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by LUCIANA SALINAS

Scenario: A longtime customer moves to a neighboring state and asks you to ship her a case of her favorite Barolo. You already ship in-state, so you look into fulfilling the request, only to find that the answer is far from simple. Whether you can legally ship across state lines depends on state laws and a patchwork of federal court decisions. This spring, however, that patchwork got a shake-up.

THE COURTS SPLIT Federal appeals courts remain divided on how to evaluate restrictions on out-of-state retailer shipping. Because a circuit court ruling binds only the states within its jurisdiction, the same question can be assessed differently depending on the state in question. Courts weigh a state’ s authority to regulate alcohol sales within its borders against the constitutional rule against economic protectionism. Some circuits view a physical storefront as essential to the three-tier system that separates producers, wholesalers and retailers, making restrictions easier to uphold. Others require states to prove, with concrete evidence, that restrictions predominantly protect public health or safety rather than local retailers.

In May, the Supreme Court declined to review Day v. Henry and Chicago Wine Co. v. Braun, leaving in place lower court rulings that allowed Arizona and Indiana to keep their physical storefront requirements for shipping, though the courts relied on different tests to reach that outcome. Shortly after, the Sixth Circuit broke the pattern. In Block v. Canepa, the court struck down Ohio’ s restrictions on out-of-state retailer shipping. Among other findings, the court held that the restriction could not be justified as a health and safety measure. Ohio had other ways to regulate out-of-state retailers and already allows residents to receive wine from out-of-state wineries, fulfillment houses and brand owners— and it never explained how out-of-state retailers are meaningfully different from those shippers.

One month later, Ohio asked the Supreme Court to review the decision. Whether the justices will hear the case is uncertain, but the split is now explicit, making it harder for the Supreme Court to ignore. Even if Ohio’ s restriction remains overturned, nationwide retailer shipping is highly unlikely to open overnight. Expect more legal challenges to state restrictions elsewhere, with states needing stronger justification to keep them in place.

WHAT THIS MEANS FOR YOU For now, nothing has changed: thirteen jurisdictions permit out-of-state retailers to ship directly to consumers, though allowable products vary by destination:

• Wine only: CA, CT, FL, LA, NM, WV and WY

• Wine and beer: OR and VA

• Wine, beer, and spirits: DC, NE, NH and ND California and New Mexico operate under reciprocal agreements rather than standard licensing. Retailers in California can ship to New Mexico consumers and vice versa, but no other state currently qualifies under this arrangement. Retailers in both states, however, can still obtain licenses in the other jurisdictions listed above.

As a rule of thumb, if a state offers no license for out-of-state retailers, shipping there is prohibited. Florida and D. C. are the notable exceptions, permitting shipments without a license, subject to standard compliance rules. Note that these regulations govern out-of-state shipments and do not alter your in-state permissions.

Thirteen markets is a smaller pool than most retailers would like, but still meaningful. Focus on two or three target states with strong customer potential, get properly licensed and build from there. The wall around out-of-state retail shipping may be beginning to crack. If it comes down, it will likely happen one state at a time, and success will favor retailers who already have their interstate shipping compliance in place over those starting from scratch. •

Luciana Salinas is an attorney at Malkin Law, P. A., a law firm serving the alcohol beverage industry. Nothing in this article is intended to be and should not be construed as specific legal advice. Do you have legal questions we can answer in a future column? Email Editor Kyle Swartz kswartz @ epgacceleration. com.