The Washington State legislature is considering a bill that would allow residents to receive wine shipments from out-of-state retailers. It addresses a long-standing disparity in state law.
Presently, a Washington consumer can receive a bottle of wine shipped by local and out-of-state wineries. They can also have wine shipped from a Washington retailer. Washingtonians, however, can’t get wine shipped to them from out-of-state retailers, auction houses, or wine-of-the-month clubs.
“To me, it’s an issue of fairness,” says Senator Shelly Short, one of the sponsors of Senate Bill 5007.
This bill, and the corresponding House Bill 1016, would allow Washingtonians to receive shipments from out-of-state retailers. Retailers would be required to obtain a permit. They would also have to remit local and state sales tax and also pay an excise tax.
“It’s the exact same rules under which out-of-state wineries currently ship,” says Tom Wark, executive director of the National Association of Wine Retailers (NAWR).
Wark testified in support of the bill at a hearing of the House Regulated Substances & Gaming Committee on January 9th in Olympia, Washington. So did Paul Zitarelli, owner of Seattle-based retailer Full Pull Wines.
“We support a lot of local Washington wineries that don’t have distribution out-of-state,” Zitarelli says. “We’d like to be able to ship wines out-of-state, but it’s very difficult to advocate for us to be able to ship wines out-of-state when our own state doesn’t allow shipments in.”
Some consumers might be surprised to hear that this is even an issue, especially if they currently receive wines from auction houses or wine-of-the-month clubs. Scott Hazelgrove, representing Washington Wine and Beer Distributors Association, testified that his father frequently receives wine from LastBottle.com, a California-based retailer.
“This is a company that is not collecting and remitting taxes, or the [Liquor and Cannabis Board] would clearly know that they are an out-of-state retailer selling in violation of the law,” he says. “The last thing we should be doing is expanding a system that isn’t currently working.”
Though Hazelgrove represents an organization opposing the bill, this is actually a strong argument for the legislation. At present, many out-of-state retailers have found creative ways around the existing laws. The state government, however, receives no tax revenue from these sales. The bill would regulate such transactions and collect taxes.
“What a lot of our competitors are going to do [if this bill isn’t passed] is continue to ship in quasi-legally,” says Zitarelli. “They’re going to use their terms and conditions that passage of title takes place in their own home states, and so they’re not going to pay or remit any tax to Washington.”
Representatives from several other distributor groups also testified in opposition to the bill. One of their concerns was enforcement.
“This bill has no enforcement mechanisms to ensure that shippers are complying with the law,” Vicki Christophersen, representing the Association of Washington Spirits and Wine Distributors, said in her testimony. “It also doesn’t have any mechanisms for enforcement of taxation.”
However, to the extent that is true, the same issue exists for out-of-state wineries. “If the provisions in the bill are not sufficient, then Washington needs to do something about winery shipping,” Wark says.
Several in opposition also expressed concern that the new law would make it easier for minors to access alcohol. However, there is no evidence minors currently use in-state wineries and retailers to receive wine shipments illegally.
“The fact is, minors do not buy wine via direct shipments,” Wark says.
Finally, John Klein, executive vice president for Southern Glazer’s Wine and Spirits – one of the largest distributors in the country, said he did not see a need to allow out-of-state retailers to ship wine to Washington.
“There’s virtually no wine that we can’t bring into the state, and there’s no wine that any retailer currently licensed within the state has not had the ability to sell,” he says.
This is untrue, however. Rare wines, by their very definition, often cannot be sourced by local distributors. For example, birth year wines, often of great interest to wine lovers, are typically only obtainable at auction.
Not stated by those opposing the bill, but likely a key driver, are concerns about increased competition. Zitarelli believes those concerns are misplaced. Due to the high cost and associated wait times, shipping wine is typically the method of last resort.
“I know my customers are going to try to buy from us first if they can because they’re not going to want to pay for shipping,” he says.
Paul Beveridge, founder of Wilridge Vineyards, Winery, and Distillery in Yakima and representing the organization Family Wineries of Washington State, also testified in support of the bill. He noted that since he started his winery in 1988, the number of states he can ship to has increased from 13 to 45.
“Every single one of those states was a battle,” Beveridge says. “And in that battle, on the other side, were the distributor middlemen. I love my distributors. They do great work. They don’t need the legislative oligopoly.”
The Senate version of the bill will have a hearing on Thursday February 2nd. If the bills make it out of committee, they would then be voted on by the entire Washington House and Senate.
“I’ve been doing this long enough to not be naive about what we’re up against,” Zitarelli says.
If the bills do not make it out of committee or fail to pass in the larger chambers, another recourse would be for NAWR and other organizations to sue the state under existing commerce laws.
“I’m not averse to suing states,” Wark says. “We have five federal lawsuits against different states that have the exact same law that Washington does.”
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Retailers or consumers wishing to weigh in on the bill should contact their state legislators. The National Association of Wine Retailers has also set up a page for those wishing to support the bill to send in comments.
Image of Washington capitol building by Martin Kraft, CC BY-SA 4.0 via Wikimedia Commons.
Image of Tom Wark courtesy of Mr. Wark.
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