Direct-to-Consumer Shipping: Missouri Decision Outlaws Retailer DtC Sales

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.

 

Want to know everything about DtC shipping? Download our 2017 Direct-to-Consumer Wine Shipping Report, and be on the lookout for the 2018 version of the report, set to be released early next year.

8 Comments

  1. laurie

    Can tasting room sales of wine at a California Winery made by a Missouri resident be legally shipped by Fed Ex or UPS to a Missouri residence?

    Reply
    • Alex Koral - Product Compliance Manager

      Hi Laurie,

      Thanks for your question! Yes, California wineries can still sell from their tasting room and legally ship through FedEx or UPS to Missouri residence. This rule change only applies to out of state retailers (think liquor stores — wine resellers — not wine producers). They used to be able to sell directly to Missouri residents, but no longer can. In order to make legal shipments direct to Missouri residents, a winery must have a specific direct shipping license. Missouri has permitted wineries, licensed to produce wine in their home state, to receive these license for several years now, and will continue to offer this license going forward. If a winery has this license, they can legally deliver to Missouri residences.

      Reply
  2. Terry

    I have been a wine collector for 35 years and moved to Missouri six years ago. I have been unable to find many of my favorite wines in Missouri stores. So I have ordered them from out of state retailers. It appears that I will no longer be able to get them. Why? I can order just about any product under the sun on the Internet. Why not my favorite wines?
    I have been trying to find out who proposed this amendment in the Missouri Senate Economic Development Committee to no avail. I would like to ask what harm I was doing that had to be corrected. Why not just require out of state retailers to collect Missouri sales taxes on wine shipments?

    Reply
    • Alex Koral - Product Compliance Manager

      Hi Terry,

      Thanks for the questions! Here’s a link to the Missouri legislature’s bill tracking system for HB 115 — there were a number of other provisions besides the one that affected out of state retailers. The old rules didn’t require any tax collection, so it could have been a reason for repeal. Unfortunately, the legislative record is often spotty when it comes to reasons — especially when it comes to the background reasons besides protecting minors and preventing overconsumption. If you’re still curious, I’d recommend checking out this blog over the next couple weeks, where we’ll plan to publish more posts on how retailers operate in the direct-to-consumer market. Also, have you reached out to the wineries themselves, checked out their websites, called them, or joined their wine club? The DtC market is much more open to wineries, so your favorite wines may be available directly from the source. Unfortunately, this is really only open to domestic wineries, so if you are looking for imports, your selection may now be limited — at least unless the Missouri rules change again.

      Reply
      • Kay

        Alex, But the description of HB 115 from your link states “Modifies provisions relating to the sale of intoxicating liquor in airports” so I’m confused. How does sale of liquor in airports affect out of state retailers shipping direct to customer’s home?

        Reply
        • Alex Koral - Industry Relations Advisor

          Hi Kay,

          Sorry for the confusion. HB 115 included several different changes to Missouri’s alcohol rules. The modifications to the sale of liquor in airports was the first thing in the bill, so it gets top billing (pun intended) in the summary. However, if you read the bill (on the right side of the linked to page, under “Bill Text”, select the “Truly Agreed” link), you can see everything that was included. The retailer DtC provisions that changed are the last part of the entire bill — and really, the change was to just delete them from Missouri’s statutes. Or, you can also read the full summary (again, right side, under “Bill Summary”, select the “Truly Agreed”), and see a much shorter version of everything that changed. Again, the retailer DtC rules are the last on that page.

          Reply
  3. Dan Garland

    No doubt I understand the rules and regulations but what I cannot understand is that a winery in CA or MO will take a transaction from a consumer, no different then a retailer, but they can legally do this but a retailer in Mo cannot ship to a consumer in CA. To me it is the same thing a business to consumer transaction. The argument about overconsumption is then not valid if the consumer can buy it anyway from a Winery. To me that is not fair trade. Can you explain?

    Reply
    • Alex Koral - Industry Relations Advisor

      Hi Dan,

      Thanks for the question. Unfortunately, I don’t think there’s a satisfactory answer because at the end of the day this is a political issue, not really a legal one. Certainly there are legal arguments about applying Granholm to retailers, and how empowered states are to abrogate fair trade under the Twenty-first Amendment. But ultimately why wineries have greater access to the DtC market than retailers comes down to the legislative battles that wineries have fought over the last decades. Opening up interstate DtC sales to retailers will come down to convincing states that they should accept packages of alcohol coming into their state from out-of-state retailers — which is a new source of competition that many local retailers may not appreciate. Wineries have largely made this argument; if retailers want to access this market too, they’ll need to organize and change states’ laws.

      Reply

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