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Mark Willstatter

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Washington state consumers hosed by not-so-new law

by Mark Willstatter » Wed Aug 23, 2006 9:10 pm

Perhaps this has been covered here; if so, please excuse the repeat. I didn't find anything in a quick search. Living in Washington state, I'm not sure how I missed this for almost two months. The ironic (but not rare, I know) result of a federal court ruling here mandating equal treatment for out-of-state wineries is that wine consumers in Washington are signficantly worse off than before.

Most here will be familiar with the Costco case, in which Costco won convincingly. Costco wanted, among other things, to buy wine directly from out-of-state wineries, to be able to get volume discounts on wine and to be able to warehouse wine, all things previously prohibited under WA law. An early ruling, like similar rulings around the country, told the WA legislature to even the playing field between wineries inside and outside the state as it relates to direct shipping. Eventually, the court issued a sweeping ruling in Costco's favor.

In April, the result was a new WA law that allowed all wineries to ship directly without restrictions. The bad news is that as of July 1, the old reciprocal laws were superseded by a new law that imposes extra red tape and expense. Wineries wishing to ship directly to WA must pay for an annual $100 permit, they must collect and remit WA sales taxes, they must file two different monthly reports on wine shipped and sales tax collected - whether or not any wine was actually sold that month.

For small wineries without staffs of accountants and form-filers, that is high enough barrier that many are stopping shipments to WA altogether. California and Oregon, the two states I'd guess WA wine consumers would tap most often, were both reciprocal states and wineries there previously been able to ship wine freely. Now those shipments will be more expensive, if they are available at all. This is obviously one case where legal changes going on around the country have not benefited the consumer. :(
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Re: Washington state consumers hosed by not-so-new law

by Hoke » Wed Aug 23, 2006 9:36 pm

I hope you've written a letter to your local and state politicians, Mark.

If enough people care about this to change it, it can be changed.

I would say the new laws certainly make a mockery of the "without restrictions" phrase.
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Re: Washington state consumers hosed by not-so-new law

by Gary Barlettano » Wed Aug 23, 2006 9:53 pm

No good deed goes unpunished. The WSWA will lobby to make the hurdles too high for the small guys; the state will always see another way to exact its pound of flesh and then some.

But, as far as reporting and compliance goes, well, every dung has its beetle. If you just stick "wine compliance" into your favorite search engine it will reveal any number of consultants willing to take over the compliance tasks for the wineries ... for a price, of course.
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Re: Washington state consumers hosed by not-so-new law

by ClarkDGigHbr » Thu Aug 24, 2006 12:34 am

California and Oregon, the two states I'd guess WA wine consumers would tap most often, were both reciprocal states and wineries there previously been able to ship wine freely. Now those shipments will be more expensive, if they are available at all.


I'd already noticed a significant price advantage to buying Oregon wines in Oregon stores. As a result, I always buy those wines when we visit the Portland area, which is relatively frequent given that we have family and friends there. I see that I'll just have to continue that practice for the forseeable future.

-- Clark
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Re: Washington state consumers hosed by not-so-new law

by Hoke » Thu Aug 24, 2006 12:38 am

ClarkDGigHbr wrote:
California and Oregon, the two states I'd guess WA wine consumers would tap most often, were both reciprocal states and wineries there previously been able to ship wine freely. Now those shipments will be more expensive, if they are available at all.


I'd already noticed a significant price advantage to buying Oregon wines in Oregon stores. As a result, I always buy those wines when we visit the Portland area, which is relatively frequent given that we have family and friends there. I see that I'll just have to continue that practice for the forseeable future.

-- Clark


Plus, no sales tax in Oregon! Buy 9% more wine!!
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Re: Washington state consumers hosed by not-so-new law

by Bruce K » Thu Aug 24, 2006 9:55 am

I was just out there for two weeks and heard a lot of griping about the ruling.

This seems particularly counterproductive, considering that Washington (I'm guessing here) is probably a net exporter of wine to other states.

I hope you and enough outraged wine consumers can get things changed.
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Re: Washington state consumers hosed by not-so-new law

by OW Holmes » Thu Aug 24, 2006 11:12 am

I know those regulations ($100 per registering winery, collection of sales tax, filing of forms) are more than was previously required in Washington to get California wine, it really isn't that bad compared to some other states. When the Supreme Court in Granholm dictated "equal treatment" of instate and out of state wineries, one solution, selected by some states and promoted by the wholesalers in almost all of them, was to ban all shipments by both in state and out of state wineries. Collection of taxes and knowing who is shipping how much into the state seems like pretty modest regulation in comparison, IMHO.
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Re: Washington state consumers hosed by not-so-new law

by Thomas » Thu Aug 24, 2006 12:18 pm

OW Holmes wrote:I know those regulations ($100 per registering winery, collection of sales tax, filing of forms) are more than was previously required in Washington to get California wine, it really isn't that bad compared to some other states. When the Supreme Court in Granholm dictated "equal treatment" of instate and out of state wineries, one solution, selected by some states and promoted by the wholesalers in almost all of them, was to ban all shipments by both in state and out of state wineries. Collection of taxes and knowing who is shipping how much into the state seems like pretty modest regulation in comparison, IMHO.


Your last point may be true enough but, to me, the filings and fees illustrate more clearly why it is essential for this situation to be decided on the basis of the words in the Dormant Commerce Clause and not on narrow cases brought to the Supreme Court.

Anyone really thinking about this situation would have known from the moment of the Supreme's decision that states would find a way to make more money while WSWA would seek a way to make things more difficult--together, they found that way.

Problem is: the present Supreme Court is likely not to look favorably on a case brought before it using the Commerce Clause. Justice Kennedy alluded to that possibility when he specifically stated in the decision last year that alcohol is a special product and so some state actions can be overlooked through the eyes of that stupid word "temperance," the definition of which includes the word "moderation."

With alcohol, the Supreme's since Brandeis simply refuse to see it as they see any other legal commodity.

The whole mess is tainted with greed and hypocrisy. The same nation that oultaws brain altering drugs like heroin, cocaine, etc. sanctions legal drugs like tobacco, alcohol, etc. but places restrictions on the legal ones so that states and others can profit. Makes absolutely no sense. Stupid government functioning, but where's the surprise in that?
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Re: Washington state consumers hosed by not-so-new law

by OW Holmes » Thu Aug 24, 2006 12:44 pm

Thomas wrote:

Anyone really thinking about this situation would have known from the moment of the Supreme's decision that states would find a way to make more money while WSWA would seek a way to make things more difficult--together, they found that way.


I recall that one of the winery owners here in Michigan actually predicted that before the Supreme Court ruled. While we were all celebrating the possibility that the court might open the borders, he was not celebrating. He was predicting that, to make things equal, the wholesalers would convince the Michigan legislature to either curtail all shipping, killing the wine industry here, or impose severe restrictions all all, making no one happy.

I don't know the current tally, but I know some states have stopped all shipping, and some have imposed restrictions on both instate and out of state shipping, and I don't know any that just opened the borders - though there may be some.
-OW
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Re: Washington state consumers hosed by not-so-new law

by Mark Willstatter » Thu Aug 24, 2006 1:42 pm

Hoke wrote:I hope you've written a letter to your local and state politicians, Mark.

I would say the new laws certainly make a mockery of the "without restrictions" phrase.


Not yet, Hoke, but I will write those letters. I only discovered this yesterday via, of all things, a Mike Dunne article in the Sacramento Bee on this subject.

The thing is, WA politicians can argue that they have, in fact, leveled the playing field. I'm sure WA wineries have to pay for licenses and collect and remit sales tax, for example. So they can say they've met the letter of the law but that still doesn't make me happy that the result of a ruling intended to make out-of-state wines more available to consumers is exactly the opposite.
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Re: Washington state consumers hosed by not-so-new law

by Mark Willstatter » Thu Aug 24, 2006 1:56 pm

OW Holmes wrote:I know those regulations ($100 per registering winery, collection of sales tax, filing of forms) are more than was previously required in Washington to get California wine, it really isn't that bad compared to some other states. When the Supreme Court in Granholm dictated "equal treatment" of instate and out of state wineries, one solution, selected by some states and promoted by the wholesalers in almost all of them, was to ban all shipments by both in state and out of state wineries. Collection of taxes and knowing who is shipping how much into the state seems like pretty modest regulation in comparison, IMHO.


I would agree on the face of it that these requirements don't sound that onerous. But you need to look at it from the perspective of the small winery - say, 4,000 cases per year, husband and wife operators, maybe one fulltime employee in the cellar. As I said before, no accountants, no form-filers, the principals have their hands full just growing, making and selling wine. It's not so much that WA's rules are in and of themselves so bad, it's that they're just one of 49 other states, each with different requirements. These folks don't have the time to be filing multiple forms in each of 49 states. Any licensing/form filing requirements becomes burdensome and constitutes in my mind what is (or should be) un-Constitutional restraint of trade.

That small winery sells, say, 10% of its production (400 cases) directly to consumers. Washington state has about 6 million residents, so assuming residents there buy wine in proportion to their population, they buy about 2% of the nation's wine. That's eight cases per year that small winery might sell directly to Washington consumers. On that volume, even $100 takes a pretty big bite out of profits and our mom-and-pop proprietors are just not going to deal with the reporting requirements for the privilege of shipping eight cases of wine. They'll just drop Washington off their list and consumers there will be out of luck.

The bottom line is, as I said before, Washington state wine consumers are going to have less choice than they did before a court ruling intended to have the opposite effect.
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Re: Washington state consumers hosed by not-so-new law

by Robin Garr » Thu Aug 24, 2006 3:41 pm

Mark Willstatter wrote:before a court ruling intended to have the opposite effect.


With all respect, Mark, that's how wine geeks want to read the ruling, but from a lawyer's perspective (and I'm not a lawyer!) that wasn't the issue at all. Disparate treatment of inter-state and intra-state business was the issue, and the ruling is neutral on whether the disparity be resolved by banning all shipping or allowing all shipping. We know which answer the wholesalers are going to pay the state legislatures to provide.
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Re: Washington state consumers hosed by not-so-new law

by Mark Willstatter » Thu Aug 24, 2006 4:01 pm

Robin Garr wrote:
Mark Willstatter wrote:before a court ruling intended to have the opposite effect.


With all respect, Mark, that's how wine geeks want to read the ruling, but from a lawyer's perspective (and I'm not a lawyer!) that wasn't the issue at all. Disparate treatment of inter-state and intra-state business was the issue, and the ruling is neutral on whether the disparity be resolved by banning all shipping or allowing all shipping. We know which answer the wholesalers are going to pay the state legislatures to provide.


As you'll note in my reply to Hoke a couple of messages up, Robin, I fully realize this complies with the letter of the law. As a consumer, though, I regret that my choices have been limited and my expenses raised.
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Re: Washington state consumers hosed by not-so-new law

by OW Holmes » Thu Aug 24, 2006 4:05 pm

Mark Willstatter wrote:
As you'll note in my reply to Hoke a couple of messages up, Robin, I fully realize this complies with the letter of the law. As a consumer, though, I regret that my choices have been limited and my expenses raised.


I'm sure you will get no disagreement at all on that.
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Re: Washington state consumers hosed by not-so-new law

by Mark Willstatter » Thu Aug 24, 2006 7:17 pm

Hoke wrote:
ClarkDGigHbr wrote:I'd already noticed a significant price advantage to buying Oregon wines in Oregon stores. As a result, I always buy those wines when we visit the Portland area, which is relatively frequent given that we have family and friends there. I see that I'll just have to continue that practice for the forseeable future.

-- Clark


Plus, no sales tax in Oregon! Buy 9% more wine!!


The trick is to live in Oregon. Then you can buy without paying sales tax in both OR and WA!
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Re: Washington state consumers hosed by not-so-new law

by Hoke » Thu Aug 24, 2006 7:35 pm

No, the trick is to live in Vancouver, WA. Then you can buy without paying sales tax in Oregon and live in WA without paying state income tax.
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Re: Washington state consumers hosed by not-so-new law

by Clint Hall » Fri Aug 25, 2006 1:48 am

Hoke wrote:No, the trick is to live in Vancouver, WA. Then you can buy without paying sales tax in Oregon and live in WA without paying state income tax.


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Re: Washington state consumers hosed by not-so-new law

by Chuck Miller » Fri Aug 25, 2006 2:04 pm

It's worth pointing out that these changes had NOTHING to do with the Costco suit and everything to do with the US Supreme Court decision. The Costco suit will potentially have additional far reaching implications in WA state and potentially elsewhere, but it is under appeal and will not have any effect until the appeals process is exhausted.

Paying sales tax on out of state purchases is a PITA, but get used to it, it will be happening more and more.
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Re: Washington state consumers hosed by not-so-new law

by Mark Willstatter » Fri Aug 25, 2006 2:27 pm

Hoke wrote:No, the trick is to live in Vancouver, WA. Then you can buy without paying sales tax in Oregon and live in WA without paying state income tax.


That depends on where you work - if you live in Vancouver but work in Portland, you're still on the hook for OR income taxes. But my comment was more narrowly aimed at sales tax on wine (and other) purchases - with an OR address, you can buy wine in both states without paying tax.
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Re: Washington state consumers hosed by not-so-new law

by Mark Willstatter » Fri Aug 25, 2006 2:53 pm

Chuck Miller wrote:It's worth pointing out that these changes had NOTHING to do with the Costco suit and everything to do with the US Supreme Court decision. The Costco suit will potentially have additional far reaching implications in WA state and potentially elsewhere, but it is under appeal and will not have any effect until the appeals process is exhausted.

Paying sales tax on out of state purchases is a PITA, but get used to it, it will be happening more and more.


You're right about the Costco suit - I seem to have convolved the two cases. The April change was a result of the Costco suit, the judge gave the state a deadline to either allow direct shipments from out-of-state or ban them altogether - but that was shipments to retailers, not consumers. The July 1 change was a response to the Supreme Court case, I'm sure.

If it were just the sales tax, I frankly wouldn't be that worried, my wine would just have become 8% more expensive. What bothers me more is that my choices are going to be limited because wineries of a certain size will choose not to deal with the new red tape. So in exchange for the new privilege of being able to get direct shipments of wine from, say, Florida and Kentucky, there will be a large group of Oregon and California wineries that will no longer ship to me. I don't know how you feel about that but from where I come from, that's not a good trade-off.

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