Court decision could change Texas wineries' shipping, sales woes

By MONETTE TAYLOR | South Central Texas Edition

Jan. 20, 2004 - Wines have been the drink of choice by many people for centuries, but Texas has seen a huge rise it its popularity in the last 25 years. Statistics indicate that in 1979, Texas wineries produced about 14,000 gallons of wine. By 1997, that number had risen to 1.6 million gallons and rising, yearly.

Texas Department of Agriculture (TDA) information shows that Texas is now the fifth-leading, wine-producing state in the United States, with more than 40 wineries and still growing.

Developing and nursing a vineyard into a successful winery is not without its problems, and the latest has been how to get preferred wines to customers.

Carl Droemer of the Lehm Berg Winery in Texas' south central region, said that most of his wine is sold directly from the winery, but he would like to be able to ship his products within the state (without customers' purchases from their visit to the winery), and out-of-state, too.

Just before the holidays, the Supreme Court heard arguments in a case that could make many changes to how alcoholic beverages are regulated and sold. The suit was filed by regulators and wholesalers in Michigan and New York against out-of-state shipments. A decision is expected later this spring.

It has been reported that "several justices appeared troubled by the notion of unequal treatment," and were "concerned" about overturning state laws. On one side is the 21st Amendment, which ended Prohibition in 1933 and "explicitly" grants states the authority to regulate alcohol sales.

In Texas, the Texas Alcoholic Beverage Commission is in charge of laws and permits pertaining to the sale and distribution of all alcoholic products, including wine. Under the laws, wineries in counties where alcohol can be sold (wet counties) are allowed to serve and sell their products to customers, as long as the wineries have the proper licenses from the state. Wineries in "dry" counties (where the sale of any kind of alcohol is prohibited) are able to operate ... with the proper licenses ... but are prohibited from selling or serving alcoholic products to customers. Under these rules, the wine can be shipped to a package store or directly to the customer, if the customer has visited the winery, paid for the product, are at least 21-years-old, and can sign for the package.

The current law in Texas, which governs the sell of wine, was developed in April 2001, when the Texas Legislature, along with TDA, decided to promote Texas wine, and the Legislature passed House Bill 892. This Alcohol Beverage Code was amended by adding Chapter 110 to the Code which would allow for the creation of the Texas Wine Marketing Assistance Program.

The TDA commissioner appointed an advisory committee composed of seven members, including representatives from winery owners, packagers and wholesalers. This advisory committee was appointed to promote Texas wine and help establish rules for delivery of the products of Texas wineries.

Along with promoting Texas wines/wineries, the program developed and maintains a database of wineries in the state and package stores that sell Texas wines and identifies the wineries to their customers. Other purposes are to operate a toll-free Texas number to answer questions concerning Texas wines/wineries and to educate the public about wines and programs all over the state.

Other than having the wine shipped directly to the customer's home, another choice is sending wines to local package stores that are working with the Texas Wine Marketing Assistance Program, and that have the proper licenses from the state, where the customer can either pick up their individual orders, or have it delivered by the package store, if proper licenses are in order and available.

According to Fred Marosko, executive director of the Texas Package Stores Association (TPSA), he and package store owners, obviously, believe that the regular "distribution" system which includes the package stores is the "way to go." States that are allowed to ship their wines into Texas pay no taxes, at this time, and all package stores are allowed to charge a fee "not to exceed" $3.50 per bottle for handling charges, since the cost of the product is paid directly to the winery involved. This means the Texas package stores must continue to pay their taxes, even if out-of-state shipments to Texas do not.

Twenty-four states have laws that generally require outside wineries to sell products through licensed wholesalers within the individual state. The states include Alabama, Arizona, Arkansas, Connecticut, Delaware, Florida, Indiana and Kansas. Other states are Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, Montana, Ohio, Oklahoma and Pennsylvania. The final states are New Jersey, New York, South Dakota, Tennessee, Utah and Vermont.

Michigan and New York allow in-state Internet or telephone sales of alcoholic beverages.

States collect millions of dollars in alcohol taxes in the $21.6 billion wine industry, so some argue that they would not have the ability to enforce laws over out-of-state sellers who aren't licensed in the state.

Texas citizens are currently able to belong to out-of-state wine clubs and receive monthly selections, as long as the recipient and signer is over 21-years-old.

Obviously, the Supreme Court hasn't heard the end of the dispute over out-of-state sales, and wine lovers can expect to receive some word concerning their decisions in 2005.

(For information on Texas wines/wineries, contact TDA at: www.agr.state.tx.us or toll-free at 866-489-9463. Questions can be addressed to the Texas Alcoholic Beverage Commission at www.tabc.state.tx.us or 512-206-3333.)