Complying with Michigan’s direct-to-consumer shipping regulations.
Howard & Howard Attorneys PLLC
Michigan has had a complex history regarding direct shipping. In fact, Michigan (along with New York) was at the center of an important United States Supreme Court case decided in 2005. Prior to that ruling, Michigan allowed in-state wineries to ship to its residents but prohibited out-of-state wineries from doing the same thing. The Supreme Court found that to be unconstitutional.
Michigan was also at the center of another important federal case ultimately decided in 2020. That lawsuit was brought by an out-of-state retailer after Michigan’s legislature passed a law that allowed in-state retailers to ship alcohol directly to Michigan residents but prohibited out-of-state retailers from doing the same thing. Despite the 2005 ruling which involved manufactures as opposed to retailers, this law was found to be constitutional and remains on the books today.
As far as enforcement goes, Attorney General Dana Nessel’s office has filed and settled several lawsuits against out-of-state retailers found to be shipping wine to Michigan consumers. It appears the law will remain for the time being after a few Michigan legislators in 2020 unsuccessfully pushed bills that would have allowed retailers more freedom to ship direct-to- consumer.
After the 2005 Supreme Court ruling, Governor Granholm signed into law legislation that allowed both in-state and out-of-state wineries and wine manufacturers to ship direct to Michigan residents, with certain conditions. Since then, the regulations have been modified slightly, but most of the original requirements remain. Like most topics alcohol related, there are a number regulations of which to be aware.
First, wineries hoping to increase sales by shipping direct to Michigan consumers must obtain a Direct Shipper license which costs $100 initially and for annual renewals as well as $70 for an “inspection fee” when applying. This license is available to both in-state and out-of-state wineries. Depending on the type of business entity under which the winery operates, several business-related documents are required along with the application and fees. Wineries may ship direct to consumers wine they manufacture, but not more 13,500 liters per calendar year (1,500 cases). All wine labels must be registered with the Michigan Wholesale Product Registry. When making a sale, the winery is required to verify the customer’s age by obtaining photo identification and must also record the customer’s name, address, date of birth, and telephone number. Regarding the actual shipment, the outside of the package must contain the following language:
“Contains alcohol. Must be delivered to a person 21 years of age or older.” At the time of delivery, the customer is required to show photo identification and sign for the package. Also, the package must include a label that has the name and address of the person placing the order as well as the recipient if someone orders wine, for example, as a gift. The winery must also include an invoice or other shipping document listing the quantity of wine by brand name.
On a quarterly basis, wineries must report to the MLCC the total amount of wine by type, brand, and price shipped direct to consumers during the previous quarter and must also pay any applicable excise taxes to MLCC. The excise tax is required per liter shipped and is differing amounts based on the wine’s alcohol content.
Michigan wineries should carefully follow these regulations if engaging in direct-to-consumer shipping. The MLCC has been known to conduct sting operations to verify that wineries are in compliance.