Out-of-State Retailers May Not Ship Wine to Idaho

A recent review by the state of Idaho Alcohol Beverage Control (ABC) division’s legal team has conclusively determined that out-of-state retailers have no permission to ship any beverage alcohol products direct-to-consumer (DtC) in the state. This determination reverses previous interpretations of Idaho’s laws, which had been understood to permit such shipments

As the DtC wine shipping market continues to grow, interest in engaging in the market also grows. While it is well established that wine producers are now able to ship to 47 states plus the District of Columbia, there is still a lot of uncertainty about who else can engage in the DtC channel, with particular interest coming from off-premise retailers.

When researching who can ship what where, it is critical to thoroughly understand the rules of the destination state and apply the rules as determined by that state’s regulators. And it is important to understand that those determinations are subject to the reasonable interpretations of those regulators.

What happened in Idaho?

The basis for any state’s DtC laws comes from their statutes, the laws as established by their legislature. Idaho’s DtC laws are found in statute 23-1309A, which set out the licensing, tax and other compliance requirements for wineries to ship DtC into the Gem State.

Found within that statute is section 7, which reads:

“A licensee who holds a license for the retail sale of wine for consumption off the licensed premises may ship not more than two (2) cases of wine, containing not more than nine (9) liters per case, per shipment, for personal use and not for resale, directly to a resident of another state if the state to which the wine is sent allows residents of this state to receive wine sent from that state without payment of additional state tax, fees or charges. The sale shall be considered to have occurred in this state.”

This provision establishes when and how an off-premise retailer can ship wine to Idaho residents.

Historically, section 7 was interpreted to establish a “reciprocal” retail DtC relationship, wherein Idaho would permit retailers to ship DtC to their residents as long as those retailers were in a state that granted Idaho retailers similarly open shipping permissions. Essentially the only restrictions were that the retailer:

1. had to hold some kind of retail license and
2. could only ship two cases of wine at a time.

Under that interpretation, it was understood then that a reciprocal relationship existed among Idaho, California and New Mexico, as those states seemed to permit retail DtC shipping of wine without additional licensing and tax obligations. (See CA BPC 23661.2 and NM Code 60-7A-3(E).)

Admittedly, Idaho’s law was never 100% clear, and the right of out-of-state retailers to ship into Idaho had to be read backwards, starting with the line about, “if the state to which the wine is sent allows residents of this state to receive wine sent from that state,” and interpreting from there. Seemingly, this statute would only work if there was an existing right for Idaho residents to receive wine shipped by retailers in other states.

However, that is not the conclusion as determined by the Idaho ABC. After a thorough legal review made upon our request, they have ruled that statute 23-1309A only provides that Idaho residents may receive wine shipped from retailers located within Idaho, and any mention of shipments by retailers to another state are to establish Idaho as the venue where the sale occurs (even if that may contradict the laws of those other states, which generally do indicate that DtC shipments by licensed shippers are designated to occur in those states for legal and tax purposes).

There is also the broader question of whether it is constitutional for a state to permit local retailers to ship DtC while prohibiting out-of-state retailers from doing the same. However, the prevailing jurisprudence is that what may not be allowed regarding wine manufacturers may be permitted for wine retailers.

While it is unfortunate to see a state restrict the right of their residents to purchase wine from the national market of wine retailers, it is the duty of being in a highly regulated market to respect and comply with the rulings of regulatory authorities. We can hope that Idaho will amend its laws in the future to enable legal shipping of wine from out-of-state retailers. Until then, going forward the understanding is that Idaho is now closed for out-of-state retailers looking for further DtC shipping destination states.