Illinois DtC Bill Could Add Rules on Using TPPs

On May 31st, the Illinois Senate voted in favor of SB 2989, sending the bill onto Governor Bruce Rauner for his signature. If approved, SB 2989 will amend Illinois’s existing direct-to-consumer (DtC) shipping laws, adding several new compliance rules for wineries using third-party fulfillment centers.

Primarily, SB 2989 will require new and renewing applicants for a Winery Shipper’s license to register all addresses from which the applicant intends to ship wine, including the name(s) and address(es) of any third-parties authorized by the winery to ship wine on their behalf to IL consumers, except for common carriers, like FedEx and UPS.

This means that if you use a fulfillment center to store and ship your wine, you will have to list its name and business address on your new or renewal application. Further, you will need to provide a copy of the appointment letter authorizing the third-party to ship your wine (essentially some indication that both you, as the winery, and they, as the fulfillment house, have agreed to that arrangement).

The ILCC will be authorized to deny approval of any third-party provider who has violated Illinois’s DtC rules in the past. This rule follows other changes which increase the penalties for violating DtC rules, including felony charges for repeat offenders.

Third-party fulfillment centers appointed by a Winery Shipper’s license holder to act on its behalf will be required to file an annual report with the Liquor Control Commission (ILCC) indicating every shipment they have made to Illinois residents.

Included in SB 2989 is language requiring the winery shipper’s license holder and third party provider to acknowledge that the winery holding the license will be responsible for the actions of the third party provider acting on behalf of the licensee. This means that, regardless of the specific arrangement between a winery and a fulfillment center, the winery will be liable for the actions of the fulfillment center when it ships the winery’s wine.

Additionally, wineries are reminded that on the Federal level, TTB has stated that industry members who engage in direct shipping are responsible for remaining in compliance with current State rules and that failure to comply with State rules puts their federal basic at risk.

SB 2989 also increases the costs of most licenses in Illinois. Most relevantly, the changes are:

  • For a Non-Resident Dealer’s license (required for selling your product to in-state distributors):
    • If producing under 500,000 gallons annually, $350 for an initial license and $250 to renew online.
    • If producing over 500,000 gallons annually, $1,500 for an initial license and $1,200 to renew online.
  • For a Winery Shipper’s license:
    • If producing under 250,000 gallons annually, $350 for an initial license and $250 to renew online.
    • If producing between 250,000 and 500,000 gallons annually, $1,000 for an initial license and $750 to renew online.
    • If producing over 500,000 gallons annually, $1,500 for an initial license and $1,200 to renew online.

Illinois gives the governor several weeks to act on a bill after it has passed the legislature. So it could be well into summer before SB 2989 becomes law. And its effective date is January 1, 2017, to provide time for the ILCC to develop the particular rules on implementing SB 2989, including the new application and reporting processes. So while these changes are important to be aware of, they are not imminent.

As part of our mission to support DtC compliance, we want to make sure that wineries are aware of changes in DtC laws that are in the works, and to be well-prepared to maintain their compliance with state laws. We’ll report on updates as they occur. To stay up to date, subscribe to our blog!

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