Top 5 Myths Surrounding Retailer Direct-to-Consumer Wine Shipping

Sovos ShipCompliant
May 23, 2023

This blog was last updated on May 23, 2023

By Tom Wark, Executive Director, National Association of Wine Retailers

Politics breed myths. This has always been the case as politics is, at its most fundamental, a form of storytelling. So it should be no surprise that myths have arisen as various elements of the wine industry have fought against consumers and specialty wine retailer seeking to ship and receive wine. The politics of the wine shipping debate have led to stories of dire consequences. These stories have morphed into myth. Here are some of the more prominent myths that surround retailer interstate shipment of wine.

Myth 1: Supreme Court only protects wineries and not retailers from discriminatory wine shipping laws

When the Supreme Court ruled in Granholm v Heald that a state may not discriminate against out-of-state wineries by banning shipments of wine while allowing instate wineries to ship wine to its residents, the Court did not distinguish between wineries and retailers. However, states, wholesalers, retailers and lawmakers said the Court did exactly this. They claimed in court cases, in the media, and in defending discriminatory laws that the Supreme Court’s Granholm ruling meant states could discriminate against out-of-state retailer shipping. In 2019, in the Supreme Court’s Tennessee Wine v Thomas ruling, explicitly declared that “there is no sound basis for this distinction….Granholm never said that its reading of history or its Commerce Clause analysis was limited to discrimination against products or producers.”

Myth 2: Bans on wine shipped from out-of-state retailers protects consumers against counterfeit wines

This justification for discriminating against out-of-state retailers is a pretext for protecting in-state interests. Though only a tiny percentage of wines sold by retailers, if any, is counterfeit, in-state retailers shipping wine can just as easily ship such wines. In the U.S. counterfeit wine is almost always a matter of very exclusive and very rare wines being counterfeited and these wines are very carefully and studiously screened for signs of fraud.

Myth 3: Retailers induce consumers to purchase and receive shipments of wines in violation of state laws

In states where wine shipments from out-of-state retailers are banned, consumers sometimes, nonetheless, buy wines from out-of-state retailers and arrange for their shipment. Consumers don’t make this effort because they are induced by retailers seeking to motivate consumers to break the law. Consumers seek out these non-resident retailers because they can’t find the wines they want at in-state retailers. This is due to the fact that the in-state wholesalers that provide and sell inventory to retailers in the state carry only a very tiny percent of the wines available in the entire U.S. marketplace.

Myth 4: Direct-to-Consumer wine shipments from out-of-state retailers harm local retailers

In reality, consumers will always look first to local retailers for specific wines they want. By doing so, they reduce the wait and often very costly shipping charges. However, when consumers can’t find the wine they want locally, that’s when they look to out-of-state retailers. If the wine the consumer wants is not available locally, then it’s not a lost sale for local retailers since they were not selling it in the first place.

Myth 5: Out-of-state wine shipments deprive states of tax revenue

This particular myth is a claim that has been leveled at both wineries and retailers that seek the right to interstate wine shipping. The claim boils down to these shipments represent sales taken away from in-state businesses and with them the sales taxes that would have been collected. This simply isn’t true. The fact is, consumers will always buy a wine locally (and pay local sales taxes) if they can find that wine locally. Waiting for the wine is monotonous and shipping costs are expensive. It’s only when consumers can’t find a wine they want at a local outlet that they look outside the state. As mentioned above, if the wine isn’t available locally, then buying it out of state isn’t a lost sale and the sales tax can’t be lost on a non-sale. Moreover, if states are truly concerned with raising tax revenue they could easily create a license out-of-state retailers could obtain that would allow them to legally ship wine into the state under the condition that sales tax are remitted to the state—conditions out-of-state retailers have said they would gladly adhere to and that would likely bring millions of dollars in tax revenue to states.

Take Action

Learn more about how retailers can compliantly ship wine direct-to-consumer.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Sovos ShipCompliant

Sovos ShipCompliant has been the leader in automated alcohol beverage compliance tools for more than 15 years, providing a full suite of cloud-based solutions to wineries, breweries, distilleries, importers, distributors and retailers to ensure they meet all federal and state regulations for direct-to-consumer and three-tier distribution. ShipCompliant’s solutions reduce risk, lessen the burden of compliance, accelerate bringing products to market and enable revenue growth. With 60+ partner integrations, Sovos ShipCompliant leads a robust ecosystem of technology partnerships, enabling powerful complementary solutions.
Share this post

North America Sales & Use Tax
February 6, 2025
The Tariff and Sales Tax Mishmash – Untying the Mess

This blog was last updated on February 6, 2025 Talk of tariffs dominates the current news cycle with some commentators suggesting that tariffs will spell disaster for our economy while others say the exact opposite. We’ve seen the stock market sometimes fluctuate as tariffs are announced but later suspended, leaving us to wonder whether an […]

retailer dtc wine shipping
North America ShipCompliant
February 6, 2025
Retailer DtC Wine Shipping: The Time Has Come

This blog was last updated on February 6, 2025 By Tom Wark, Executive Director, National Association of Wine Retailers We are often reminded by the media and those in the wine industry—as well as by wine enthusiasts—that the three-tier system of alcohol distribution in most states hinders consumer access to the expansive number of wines […]

Montana 1099-DA
North America Tax Information Reporting
February 5, 2025
State Filing Alert: Montana’s New 1099-DA Requirements for Crypto Brokers

This blog was last updated on February 5, 2025 Reporting digital asset transactions on Form 1099-DA just got a little more complicated. For 2025 transactions, crypto brokers that file Form 1099-DA with the IRS will be required to file the 1099-DA with the State of Montana. This makes Montana the first state to introduce a […]

North America ShipCompliant
January 23, 2025
DtC Wine Shipping in 2024: A Year-in-Review

This blog was last updated on January 28, 2025 The direct-to-consumer (DtC) wine shipping channel faced a storm of challenges in 2024, navigating some of the toughest market conditions in over a decade. As inflation tightened wallets and consumer behaviors shifted, the industry recorded its steepest declines in shipment volume and value since the inception […]

Form 1099-DA Crypto Transactions
North America Tax Information Reporting
January 21, 2025
What is Form 1099-DA and How Does it Impact Crypto Transactions?

This blog was last updated on January 24, 2025 The IRS has released Form 1099-DA and its accompanying instructions for filing for TY 2025. Form 1099-DA is the newest IRS information return, designed for reporting digital asset proceeds from broker transactions and is required to be filed by brokers managing digital assets such as NFTs […]