Preparing for Changing DtC Wine Shipping Market Regulations in 2024

With 2024 just around the corner, it’s necessary to review upcoming regulations that are set to impact wineries and other producers in the direct-to-consumer (DtC) wine shipping market in the coming year. Everything from California’s new bottle bill to Alaska DtC shipping updates were discussed in a recent webinar featuring Jeff Carroll, VP of partners and compliance, WineDirect, and Sovos ShipCompliant’s Alex Koral, regulatory general counsel. The duo presented, “How to Prepare for Changing Regulations in 2024.” Some of the event highlights are presented below.

The California bottle bill

Effective January 1, 2024, wines and spirits sold in California will become subject to the state’s Container Recycling and Litter Reduction Act. This bottle bill program is meant to encourage recycling and applies to a number of beverages being sold in the state. California is hardly alone in having this type of program, but in most other states, wine and spirits products are excluded.

There are two aspects to the California bottle bill: one for manufacturers and one for distributors.

Manufacturers are defined under the bottle bill as any party that produces or bottles subject beverages. For the alcohol beverage industry, manufacturers are specifically defined as the party holding a license issued by the California Department of Alcoholic Beverage Control, including a producer license, an importer license or a certificate for out-of-state producers. Under the bottle bill, manufacturers will need to register with CalRecycle and file a monthly return paying the Manufacturer Processing Fee for all beverages they sell in the state.

Distributors are defined under the bottle bill as any party that sells subject beverages to California consumers or retail establishments—which includes many parties that would not typically be considered a “distributor” in the alcohol industry, such as California producers that self-distribute and all wineries selling direct-to-consumer in the state. Distributors must register with CalRecycle, collect the California Redemption Value (CRV) from consumers at the point of sale and file a monthly report remitting the CRV collected. Notably, sales by wineries for on-premises consumption in tasting rooms are explicitly excluded from CRV requirements.

The rates for the Manufacturer Processing Fee and the CRV vary depending on the size and type of the container.

There are also key labeling requirements to keep in mind about the program.  All applicable beverages sold in the state must:

• Show the CRV on the label
• Be prominent, indelible, contrasting color, minimum size
• And can be through a QR code or a sticker (under review)

Wine and spirits bottles are exempted from the labelling requirement until July 1, 2025, and any products bottled before January 1, 2024, will never need to show CRV. However, best practice will be to start the CRV labeling process in 2024.

Alaska DtC shipping rules

There are also changes coming into effect for Alaska DtC rules, starting on January 1, 2024. A new license will be required for direct-to-consumer shippers, but as of the webinar, it is not currently available to apply for yet. The license will cost $200 and will need to be renewed annually.

Point-of-sale (POS) age verifications are also being instituted, and the state will continue to mandate its ban of selling to certain local option communities. There will also be a customer volume limit of two cases per month or a 10 case per year limit.

Finally, excise tax will need to be remitted to the state. Notably, Alaska does not have state sales tax, though the state does permit individual communities to assess their own sales tax and adopt economic nexus rules, extending liability for those local sales taxes to remote sellers that make over $100,000 in sales in the state.

NOTE: Regulators are still working to finalize select rules for DtC shipping, including how to better identify local option communities, and how shippers can verify that the purchaser and recipient are not on a list of persons prohibited by the state from purchasing alcohol. It is recommended that shippers wait to apply for an Alaska DtC license until how these rules should be managed have been sorted out by the state.

Ongoing regulatory compliance concerns

Overall, there are key compliance behaviors that states are cracking down on, working to increase their enforcement of certain rules. Organizations operating in the DtC shipping market must ensure they are keeping tabs on the latest changes and how they may be impacted.

One of the top issues continues to be preventing alcohol sales to minors. It’s important to always conduct age checks, even in states that don’t necessarily require it. Businesses can utilize tools such as IDology or LexisNexis to help ensure that all alcohol sales are in fact being done legally. (Note to ShipCompliant users: you can enable these checks via third-party tools in your account.)

Customer aggregate volume limits (CAVL) also present continued concerns, with more states using electronic reports, which are easier to search through to find questionable sales. States are keeping closer watch on names being switched around or pseudonyms being utilized. Remember that if a consumer breaks the law with regard to CAVL, it is your license potentially in jeopardy.

There is also heightened awareness around license details and who can sell what, specifically, on sales happening outside the scope of a license. For example, many states limit the brands that a DtC shipper can sell. These are called “not of own production” (NOOP) rules and can vary between states, making it all the more critical for businesses to understand the intricacies.

Evolving compliance requirements for fulfillment houses are also a top DtC issue. States are being told of questionable practices taking place with fulfillment houses and are subsequently updating licensing requirements and reporting rules.

Essentially, it’s necessary more than ever to stay vigilant in your DtC compliance practices, ensuring there is open communication with consumers. They also must understand and be mindful of compliance requirements – as they themselves are also an important part of the DtC shipping market. Encourage consumers to contact their state legislatures to continuously move the industry forward, allowing DtC shipping to expand in a safe and regulated way that benefits all parties involved.