As 2023 comes to a close, now is a great time to review the regulatory changes that impacted the beverage alcohol industry this year. From California’s bottle bill to the direct-to-consumer (DtC) shipping legal battles that occurred around the country, a lot has happened this year. These updates were covered in a webinar hosted by Sovos ShipCompliant; some of the highlights are presented below.
Colorado raises threshold for retail delivery fee
The annual sales threshold for businesses subject to Colorado’s retail delivery fee was raised to $500,000 from $100,000. The fee was adopted by the state in 2022 to generate revenue on retail deliveries made in the state, including everything from pizza deliveries, Amazon deliveries to, of course, alcohol deliveries. However, only businesses that have annual earnings in the state greater than the threshold amount are required to collect and remit the fee. The change in the retail delivery fee threshold does not affect any other Colorado state tax or fee, so DtC shippers with sales exceeding $100,000 in the state are still subject to Colorado sales tax liability.
Alabama updated licensing requirements
After Alabama opened up for DtC shipping in 2022, many would-be shippers opted out of selling there because the state adopted rather complex application requirements. Earlier this year, however, the state passed a bill removing many of those requirements, including the need to register with the secretary of state, a bond requirement and a need to have liability insurance on their shipments to the state. Additionally, ownership information is now only required for those with more than a 10% stake in the company. If you’ve previously skipped DtC shipping in Alabama based on the requirements, now may be a good time to reassess if these changes lower the barrier to entry.
Oregon was central to a key legal battle in the beverage alcohol industry this year around DtC beer shipping and self-distribution. Oregon law enabled self-distribution from in-state breweries and reciprocal DtC beer shipping rules but prohibited most out-of-state brewers from engaging in these sales. After a group of Washington breweries sued the state, Oregon agreed to compromise, allowing national self-distribution and DtC shipping.
Soon after that case, an Oregon winery sued the state of Iowa on similar grounds, as Iowa only allowed local wineries to self-distribute in the state. This could be the beginning of a trend for broadening self-distribution rights, and we’ll be keeping an eye on these and other cases in the new year.
Related, there was some positive movement in retailer DtC shipping litigation. In the last few years, most courts have held up discriminatory rules that allowed only in-state retailers to ship DtC. However, in a couple notable cases this year, appellate courts have indicated an unwillingness to accept state claims on their face and have required a full hearing of the arguments before the court, signaling a possible shift in how courts will assess facially discriminatory retailer DtC shipping laws.
Increased state enforcement
State enforcement officials had a close eye on DtC shipping this year. Age checks and sales to minors were the main focus, with a report issued by Massachusetts claiming widespread compliance failures. While there is much to criticize about the Massachusetts report, this is a good reminder that DtC shippers must do everything they can to prevent sales to minors. Even if a state doesn’t require point of sale age checks, we always recommend doing it anyway to ensure that your products are not being sold illegally to anyone underage.
In the last few years states have been increasing their enforcement activities against businesses shipping alcohol without a proper license. Ohio and Michigan have been actively prosecuting those who sell and ship products without licenses for a few years, and Tennessee joined them this year by issuing cease and desist letters. Virginia also sued a company that was over-extending the terms of their license by shipping from locations not covered by their license.
California bottle bill
Of course, the introduction of California’s bottle bill is a top headline, which will extend to wine and spirits products starting on January 1, 2024. The bill is a recycling encouragement program, with a fee charged on all manufacturers selling in the state along with the California Redemption Value (CRV), a 5- to 10-cent deposit collected from retail beverage sales in the state.
Under the new law, for alcoholic beverages, a “manufacturer” is the party that is licensed by the California ABC to produce or sell products in the state, including California-based producers and importers and DtC wine shippers. Manufacturers must register with CalRecycle, file a monthly report and pay the Manufacturer Processing Fee.
There is a separate requirement for “distributors,” which the state has defined as anyone who sells directly to California retailers or consumers. Distributors also must register with CalRecycle, collect the CRV from consumers and remit it to CalReycle with a monthly report. This applies to all DtC shipments going to California residents along with most distributions to California retailers. There is a limited exception to the CRV for sales of wine that will be consumed in wineries’ tasting rooms.
The California bottle bill also includes a labeling requirement to alert consumers of the California Redemption Value (CRV). There is a labelling grace period through July 1, 2025, with a total exemption for any wines or spirits bottled before January 1, 2024.
The sheer number of regulatory changes that we saw this year is a great reminder that wineries need to stay updated on what’s going on in the industry. While Sovos ShipCompliant regulatory experts share their findings on our blog, we also recommend keeping tabs on what your local guild and groups like Free the Grapes! are up to. By keeping up with the latest regulatory happenings, you can ensure that your company enjoys a compliant 2024.
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