Why Allowing Retailer-to-Consumer Shipping is Good Public Policy
February 8, 2008 – 11:05 amAcross the country a variety of states are currently considering direct shipping legislation that addresses retailer-to-consumer shipping. In most states the same issues tend to arise. Below are the most important issues that have been arising and the points that should be raised in each case
1. CONSTITUTIONAL ISSUES CONCERNING DIRECT SHIPMENT OF WINE & RETAILERS
-According to the Supreme Court in Granholm v. Heald (2005), “States may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses.”
-According to the U.S. District Court of Northern Texas in Siesta v. Perry, the state “cannot prohibit consumers from purchasing wine from out-of-state retailers who comply with the Code3 and TABC regulations. Accordingly, the challenged ban on consumer imports of wine…is also unconstitutional.”
Conclusion: STATES MAY NOT PROHIBIT OUT-OF-STATE RETAILERS FROM SHIPPING INTO A STATE IF IT ALLOWS ITS IN-STATE RETAILERS TO SHIP WITHIN THE STATE.
2. THE FISCAL IMPACT OF RETAILER-TO-CONSUMER SHIPPING
-There is no evidence to support the notion that allowing out-of-state retailers to ship into a state will result in a loss of tax revenue.
-In fact, the experience of New Hampshire, Nebraska, North Dakota and Wyoming is that allowing retailer shipping results in increased tax revenue.
-Consumers use out-of-state resources when they cannot obtain the wines they want locally.
Conclusion: STATES THAT ISSUE PERMITS TO OUT-OF-STATE RETAILERS CAN EXPECT AN INCREASE IN TAX REVENUE AS A RESULT.
3. ESTIMATION OF NUMBER OF RETAILER SHIPPERS
-When shipping permits are issued to both out-of-state retailers and wineries, the vast majority of permits will be issued to wineries, not retailers.
-According to a survey of those states that issue permits to both retailers and wineries, retailers represent 15-20% of the permits.
-Most retailers in America serve a local market, not a national shipping market.
Conclusion: STATES THAT ISSUE PERMITS TO OUT-OF-STATE RETAILERS CAN EXPECT ONLY A MINIMAL NUMBER OF OUT-OF-STATE RETAILERS TO SHIP INTO A STATE RELATIVE TO THE NUMBER OF WINERIES THAT SHIP INTO THE STATE.
4. WHO BUYS FROM OUT-OF-STATE RETAILERS AND WHY?
-The vast majority of wine is purchased on-premise. It is much more convenient for consumers as well as less expensive since shipping costs can range from $25 to $60 to ship a case of wine.
-Out-of-state sources tend to be used only when the specific, specialty wine desired is not available locally.
-America now hosts 5,000 wineries with thousands of more specialty wines imported from Europe, Australia and South America.
Conclusion: CONSUMERS BUY LOCALLY, AND ONLY LOOK ELSEWHERE WHEN THEY CAN NOT FIND IN LOCAL STORES ONE OF THE 1000S OF WINES THAT ARE NOW AVAILABLE IN THE UNITED STATES
5. MINOR ACCESS VIA SHIPPING
-Supreme Court of the United States, the Federal Trade Commission and regulators across the country have admitted that on-line sales to minors are not a problem
-Online age verification systems adopted by retailers, the necessity of using credit cards, the requirement to obtain adult signatures before delivery, and the necessity of minors to have to have wine delivered without parents knowing all conspire to make it far less likely that a minor will obtain wine via the Internet.
-The vast amount of alcohol falling into the hands of minors is obtained from Brick & Mortar stores and from the home.
Conclusion: THE INTERNET IS THE LEAST LIKELY PLACE MINORS WILL LOOK TO OBTAIN ALCOHOL
6. ELEMENTS OF A MODEL RETAILER SHIPPING PERMIT LAW
-In order to assure the state retains regulatory control over out of state retailers, any law allowing shipping should contain:
-A process for issuing annual permits to out-of-state retailers.
-Provisions that require out-of-state retailers to remit taxes to the state
-Provisions that require out-of-state retailers to submit to local legal jurisdiction
-Requirements that out-of-state retailers allow States to audit retailer books
-Requirements that all shipments are marked as containing alcohol and require a signature by an adult 21 or over
Conclusion: LEGISLATION ALLOWING OUT-OF-STATE RETAILERS TO SHIP INTO A STATE CAN BE CRAFTED SO THAT THE STATE RETAINS SIGNIFICANT REGULATORY CONTROL OVER THE RETAILERS AND THEIR ACTIONS