"Illinois sends over 100 cease and desist letters"

I just read this blog post on ShipCompliant. Are things “getting worse before they get better” or are we seeing an actual push back?

The Illinois Liquor Control Commission (ILCC) announced at their board meeting last week that they had sent over 100 cease and desist letters to retailers, wineries, and fulfillment houses. The letters state that the ILCC “has evidence that your business is transferring alcoholic liquor into Illinois from a point outside of Illinois without a license.” This action appears to be completely separate from the tax on shipping issues in Illinois.

Recipients of the letter have five business days following receipt to respond if they believe they’ve received the letter in error or if they would like to apply for a license to ship to consumers to bring them into compliance with Illinois law. Notably, the letter explains that the agency will notify the common carrier making the shipment, resulting in a violation of the carrier agreement and potentially putting shipments to all states at risk for that seller.

The Liquor Control Act authorizes this Commission to take all necessary steps to prevent unlicensed alcoholic liquor sales and shipments into Illinois including notifying law enforcement authorities and other interested parties of State law violations. If a violation is found to have occurred, your actions may result in serious criminal and tax related penalties. In addition, if you are transferring alcoholic liquor without a license, or on behalf of an entity that is unlicensed, we will notify your common carrier that your shipments are not compliant with State law which would violate the compliance agreements you have signed with the common carriers.

Analysis: It seems like the ILCC is targeting out of state business that do not hold licenses in Illinois. There are many out of state retailers that have Illinois on their list of supported destination states. They’ll have to stop shipping there now unless they want to invest heavily in a physical presence and license in Illinois.

It’s unclear at this point what the ILCC will ask of fulfillment houses that are shipping on behalf of licensed wineries. State agencies use the common carrier reports from UPS and FedEx that list the origin address as well as the address of the recipient for each package to reconcile with license lists, volume limit calculations, and tax reports. But, if the fulfillment house is listed as the shipper, the reports do not usually show the licensee that is accepting the order. Agencies will often ask for and accept supplemental information directly from fulfillment houses to provide visibility into the licensees that are making shipments.


Iowa Also Continues Cracking Down

We’re not sure exactly how many letters were sent by the Iowa Alcoholic Beverages Division (IABD), but the IABD also sent (friendlier) letters to multiple shippers last week. “The ABD respectfully requests that you you voluntarily implement corrective measures to resolve the violation(s) explained above”.
Analysis: This is likely a continuation of the ABD’s monitoring of the carrier reports to identify and halt shipments coming from business that do not hold licenses in Iowa.


Is Michigan Next?

There’s good reason to believe that Michigan may be the next state to increase enforcement activities. We’ve heard from several people that have indicated that coordinated buys and investigations may be coming in Michigan soon.
Analysis: This seems different than what we’re seeing in Illinois and Iowa. Whereas the ILCC and IABD are monitoring the carrier reports, we have yet to see sting operations from those agencies. If you ship to Michigan, now would be a great time to review your program and make sure your license is up to date and that you’re filing your tax reports on time. Also remember that Michigan is one of about 5 states that require age verification on the purchaser of each direct shipping order.


Remember — Retailers Don’t Have the Same Rights As Wineries

With the passage of South Dakota’s new shipping law, wineries will have access to 43 states for direct shipping effective January 1st. According to the ShipCompliant / Wines & Vines 2015 Direct Shipping Report, Illinois is the 5th largest destination state for wineries in terms of volume, with 10.9% growth last year. Michigan is the 11th largest with 8.9% growth, and Iowa is the 24th, with 13% growth in 2014.

Wine retailers, on the other hand, can only legally ship to 14 of those states across state lines. Retailers located in New York or New Jersey, for example, can not ship to Illinois, Iowa, or Michigan consumers using common carriers.
If you are a winery or retailer that received one of these letters and want to learn more about how to comply with state rules, attend one of our ShipCompliant Direct demos. These demos cover how to get compliant, stay compliant, and manage your direct shipping program. Our team also spends some time in these demos discussing how you can automagically file your reports with AutoFile.

Ah. It seems the politicians must mow pay their masters.

I am so tired of the wholesalers trying to cut off out-of-state sales.

It’s always about the money.

Agreed. I actually reached the point last year that one of my New Year’s resolutions was not to purchase wine or spirits through in-state distribution channels any longer. Given all of the cracks that have developed in the system - including direct winery sales and for me, easy driving to NH to purchase my 4 quarts of each and legally bring it back – I wonder if we’re not getting to the point that a boycott could be effective.

From a winery standpoint, both wineries and state governments would benefit from uniform shipping laws and tax collection.
For example, even a simple one such as…
an annual license fee (depending on production size)
5% sales tax rate for all states
collected quarterly
controlled by one agency (instead of 50)
… would result in more wineries applying for more licenses and reporting sales more accurately.

I know distributors would block this, so it is a pipe dream of efficiency on my part.

I have a license for all the states mentioned above along with dozens of others. One of the biggest wastes of time in all of my work is reporting different sales on different due dates with different frequency to different states by different methods with different e-file passwords.

It is extremely inefficient and a deterrent for many, many wineries to even apply for a state license, which results in zero revenue for that particular destination state.

BETTER?!?

This is tax revenue that we’re talking about, right?

[u]http://www.statebudgetsolutions.org/publications/detail/promises-made-promises-broken-2014-unfunded-liabilities-hit-47-trillion[/u]

Promises Made, Promises Broken 2014: Unfunded Liabilities Hit $4.7 Trillion
November 12, 2014

State ||| Fair Market Valuation Unfunded Pension Liability (in thousands)

1. California ||| $754,049,342
   2. Illinois ||| $331,579,500
2. New York ||| $307,932,488
3. Texas ||| $296,099,832
4. Ohio ||| $289,603,831
5. New Jersey ||| $200,150,052
6. Florida ||| $183,400,221
7. Pennsylvania ||| $181,834,408
8. Michigan ||| $136,352,801
9. Massachusetts ||| $104,045,210

[u]http://www.civicfed.org/civic-federation/blog/direct-debt-capita-six-illinois-municipalities[/u]

Direct Debt Per Capita for Six Illinois Municipalities
September 6, 2013

Chicago $9,683
Oak Brook $8,192
Peoria $6,525
Oak Park $5,708
Joliet $4,688
Rockford $3,202

I think this is independent of tax revenue. Most of the wineries I this is an attempt at constitutionally acceptable protectionism

The three-tier system was created to bring the bootleggers in from the cold and to TAX the movement of alcohol across borders.

The only thing that the government cares about is the amount of rent which it can extract at that cross-border choke point.

And these governments are already insolvent.

You haven’t seen anything yet.

No. Politicians care about fundraising, and the cash provided by the wholesalers here are a rich vein. They have a history of feeding the legislature legislation of dubious legality to further the wholesaler agenda, which is almost always passed.

See, for example, U.S. judge overturns Wirtz law on liquor – Chicago Tribune

I’m a bit confused by this, but this is a regulatory agency, so I guess it’s not meant to be understandable. My confusion is about licensing. If the sender is licensed in the state that they’re sending from, I think that’s all the carrier would care about. It’s probably not possible for an out-of-state retailer to get an Illinois Liquor License since they don’t have a presence here, and for Illinois to require one without the ability for them to get it would set up a situation that would likely result in a court ruling of discrimination on the state’s part. Isn’t that what happened in Michigan a few years ago?

The Wirtz law was a joke. The worst part of it was that they tried to cloak it under the auspices of consumer protection.

And this quote is just so obnoxious:

“Franchise laws have an honorable history,” said Guy Chipparoni, a Wirtz spokesman. “They protect local small businesses who have made heavy investments from capricious decisions.”

Wirtz was a billionaire, not exactly the mom and pop grocery store. I hate Illinois politics (which reminds me I have to vote later today).

I hate Illinois Nazis.

California wineries need to have what are usually labeled “Direct Wine Shipping” licenses to most states, Illinois being one of them. Most collect excise taxes on gallon amount and sales tax based on purchase price. It is quite thrilling to fill 30-40 of these out every month.

Isn’t this ShipCompliant’s (the source of the OP news) business? I wonder if this is related to the story that I thought I heard about the lawyer in Chicago that is seeking a bounty for turning non-compliant wineries into the state.

we were discussing that attorney here

Blame prohibition and the repeal of it. Dumb laws leave lasting dumb residual problems.

Blame politicians and their inherent dishonesty.

LOL’ed.

The retailers are the Soldiers. The wholesalers are the Capo’s. They’re required to send a percentage of the action back up the chain of command to the Consglieres and the Bosses.

Too bad we don’t have enough money to buy politicians or the opportunity to show them an easy multi-billion source of government funding.

We need a law passed that opens all states to inter-state commerce and the states like Ill, Mass, Mich, et al, will have to find other sources of taxation if they want their local retailers competitive, (wink, wink, wholesalers save money on pacs). If we can’t buy the politicians to do it then:

Initiate a 2 to 4 percent federal tax on ALL inter-state commerce (on-line, wine club, etc) and no state can further tax the purchase. Kinda the same as above, but now the USA would have enough money to build battlestar gallactica and Amazon stock might dip a little until they close all the store fronts they had to invent in many of the states.