47 Pages Posted: 28 Apr 2005
Many states prohibit out-of-state sellers of wine from shipping their product directly to consumers, but permit in-state wine producers to engage in such direct shipment. Recent lower federal court decisions have cast serious constitutional doubt upon the authority of a state to discriminate in this manner against wine producers and sellers from other states in favor of its own domestic wine industry. This issue is now before the Supreme Court of the United States. The outcome cannot be foreseen with certainty, but it is likely the Court will find this discrimination unconstitutional.
The thesis of this Article is that States which presently prohibit direct shipment of wine to consumers from out-of-state sources but permit such direct shipment from in-state sources should now give serious consideration to repealing their bans on direct shipment of wine from out-of-state sources. The resolution of this issue by the Supreme Court cannot be predicted with certainty, but the Court's current Commerce Clause and Twenty-first Amendment jurisprudence weighs heavily in favor of the argument that differential treatment of direct shipments of wine from out-of-state and in-state sources violates the Commerce Clause and is not closely related to powers reserved to the States by the Twenty-first Amendment. Rather than facing the likely prospect of court-imposed remedies, State legislatures should craft reforms best suited to individual States' needs, such as tying repeal of the ban on direct shipment of wine from out-of-state sources to collection of state taxes on the transaction.
States that have discriminatory direct shipping laws should repeal the ban on direct shipment of wine from out-of-state sources and enact legislation to regulate such direct shipment. Such a solution will serve several legitimate State interests. First, it will continue to permit in-state direct shipment of wine so as to encourage a State's domestic wine industry. Second, it would prevent minors from using direct shipment to make illegal purchases. Such legislation could require out-of-state vendors to obtain a license for a modest fee to ship limited amounts of wine directly to consumers, to collect and remit applicable State taxes, and to submit reports of such shipments. It could also provide that a carrier that delivers such a shipment must obtain the signature of an adult when the product is delivered. The system should be designed in such a way that it is not so cumbersome that out-of-state vendors are discouraged from applying for a license. Third, it would create a new market in which States could gain additional revenue. Finally, this approach will allow these States to craft legislative solutions that are responsive to their own local interests without having reform imposed upon them by a court. Thus, States that have discriminatory direct shipment laws should give serious consideration to enacting such legislation.
Keywords: wine, shipment, prohibition, direct
JEL Classification: K1
Suggested Citation: Suggested Citation
Anderson, Lloyd, Direct Shipment of Wine, the Commerce Clause and the Twenty-First Amendment: A Call for Legislative Reform. Akron Law Review, Vol. 37, p. 1, 2004. Available at SSRN: https://ssrn.com/abstract=712822