Utah’s Wine Shipping Bill — It’s Kind Of Funny…And Complicated
A funny thing happened on the way to a wine direct shipping bill in Utah.
What’s so funny? The 88% mark up the state wants to place on wines that could be shipped into the state under the bill, HB 157. It’s a funny story.
So, somehow lawmakers in the Utah state legislature got it into their head that maybe it’s time to allow wine lovers in the state to have wine shipped to them. I’ll admit, this idea got into their heads about 25 years ahead of when I thought it would.
Nevertheless, once legislators saw that the proposal would allow consumers to actually receive wine shipments directly at their home, they picked themselves up off the ground, circled the wagons and declared a great big “NO” to that idea. They had a better idea.
Instead of wineries and retailers shipping wine directly to Utah consumers, the Utah Department of Alcohol Beverage Control would create a “Subscription Program” whereby the Department of Alcohol Beverage Control (not consumers) would contract with wineries and retailers to sell them “wine subscription packages” that could then be offered to Utah wine lovers. The Subscription Packages would have to include periodic shipments of wine (no one-time purchases allowed). The Department would buy the subscription in the name of the consumer, receive the shipments at a warehouse in Utah, then deliver the box of wine to a Utah state store for pick up.
Now here’s the really funny thing I alluded to earlier. Each shipment would have an 88% mark-up on it, a $20 handling fee and a sales tax of 4.85%. If you are doing the math, a NY retailer who wants to sell their $100 bottle of Burgundy to a Utah wine lover would be asking them to purchase it for $217.
Same for the winery. But if the winery wanted the customer to be able to buy the wine at anything near their suggested retail price at the winery and at what folks in other states buy it, they’d have to sell the “wine subscription package” to the Utah ABC at FOB pricing. That’s not exactly the model DtC wineries have in mind.
There is a recording of the hearing that was held on this bill last month. At the hearing, the Wine Institute’s Tyler Rudd testifies against the bill, explaining that the complexity of “Subscription Program” along with the 88% mark up means very few people are going to sign up for the program if only because the wines will be too overpriced after the 88% mark-up. He knows this because Pennsylvania tried a similar thing and attracted a whopping 50 subscribers over a few year period.
“Now wait one minute,” says a lawmaker on the committee after the patient Mr. Rudd explains the problems with the bill. “Are you saying you’d rather have no bill and no way to ship wine into the state than this bill,” he asks incredulously. Mr. Rudd confirms, “That’s correct, the bill just won’t work as it is written.”
But then comes the kicker. Mr. Rudd explains that with so few people willing to so overpay for wine under this set up, the state of Utah will never recoup the estimated $1.6 million dollars they say it will take to set up and administer the program. The lawmakers either don’t care or don’t understand and they cut off the good Mr. Rudd.
This bill, HB 157, has passed the House and it is very likely to pass the Senate and become law. Utah is passing a wine shipping bill that will have nearly no users and will cost the state $1.6 million according to their own figures. That’s funny.
Utah is a beautiful place, with really dopey alcohol laws (who can forget the “Zion Curtain”). What’s clear is that there is no one in state government who really thought through what they are doing with this winery/retailer shipping bill. I think the reason something as loopy and guaranteed to fail as HB 157 actually moves forward in Utah is that lawmakers and regulatory officials can’t bring themselves to think outside the “Utah Alcohol Policy” box they’ve all lived within for so long. Being in that bubble makes them impervious to rational thinking on this issue of direct shipping. So, you get these funny and loopy legislative mousetraps.
After the bill becomes law and after the state spends a million dollars implementing these new and unworkable procedures, they will eventually be talking about this issue again. My guess is that it will take about 4 years for them to get the system up and running and to figure out that no one wants to use it. Then someone else from inside the Utah Bubble will come up with a “fix”.
How much you want to bet the fix is to keep the kooky “subscription service” (“hey, we already spent $1 million putting it together), but figure they’ll just lower the mark up to 50%. That’ll do the trick.