This blog was last updated on January 6, 2025
Learn why Tennessee’s Alcoholic Beverage Commission (TNABC) is cracking down on ‘agent of the consumer’ sales for DtC wine shippers.
The Tennessee Alcoholic Beverage Commission (TNABC) recently sent a notice to licensed direct-to-consumer (DtC) wine shippers indicating that shipping as an “agent of the consumer” is a violation of the state’s laws.
This practice, also sometimes called a “passage of title” sale, has become increasingly popular among some members of the beverage alcohol industry looking to engage in DtC sales without complying with state licensing requirements. However, it has never been endorsed as an acceptable practice by any state regulatory agency, and the action by the TNABC clearly demonstrates the wrongness of this kind of sale when it comes to alcoholic beverages.
How do “agent of the consumer” sales work?
An “agent of the consumer” sale relies on contract gimmickry to get around the common rules that govern the DtC alcohol shipping market by including some key provisions in the terms and conditions.
First, the sale is determined to be finalized at the seller’s place of business, which often is a licensed retail shop or winery where alcohol can otherwise be legally and freely sold. This sets up the consumer as the owner and controller of the products purchased as soon as the credit card payment goes through.
The terms and conditions then set out that the consumer will take sole responsibility for the subsequent shipment, that the consumer is directing the seller to take this action (hence the seller is the consumer’s “agent”) and that the consumer will ensure that the shipment is in compliance with any relevant state laws that govern the shipment.
So agreed, the sale is completed and the seller ships off a package containing alcoholic beverages on behalf of the consumer, who has (knowingly or not) assumed total control of the entire process.
On its face, this theory of sale does seem attractive, as it avoids the onerous burdens that come with abiding by various state laws governing alcohol shipments. Instead of getting a license and paying taxes and tracking consumer volume limits and checking ages and properly labeling their packages, the seller can just say that that’s for the consumer to do. Even if they are a type of seller that is otherwise unable to get a shipping license in the state they’re shipping to, that doesn’t matter under an “agent of the consumer” sale.
And indeed, adjusting the language of a contract to come to a more favorable situation for the consumer or seller is common in commerce. When it comes to t-shirts or scrap metal or apples, it can be incredibly useful to prescribe what taxes will apply or in which jurisdiction litigation will take place in.
However, the problem when it comes to the DtC wine shipping market is that this kind of gimmickry just does not work, specifically when it comes to contracting away the regulatory burden.
Why can’t I contract out of compliance?
As the TNABC makes clear, only wineries properly licensed and authorized by the TNABC can ship wine to Tennessee consumers. Every other shipment of alcohol into the state of Tennessee is in violation of the state’s laws and brings the risk of cease-and-desist notices, fines and even potentially criminal charges.
Indeed, the state’s stark language that licenses are required to ship alcohol signals the clearest problem with the “agent of the consumer” sale: even if a seller and consumer agree that the consumer will be responsibility for the compliance of the shipment, there is almost no ability for an unlicensed consumer to ship alcohol—even to themselves. (In the few states that do allow a consumer to direct an out-of-state seller to ship alcohol on their behalf—Rhode Island, Hawaii, Connecticut—this is largely limited to small amounts from producers only.)
That is, while I can certainly take a trip to, let’s say, Los Angeles; and while there I can go into any off-premises retailer and buy as much alcohol as I can carry or afford; I cannot then go down to the local shipping store and hire a common carrier to deliver my purchase to my home. To the extent the state where I live allows it, I can bring the alcohol I bought on vacation back with me under a personal importation right, but this requires that I personally import it, in my luggage or in my car but not through a third-party common carrier.
Indeed, in almost every state, it is illegal for anyone but a licensed business to ship alcohol. At best these “agent of the consumer” sales simply set up the consumer to break the law and risk prosecution by their local alcohol authority. But as Tennessee has made clear, despite the contract language, the seller will also become subject to scrutiny.
It is certainly true that DtC shipping can be complicated and expensive. It is unsurprising that some will look for loopholes to get around these burdens or state laws that otherwise prohibit them from getting the necessary licenses. But gimmicks will only get you so far and just because you put something down in writing doesn’t make it automatically legitimate.
The only real way to participate in the DtC shipping market is compliantly. State laws matter and will be enforced by regulators. The solution to addressing laws you disagree with is to go to the legislatures and change them, not pretend they don’t exist.
