Laws on Interstate Wine Sales, Wine Law Overview

Remaining Limits on Direct Wine Sales in Some States

Apr 13, 2009

Consumers in some states continue to face legal obstacles in making direct wine purchases despite the U.S. Supreme Court permitting these sales in a 2005 ruling.

Wine consumers in some states continue to face legal obstacles four years after the U.S. Supreme Court declared that individuals could buy directly from out-of-state wineries. The court’s ruling overturned state prohibitions on direct-to-consumer interstate wine purchases, though the overall market still has limits on direct shipping.

Limits on Ability to Ship Wine

The Supreme Court’s decision in May 2005 held that it is unconstitutional to favor in-state wine and liquor makers over businesses from out of state when it comes to wine shipping. While the ruling was a boom to many smaller wineries, it has required further litigation to remove barriers in purchasing wine from out-of-state wineries and retailers.The Wine Institute, a major trade group for the California wine industry, estimates that direct sales by wineries to consumers constitute only 1 percent to 2 percent of all sales. Even where wineries can ship directly to residents, limits are sometimes imposed on the annual amount that can be sent.

Wine retailers and their advocates have argued before state courts that the Supreme Court ruling should apply to wine retailers as well as to producers. They point out that the high court did not strike down the wider system of state alcohol regulation. Still unclear from the high court is whether states can ban direct sales of wine outright. Before the court ruled, federal appeals courts had both struck down and upheld bans on out-of-state wine shipments.

Interstate Wine Sales

Each state can regulate who can ship to it. Some require a yearly permit fee and make it difficult for small wineries to ship there. Some wineries are able to use third-party shippers to send to states that are otherwise closed to them.

Last year, a federal judge last year struck down a Massachusetts statute banning direct shipping by wineries producing more than 30,000 gallons, ruling that such volume caps were discriminatory. According to Robert Taylor in a November 25, 2008 Wine Spectator article "Wine Shipping Restrictions in Massachusetts Ruled Unconstitutional," the case could affect similar laws in other states.
A Michigan state law signed this year bans direct wine shipments from out-of-state retailers to residents as well as from in-state retailers to consumers in most instances. The law came in response to a federal judge’s ruling overturning state law that allowed in-state retailers to ship directly to consumers, but not out-of-state retailers unless they had a brick and mortar location in the state and held a “specially designated merchant” license.
In Tennessee, wineries anywhere are barred from making shipments to consumers because state law, even before the Supreme Court ruling, treats in-state and out-of-state distribution the same. However, proposals before the state legislature would enable wineries with a permit to ship to Tennessee residents, as Eric Arnold noted in a March 18, 2008 Wine Spectator article "Fight for Direct-Shipping Rights Heats Up in Tennessee."
As the Specialty Wine Retailers Association said in its March 30, 2009 publication The Bottom Line, a case now before the Fifth U.S. Circuit Appeals Court is challenging Texas law that bars out-of-state retailers from shipping wine directly to consumers.
A law in Illinois that took effect last June bars out-of-state retailers from shipping wine directly to state residents. A state proposal would reverse that measure as a Chicago Tribune article, "Letting out-of-state wine retailers sell in Illinois," reported on February 23, 2009.
Maryland makes all direct wine shipments to consumers a felony whether a winery is located in the state or not. Measures to allow direct shipping with a permit and limit on cases sent "will continue to face heavy opposition from retailers and wholesalers who have successfully fended off the legislation," wrote Sue Schultz in a February 6, 2009 Baltimore Business Journal article "Wine consumers seek open borders."

The battle goes on among state governments, wineries, and consumers over wine sales across state lines. Even the promoters of interstate sales stress that much work remains in coordinating state laws with the court’s ruling as some states continue to resist opening their borders.