Pros and cons of wine shipping

The Carroll County Times posted the article below about the pros and cons of direct wine shipping:

Pros and cons of wine shipping
Sunday, January 31, 2010
DYLAN SLAGLE/STAFF PHOTO
Wines are shown at Black Ankle vineyards in Mount Airy Jan. 24.

Each side has a lot to say about why Maryland should or should not allow direct shipping of wine to consumers. Here is a look at some of the arguments.

Pro: Consumers would have more access

Adam Borden, executive director of Marylanders for Better Beer & Wine Laws, said wine consumers in Maryland only have access to 15 percent of the wines in the country because that is all the wholesalers carry.

Maryland law makes it a felony to ship alcohol directly to a consumer, so it is hard to convince wineries to personally arrange a shipment on behalf of a Maryland customer, no matter where it is being shipped, when a state has a reputation as being one of three felony shipment states in the country.

Because of the laws, Marylanders are also restricted from participating in “Wine of the Month” clubs, receiving gift baskets that contain wine, or even mailing wine to themselves from a vacation destination.

“There’s not a single consumer I’ve met who does not support this initiative,” Borden said.

Thirty-seven other states allow direct-shipping to consumers in some form, putting Maryland in the minority. If other states can make it work, so can Maryland, Borden said.

On the other hand: Wine buyers can use the Direct Wine Seller’s permit to have special ordered wines delivered to a retailer of their choice.

All wineries are eligible to use the Direct Wine Seller’s permit, unless they hold any type of alcoholic beverage license or permit in Maryland, have held such a license or permit within the immediate past two years, or are wholly or partially owned by a Maryland licensee or permit holder. Similarly, any product sold to a consumer may not be in current distribution in Maryland or have been distributed in this state within the past two years.



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Con: Direct-to-consumer shipping undermines Maryland’s three-tier system, which was designed for a reason

The three-tier system was instituted after the end of Prohibition, and Maryland law on alcoholic beverages outlines some of the reasons why the state wanted to control alcohol sales and distribution: “to obtain respect and obedience to law; to foster and promote temperance; to prevent deceptive, destructive and unethical business practices; and to promote the general welfare of its citizens.”

Jack Milani, of Monaghan’s Pub in Baltimore and legislative chairman of the Maryland State Licensed Beverage Association, said the three-tier system uses wholesalers to collect the state’s excise tax on alcohol and report all transactions.

“This way you know that excise tax and sales tax is collected,” Milani said. “And you do have a way for servicing people who can’t get what they want [through the Direct Wine Seller’s permit].”

Milani said he views the issue as a matter of philosophy — do you believe that alcohol is a different type of good that needs to be regulated?

“I think there are those of us that think that alcohol should be regulated, and when you get into this business, you know that you’re coming into a regulated industry,” Milani said.

Local liquor boards, which issue liquor licenses, have recourse for businesses in their district that don’t follow the laws, he said, but these boards would have no way to control an out-of-state manufacturer who does not pay Maryland excise taxes on its goods sold here, or for selling to minors, he said.

On the other hand: If 37 other states have decided to allow direct-to-consumer shipping, there must be ways of including these safeguards in a new way.

FedEx and UPS contractually require their wine shippers to purchase their signature verification services. This requires the shipper to clearly label the box as containing alcohol with a sticker and pay the additional fee of about $2 per box to ensure the box receives a signature of an of-age recipient at the delivery address, said Adam Borden, executive director of Marylanders for Better Beer & Wine Laws.

Pro: Maryland would have the potential of collecting more tax on increased sales

Since the Direct Wine Seller’s permit was instituted seven years ago, Maryland has collected $150 from excise tax and permits on these sales, said Adam Borden, executive director of Marylanders for Better Beer & Wine Laws.

His organization estimates that Maryland could collect $1.4 million in additional revenue under direct shipment by permit fee income, excise taxes and sales taxes. Those estimates are based on numbers from Virginia, which reported $329,000 in 2008 from direct shipment, and New Hampshire, which reported $520,000 for the same year.

“Look at all the sales tax that Maryland is missing out on,” said Lisa Austin, a Woodbine resident in favor of the state allowing direct-to-consumer shipping.

As for it taking time to administer, the Maryland Comptroller’s office has estimated the cost of administering the program to be about $22,000 per year, Borden said. Since Maryland wineries would also be able to ship more wine in-state and out of state, there is potential for even more income there, he said. n On the other hand: Out-of-state wineries and retail stores may not report their sales to the state, and the state wouldn’t garner that extra tax income.

The state does collect sales tax on other goods sold over the Internet to Maryland consumers, but the law would need to have some teeth to ensure the comptroller’s office would be able to enforce sales reporting and tax collection on alcohol products directly shipped from out of state, said Jeff Kelly, director of the field enforcement division of the comptroller’s office.

Con: Shipping companies can’t be trusted to check IDs and people under the age of 21 may get access to alcohol

Jane Springer, executive director of the Westminster-based Maryland State Licensed Beverage Association, said retailers spend a lot of time and money making sure that their employees are checking IDs and know who they can and cannot sell alcohol to — a duty that shouldn’t be left to the discretion of untrained delivery people.

“Bottom line, we really are concerned about underage drinking and we really think this is a serious threat to that,” Springer said. “We’re talking about alcohol — it’s not potato chips or anything else you can buy on the Internet.”

Last year in Annapolis, the organizations against direct shipping submitted written testimony to the House of Delegates Economic Matters committee showing cases where alcohol was delivered into the custody of minors in other states over the past decade, including more than 60 cases in a dozen states — and those were only the cases that were caught.

“We did oppose the bill last year, and if the bill is similar this year, I’m sure that MSLBA will be opposing it again,” Springer said.

In addition, a survey by Teenage Research Unlimited, commissioned by the Wine and Spirits Wholesalers of America, Inc., found that in a survey of 1,001 people ages 14 and 20, 2 percent said they had personally bought alcohol online and 12 percent reported having a friend who has ordered alcohol online.

On the other hand: Youths sometimes get away with buying alcohol in retail stores in Maryland.

Research shows that youths are also more likely to get someone who is 21 to buy them alcohol at a store for instant gratification, rather than waiting for a week or more to get wine in the mail. According to Jeff Kelly, director of the field enforcement division of the comptroller’s office, local jurisdictions reported 485 incidences of businesses selling alcohol to minors in fiscal year 2009.

Pro: Retail stores and wineries in Maryland would also be able to ship in-state and out of state

Sharleen Kutrumbis of Vino 100 in Mount Airy, a wine specialty store that offers tastings, wine by the glass and retail sales, said she has gotten active in the issue after she opened her shop last year.

“We’re a small new company and something like this, if the law were to change, would probably make us or break us,” Kutrumbis said. “And I think that’s the case for a lot of small retail wine shops like ourselves.”

Kutrumbis said she received many inquiries at the holidays from customers who wanted to ship specialty wines as gifts to people out of state, but she had to explain that she couldn’t because it’s illegal.

Allowing wine to be shipped would also help expand her business by allowing her to use her store’s Web site to list and sell her wines.

“We have a very different selection than what’s in our local market, and we’re limited to people who know that we’re there,” she said.

Maryland is a state that doesn’t allow an individual to own more than one liquor store, said Adam Borden, executive director of Marylanders for Better Beer and Wine Laws, so allowing storeowners to have a marketing and sales presence on the Web could be beneficial to many individual business owners.

On the other hand: Liquor stores could lose business if consumers can take their business elsewhere.

However, data from other states shows that online wine sales make up an average of 1 percent of total alcohol sales in states that legally offer that availability.

Con: The current system works, people just need to give it a chance

Kevin Fosnoski of Goska’s Liquors in Severna Park is one of a few retailers who have taken part in a transaction using the Direct Wine Seller’s permit. Fosnoski said he has one customer who has been doing it for a few years, usually ordering between one and four cases at a time to split with friends.

“Since doing it, they’ve become regular customers for us,” Fosnoski said. “A lot of the wine that does come in, it’s not for everyday use. It’s a special occasion wine, it’s wine for collectors, something that they had on a visit to California somewhere or New York or whatever, and it just brings back good memories for them.”

Fosnoski said he thinks the current system works. It’s not too much trouble for him to receive a customer’s shipment and hold it for them, and stores are able to perform the required ID checks to ensure minors aren’t making the purchases.

Fosnoski said he doesn’t think there’s really that much consumer demand out there for direct shipping, because if there were, more people would take advantage of the current Direct Wine Seller’s permit avenue. “It’s kind of just human nature, people want what they can’t get, and as soon as you get, it seems like it’s not as important as it used to be,” Fosnoski said.

On the other hand: It’s been seven years, and it still doesn’t work.

Rather than spending more time on it, consumers have bonded together through Marylanders for Better Beer and Wine Laws, and have come up with a new system that they feel would work better and get them the wine that they want. The group’s numbers have increased from 1,500 members last year to more than 15,000 this year.

Reach staff writer Carrie Ann Knauer at 410-857-7874 or carrie.knauer@carrollcountytimes.com.

Wineries with Permits

Wineries Able to Ship to MD

Here is a link to the Comptroller's website. Search for "DW-Direct Wine Shippers Permit" under permit type.

Search for wineries

 

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