Kentucky Passes On-site DTC Shipping Bill, Leaving Key Issues Unresolved

HB 400, a Kentucky bill allowing limited direct-to-consumer spirits and wine shipments, has been signed by the state’s governor and is effective immediately. However, important issues remain unresolved and shipping to Kentucky is not advisable. As it stands, the bill allows for:

• Shipping of up to four cases of wine per day for purchases made on the winery premises;
• Shipping up to 12 cases of wine per year, as part of a subscription or wine club service/membership, if the service/membership was entered into on the winery premises;
• Shipping of 4.5 liters of distilled spirits per day (increasing to 9 liters on Jan. 1, 2021) for purchases made on the distillery premises;
• Shipping of up to nine liters of distilled spirits per year, as part of a subscription or distillery-sponsored club, if the service/membership was entered into on the distillery premises.

In order for a winery to avoid potential liability by shipping to a “dry” address, the new law requires wineries to obtain a written representation from the consumer that the shipping address is located in a “wet” territory.

Two important issues remain unresolved:

• It is unclear whether the new law requires the collection and remittance of excise, wholesale, and/or sales taxes. Wine Institute is waiting for clarification and will inform members when new information is received;
• The on-site requirement is directly contrary to a U.S. Circuit Court of Appeal decision that is binding on Kentucky. Wine Institute expects the Kentucky ABC to challenge the constitutionality of the on-site requirement and seek to have it deleted from the law.

Wine Institute recommends against wineries shipping to Kentucky until tax questions are resolved.