Supreme Court Ruling Says State's Ban On Direct Shipment Of Wine Unconstitutional

Albany, N.Y.-- The United States Supreme Court has ruled 5-4 in favor of allowing the direct interstate shipment of wine, a ruling which State Senator George H. Winner, Jr. (R-C, Elmira) called a great -- and long overdue -- victory for Finger Lakes wineries and winemakers throughout New York State.

"This decision by the nation’s highest court promises a harvest of good news for New York State’s winemakers and grape growers. It strikes down an outdated, unfair prohibition that has existed as the single-greatest obstacle to economic growth within this vital industry," Winner said. "Most importantly, it points the way to a future of long-awaited economic opportunities for the grape-and-wine industry here at home and throughout New York State."

Winner has been sponsoring legislation in the Senate to allow the state’s wineries to ship their products directly to out-of-state consumers. He said that New York’s existing, Prohibition-era law preventing New York’s wineries from shipping wine directly to customers outside the state is outdated and the single greatest obstacle to significant growth within the industry.

The state’s ban on these interstate sales is discriminatory and anticompetitive, the Supreme Court ruled in yesterday’s decision.

"In a day and age when online commerce becomes an increasingly important economic development tool, Finger Lakes wineries and winemakers throughout New York State have been shackled by this outdated, unfair law," said Winner.

New York is the third-largest wine producing state in America, with 192 wineries statewide. The industry employs 18,000 workers and annually generates more than $500 million in gross sales, together with $85 million in state and local tax revenue. Over three million people visit the state’s wineries every year. One-third of them come from out of state. Many New York winery owners, particularly those who operate smaller wineries, say current state law prevents them from accommodating thousands upon thousands of these out-of-state visitors once they leave New York and return home. The law bans out-of-state shipments to individual consumers, but it allows New York wineries to ship to New York residents.

Winner said that granting wineries limited, direct shipment privileges to out-of-state customers, as his legislation proposes, would represent a significant and important market expansion, and facilitate new and important economic opportunities for many Finger Lakes wineries. For some wineries it’s estimated that direct shipment could increase sales by as much as 30 percent.

When he released his 2005-06 proposed state budget earlier this year, New York Governor George Pataki included, for the second straight year, an interstate shipment proposal similar to the one Winner proposes. The governor estimated that authorizing direct shipments would raise $2.6 million in 2005-06 and, by 2007-08, $3.8 million a year in increased revenues for New York State.

Now that the Supreme Court has ruled New York’s ban on interstate wine sales unconstitutional, state lawmakers should move swiftly to put in place the necessary regulatory, reporting and revenue-collecting systems that will ensure an effective and responsible transition to the direct shipment of wine into and out of New York State.

If enacted, Winner’s legislation would:

> enable wine manufactured by licensed New York wineries and wine sold by licensed New York retailers to be shipped in limited quantities to individual consumers in other states that have reciprocal direct shipping statutes. Currently 26 other states allow some form of direct wine shipment;

> require out-of-state shippers to obtain a license from the New York State Liquor Authority and adhere to strict reporting requirements and regulations when carrying and delivering wine into New York. Direct shipments could only be made to individual adult consumers in New York, for personal use only. Proposed regulations would require carriers to obtain the signature of a person over 21 years old at the delivery address;

> subject all wine shipped from New York to the payment of all New York alcoholic beverage taxes. Wine shipped into New York would be subject to the payment of all state sales and excise taxes.

"We need to act swiftly to put this legislation into place, and I look forward to joining Governor Pataki and the Assembly on this important work," said Winner.

Winner downplayed concerns raised by some opponents that direct interstate wine sales would encourage and facilitate underage drinking. He pointed to a July 2003 Federal Trade Commission report that found that "states that permit interstate direct shipping generally report few or no problems with shipments to minors." He also highlighted his legislation’s safeguards to prevent wine shipments from reaching underage recipients.

The Supreme Court heard oral arguments last December in two cases challenging the constitutionality of state laws in Michigan and New York limiting interstate trade. Both the New York case, Swenderberg v. Kelly, and the Michigan case dealt with the constitutionality of laws preventing wineries from shipping directly to out-of-state consumers while permitting intrastate shipping from in-state wineries.