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

Sovos ShipCompliant
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.

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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.
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