, there are limited options to engage in DTC shipping. Normally, the state license held by an importer does not include the privilege of selling directly to consumers. However, a few states — California, Massachusetts and District of Columbia — allow importers to also hold a retail license, allowing sales to consumers within importers’ home states. Fourteen states allow out-of-state retailers to sell and ship direct to consumers. This privilege would include imported wine sold by the retailer.

There are a few states that allow importers to receive a DTC license, regardless of their home state retail privileges. However, these are limited to only a few, relatively small states, such as West Virginia, New Hampshire and Wyoming. But we would remind importers they are not normally allowed to make retail sales or ship DTC.

Working with a winery that holds DTC permits to sell your imported wines would not be compliant. This is because most states permit only wines produced by the licensed winery to be sold.

Some states specifically prohibit imported wines to be sold DTC by the winery, even if the winery owns the brand and imported the wine itself. If a winery holds a retail license, they could work with you to sell your imports in the fourteen states that allow retailer shipping, but attempting to reach the other states that issue winery-only permits is problematic.

Q: What rules are there regarding for non-sale direct shipments of wine? For example, if a winery wants to send gift packages for Christmas, does it need a license or need to comply with other standard DTC rules like tax payments and reporting?

A: Unfortunately, there aren’t any specific rules allowing this, so there is no clear-cut answer and no easy solution. For years, wineries shipped wines as gifts, trade samples, samples to wine reviewers, and for lab analysis. There was no sale involved and the states simply ignored these shipments.

With the maturing of the DTC market and the collection of taxes on DTC shipments, the states are now monitoring all alcohol shipments and getting information from the carriers to ensure reporting and tax payment. Non-sale shipments are being caught in these audits, and when they come from unlicensed wineries, the carriers could be implicated for accepting illegal shipments. Understandably, the carriers are now balking at carrying these types of shipments.

If the winery already has DTC licenses, it can ship non-sale wines under its permit and report them as complimentary shipments. The states may still want to collect excise taxes on such shipments but the winery should be free of sales taxes since no sale was made. If the winery does not have licenses, it is increasingly difficult — because the carriers are being audited — to convince the carriers these types of shipments do not require a DTC license because they are not “sales” to consumers.

Q: When there’s a change in the ownership structure of a winery, does that winery need all new DTC licenses, or can it continue to sell under the existing licenses? What if there’s a merger or acquisition of the winery?

A: The answer depends on the nature and size of the changes. If the same company or entity that holds the TTB Permit and license remains in control after the changes, in many cases the DTC permits will remain in good standing and the winery can continue to ship under its existing DTC licenses — although some states require the changes in ownership to be reported.

If the change in ownership is actually a sale of winery’s assets to a new company and the new owner must get a new TTB Permit and state license, the new entity owning the winery must obtain new DTC permits. In such cases the seller and buyer often work out an interim services agreement to allow for continued shipping under the existing permits. This is an area where good legal and compliance advice is necessary. Mergers and conversions of entities require an analysis of the specific situation to determine what is possible.

Q: Can a consumer purchase wine at a winery and personally ship it home to herself? Or would she need to have the winery ship it to her, under their DTC license?

A: This type of sale is called an “on-site sale” and rules are slightly different. Generally, either the consumer can ship the wine or have the winery ship it to them. There are volume limits on the amount of wine that can be shipped when it is purchased onsite at the winery. For more specific information see the Wine Institute’s State Shipping Laws for Wineries Portal and under each state you will find the “On-site Rules.”

While most states do allow for personal imports of beverage alcohol carried across state borders, it’s not clear how legal this practice is since most states’ laws don’t explicitly allow the use of common carriers.

As common carriers face increased scrutiny from states, they are less and less willing to accept such shipments. We’ve heard anecdotes of shipping stores in California being required by UPS to provide the license number associated with any package said to contain wine.

Whenever a consumer brings in wine to ship home, they can’t provide a license number, meaning the shipping store has to reject that package. So the best advice would be to have the winery ship any wine purchased on-site for the consumer.

 

Learn more about DtC licensing, watch our webinar on demand

The post Top Questions (and Answers) From “Getting Real About DTC Shipping: Issues Wineries Need to Consider” Webinar appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

BevAlc Roundup | TX Beer Bill Faces Major Push Back From Local Brewers, Powdered Alcohol is Not Dead, and How Whiskey Overtook Rum in the US

Mon, 06/05/2017 - 15:00

Today’s roundup covers Texas Beer Bill Faces Major Push Back From Local Brewers, Powdered Alcohol is Not Dead, and How Whiskey Overtook Rum in the US. Have a great week and hope to see you at the ShipCompliant Wine Summit

LegislativeUpdate

TTB Newsletter | Top news includes an announcement that the 2017 satisfaction survey is now open, TTB is no longer requiring declarations from the French government regarding pinot noir wine from the Languedoc-Roussillon region of France, USDA has announced their annual meeting of the National Organics Standards Board, and thirty-five people have been indicted on Federal conspiracy charges. TTB

Wisconsin Tavern League, Beer Distributors Draft Plan to Narrow Distribution Laws | The Wisconsin Tavern League, Wisconsin Beer Distributors Association and the Wisconsin Wine and Spirits Institute want to create an Office of Alcohol Beverages Enforcement to crack down on violations, according to a draft of the plan. The Cap Times

What’s the Big Brouhaha? Texas Beer Bill Faces Major Push Back From Local Brewers | Before Governor Greg Abbott signs or vetoes house bill 3287, he will also have to review the thousands of signatures attached to a petition opposing the proposed law. NBC 5 Dallas-Fort Worth

Mass. Wants to Update its Alcohol Laws. Not All Are Happy | Business groups are calling for the abolition of “place of last drink” reports, and want it to be legally safer for bars and stores to accept out-of-state identification. Boston Globe

Local Companies Cheer Gov. Rick Scott’s Veto of Bill That Sought to Break Down ‘Liquor Wall’ | Two Central Florida companies who opposed the bill ending the state’s “liquor wall” greeted Gov. Rick Scott’s veto of the bill warmly on Thursday. The Ledger

Why the FDA is Inspecting Wineries | The FDA is on the march and busy auditing food processors under their jurisdiction. Hinman Carmichael

IndustryUp

Beer Institute and NBWA Announce U.S. Beer Industry Contributes $350 Billion to Economy and Creates 2.23 Million Jobs | Beer Serves America reveals the beer industry’s vast impact on U.S. economy and job creation across the nation. PR Newswire

 Direct-To-Consumer Wine Sales Is The Future That Has Arrived | A new survey attempts to uncover what it takes to succeed with the direct-to-consumer wine sales model. Forbes

Incredibly, Americans Drank Less Alcohol in 2016 | Industry tracker IWSR reported that Americans consumed less alcohol in 2016 than the prior year, with volume slipping by 3.5 million nine-liter cases last year to 3.39 billion nine-liter cases. Fortune

Powdered Alcohol is Not Dead | Just when we least expected it, here is another version of powdered alcohol. BevLaw

Wine Industry Racing to Meet $10–$20 a Bottle Demand | Consumer thirst for wines retailing for more than $10 a bottle is set to grow with California winegrape acreage for such brands growing by double digits in the next few years. The North Bay Business Journal

JustFun

How Whiskey Overtook Rum to Become the Signature Spirit of the U.S. | As a country, the United States chose to encourage the development of whiskey over rum, perhaps to discourage duties being sent to Great Britain and to ameliorate farmer revenue sources for grains. Time

Winery Waste Meets Betty Crocker: Using Grape Pomace Powder As A Replacement for Flour in Cookies | The winemaking process always yields varying amounts of waste, the disposal of which varies greatly from producer to producer, and from region to region. The Academic Wino

A Four-Mile Beer Pipeline Is Coming to This German Heavy Metal Festival | To streamline the suds distribution at this year’s Wacken Open Air Festival in Germany, the organizers of the three-day fest are burying a four-mile-long beer pipeline two-and-a-half feet below the fairgrounds. Eater

The post BevAlc Roundup | TX Beer Bill Faces Major Push Back From Local Brewers, Powdered Alcohol is Not Dead, and How Whiskey Overtook Rum in the US appeared first on ShipCompliant | The software leader of the beverage alcohol industry.

Update: TTB Clarifies Hard Cider Definition For Lower Tax Rates

Tue, 05/30/2017 - 14:00

The changes to the IRC’s definition of “hard cider” are welcome as they generally align the legal definition with the nature of cider production.  If you are producing products that now fit in the definition of “hard cider,” you should make sure you’re paying the correct tax rate.

On May 16, 2017, the Tax and Trade Bureau (TTB) released Industry Circular 17-2, explaining recent changes to the federal definition of “hard cider” as set forth in the Internal Revenue Code (IRC). These changes were set out in the Protect Americans from Tax Hikes (PATH) Act, and came into effect earlier on January 1, 2017. The TTB is now providing guidance on how these provisions affect the beverage alcohol industry.

What Has Changed for “Hard Cider”

According to the circular, as of January 1, 2017 those wines that can receive the lower hard cider excise tax rate are wines that:

  1. Have no more than .64 grams of carbon dioxide per 100 mL — which doubles the previous allowed carbonation;
  2. Are primarily derived from apples or pears, or apple or pear juice concentrate, and water — which now allows pear and pear juice;
  3. Have no other fruit product or fruit flavoring, besides that of apples or pears; and
  4. Have no less than .5% and no more than 8.5% alcohol by volume (abv) — an increase to the previous acceptable abv of 7%.

These represent fairly significant changes, and mean that many more cider products will benefit from the lower tax rate that “hard cider” enjoys.

Now, it must be noted that this circular only applies to the specific definition of “hard cider” as it applies to products eligible for the hard cider tax rate. The TTB acknowledges that while there are numerous industry, or even colloquial definitions of cider, it is only referring to a set range of products for specific rules under the IRC.

These changes do not affect the definition of “hard cider” within the Federal Alcohol Administration Act (FAAA). The FAAA provides for most production and labeling requirements, as governed by the TTB. Rules under the FAAA, including Certificate of Label Approval provisions, therefore are not affected by these changes.

What does this mean to producers of hard cider?

The main change is the determination of what products are eligible for lower tax rates. If you are producing products that now fit in the definition of “hard cider,” you should make sure you’re paying the correct tax rate.

If you produce products that once were considered a standard wine (e.g. produced from pears, or having an abv above 7%), or were once a “sparkling wine” (if the carbonation was over .32 grams per 100mL), you can now take advantage of the lower tax rate.

Similarly, the definition changes what products are eligible for a tax credit for small domestic producers. This credit of 5.6 cents per wine gallon is available to wine producers with annual output of not more than 250,000 gallons the first 100,000 gallons they produce. While these credits do not apply to sparkling wines, with the definition change products that used to be deemed sparkling wines due to their carbonation can now qualify as “hard ciders,” and be included in amounts for the tax credit.

Besides tax rates, there are other provisions of the IRC that you should be aware of. For instance, the IRC includes its own set of label requirements, including the designation of class type. Products that once had a different class type will therefore now need to be properly designated as hard ciders.

This will require adding the statement “Tax Class 5041(b)(6)” to all hard cider labels, including imports. However, the TTB recognized that most producers would be unable to comply with this change just as the hard ciders rules came into effect. Therefore this will only be a requirement for products taken out of bond after January 1, 2018.

The TTB also reminds cider producers that Formula requirements still apply for products that do not meet the definition of a “standard” wine (see this post for more information on wine formulas). If a producer does change an existing product to take advantage of the new definition (such as adding pear wine to an apple wine, or changing the abv or effervescence of a product), this may require receiving a new or amended Formula approval.

The changes to the IRC’s definition of “hard cider” are welcome as they generally align the legal definition with the nature of cider production. Previously in order to receive the lower tax rate, producers were forced to cut off the fermentation process in order to stay below the abv cap (apples and pears can naturally ferment to 8.5%). Similarly, ciders had to remain relatively flat, lacking an enjoyable fizz that is common in non-alcoholic apple juices (think Martinelli’s). With these tax benefits now being made available for more products, we should expect the hard cider industry to take advantage.

 

Learn more about how ShipCompliant by Sovos can help you keep your cidery in compliance.

The post Update: TTB Clarifies Hard Cider Definition For Lower Tax Rates appeared first on ShipCompliant | The software leader of the beverage alcohol industry.