Alcohol

Tennessee Tries To Limit Residents' Access to Wine From Other States (Again)

After losing at the Supreme Court in 2019, state lawmakers are now targeting fulfillment houses in an attempt to stop consumers from buying what they want.

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The COVID-19 pandemic has seemingly proven the merits of tearing down nonsensical laws limiting the direct shipment of alcohol, giving wineries more potential buyers and consumers more choices without having to leave home. But some state lawmakers are all too eager to put those barriers back in place.

Legislation making its way through both houses of the state legislature would ban wine shipments to Tennessee residents from "fulfillment houses," or wine warehouses that act as wholesalers in the direct-to-consumer shipping market, buying from wineries and selling to consumers. Instead, consumers would only be allowed to order direct shipments of wine sent from wineries to home addresses.

Using fulfillment houses removes many logistical hurdles for wineries, giving them access to more consumers without having to set up their own in-house mailing operations, and consumers get access to a wider range of wineries via direct shipment than they otherwise would. It's a win-win arrangement. Even before the pandemic, an estimated 60 percent of direct-to-consumer wine sales passed through a fulfillment house, according to Avalara, a sales tax consulting firm.

But some Tennessee lawmakers are trying to argue that fulfillment houses represent a public health threat. "We must protect the safety of Tennesseeans by ensuring that alcohol is sold in a safe manner," state Sen. Page Walley (R–Bolivar), who introduced one of the two bills, told Wine Spectator. "I introduced this legislation because it puts the people of Tennessee first."

But the bill seems to be more about taxes and protectionism than consumer safety.

On the tax front, Tennessee's legislation is a response to a 2020 Kentucky law that opened up direct shipping of wine, beer, and spirits into that state. The law has been terrific for consumers in Kentucky, but the state has struggled to collect tax revenue because the new direct shipping law does not require carriers like FedEx and UPS to report how much alcohol they are delivering into the state. Instead, the state is relying entirely on data reported by registered out-of-state shippers—an arrangement that likely misses shipments from distributors that aren't registered with the state.

Kentucky's enforcement issues appear to have spooked neighboring legislators.

"Tennessee looked at it and said 'we need to prevent that from happening,' when what they really should have done is said 'we're not going to be as dumb about it as Kentucky,'" Matt Dogali, president of the American Distilled Spirits Alliance, an industry group, tells Reason.

Meanwhile, the bills also represent an opportunity for Tennessee's alcohol establishment to deal a blow against unwanted out-of-state competition.

Until the Supreme Court struck it down in 2019, Tennessee law forbade out-of-state wineries from shipping their products into the state. The state used to defend that protectionist racket using the same vapid claims about public health that Walley is now trotting out to justify his new proposal. In the majority opinion for Tennesse Wine and Spirits Retailers Association v. Russell, Supreme Court Justice Samuel Alito wrote that the ban on out-of-state shipping "blatantly favors the state's residents and has little relationship to public health and safety."

Now, by targeting out-of-state fulfillment houses, the state legislature is seeking to restore a part of those unconstitutional restrictions on selling wine to consumers in Tennessee. Many smaller out-of-state wineries probably can't or won't go through the difficulties of setting up their own shipping services, so the only way to distribute into Tennessee will be through the state-run alcohol system.

Unsurprisingly, the bills have the support of Tennessee-based alcohol wholesalers and retailers, according to Avalara. Passing the legislation would "significantly reduce the available options for Tennessee wine lovers," the accounting firm notes.

Advocates for expansion of direct-to-consumer alcohol shipments, like the American Distilled Spirits Alliance, worry that Tennessee's law could become the start of a new trend of protectionist legislation in state capitols.

"Rather than seeing the country evolve and grow up and have [direct-to-consumer] happen in a manner that makes the consumer happy and lets the state get its tax revenue," says Dogali, "we're going to see this crazy backlash."

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  1. 1. This makes perfect sense because in Tennessee you should drink moonshine,
    2. Wine is known to be a drink of choice for people with suspect political views, and should be in limited supply, so just in state stuff where at least locals are getting the purchase price is OK.

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  2. In Tennessee, anything aged more than 7 hours is not considered wine.

    1. I realize that you’re just being a smartass, but TN is prime grape territory and there are some damn fine small batch wineries there. What VT is to craft beer, TN is to boutique wine. Of course folks would have to travel to places that sceeer them to know such things.

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  3. How is a shipment direct from a winery safer than a shipment from a warehouse?

    1. It isn’t. Which is why even if it is passed, it will fail a court test so long as they aren’t trying to overturn Alito’s decision. And if this is allowed to stand, then why not everything else? His same stupid arguments could be made about any product out there. Let’s just kill interstate commerce. I’ll give you odds the guy who proposed this has a family member that runs a TN winery.

      1. “And if this is allowed to stand, then why not everything else? His same stupid arguments could be made about any product out there. Let’s just kill interstate commerce.”

        Why not everything else? Well, because the 21st amendment explicitly allows the states to regulate the importation of alcoholic beverages at the state level. Arguably, to the extent that the interstate commerce clause bars state governments from regulating interstate commerce into their states that bar does not apply to alcohol.

        So no, allowing this law to stand would not apply to anything other than alcohol.

    2. If you want some hilarity, go look in past Congressional Records for Congress critters making arguments against wine shipping like, the distributor makes sure the products are adequately stored, is far more vigilant about not selling to minors, contributes far more to the local community, and knows what the community needs, blah, blah, blah. Paper thin excuses, but they worked.

      I remember people bitching strenuously about Joe Scarborough torpedoing direct shipping bills, when Southern Wine and Spirits contributed heavily to his campaigns. I can’t remember whether this was when he was a House of Representatives guy, or when he was in the Florida Legislature, and I can’t pull up his quotes from the Congressional Record right nowl

  4. Wow. Terrible policy, but I’m not too happy with the Supreme court having blown off the fairly absolute language of the 21st amendment,

    “The transportation or importation into any State, Territory, or Possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.”

    which damned well DID give states “a license to impose all manner of protectionist restrictions on commerce in alcoholic beverages.”

    Do you see any qualifications restricting that power to health and safety measures? Because I sure don’t.

    Just another example of the Supreme court interpreting federal grants of power insanely broadly, but state grants of power so narrowly as to almost extinguish them.

    1. I mean, look, if we are going to suddenly start reading the Constitution as it is written, we may as well disband the entire government.

      1. I am waiting for Boehm to find some way to blame Trump for the actions of TN. You know Boehm wants to.

    2. The Amendment bans importation of booze “in violation of the laws thereof.” But it doesn’t say that those “laws thereof” are exempt from the rest of the Constitution, just because they deal with booze. The Constitution normally takes a dim view on privileging intra-State interests in a commercial context over foreign actors in another State. So, see if these protectionist mandatory three tier distribution laws violate the Constitution if they were for any other commercial product besides booze, and if so, void those mandatory laws. While leaving the rest of the UCC in Tennessee intact.

      Voila, no contradiction with the Amendment, and Tennessee residents can finally get some Sine Qua Non shipped to them.

      1. Yet oddly California is allowed to exactly the same thing to people who want to buy ammunition from out of state retailers. How does that work since there’s actually some form of carve out for state alcohol laws but none for guns and ammunition.

        1. I believe that’s the increasingly-used parliamentary procedure of, “Fuck You, That’s Why.” Works for the IRS too, but they substitute, “Pay Me,” at the end instead.

          You can make the argument that the State’s very broad police power to help maintain the health, safety, and welfare of its citizens, justifies its broad assertion of regulation and oversight over markets in dangerous products like ammunition and intoxicating beverages. I don’t agree with it, but as we’ve seen with their actions during the Covid scare, a State’s power to regulate the health of its citizens is really broad.

      2. The 21st amendment is an amendment. The whole purpose of amendments is to change things, it is inherent to the nature of amendments that they override contrary prior language.

        In this case, the POINT of the amendment was to create a product specific exception to the interstate commerce clause, active OR dormant. And it is not a qualified exception. The Supreme court pulled that qualification out of their nether regions.

      3. seems a lot like interstate commerce. which the states have no power over.

        1. Except for the fact that there’s a perfectly on point amendment to the Constitution that was specifically intended to give them power over THIS part of interstate commerce, as the Supreme court dissenters went to great and rather irritated length to point out.

          1. Yes, I know what an Amendment is. The plain language of the Amendment says that importation of spirits is allowed now, but only allowed in accordance with State law. It doesn’t further go onto to say that state laws regulating alcohol get to ignore the rest of the Constitution. State alcohol regulations don’t get to, e.g., ignore the Due Process Clause of the Fourteenth Amendment, and so on.

            If we want to go back to intent at the time the Amendment was enacted, it was intended to allow individual States to continue to ban alcohol entirely, if they chose. Doing that wouldn’t bring up any interstate/intrastate actors in commerce preference issues, since the conduct would be banned for both.

            If what I think you’re saying about the majority opinion is right (since you’re mentioning how bent the dissenting opinion writers were about this), what the 21st doesn’t allow, is to privilege intrastate alcohol producers over foreign producers seeking to export alcoholic products to that State. Subject them to equal regulation, under rational basis review, to ensure the health, safety and welfare of their State citizens, fine. De facto banning foreign producers, not fine.

  5. The stupidity of restricting competition is compounded by the ignorance of reality. This is sold to their supportive wineries under the idea that they can destroy incoming competition while keeping their outgoing competition. [other states won’t figure out our little trick] It’s the same mentality that was used to sell motel tax to the public [we will get visitors to pay our taxes] without the reality check that every other damn city would also do it back to us. Now everyone just pays more tax and few people understand that they’ve been hornswaggled.

  6. A lot of people in this country pooh-pooh Tennessee table wines. This is a pity, as many fine Tennessee wines appeal not only to the Tennessee palette, but also to the cognoscenti of Great Britain
    “Black Stump Bordeaux” is rightly praised as a peppermint flavoured Burgundy, whilst a good “Sydney Syrup” can rank with any of the world’s best sugary wines
    “Chateau Bleu”, too, has won many prizes; not least for its taste, and its lingering afterburn
    “Old Smokey, 1968” has been compared favourably to a Welsh claret, whilst the Tennessee wino society thouroughly recommends a 1970 “Coq du Rod Laver”, which, believe me, has a kick on it like a mule: 8 bottles of this, and you’re really finished — at the opening of the Sydney Bridge Club, they were fishing them out of the main sewers every half an hour
    Of the sparkling wines, the most famous is “Perth Pink”. This is a bottle with a message in, and the message is BEWARE!. This is not a wine for drinking — this is a wine for laying down and avoiding
    Another good fighting wine is “Melbourne Old-and-Yellow”, which is particularly heavy, and should be used only for hand-to-hand combat
    Quite the reverse is true of “Chateau Chunder”, which is an Appelachian controle, specially grown for those keen on regurgitation — a fine wine which really opens up the sluices at both ends
    Real emetic fans will also go for a “Hobart Muddy”, and a prize winning “Cuiver Reserve Chateau Bottled Nuit San Wogga Wogga”, which has a bouquet like an aborigine armpit

  7. So the prohabitionists seem to be taking a page from the gun grabbers. Make an unconstitutional law and have your opposition spend massive amounts of money to fight it, drop the law before the trial. Repeat.

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  9. missing your general blame it all on Trump here. interesting.

  10. The usual lousy English. “Tennessee law forbade out-of-state wineries from shipping their products into the state” is not English. In English, we say, “Tennessee law forbade out-of-state wineries to ship their products into the state.” Even the KJV Bible gets it right!

    1. English is not etched in stone. While it might make your spinster elementary school grammar teacher sad, most English speakers will use “from” instead of “to” for this case.

  11. Yet states with ABC stores are still a thing.

    1. Blue laws too. Establishment Clause says what? Not like they’re closing at sundown on Friday in Texas…

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