As of August 28, 2017, retailers are prohibited from making direct-to-consumer (DtC) sales to residents of Missouri. Previously, Missouri had operated as a reciprocal state for retailer DtC sales, permitting retailers in California, Idaho, and New Mexico to ship to Missouri residents.
The Missouri rule changed with the passage of H.B. 115 in late July. With this rule change, it is now illegal for any out-of-state retailer to sell and ship orders of beverage alcohol to Missouri residents. According to the Missouri ATC, in-state retailers may continue to deliver to Missouri residents.
The rules surrounding retailers’ ability to make and fulfill DtC orders, like most beverage alcohol regulations, can be complicated. Most retailers in the industry at least seek to remain compliant with the relevant rules. However, due to either a lack of awareness or the complexity of the rules, sometimes they miss their marks. Despite the lack of malicious intent, failure to comply with regulations can create the image of rampant lawlessness, which casts a shadow on the entire industry.
ShipCompliant’s clarion call is that compliance with regulations is both a necessary part of a business’s success and not as hard as it may seem. When information is provided in a clear and accurate manner, a business can better understand what its compliance needs are, and move forward in a compliant manner. As such, we have planned a series of articles to discuss regulations for retailer DtC sales. This first post highlights the Missouri rule change, while the following posts will further detail the regulations surrounding these rules and the political conditions that have created this situation.
What Are Retailer Direct-to-Consumer Sales
To succeed as a participant in the beverage alcohol industry, a business has to follow the rules as they apply to the type of sales it engages in. At the heart of these rules is what license a business is operating under, whether that’s a Federal Basic Permit, a Special Festival Permit, or a Direct Shipper Permit.
“Retailers,” for this series of articles, means businesses licensed to make final end sales to consumers (the “third” tier). This designation distinguishes them from licensed suppliers, like wineries and breweries, whose primary business is making beverage alcohol – even if they can also enjoy some retail privileges like selling out of a tap room or making DtC sales. “Retailers” in this article also refers to those making sales for off-site consumption, as opposed to bars and restaurants.
Many states allow off-sale retailers to deliver directly to their customers. However, these types of sales are not the focus of this post. Such deliveries are restricted to in-state, or even in-city or in-county delivery, limit the means by which a retailer can receive an order, and may require using a vehicle registered by the licensee for the purposes of making deliveries.
Our focus here is on sales made to customers in a different state from where the retail store is located, which require the retailer to use common carriers (such as FedEx or UPS) to fulfill the order.
What Changed in Missouri?
Prior to August 28, section 311.462 of the Missouri Revised Statutes was still in effect. This provision permitted out-of-state retailers to ship two cases of wine to each Missouri resident per year. Under the state’s reciprocal rules, only retailers in states that gave Missouri retailers equal protection from licensing and tax requirements could sell to Missouri residents. While only California, New Mexico, and Idaho were in on the reciprocal schema, many retailers in these states enjoyed the ability to sell DtC to Missouri residents.
These rules fell under judicial scrutiny earlier this year in a lawsuit promulgated by a Florida retailer who argued against Missouri’s reciprocal policy. However, with the repeal of section 311.462, the claim of discrimination is now moot. With the reciprocal rules now repealed, the retailer has nothing to argue against.
The rules and politics of retailer DtC shipping can get quite complicated. Stay tuned to this blog in the coming weeks as more articles on this topic will be published.
Correction: a previous version of this post incorrectly stated that the Missouri rule change also applied to in-state retailers. According to the Missouri ATC, in-state retailers retain the ability to make instate deliveries.