2011 Legislative Update

1. 2011 session underway, FWWS introduces four bills.
2. New FWWS proposal would legalize consumer direct ship by retailers.
3. Farmer’s market sampling bill introduced, receives hearing.
4. Wine Institute “What is a Winery” proposal still a mystery.

2011 Session Underway

As of this writing, the first week of the 2011 Washington Legislative session is behind us. The FWWS Board has been very busy over the past year preparing for this hectic season. Together with our Lobbying Team of Mark Gjurasic and Terry Kohl, we have secured sponsors in both the House and Senate for a total of four bills – a very ambitious agenda. Three of these bills, our Tax Reporting Relief Act, Payment Parity Act, and Craft Wineries Act have been previously introduced. Our Direct Shipping Bill is new. No hearings have yet been scheduled on any of our bills. Fact sheets and the complete text of all these proposals are available on our website.

FWWS Introduces Direct to Consumers Shipping Bill

FWWS has introduced a new bill this session which we believe has many positive aspects for Washington wineries, consumers, and the State. While Washington wineries and out-of-state wineries presently have the right to ship wine direct to consumers in Washington, both domestic and out-of-state retailers are prohibited from doing so. In other words, any retailers presently shipping to Washington consumers are doing it illegally. We believe creating a legal venue for this practice is a good idea and will accomplish the following:

• Level the playing field for Washington wineries. Presently any wine shipments by out-of-state retailers are shipped without collection of Washington State sales and excise taxes since such shipments are extra legal and outside the tax registration process. This puts your wines at a roughly ten percent competitive disadvantage even before considering the cost of adult signature requirement compliance, presently $4 per package for UPS shipments.
• Adult signature requirements can be extended by regulating such shipments, accomplishing a clear and valuable public safety goal.
• Tax revenue can be generated at a time of tight state budgets from a population that will gladly accept such taxes in exchange for the benefit of being able to bring what we believe is a common practice into the legal daylight.
• Strategically, we believe that seeing such revenues suddenly appear from a currently underground economy, will encourage other states to join the handful that presently allow direct shipment from retailers to consumers. This will allow Washington wineries to sell to Washington retailers, or nationwide retailer intermediaries such as Vinoshipper.com, for resale to consumers in other states, and in quantities that presently make it impossible to either attract the representation of a wholesaler or justify the cost of compliance by an individual Washington winery in such an out-of-state market.
  

Farmers’ Market Wine Sampling Bill Introduced

A bill has been introduced in both the State House (HB 1172) and Senate (SB 5029) that provides a pilot program allowing wineries to provide tasting samples at farmers’ markets. Currently wineries may apply for a $75 license endorsement to sell wine at farmers markets meeting certain requirements. Tasting at such markets is not allowed. Under the proposal, tasting of samples up to 2 ounces would be allowed with a maximum of 4 ounces per customer, and only at markets currently approved for such wine sales. The pilot program would expire at the end of 2012 unless extended.

FWWS supports this proposal. It has already received a hearing in the house and is presently scheduled for a hearing before the Senate Labor, Commerce, and Consumer Protection Committee on January 18th. We will keep you posted on its progress.

Washington Wine Institute “What is a Winery?” Bill Still a Mystery

Last month we reported to you on the WWI’s “What is a Winery?” concept. The WWI has been discussing concerns in this regard for at least eighteen months. As we reported, last August we became aware through the trade media that the WSLCB shared some concerns being discussed by the WWI. Inquiries to the WSLCB indicated that they expected the WWI to present such a bill in the 2011 session but that the WSLCB could offer no details since they were only providing “technical assistance” to the WWI in this regard. Repeated subsequent requests to the WWI for a draft copy or even an outline of their proposal have gone unanswered.

In December, a legislative committee Chair offered to arrange a meeting between FWWS, the WWI, the WSLCB, and the federal Alcohol and Tobacco TTB in order to discuss agency concerns and the WWI concept. While the WWI refused the invitation, a meeting was subsequently arranged by the WSLCB. Attending were FWWS Board members, our lobbyist, and staff from the TTB and WSLCB. While several issues of regulatory concern were discussed, what became clear from the meeting is that the current State definition of “production” within the licensing statute is not sufficiently clear or comprehensive to cover business models currently being used, models which may be allowable under the current federal statutes, assuming wineries are actually complying with the federal rules. Beyond identifying this fairly straightforward definitional inadequacy in the statute, what was not sufficiently covered in the meeting is; first, to what extent the proposal is being driven by public policy goals arising from the lack of clarity in the licensing rules, and, second, if this is primarily being driven by insufficiency with the current licensing laws, why the WSLCB, rather than the WWI, is not pursuing this legislation as a regulatory reform proposal. We believe that broad industry input on proposals which mandatorily affect all state winery licensees is vital and that the WSLCB, as our regulator, is in the best position to coordinate such input. Thus far, the WWI has not only not solicited such broad industry input, they have been unwilling to accept it, except, presumably, from their membership.

At the present time and one week into the current legislative session, we have not received either a draft bill or an outline of the bill concept from the WWI. We are, therefore, uncertain whether the WWI intends to proceed with such a bill at this time, or why such a bill is necessary beyond a few definition tweaks in the liquor code. Obviously we are in no position to comment on what may or may not be in it. We will keep you posted.

As always we welcome and value your questions, comments, and input.

The Board of FWWS