Know the Rules — The Tennessee ABC is cracking down on direct shippers

Direct shipping is quite dynamic right now. Recent litigation, legislation, and active enforcement make it even more critical for wineries to have the latest information on state direct-to-consumer (DTC) rules.

The Tennessee Wine Supreme Court decision from last year has played a large part in the dynamic nature of DTC regulation. Even though it didn’t directly address the issue of retailer DTC shipping, the Tennessee Wine decision has been followed by litigation by wine retailer groups, retailer DTC legislation, as well as legislation that includes the direct shipment of distilled spirits products.

Perhaps as a side effect of the activity following the ruling, we’re also seeing multiple states increase attention and enforcement on direct shippers. For instance, we recently published a post about the comprehensive audits the Texas ABC is performing.

To support compliant direct programs and help wineries protect their business, we’re kicking off a new series — Know the Rules. We’ll keep you up to date on the latest changes across the country and help you know when and how to prepare.

Last month, the Tennessee ABC (TABC) issued a press release announcing investigations based on the reports submitted by common carriers (FedEx and UPS).

“After investigations by the Tennessee Alcoholic Beverage Commission (TABC), seven out-of-state businesses, who combined for approximately 1000 illegal direct-to-consumers shipments of alcohol in Tennessee, were permanently ordered to cease and desist further shipping operations in the state. In recent months, the TABC has increased efforts to end illegal shipments of alcohol across Tennessee through investigations, educational outreach, and communication with industry members. ‘Wine is the only alcoholic beverage that can be legally shipped direct to consumers in Tennessee, and it requires a Winery Direct Shipper’s license issued by the commission,’ said TABC Director Russell Thomas. All the businesses accused of illegally shipping have been cooperative.”

Wineries shipping legally into Tennessee should be sure to understand and comply with the rules to ensure their business is protected. This is especially important when shipping to states like Tennessee, where shipping without a license is a felony.

To maintain compliance, there are three fundamental rules. Make sure your winery:

1. Has the right license to ship (and that the license belongs to your winery)
2. Is paying taxes
3. Complies with the volume restrictions and other provisions

It’s also wise to refresh your memory on the rules of shipping into Tennessee. Here’s a summary of the basics.

License

• A Direct Shipper License is required to ship to Tennessee residents
• Licenses expire one year from issue date

Sales tax

• Sales tax registration is required
• State and local sales tax is required (effective October 1, 2019, the “simplified local sales tax reporting option” is no longer an option, so specific local taxes apply)

Excise tax

• Excise tax is required and it’s $1.21 per gallon

Volume limits

• There are volume limits per winery

            ○  1 case (9 liters) per individual per calendar month    

            ○  3 cases (27 liters) per individual per calendar year

Reporting

• Sales tax reporting is required monthly and must be submitted by the 20th of the month
• Excise tax returns must be submitted annually by January 15

Product requirements

• Submit to the Commission a list of the brand names that will be shipped to Tennessee consumers

You can find more details for Tennessee, and other states, on the Wine Institute Compliance Rules site. We know these rules and regulations can be overwhelming, so you’re not alone if you still have questions. The Avalara team has the expertise to help you untangle them, in every state. You can reach us at 877-855-9956 or bevalcinfo@avalara.com.