Tennessee to drop requirement for direct wine shippers to register with the Secretary of State

Any winery seeking to obtain or renew a winery direct shipper license in Tennessee must first register with the Tennessee Secretary of State and provide the Tennessee Alcoholic Beverage Commission (ABC) with a certificate of authority or existence. At least for now.

Registration with the Secretary of State (SOS) is second on the ABC’s list of requirements for a winery direct shipper license, right after “a federal basic permit to manufacture, bottle, or rectify wine.” Yet until recently, the ABC hasn’t enforced this regulatory requirement.

Tennessee is now enforcing SOS registration, but may not do so for long — and that may put some direct wine shippers in a pickle.

Wine Institute has been working with the ABC since learning about the increased enforcement, and the ABC now intends to remove the SOS registration requirement. However, it could take as long as 90 days for the ABC to complete the mandatory rulemaking process.

Thus, wineries whose direct shipper licenses are set to expire during this 90-day window have a choice: Register with the Secretary of State as currently required, or let their license lapse and obtain a new one after the SOS registration requirement has been eliminated.

Direct wine shippers are required to renew their direct shipper license within 30 days of the expiration date or the license will lapse. Once a license has lapsed, a direct wine shipper would need to reapply as a new applicant in order to ship directly to consumers (DTC) in Tennessee. This takes time. Tennessee requires a hearing for all new license applications, and the hearing is held at the end of each month.

Why would a winery opt to let their license expire rather than simply renew it and register with the Secretary of State as required today? Primarily because registration with the SOS can be expensive: The fee for a foreign corporation is $600 while fees for a foreign LLP and foreign LLC can reach $2,500 and $3,000 respectively.

SOS registration may also lead to additional tax obligations. Direct wine shippers are currently required to collect and remit applicable alcohol beverage excise tax as well as state and local sales taxes. They also need to file a shipment report.

Because SOS registration can be costly and potentially create an additional tax burden, Wine Institute says “some wineries may wish to let their license expire and then apply for a DTC license after the rule change is effective.” This is a decision each business must make for themself.

Tennessee also recently adopted four new registration and reporting requirements for licensed alcohol sellers and fulfillment houses. Read this for more details.

Avalara for Beverage Alcohol can help you identify and comply with direct-to-consumer wine shipping regulations in all states, easing the burden of compliance.