Wine Law: The Times They Are ‘A Changing

We’ve recounted the horrors of the big brown truck, especially when our wine must be shipped to the Gulf Coast in Texas’ gawdawful summer heat. Last night we opened a Chateau de Fontaine-Audon Sancerre; completely undrinkable and unusable because it was oxidized. This probably resulted from traveling “ground” across Texas in 100+ degree heat.

Well Hallelujah, those folks who spend a 140 calendar days every odd year in Austin have seen the light.

Texas Triples Monthly Direct Shipping Limit

Following the 81st Legislative Session, 18 bills resulted in amendments to the Texas Alcoholic Beverage Code (TABC), including House Bill 1084, which increases the amount of wine that can be direct-shipped to a consumer from three to nine gallons per month. What the new law does not do is increase the annual amount from 36 gallons (approximately 15 cases). But the legislature recognized that it was losing tax revenue, because most consumers were reluctant to have wine shipped to them during the hotter months (which, in Houston, for example, can be from May through October.)

Authored by former “national championship barrel racer and rodeo queen,” six-term Representative Vicki Truitt (R) from Northeast Tarrant County, and sponsored by attorney and recently-elected Bexar County Representative Roland Gutierrez (D) San Antonio, HB 1084 goes into effect September 1, 2009.

Background

In 2005, the 79th Legislature enacted Senate Bill 877 which allowed holders of TABC winery permits and out-of-state direct shipper’s permits, to ship wine directly to Texas consumers, including consumers in dry counties. Alcoholic Beverage Code sec. 16.09 (e)(3) sets a limit of three gallons of wine shipped to the same Texas consumer within a 30-day period. The same restriction is included in Alcoholic Beverage Code, sec. 54.02 as part of the list of prohibited activities by an out-of-state shipper’s permit holder. HB1084 changes the limit to nine gallons within a calendar month OR 36 gallons within a 12-month period.

Bright & Haselwood

Since the limitation can be confusing, I asked TABC General Counsel Lou Bright, what exactly that meant, at a recent CLE sponsored by the University of Houston Law Alumni Association, Decanting the Law of Wine. Bright and Dacota Haselwood, Director of Policy and Governmental Relations, Texas Wine and Grape Growers Association, were speakers for the event.

Bright confirmed that the 3-gallon limit applied to the consumer per direct shipper. That means, for example, I could get 3 gallons from Twisted Oak, 3 gallons from Bedrock Wine Co. and 3 gallons from Enkidu, Anaba or any number of fine out-of-state wineries, as long as each shipper only sent them every 30 days. Likewise, I could have 3 gallons of in-state wine shipped to me as well, as long as each one only sent me a total of three gallons every 30 days, under the existing law.

Said supporters of Committee substituted C.S.H.B 1084:

Current law authorizes the holder of a winery permit or an out-of-state winery direct shipper’s permit to deliver only three gallons of wine every 30 days to a consumer, which creates a de facto cap on wine shipments of 36 gallons of wine per year. Because the hot Texas weather creates challenges to delivering wine during certain times of the year, it is difficult for wine permit holders to exercise their ability to deliver the full amount of wine under the statute. Given that the business of direct-to-consumer shipment is a growing part of the Texas economy, the issue should be addressed.

Two sets of opponents weighed in on the substitute bill; those who wanted to increase the monthly limit to 18 gallons which was provided in the original bill, and those who wanted the limit to remain at 3 gallons per month.

Three-tier System Opposes Change in Law

Those who preferred the status quo included Alan Gray, spokesman for the Glazer’s-controlled Licensed Beverage Distributors PAC; Fred Marosko, spokesman for Texas Package Stores Association; Rick Donley, the president of the Beer Alliance of Texas; and Ralph Townes, Glazer’s Senior Vice-President – Texas representing the Licensed Beverage Distributors. Opponents’ argued that the bill could lead to individuals reselling wine, thereby depriving the state of the tax revenue.

According to the opponents who favored status quo (and are members of the vaunted three-tier system):

The current restrictions on direct sales by wineries and out-of-state shippers to consumers provide clear and sufficient guidance for enforcement. There is no need to change the current statute, which allows a limited exception to the three-tier — producer, distributer, retailer — system of alcohol sales.

Wine Consumer Advocates Promoted 18-Gallon Monthly Limit

The second group of opponents favored increasing the limits:

HB 1084 should allow for the purchase of up to 18 gallons in a single shipment with a yearly cap of no more than 36 gallons for a single customer from the same winery or out-of-state shipper. Consumers who would purchase that quantity of wine are more likely to be oenophiles or wine connoisseurs than someone who might seek to resell wine.

In most incidences, they are purchasing wine from small wineries or seeking vintages with very limited seasonal availability. Shipping costs, particularly temperature-controlled shipping, are very expensive. Anyone willing to pay that much would be more likely to store the wine in their own private wine racks or cellars rather than try to undercut local retailers or wholesalers.

CSBH 1084 Supporters Sought Compromise

But supporters of the committee-substituted bill cited the State’s interest in capturing all possible tax revenue generated by the sale from in state or out of state wineries:

CSHB 1084 would retain and codify the current cap of 36 gallons of wine per year that a consumer could order from a winery or out-of –state shipper in one year under current law, but would allow more flexibility in the monthly limit. Increasing from three to nine gallons the maximum amount of shipments to the same consumer within a month would acknowledge the unique seasonal requirements of wineries as well as the realities of Texas summers. Wine is a perishable product that spoils at temperatures above 75 degrees Fahrenheit, so many out-of-state wineries are reluctant to ship to Texas, especially during July and August.

CSHB 1084 would not increase the overall amount of wine that a winery or out-of-state shipper could ship to the same consumer per year. In fact, it would codify in statute the current limit of 36 gallons per year, which is
based on the existing restriction of no more than three gallons per month. It simply would allow wineries to ship somewhat larger quantities of wine to Texas consumers during the cooler seasons of the year.

CSHB 1084 would help eliminate potential losses in state revenues from taxes on wine shipments. Consumer preferences and winery practices not to ship wine during warmer months effectively reduce the yearly allocation to less than 36 gallons a year. Texas collects sales tax on those out-of-state purchases, and any reduction represents a loss of potential tax revenue. Limiting the amount of purchases to nine gallons per month would help prevent out-of-state wine purchased by a single consumer being resold on the “gray market.” Such transactions could involve sales to restaurants or to other consumers in which the ultimate buyer would not pay sales or other taxes due to the state.

Sunday Liquor Sales Bill Dies in Committee

Another bill by Rep. Roland Gutierrez, would have allowed liquor sales statewide from noon to 6 p.m. Currently, Texas allows Sunday beer and wine sales at grocery stores, and liquor can be sold in bars and restaurants. Texas’ prohibition-era “Blue laws” prohibit sale of liquor in actual liquor stores on Sunday. The statewide Sunday ban dates at least to 1935, when lawmakers wrote what is now the Texas Alcoholic Beverage Code, purportedly “for the protection of the welfare, health, peace, temperance and safety of the people of the state.”

Even more archaic is the part of the law that deals with holidays:

ALCOHOLIC BEVERAGE CODE. CHAPTER 105. HOURS OF SALE AND CONSUMPTION

§ 105.01. HOURS OF SALE: LIQUOR.

(a) Except as provided in Sections 105.02, 105.03, 105.04, and 105.08, no person may sell, offer for sale, or deliver any liquor:
(1) on New Year’s Day, Thanksgiving Day, or Christmas Day;
(2) on Sunday; or
(3) before 10 a.m. or after 9 p.m. on any other day.
(b) When Christmas Day or New Year’s Day falls on a Sunday,

Subsection (a) of this section applies to the following Monday.

Acts 1977, 65th Leg., p. 511, ch. 194, § 1, eff. Sept. 1, 1977. Amended by Acts 1979, 66th Leg., p. 1973, ch. 777, § 23, eff. Aug. 27, 1979.

Amended by: Acts 2005, 79th Leg., Ch. 84, § 1, eff. May 17, 2005.

Gutierrez’ HB863 sought to amend the Code to permit the sale of liquor from noon to 6 p.m. on Sunday. The bill would also have allowed the sale of liquor on Mondays following Christmas Day or New Year’s Day if either holiday falls on a Sunday.

As is the case of CSHB 1084, SB863 would take effect September 1, 2009. One group pushing to lift the ban is the Washington, D.C.-based Distilled Spirits Council of the United States (DISCUS), which represents alcohol producers and marketers across the country. However, opponents led by the aforementioned Fred Marosko of the Texas Package Stores Association, cited a deceptive poll in efforts to skew the public debate on the issue, according to Wine & Spirits Daily:

In a rebuttal, DISCUS said the Texas Package Stores Association was relying on a “widely-debunked 2006 study of Sunday sales in New Mexico.” The study reportedly did not account for other factors during the period Sunday sales were allowed, such as a state-wide increase in the speed limit. Furthermore, there were only 4 more fatal accidents for all Sundays in the five years after the Sunday sales ban was repealed, according to Discus.

Frank Coleman, Senior vice-president said: “Their real agenda is to thwart competition, particularly among minority package store owners. Otherwise, why would they hide their ownership of such a blatantly skewed study?”

The trade group further reported to research that indicated 12 states allowing Sunday sales between 2002 and showed that in 2006 each state saw an average of 5-7% increase in tax revenues with zero negative social impact, such as drunk driving or underage drinking.

Texas border liquor stores complain that the ban on Sunday sales is sending consumers and tax revenue to Mexico. But as of now, Gutierez’ bill has been left in committee.

Blue laws in the U.S. restricting sales and shopping on Sundays date to colonial times, although many have been repealed as morals changed and Sunday shopping became an economic necessity. Fourteen states still ban Sunday liquor sales. In March, Arkansas repealed its statewide ban, allowing counties to decide.

As far as liquor sales are concerned, Texas “family values” won this round, reported the Austin American Statesman:

While the conservative group Texas Eagle Forum has not taken a strong position, President Cathie Adams said she would be surprised if the Republican-controlled Legislature lifted the ban.

“I can’t imagine the House or Senate doing that. Texas is first and foremost in a family environment. If people want to imbibe, they can do it six days a week,” Adams said.

But for those of us in Texas who are wine lovers, Gutierrez and Truitt’s victory to increase monthly limits of wine direct shipments to consumers, is indeed something to celebrate!

Cheers!

~ Amy Corron Power,
aka WineWonkette

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