New Jersey: doing everything it can to make its direct shipping permit unworkable

There is a belief among most American wine lovers that the direct shipping battle is over, with a clean victory for wineries and consumers. And there is some reason for that: in most states, covering more than 90% of the US population, it's fairly straightforward. At the time of my most recent State of the Wine Shipping Union blog, from 2021, we could ship to 41 states for the total cost of about $20,000. We've added three more states since then; please welcome Connecticut, South Dakota, and Kentucky to the fold. Arkansas, Alabama, and perhaps Mississippi look like they'll be next, leaving just a few holdouts.

Most of these holdouts are small wine markets, including Utah, Rhode Island, and Delaware. And then there's New Jersey.

New Jersey passed a direct shipping bill all the way back in 2012. But the way that they did it makes it so expensive and difficult to comply with that I have always suspected that it was done intentionally. Why? State-licensed wholesalers oppose direct shipping of wine, and are major donors to state legislative campaigns. The official statement that their national body has published rehashes concerns like "delivery to dry counties to delivering to underage youth" and "the loss of billions of dollars in taxes". I once had the scion of our Massachusetts wholesaler tell me that they oppose direct shipping as a standard policy.

For all that posturing, I think distributor opposition to DTC shipping is better thought of as an attempt to limit competition. After all, every state requires common carriers to follow delivery laws and inspect ID's at delivery, and most states now also require wineries to collect and remit taxes. Plus, research has shown actual attempts to skirt age requirements by online ordering of alcohol are vanishingly rare and liberalization of direct shipping laws has had a negative correlation with underage drinking rates.

The liberalization of direct shipping laws followed the Supreme Court's Granholm v Heald decision in 2005. One by one states passed direct shipping laws, most of them relatively straightforward to comply with. Get a permit, collect and remit taxes, and agree to ship using a common carrier who checks IDs. Done and done. So how does the New Jersey law make life difficult for wineries? Let me count the ways.

• The permit is the country's most expensive at $938 and there are 29 reports to submit annually
• Label registration is required, at an annual fee of $23 per label, which for a winery like us that lists 37 different wines (and 44 total products when you count different sizes/formats) on our shop page comes to more than the annual permit cost
• There is a bond wineries have to post based on their tax remissions (or expected tax remissions) with a minimum of $1,000
• There are registration fees of $150 per partner per year, an issue for a winery like ours owned by two families, each with several owners
• The winery needs to designate (and pay for) a "registered agent" in New Jersey
• To receive a permit, we need to establish nexus with the state of NJ and are therefore liable for filing taxes there and paying an annual corporate income tax of at least $500
• Plus there's a capacity cap of 250,000 gallons (around 100,000 cases) that eliminates the access to the market for many wineries, possibly including us. To know for sure, we would likely need to engage legal counsel. We make something like 76,000 gallons of wine per year at Tablas Creek, which is well under the capacity cap. But one of the questions in one of the dozens of forms any prospective winery needs to fill out requires each partner to certify, among other things, that they "do not have any financial interest, either in whole or in part, directly or indirectly, in a winery that produces more than 250,000 gallons per year". While Tablas Creek is fine, the many brands the Perrins produce in France push them over the capacity cap. Does that mean that New Jersey customers shouldn't be able to access Tablas Creek?

We would estimate total annual costs to register in New Jersey – if we even could – would be somewhere between $5,000 and $10,000. Does this sound like it's in keeping with the paean to the Commerce Clause of the US Constitution published by the Supreme Court in 1949 in H.P. Hood & Sons vs. Du Mond? Not to me:

"Our system, fostered by the Commerce Clause, is that every farmer and every craftsman shall be encouraged to produce by the certainty that he will have free access to every market in the Nation… Neither the power to tax nor the police power may be used by the state of destination with the aim and effect of establishing an economic barrier against competition with the products of another state or the labor of its residents."

In the State of the Wine Shipping Union blog I mentioned in the opening paragraph, I listed New Jersey in "Tier VI: Extremely Difficult/Expensive". But my characterization of the state in my original 2015 "state of wine shipping" blog was maybe more accurate: "Death by 1,000 cuts". We are no closer to getting our wine to the Garden State's 9.5 million residents than we were a decade ago. And that, as far as I can tell, has been the state's goal all along.