As direct-to-consumer (DtC) shipping of alcohol has become an increasingly valuable market for suppliers and manufacturers over the last many years, regulatory restrictions in states have hampered the ability of certain parties to enjoy the same benefits. However, with the passage of HB 110 in Ohio, recently signed into law by Governor Mike DeWine, a key limitation on wine DtC shipping will soon go away.
Currently, Ohio will only issue a license for DtC shipping to wine manufacturers that produce less than 250,000 gallons of wine annually (and as we know, holding an active license is often a prerequisite for DtC shipping of alcoholic beverages). HB 110, though, contains a key provision establishing a new S-2 type DtC shipping license that will be available to wineries producing more than 250,000 gallons of wine per year. An S-2 type license will have an initial cost of $250, with an annual renewal fee of $100.
The changes in HB 110 are set to become effective on September 28, 2021.
This change will create a two-tier schema for DtC shipping of alcoholic beverages in Ohio, with smaller-scale wineries and beer manufacturers operating under the existing S-1 DtC shipping license, while larger-scale wineries will require a new S-2 type license. But the availability of this new license is very good news for the DtC wine shipping industry and Ohio consumers as many more wineries that were previously excluded from the Ohio market will soon be able to ship there.
Notably, the DtC compliance rules for S-1 permit holders are unchanged by HB 110, so wineries and breweries currently shipping DtC to Ohio consumers should not see any adjustments to their current regulations. Wineries that will soon ship under a S-2 license will also be required to abide by the established regulations on S-1 licensees, including making good faith efforts to verify the age of purchasers at the time of sale, selling only wines that they directly manufacture themselves, and collecting and remitting all applicable Ohio sales and excise taxes.
In addition to establishing the S-2 DtC shipping license for larger-scale wineries, HB 110 creates new provisions for fulfillment houses servicing shipments to the state. These new provisions echo similar new rules established recently in Tennessee and Kansas. Under these provisions, fulfillment houses are required to register with Ohio prior to fulfilling shipments of alcohol and must file an annual report of the shipments they serviced. Type S-2 licensees using fulfillment houses will be required to only use those fulfillment houses that abide by Ohio’s new regulations.
HB 110 also makes clear that the S-1 and S-2 type DtC shipping licenses are only available to wine or beer manufacturers, and not to businesses licensed as retailers in Ohio or other states. This provision is notable in light of action by Ohio over the last couple of years, under the 21st Amendment Enforcement Act, to crack down on apparent shipments by unlicensed businesses.
The change to Ohio’s DtC wine shipping laws to allow larger-scale wineries to join the market has been a long time coming, and reflects the ongoing efforts by groups such as Free the Grapes! and Wine Institute to effect positive change for the DtC shipping market. A similar restriction in New Jersey, restricting wineries that produce more than 250,000 gallons of wine annually from DtC shipping there, is also targeted for change. We all certainly hope that New Jersey will soon follow the lead of Ohio and remove this barrier on New Jersey residents’ ability to fully enjoy the benefits of an open, though regulated, DtC wine shipping market.
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