Crossing state lines

Supreme Court ruling on wine sales
could impact Indiana

Wineries in Indiana, Kentucky
would like to sell to out-of-state retail customers

By Levi King
Staff Writer

(July 2005) – Some area wineries are anticipating big changes in the way they do business because of a U.S. Supreme Court ruling that occurred in May. The court struck down laws in Michigan and New York that prohibited out-of-state wineries to ship wine directly to consumers within their borders. The decision reasoned that states with such laws unfairly discriminate against out-of-state producers and grant in-state wineries a “competitive advantage.”

Sandy and Steve Palmer

Photos by Levi King

Sandy and Steve Palmer, who own
and operate Madison Vineyards, are watching the wine sales ruling with interest.

“This could affect us tremendously,” said Mary Jane Demaree, who owns and operates the Ridge Winery in Vevay, Ind., with her husband, Tom. “We have customers from all over the state, as well as Kentucky and Ohio. We have to turn down orders because we can’t ship them.”
Both Indiana and Kentucky have laws that could be affected. Indiana law makes it a Class A misdemeanor for a person or business who produces or sells alcohol to ship an alcoholic beverage to a state resident who does not hold a wholesaler’s permit. In Kentucky, the violation is a felony.
In an official statement released after the ruling, Dave Heath, chairman of the Indiana Alcohol and Tobacco Commission, claimed that the ruling would not impact Hoosiers. Previous Indiana laws were put in place after Prohibition and said little about wine shipping, until a 1998 law forbid wineries from shipping orders placed by phone, fax or Internet. However, the law made no mention of a winery’s ability to ship orders placed in person.
Ironically, the commission seized the high court’s ruling as an opportunity to close this loophole, informing all state wineries that they were to cease ALL wine shipping. Jim Butler, former president of the Indiana Winegrowers Guild, says this could cause Hoosier vintners to lose $2 million to $2.5 million in annual sales. The proprietor of Butler Winery in Bloomington said, “Indiana wineries have been shipping to customers since the 1970s. Now some are saying this may put them out of business.”
In Kentucky, wineries can only ship within state borders and only if a customer places an order in person with identification. Wineries and consumers are anticipating new legislation that would make it legal for bluegrass wineries to ship in or out-of-state. As specified in the new ruling, this means out-of-state wineries would be allowed to ship to Kentuckians as well.
Chuck Smith, a member of the Kentucky Vineyard Society’s board of directors and co-owner of Smith-Berry Winery in New Castle, Ky., doesn’t foresee an immediate effect from the recent verdict.

Sandy Palmer

Photos by Levi King

Sandy Palmer pours a glass of wine
at the tasting room. The couple
hold special events and are opening
a bed & breakfast soon.

“It’ll still take new legislation, and if it passes, I don’t know if it’ll have a big impact,” he said. Most of the winery’s sales are made face to face. Smith explained that KVS is not going to push the issue into legislation too soon. “It’s all political, and we don’t want to get too eager and make anyone mad,” he said.
Hoosier wineries are ready, though. Many have begun rallying their customers to contact state representatives. However, the next legislative session would not convene until January. If a bill passes and the governor signs it into law, it likely will not take effect until July. This could be too late for small wineries.
Sandy and Steve Palmer, owners of Madison Vineyards, note the importance of big holiday sales and shipments. “People don’t want to drive here from around the state just to purchase a gift,” said Sandy.
In both states, there is sizeable opposition to new legislation, however. Wholesalers, who must purchase an annual license to sell and distribute alcohol, are expressing their concerns. Some wholesalers claim that shipping wine to customers will allow underage persons access to alcohol, but states that currently allow direct shipments require an adult to show ID and sign a receipt upon delivery.
Steve Palmer rejected the wholesalers’ argument. “It’s a red herring, and everyone knows it. No teenager is going to order wine off the Internet; he’s going to ask a friend to buy him a six-pack.”
Lawsuits which could overturn the states’ laws are pending in Kentucky and Indiana. Immediately following the Supreme Court’s decision, Ted Huber of the Huber Winery in Starlight, Ind., sued the state of Kentucky to allow him to ship to customers across the Ohio River. Two of Huber’s Louisville customers, tired of the 15-mile drive to purchase Huber wines in person, are co-plaintiffs in the suit. J. Alexander Tanford, the attorney who successfully brought the case against Michigan before the Supreme Court, filed a suit just two days later against the state of Indiana on behalf of wineries in Illinois and Michigan. The suit seeks a federal injunction to prohibit Indiana from enforcing its wine shipment law.

Back to July 2005 Articles.



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