How Do Online Wine Marketplaces Do It?

Online wine marketplaces are a way for consumers to purchase many of their favorite brands with a few clicks, and often enjoy discounted or included shipping to boot. But state regulators are starting to take note of their shipping practices. States like Ohio are arguing that these web shops are not only depriving the state of sales tax revenue, but breaking shipping laws as well. With tactics that raise question marks and states in turn raising an eyebrow, how do online wine marketplaces do it?

Which license is needed for online wine marketplaces?

Many of the big online wine marketplaces do actually hold wine production licenses, including federal Basic Permits, through which they can receive the proper licenses to ship direct-to-consumer (DtC) across the country. However, there is still the legal question of how they are shipping wines brand that they do not produce or own themselves, as many states have what are called “not of own production” laws that restrict the brands that licensed DtC shippers can sell.

What qualifies as not “not of own production” varies from state to state. In the strictest scenarios, the state will say that only products produced specifically at the premises address listed on a DtC license can be shipped. If a winery owns several production facilities, each location may need its own DtC license.

If the online wine marketplace does not hold any wine production licenses, then it can only receive DtC shipping licenses if it is licensed as a retailer by its home state. It would then be very limited in its ability to DtC ship, though, as licensed wineries enjoy more expansive DtC shipping privileges than licensed retailers. Each has their own set of responsibilities and would-be shippers must tread carefully through the complex web of state regulations to ensure compliance.

Out-of-state retailers can only ship to 13 states and the District of Columbia. Eleven of these states, plus D.C, will allow shipping by retailers located in any other state, if they comply with the destination state’s rules. But California and New Mexico operate under a reciprocal process, meaning they will allow out-of-state retailers to sell directly to their residents only from retailers located in those two states.

Online wine marketplaces are not illegal, and when following each state’s shipping laws, are a healthy addition to the DtC wine industry. Wineries and retailers may elect to operate under other interpretations of state regulations, but we highly recommend they consult with their own legal counsel before acting on those interpretations.