Research Suggests Iowa Update Wine Shipping Laws to Allow Direct Shipment to Customers
According to a recent article, authored by University of Iowa law student Jessica Reese and published in the most recent issue of The Iowa Law Review, titled “A Post-Granholm Analysis of Iowa’s Regulatory Framework for Wine Distribution” portions of Iowa’s wine distribution laws are unconstitutional in the wake of the US Supreme Court Decision in Ganholm v. Heald.
The US Supreme Court, in Granholm v. Heald, struck down laws in Michigan and New York that limited the ability of residents in those states to have wine shipped directly to them from out of state wineries. Since the laws in those states allowed in-state wineries to ship directly to residents, the Court ruled the law was an unconstitutional discrimination against out of state wineries.
Iowa’s wine distribution laws, many dating back to the repeal of Prohibition in 1933, have not been modified in light of the Supreme Cour’ts Granholm decision. In particular, laws granting native Iowa wineries direct shipping access to Iowans while using an outmoded “reciprocity” system for out of state wineries. Iowa law places different conditions upon in state and out of state businesses, and as a result, likely runs afoul of the Court’s decision.
Reese concludes that the Iowa Legislature should amend the state’s wine laws and implement a direct-shipment permit system, allowing Iowa residents to have wine shipped directly to them regardless of whether the winery was located in or out of state.
HOW IS WINE CURRENTLY TRAFFICKED IN THE US?
The majority of states, Iowa included, regulate alcoholic beverages distribution via a “three-tier” system, comprised of manufacturers, wholesalers and retailers. Wholesalers typically collect the excise tax, which in Iowa is $1.75 per gallon, and remit the tax to the state. State and federal “tied-house” restrictions prohibit vertical integration between the tiers. As a result, manufacturers and wholesalers can typically not make retail sales.
WHO WOULD SUE STATES FOR GRANHOLM VIOLATIONS?
One possibility would come in the form of The Wine Institute, a consortia of California-based wineries joined together to address public policy issues. California wineries, some states, are treated disparately to in state, or “native” wineries. Click here to view an overview, created by The Wine Institute of the shipping laws in each state. Currently, Iowa and New Mexico are the only remaining “reciprocity” states, meaning that wineries in Iowa in New Mexico can ship wine directly to consumers in either state. The majority of states, in light of the Granholm ruling, have switched to direct shipment, where an out of state winery may obtain a license for a particular state for the privilege of shipping wine directly to residents of that state