Compliance Considerations for Wineries
Wineries often ask us the question, “How should I handle DTC compliance?” We don’t have the fancy credentials to tell you what to do, but we can share information about your options based on our experience and a few useful resources. It’s up to you and your winery to decide the role that direct shipping will play in your business strategy and how much risk you are willing to take on.
The more states you ship into, the higher your risk—especially, if you’re not operating compliantly. And, as the DTC market and laws mature, states are increasingly enforcing wine shipping laws. Only licensed entities may ship wine across state borders, and each state has their own unique rules.
If you are caught shipping wine into a state where you don’t have a license or are shipping outside the compliance rules you risk losing your license, incurring fines, or more serious charges.
But! You don’t have to make it overly complicated. There are some simple steps to kick off your DTC program, compliantly.
- Apply with the Department of Alcoholic Beverage Control in each of the states you plan to ship to obtain licenses for those states.
- Pay a registration fee for each license in each state. Licensing fees vary by state and can be found on the Wine Institute State Shipping Laws Map.
- Determine how you will manage sales and excise tax collection and reporting for each state.
- Decide how you will fulfill orders and which fulfillment partners you will be working with.
So, how do you get started? Here are a few areas to consider:
First, which states do you intend to ship to?
Recently, on a webinar with ShipCompliant and the Compliance Service of America, Alex Heckathorn of the CSA recommended that when you’re starting out, you should begin shipping into just a few states.
To determine which states to start out with, here are a few considerations suggested on the webinar:
Which states do your current customers live in? A good strategy is to open up shipping to the areas of the country where you have customers who already know and love your wine.
What are the top performing states for DTC shipments? If you take a look at the annual direct-to-consumer shipping report, you get an idea of the states that have the highest propensity to buy wine DTC. Below are the top ten states by volume of shipments. As you can see, California, Texas, New York, Florida, Washington, Illinois, Colorado, Virginia, Oregon, and Georgia are the states that buy the most wine DTC.
Which states will be most profitable for your winery? Using ShipCompliant’s State Break-even calculator, you can determine which states are worth the investment.
Second, what are the compliance requirements for those states?
Once you’ve determined which states you want to start testing your DTC program out in, it’s time to find out the compliance requirements for each state.
It’s good to know that there are some states that you don’t need a license in
The District of Columbia doesn’t require a license, tax registration, or reporting.
Florida does not require a license or brand registration for DTC licensing. However, the winery responsible for paying excise tax and sales tax. But, you can either collect and remit for the customer or put the remittance burden on the customer.
For the other states, you can find the details of their requirements via two helpful resources.
This tool provides you with the details of which states you can ship to, the complexity of those states, and the cost of registering to ship in each state.
Using the Wine Institute’s map, you can explore state regulations and license requirements. Each state varies with their direct shipping requirements, so explore the map to find out which states fit your approach.
Once you get all set up in your chosen states, spend some time testing your systems. It takes a while to figure out how much time and resources you will need to manage the order processing, reporting, registrations, and renewals.