Prior to 2005, several states took a lopsided approach to regulating the shipment of wine within their borders. They allowed in-state wineries and retailers to ship products directly to residents while banning out-of-state businesses from doing the same. In the 2005 court case, Granholm v. Heald, the U.S. Supreme Court declared that such discriminatory regulations were in violation of the Constitution’s interstate commerce clause.
The ruling forced states to make a decision about how to regulate wine shipments: either open the market for all or ban shipments of wine to their residents entirely. New York, one of the states involved in the Supreme Court case, chose the former option. After six years the results are in and they show more choices for consumers and more tax revenue for the state.
According to New York Liquor Authority Chairman Dennis Rosen, there are more than 800 wineries from 15 states registered to ship within New York, resulting in the collection of $431,375 in permit fees. Wineries that ship directly reported $54 million in sales to New York consumers between March 2009 and February 2010, which yielded about $4.5 million in sales taxes.
Other states, like Michigan, chose to go a different route. While Granholm v. Heald made states treat out-of-state and in-state companies equally, in 2009 then-Michigan Gov. Jennifer Granholm (for whom the case is named) decided to pursue another option by enacting a complex system of prohibitions and requirements that prevents all but the most ambitious and moneyed out-of-state wineries from shipping directly to Michigan residents.
House Bill 6644 was rushed through the legislative process, and a major supporter was the powerful Michigan Beer and Wine Wholesalers Association. This is not the first time the wholesalers have thrown their weight around to block any new law that would open up the alcohol market, allow consumers to deal directly with producers, or in any way cut them out of every single alcohol transaction that occurs.
As noted by wine.com, while wineries are now able to register to ship directly to consumers, a law signed by Gov. Granholm in 2009 prohibits retailers from shipping wine to Michigan consumers via third-party delivery services like UPS or FedEx — and that goes for in-state as well as out-of-state retailers. This creates an inconvenience for in-state retailers of wine and results in a de facto ban on out-of-state retailers shipping wine directly to consumers in Michigan, unless the producers can somehow manage to afford to have their own trucks drive to Michigan and make direct deliveries.
This sneaky move benefits the powerful wholesalers in Michigan, but does nothing to aid consumers, and as New York has demonstrated, could be costing Michigan by missing out on a desperately needed source of revenue.
Michelle Minton is director of insurance studies at the Competitive Enterprise Institute. The Mackinac Center for Public Policy is a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.