This blog was last updated on December 27, 2023
2024 has not yet begun but there are some potential upcoming regulatory changes affecting the direct-to-consumer (DtC) wine shipping market that we’re already tracking.
The first is Wisconsin SB 268, a major overhaul of the state’s beverage alcohol laws. Since the bill was signed by the governor earlier this month, the question is not so much around will it happen or not as opposed to how impactful it will end up being.
Perhaps the biggest change within SB 268 is the creation of a new division within the Wisconsin Department of Revenue dedicated to the beverage alcohol industry. The new division is intended to administer Wisconsin’s alcohol laws, including providing a source of regulatory interpretation and guidance for the industry. However, SB 268 also charges the new division to strictly police those laws, meaning that Wisconsin may step up its enforcement actions in coming years—particularly when it comes to DtC wine shippers.
Indeed, SB 268 includes several new provisions directly related to DtC wine shipping, including new licensing and reporting requirements for carriers and fulfillment houses that support the DtC industry. While Wisconsin will be hardly alone in regulating these third-party support systems, there are reasons to be concerned with the specific laws the state has adopted.
Under SB 268, both carriers and fulfillment houses will need to be licensed in order to carry or package containers for wine shippers. A fulfillment house license will cost $100 per year, but each facility the fulfillment house ships from will need to be separately licensed; carriers will need to pay $1,000 a year for their license. But more impactful than the cost, SB 268 sets up strict penalties for compliance issues by carriers or fulfillment houses—picking up a package of wine from an unlicensed shipper once brings a $2,000 fine, doing so twice results in a loss of their shipping license, meaning if FedEx or UPS make two mistakes in a year, they won’t be able to carry any more wine to Wisconsin consumers.
SB 268 also imposes new requirements for carriers to report the DtC shipments they delivered in the state. While many states have carrier reports, Wisconsin’s could end up being impossible for carriers to file, at least as it is currently established in SB 268. As drafted, carriers will need to report (among other things), the name and address of the person who manufactured the alcohol along with the type and quantity of alcoholic beverages in a package—neither of which are data points that carriers have any ability to collect or report on.
However, Wisconsin’s new carrier and fulfillment house laws won’t come into effect until January 1, 2025, so there is time for the DtC industry to work with the state and find workable solutions. Indeed, there is good reason to believe that once it is made clear to Wisconsin regulators and legislators that SB 268 as enacted could lead to the shutdown of the DtC wine market in the state, they will moderate the worst of the new regulations. Whenever other states have tried to establish similarly onerous reporting requirements or harsh penalties on carriers, they have invariably been tempered. But concerned industry members should make sure to do their part in outreach to Wisconsin policymakers and consumers to help avoid the worst potential impacts.
DtC shipping in Delaware, at long last?
The other big potential change we are tracking already for 2024 is whether or not Delaware will open up to DtC shipping. Delaware is one of the few states that prohibits all DtC shipping of alcohol (the others being Utah and Mississippi), but that is not for a lack of trying. For the past several years, concerted efforts have been made to pass a model DtC shipping bill in the state, which have not yet succeeded despite there being widespread interest by Delaware consumers for access to the DtC shipping market.
Part of the issue is that competing DtC shipping bills were introduced, splitting the support either may have received on its own. Already in 2024, there are two DtC shipping bills that have earned attention—HB 262 and HB 259. While they both would establish DtC shipping permissions, they vary in their range, with one only allowing shipping of wine, with a three case per year per person limit, and the other also permitting shipping of beer and spirits with a much higher shipping volume limit.
There is real risk that neither will pass, if proponents of DtC shipping cannot settle on a single version to support. But it is likely both bills will be amended (and possibly consolidated) as the Delaware General Assembly reconvenes in January and begins hearings on the new legislative session.
It is unlikely that Wisconsin and Delaware will be the only states with potential changes to the DtC shipping market in 2024, even if they are already on our radar for the new year. As the regulatory calendar does develop, we at Sovos ShipCompliant will make sure to keep you informed.
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