Enforcement efforts around the country have revealed that states grapple with the harmful impacts of non-compliance in the direct-to-consumer alcohol shipping market. While many shippers respect state laws, there are bad actors that ship alcohol illegally to consumers by taking advantage of loopholes to evade compliance, which harms law-abiding businesses, undercuts state authority, and ultimately has negative impacts on the entire marketplace and consumers.
Direct-to-consumer (DTC) shipping has become increasingly common in recent years. Increases in this marketplace highlighted the significant challenges that states face when shippers evade state law. Beverage alcohol shipments occur when an in- or out-of-state retailer or supplier uses a common carrier such as FedEx or UPS to bring product to a consumer from its premise or agent. A large number of shippers utilize loopholes in the system to avoid paying taxes and complying with relevant laws in the receiving state. Law-abiding businesses, the state, and in-state consumers are left to pay the price, while these bad actors continue to make profits by abusing the system.
WSWA works to mitigate the negative impacts of illegal direct-to-consumer shipments to ensure a level playing field and preserve a safe and innovative alcohol marketplace. WSWA strongly supports giving regulators the tools they need to carry out enforcement against illegal shippers, including ways to identify and recoup lost excise and retail taxes and ways to prevent and penalize underage sales.
Lost taxes: Excise and Retail - America’s family-owned distributors play an important role in most state’s alcohol distribution system. Beyond ensuring that Americans have access to the world’s most diverse selection of unadulterated products, they work to ensure necessary excise taxes are collected and remitted. Additionally, retailer partners ensure that taxes are paid during the final sale of alcoholic products. When an out-of-state entity does not follow the same laws and pay the taxes like in-state businesses, regulators need better mechanisms to preserve an orderly marketplace.
Common Carrier Reporting - A useful tool for states because it provides a means to differentiate between legal and illegal sales and shipments by requiring carriers like FedEx and UPS to report all alcohol shipments brought into the state from businesses to state regulators. States can use these reports to verify that licensed shippers have paid all taxes and fees necessary to continue their privilege and can identify those businesses that need to be brought into compliance.
Underage Access - Because wholesalers are local, licensed businesses, they have a vested interest in ensuring their products are safe and responsibly used. Direct-to-consumer sales can be made by bad actors that do not have this local interest in mind. This can easily lead to internet sales to underage persons.
Luckily, there is a responsible e-commerce solution: local, licensed delivery. Delivery from a local retailer provides consumers with convenience, access to a variety of products, and assurances that products are genuine and safe to consume all while ensuring public health and safety. A clear choice for communities!