Alex Koral
ognize the individual rules of the different markets ,” he adds . “ We send orders to partners holding the products , who then pack and ship . We automatically pay the proper sales tax and excise tax .”
As with alcohol laws in general , DTC rules vary greatly from state to state . Sovos ShipCompliant offers services that efficiently comply with these differing laws and taxes when shipping .
For instance , some states limit how much alcohol an individual or household can order via DTC . Other laws limit how much alcohol a producer can ship into a state during a given length of time . Sovos ShipCompliant is programmed to get out and ahead of potential violations .
“ We ’ re tracking these things all the time to see when they ’ re coming up ,” Koral says . “ We send a notice ahead of time when it ’ s getting close . And we block an illegal order automatically . We ’ ll send a message like , ‘ It ’ s great that you want to buy that wine , but you have to wait a couple of weeks ’.”
“ These are very real laws that states
are increasingly tracking ,” he adds . “ It ’ s a central part of our business .”
DTC ISSUES OVERBLOWN ?
Koral is correct that state alcohol agencies and their legal / law enforcement divisions have focused more on DTC in recent years . Beyond bad actors shipping alcohol illicitly , states nationwide face legal challenges from out-of-state producers and retailers who claim discrimination that they cannot sell products across state lines .
“ These people want to get rid of the three-tier system altogether ,” says Renee C . Metz , Assistant General Counsel North Carolina Alcoholic Beverage Control Commission , during a recent panel at the 2023 National Alcohol Beverage Control Association Administrators Conference . “ But we have to discriminate in some way , because we only have jurisdiction [ that extends ] so far . The 21st Amendment Enforcement Act is not an either / or . It gives leeway in alcohol-related issues to rule in favor of public safety measures .”
Metz points to the large number of lawsuits claiming discrimination against out-of-state producers . For states that have not yet been sued in this area , Metz suggests , “ Take a look at your statures for anything potentially discriminatory , and get your data sets ready about what ’ s coming in and out of your states .
“ Have a cease-and-desist letter ready to go ,” she adds . “ And when you get no response from that , know who in your Attorney General ’ s Office will take this on .”
For all the concerns expressed about the spread of alcohol DTC , the question remains : are these fears legitimate , or overexaggerated ?
“ While we recognize that states need to maintain laws , it does seem that states have been overbearing at times focusing on DTC ,” says Koral of Sovos ShipCompliant . “ We ’ re in contact with state regulators , talking with them all the time . We absolutely want to support regulators and abide by the laws . But many of the fears with DTC are unfair and unjustified ."
" There ’ s a lot of fearmongering out there that doesn ’ t reflect the actual compliance in shipments ,” he adds .
One commonly cited criticism of DTC is that alcohol could potentially end up in the possession of underage consumers . Koral believes this concern is overblown .
“ Our website has age verification services ,” he says . “ And more carrier services are getting signatures with IDs now , as well .”
Moreover , underage consumers — like college students who obtain alcohol illegally — want the product immediately , Koral points out . These individuals do not want to order an alcoholic product and have it show up days later .
“ And these people are looking at the lower end , not a $ 40 bottle of wine ” shipped across the country , Koral adds . “ I don ’ t downplay the potential for risks , but the risk of underage purchase through DTC seems less than the risk of it happening at
NOTE FROM THE PUBLISHER : In the NovDec 2022 issue of Beverage Dynamics , we ran the first in a series of articles about direct-to-consumer alcohol shipping titled “ Consumer Convenience , but at What Cost ?” It included interviews with Attorneys General from multiple states , beverage alcohol industry regulators and representatives from the distributor tier . Many of those sources highlighted illegal shipping ’ s negative effects on the industry and society at large .
Part two of our series focuses mostly on legal alcohol shipping , which is allowed in dozens of states under varying rules and regulations . In almost all cases , these purchases flow through the existing three tier-system ( although not everyone interviewed believes that should be the case ).
We do not take a position on whether DTC sales should or should not be allowed , only that everyone should follow the letter and spirit of the law . Editor Kyle Swartz conducted dozens of on- and off-the-record conversations in reporting this series , which will continue in 2024 as new developments come to light .
Jeremy Nedelka , Beverage Group VP , jnedelka @ epgacceleration . com
22 Beverage Wholesaler • Spring 2024 www . beveragewholesaler . com