The fulfillment house folly, what exactly are we accomplishing?

Recently, several states including Alabama, Kansas, and Tennessee passed bills requiring that fulfillment houses shipping wine become licensed. Under these laws, a winery can only ship wine via its own premises or a licensed fulfillment house.

If a winery ships from an unlicensed fulfillment house, it makes an illegal shipment.

The states injected a fulfillment house shipment standard into these laws, even though this standard may run against the regulatory purpose of wine shipping laws.

When looking at a regulatory regime governing wine shipping, we must ask, what is the purpose of wine shipping laws? In my view, the goal of winery shipping laws is to ensure winery shippers are licensed and pay taxes.

So, let’s take an example of Winery A, it has a winery shipper’s license in one of these states and pays all the requisite taxes, and ships from an unlicensed fulfillment house. The three states deem this an illegal shipment, yet the winery is licensed and the state is getting its taxes. So, in this situation, what important interest is the state missing out on when the wine comes from an unlicensed fulfillment house?

Quite honestly in this situation, we must ask if the states regulatory goals of licensing and taxation are met, why do the states care where the product is coming from!

The problem is the new fulfillment house laws can take a perfectly legal wine shipment and make it illegal based on a regulatory standard that should not apply in this situation.

In the end, people can talk about how fulfillment house licensing is necessary or how it’s a workable compromise, but what they can’t explain is how a licensee, meeting the regulatory goals of licensing and paying taxes, all the sudden becomes a rogue and illegal player in the system!

Clearly, some laws and not well though out and have unintended consequence.