Taxing Wine And Truthfulness

The most compelling argument that can be made in favor of shutting down direct shipping from wineries to consumers and retailers is not that minors might get their hands on alcohol. It’s that out-of-state wineries might evade paying state taxes and the state would lose important revenue.

Have you ever seen the reaction of a state agency or state legislator when faced with the prospect of having less money to play with. It’s the mother bear syndrome. Get out of the way.

It is this reality that is behind wine wholesalers across the country making the argument that to even out state laws and allow out of state wineries to ship direct to retailers and restaurants would result in the inability of states to collect their taxes.

This argument is without merit and more ludicrous than the claim that minors will order wine over the Internet.

In 2000 the U.S. Congress passed the 21st Amendment Enforcement Act that specifically gives state Attorneys General the right to sue out of state business for non-compliance with state laws. You’ve never heard this brought up in the course of the wine shipping debates because it would pull the rug out from under the wine wholesalers’ doomsday scenario that allowing out-of-state wineries to sell direct to retailers, restaurants and consumers would lead to "anarchy" and huge losses in revenue. This is a lie, but we continue to hear it.

"If these deregulation efforts were left unchecked," said Bruce Robertson, spokesman for the wholesalers, "wine suppliers from around the country could then ship their products directly to stores, bars and restaurants across our state. The ultimate effect would be to leave Oklahoma incapable of enforcing state law as it does today. The state would be unable to ensure that tax is collected on the tens of millions of dollars of wine imported into the state, which would endanger important state programs."

This statement comes from the Oklahoma wholesalers who are suing to ensurer that no one but them are allowed to sell wine to retailers and restaurateurs.

Clearly Mr. Robertson does not agree with Associate Justice of the U.S. Supreme Court Anthony Kennedy who wrote last year:

"The Tax and
Trade Bureau (formerly the Bureau of Alcohol, Tobacco, and Firearms)
has authority to revoke a winery’s federal license if it violates state
addition the Twenty-first Amendment Enforcement Act gives state
attorneys general the power to sue wineries in federal court to enjoin
violations of state law. §122a(b).

"Finally, it should be noted that improvements in
technology have eased the burden of monitoring out-of-state wineries.
Background checks can be done electronically. Financial records and
sales data can be mailed, faxed, or submitted via e-mail. In summary, the States
provide little concrete evidence for the sweeping assertion that they
cannot police direct shipments by out-of-state wineries."

Here is what needs to be understood:

-States, wineries and common carriers can easily ensure minors don’t purchase wine for delivery
-States can easily license and monitor the shipment of wine from out of state sources
-States have numerous avenues to ensure compliance with their alcohol laws
-States can easily collect taxes on wine shipped into their states.

The only reason not to dismantled the corrupted state-mandated systems of running all alcohol sales through wholesalers is to make sure wholesalers continue to give huge amounts of campaign contributions to state legislators. All other justifications are without merit.

2 Responses

  1. Fredric Koeppel - March 9, 2006

    Tom, thanks for pointing out the fallacy of these arguments from wholesalers and reminding us (or informing us) of the legal apparatus already in place. I wish more people — like all the state legislators — knew this. Keep hittin’ ’em hard!

  2. Zinman - March 9, 2006

    Oklahoma distributors are the weakest in the nation. Local laws demand that every distributor carry the top brands, so the real power in the state is the brokers.
    Oklahoma distributors work on very low margins because they all carry the same products, so they offer very few services.
    I can’t imagine what they are thinking by going after in-state wineries, since those wineries aren’t going to do a fraction of a percent of the states total wine business.
    The cynical nature of distributor ownership defies explanation. Sooner or later they will lose not only these little battles but the big ones for control spirits distribution.
    Distributors should try to negotiate with the local wineries and take them out of the legisative equation. The wineries have a good story and most people support them, so beating them isn’t a win.

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