Looking Back at Beverage Alcohol Regulatory Change in 2021

As 2021 comes to a close, perhaps there is small comfort in knowing that the old adage of “the only constant is change” remains true for beverage alcohol. Rules and regulations on direct-to-consumer (DtC) shipping are adjusted, more states are opening options for DtC shipping and economic nexus continues to impact how suppliers, shippers and producers approach tax. 

Throughout the year, Sovos ShipCompliant worked to stay on top of the latest beverage alcohol regulatory changes and how they could potentially impact your business. Following is a review of some of the top regulatory highlights from the past year. 

Kansas, Tennessee set fulfillment house changes 

Wineries and other alcohol suppliers will sometimes utilize fulfillment houses to store their products and help bring products to purchasers when they are sold. As more fulfillment houses began to move beyond being storage facilities and started enabling shipments to consumers, more regulators began to impose restrictions on what fulfillment houses could and could not do. 

In May, two states made changes on fulfillment house regulations that would impact DtC wine shipping. Tennessee Governor Bill Lee signed HB 742, which included new restrictions on the wines that a licensed DtC shipper may sell and ship DtC to Tennessee residents. Additionally, a bill provision discussed new record retention and quarterly reporting requirements on winery direct shipper licensees.  

Kansas Governor Laura Kelly signed HB 2137, which included provisions that require both in-state and out-of-state fulfillment houses to register and receive a Fulfillment House License.  With that, the licensee is allowed to handle all logistics on behalf of a special order shipping license holder, including packaging, warehousing, order fulfillment and shipping services. 

More states open for DtC shipping 

Kentucky updated its DtC alcohol shipping laws in March, removing a requirement for licensed DtC shippers to register their brand/labels with the state before shipping those products. The bill also removed a provision that previously prohibited DtC alcohol shippers from using third-party fulfillment houses to help with their shipping logistics needs. 

In May, Alabama became the latest state to legalize DtC shipping of wine, with the new law going into effect in August. Alabama’s changes also established several requirements for common carriers and fulfillment centers, which may be involved in facilitating DtC wine shipments.  

Over the summer, Ohio Governor Mike DeWine signed a law allowing larger-scale wineries to also ship DtC. Previously, a DtC wine shipping license could only be issued to wine manufacturers that produced less than 250,000 gallons of wine annually. Now, smaller-scale wineries and beer manufacturers can operate under the existing DtC shipping license, while larger-scale wineries will require a new S-2 type license. 

Ban lifted on USPS shipping alcohol? 

The debate continued on whether the U.S. Postal Service should be permitted to ship beverage alcohol directly to consumers over the age of 21. A bipartisan bill introduced in May would lift a Prohibition-era ban that prevents the USPS from shipping wine and other alcohol directly to consumers. Even with the new law in place, though, USPS and alcohol shippers would still have to comply with local and state laws.

How economic nexus impacted DtC wine shipping

Florida adopted economic nexus rules, imposing a sales tax liability on remote sellers, including DtC shippers of wine. Florida does not currently require DtC wine shippers to assume a sales tax obligation in the state to make sales. The new economic nexus rules will now require more DtC wine shippers to collect and remit Florida sales tax.

Kansas also adopted economic nexus rules, although there was no immediate guidance on how DtC wine shippers may be impacted by the change. As we explored in another post: 

“Under the law as written, a DtC wine shipper would thus face a sales tax burden once they sell over $100,000 in wine into Kansas in a year. A DtC wine shipper reaching that threshold would be required to register with the Kansas Department of Revenue and file regular sales tax returns reporting their sales into the state. While they would be able to fully exempt their wine sales from their sales tax returns (providing that they are regularly filing and remitting their Beverage Occupational Taxes), they would still be required to file a return reporting their retail sales, and collect and remit sales tax on non-wine purchases made by Kansas customers.”

License type consolidations, permitted volume changes

Both Oregon and Wyoming increased the permitted volume for DtC wine shippers. Oregon now allows for up to five cases of wine per Oregon resident per month, with a case not to exceed nine liters of wine. With a previous limit of just two nine-liter cases, the volume limit more than doubled. Wyoming now allows licensed DtC wine shippers to ship up to 108 liters (12 nine-liter cases) of wine per resident in a given 12-month period, up from 36 liters.  

While not quite the same as shipping volume limit adjustments or economic nexus change, Texas revamped its alcohol license process and fees. The Lone Star State moved from 75 to 37 licenses and permits, including the elimination of 14 licenses/permits and 24 licenses/permits being consolidated into others. 

Idaho, Nevada DtC restrictions

While some states began to lift DtC wine shipping restrictions this past year, others took the opposite approach. The Idaho Alcohol Beverage Control (ABC) division’s legal team reviewed the state’s existing DtC laws and determined that out-of-state retailers have no permission to ship any beverage alcohol products DtC in Idaho. Previously Idaho’s laws had been interpreted to establish a “reciprocal” retail DtC relationship, permitting retailers to ship DtC to Idaho residents as long as those retailers were in a state that granted Idaho retailers similar shipping permissions.

A recently enacted Nevada law also restricted DtC alcohol shipping. Before the new law, Nevada had very open DtC regulations, allowing wineries, breweries, distilleries and retailers to sell and ship their products directly to Nevadans. Now, only wine from domestic wine producers may be shipped DtC into Nevada.

These were the top highlights that we followed through the year. We might not know what is coming for beverage alcohol in 2022, but we’ll work to keep you informed of changes as they unfold.