Wine Articles --> The Shipping Saga Continues
The Shipping Saga Continues
Last year about this time, I wrote an article for the newsletter called Indiana's New Direct Shipment Law or "so you thought you could get wine shipped back home…." It appears that last week justice was served and major portions of that restrictively contrived law were ruled unconstitutional by the the Untied States District Court. To refresh your memories, here is what the law originally required:
Wineries can obtain a $100 permit to direct ship into Indiana if they sell less than 500,000 gallons (or 210,300 cases) in Indiana and the Indiana consumer makes an initial on-site visit to the winery and provides the following:
A) Name, telephone number, Indiana address, or consumer's Indiana business address;
(B) Proof of age by a state-issued driver's license or state-issued identification card showing the consumer to be at least twenty-one (21) years of age;
(C) A verified statement, made under penalties for perjury, that the consumer is at least 21 years of age, has an Indiana address and intends to use the wine for personal use and not for resale.
Then, if the winery does not have a wholesaler in the state of Indiana, and the winery qualifies with the Secretary of State to do business in Indiana, and pays excise, sales, and use taxes monthly directly to Indiana, they can ship you a case of wine.
All in all, it was a clever compromise to allow Indiana wineries to ship to consumers while discouraging out of state wineries from shipping in.
Last Wednesday, Federal Judge John D. Tinder ruled in the U.S. District Court in Indianapolis that the law erects an unfair trade barrier and violates the Commerce Clause of the United States Constitution. His ruling reads as follows:
The court finds the wholesale prohibition, Ind. Code § 7.1-3-26-7(a)(6), to be unconstitutional insofar as it bars wineries that possess wholesale privileges in states other than Indiana from seeking a Direct Wine Seller's permit. The court also finds the requirement of an initial face-to-face transaction between a winery and customer prior to direct shipment, as described in Ind. Code §§ 7.1-3-26-6(4), 7.1-3-26-9(1)(A), to be unconstitutional. These two conditions constitute a form of economic protectionism and violate the Commerce Clause of the Constitution.
The court does not find Indiana's general prohibition of direct shipping, Ind. Code § 7.1-5-11-1.5, to be unconstitutional except with respect to the two specific conditions in the statutory provisions cited above. Nor does the court find the statute allowing an Indiana farm winery to sell its product on site and at certain other locations, Ind. Code § 7.1-3-12-5, to be unconstitutional.
I'm no lawyer, but it appears that until the wholesaler's lobby comes up with another trick, Tinder's order stops the state from enforcing the rules he declared to be unconstitutional. So, now you do not have to appear in person at the winery to place your first order and you now can order wines from wineries that are already distributed in Indiana. Kind of makes you glad we have that third branch of government... one that lobbyists can't influence!
We had lots of feedback to last week's article about the court ruling that found two parts of Indiana's wine shipping law unconstitutional. The most interesting was the response that reader Ted Vatnsdal received from Cakebread Cellars when he forwarded the law on to them and asked if he could join their wine club.
The very articulate response he got really makes the position the wineries occupy in the shipping wars crystal clear. Not to mention the absurdity of the 24-case provision of our law, which while stupid and unenforceable, is still constitutional. Can you imagine having to know the legal ramifications of shipping to 50 different states... especially if making a mistake could get you charged with a felony!
I contacted Mr. O'Rourke and he got Dennis Cakebread's permission for us to reproduce the letter — it makes interesting reading.
Dear Mr. Vatnsdal,
Thank you for your interest in Cakebread. We too are pleased with the results of the judge's ruling on the Indiana wine shipping laws, but we don't have a green light for shipping yet. Indiana did not pass a new law but the judge ruled that portions of the existing law are unconstitutional and cannot be enforced. Now the state must decide if it is going to appeal the ruling and if so we have to wait and see what rules we must follow during the appeal process. If the judge's ruling holds, even after all appeals, then the Indiana legislature gets to go back and write a new law and we can't be sure that any new laws would allow us to ship.
It should also be noted that there is a clause in the current law which the judge did not rule on that keeps most wineries from shipping to Indiana, and that clause must be followed until a new law is written. Specifically that clause places a 24-case aggregate limit on ALL the wine combined that a consumer can receive from everyone during a year. There is no way that a winery knows how much wine someone has received from other wineries. If we get an order from someone for the first time - it could be for just one bottle — and has that person going over his 24 case limit — then Indiana would be able to convict us with a felony. And with a felony conviction the federal government could revoke our permit to make wine. As you can understand, with that level of consequence very few wineries will risk shipping wine to anyone in Indiana.
Mr. Vatnsdal, we would love to ship wine to our fans like you in Indiana but until the law gets changed it is not something we can do. So please, keep the pressure on your legislature to pass a reasonable law for wine shipping.
I wish I could give you a better response to your inquiry but again thanks for your interest.
Direct Sales Compliance
September 12, 2007