Alabama is Latest State to Permit Direct-to-Consumer Shipping of Wine

Alex Koral
May 14, 2021

Alabama Governor Kay Ivey signed HB 437 into law on May 13, 2021, making Alabama the latest state to legalize direct-to-consumer (DtC) shipping of wine. With this step, only Delaware, Mississippi and Utah continue to prohibit this popular and valuable means of selling wine.

Alabama’s new DtC law will not become effective until August 1, 2021. Before then, wineries looking to engage the Alabama market can familiarize themselves with the regulations and requirements that are in place.

As set out in HB 437, DtC wine shippers must comply with the following conditions:

  • Receive a Direct Wine Shipper License issued by the Alabama Alcoholic Beverage Control Board (ABCB). Only parties who are currently licensed as wine producers, holding an active federal Basic Permit and a manufacturing license issued by their home state, are permitted to apply for this license. A license will cost $200 initially and must be renewed annually for $150.
  • Ship no more than 12 cases of no more than 9 liters of wine each per individual resident in a 12-month period.
  • Ship only wines that either were produced directly by the Direct Wine Shipper Licensee or were exclusively produced on behalf of the licensee under an established agreement by another wine producer. In addition the Direct Wine Shipper Licensee must outright own the Certificate of Label Approval (COLA) issued by the federal Tax and Trade Bureau (TTB) or have exclusive right to sell that wine under a written contract with the licensed manufacturer who does own the COLA.
  • Ship only wines that have been approved for sale by the ABCB. As provided in HB 437, the ABCB must approve wines to be shipped DtC into Alabama. Currently, the ABCB requires all wine suppliers to register the brand/labels that they will sell to Alabama wholesalers for three-tier distribution in the state. It is therefore possible that the ABCB will require DtC shipped wines to go through the same registration process. However, HB 437 does not detail what kind of approval will be required for DtC shipped wines, so it remains to be seen what the ABCB works out here. It is also unclear at this point whether wines that have already been approved for three-tier distribution in the state would need to be separately approved for DtC shipping.
  • All packages containing wine must be properly labeled with the words “CONTAINS ALCOHOL: SIGNATURE OF PERSON AGED 21 OR OLDER REQUIRED FOR DELIVERY.”
  • Consent to the jurisdiction of Alabama law enforcement and courts concerning any violation of the state’s DtC laws.
  • Receive an attestation from the consumer that they are 21 years or older. It is unclear exactly what form this attestation should take, whether a website’s age gate is sufficient or if something more formal would be required. Nevertheless, this rule underscores the importance of maintaining at least an age gate to demonstrate a wine seller’s commitment to not selling to minors.
  • Collect and remit all state and local sales and excise taxes on their shipments to Alabama residents.
    • Alabama’s state sales tax rate is 4%, but depending on the ship-to location, local rates can bring that up to a possible total 11% rate.
    • Alabama’s excise tax on wine is $0.45 per liter, which applies to both still and sparkling wine.
  • File a quarterly shipping report to the ABCB, on a form and manner to be determined by the ABCB. As set out in HB 437, these reports must include the following information, detailing each shipment made by the Direct Wine Shipper Licensee during the reporting period:
    • Name and address of the recipient of wine
    • Name and license number of the common carrier used
    • Name and license number of the fulfillment house used, if any
    • Date of shipment
    • Carrier tracking number
    • Quantity of wine shipped
    • Evidence of a signature by an individual aged 21 or older

Violating any of these requirements can bring severe monetary penalties, particularly for repeat offenders.

In addition to these regulations on the Direct Wine Shipper Licensee, HB 437 establishes several requirements for common carriers and fulfillment centers, which may be involved in facilitating DtC wine shipments. As in other states, common carriers will be required to collect a signature from someone aged 21 or older at the time of delivery and maintain a record of those signatures for up to three years. Common carriers will also be required to file a quarterly report detailing each shipment of wine they facilitated. Direct Wine Shipper Licensees should then only work with carriers who do abide by these requirements.

Fulfillment centers, defined in HB 437 as entities that operate as bailment warehouses and logistics servicers for licensed Direct Wine Shipper Licensees, are also subject to a number of provisions that largely resemble rules recently imposed by Tennessee

These rules on fulfillment centers include a licensing requirement ($500 per year) and identifying each location from which the fulfillment center might ship products into Alabama (an additional $100 fee per location). Fulfillment centers must also file a quarterly report detailing each shipment they facilitated. And they must agree to work only with compliant carriers and only ship on behalf of wineries that have active Direct Wine Shipper Licenses issued by the ABCB. Fulfillment centers will similarly face severe penalties and fines if they fail to comply with these requirements.

Notably, HB 437 explicitly states that entities involved in DtC shipping of wine, including Direct Wine Shipper Licensees and fulfillment centers, may not avoid liability for any violations by contracting with a third party to handle their DtC shipping obligations.This does not mean that DtC wine shippers cannot avail themselves of a service that helps them manage their own compliance needs (such as Sovos ShipCompliant). Instead, it more emphasizes the need for wineries to assume personal responsibility for their DtC markets and not rely on third party entities that claim to enable legal, compliant sales under their licenses.

It is always good news when a state opens up to permit DtC shipping and Alabama is a particular prize after the many years of effort it has taken to pass HB 437. DtC shipping of wine continues to be a safe and effective means for wine consumers to access thousands of wine labels that may not be widely available in their states and for those winemakers to engage with a national market. With only a few holdout states remaining, we anxiously await the day when all Americans can benefit from the DtC wine shipping market.

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Author

Alex Koral

Alex Koral is Senior Regulatory Counsel for Sovos ShipCompliant in the company’s Boulder, Colorado office. He actively researches beverage alcohol regulations and market developments to inform development of Sovos’ ShipCompliant product and help educate the industry on compliance issues. Alex has been in the beverage alcohol arena since 2015, after receiving his J.D. from the University of Colorado Law School.
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