Food Service & Agriculture, Government, and Law

Association scrutinizes illegal wine shipments

Officials estimate 150,000 bottles arrived from out-of-state retailers that didn’t pay taxes.

October 26, 2018
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The Michigan Beer and Wine Wholesalers Association is estimating nearly 150,000 bottles of wine were illegally shipped into Michigan over a recent three-month period, causing the state to lose out on as much as $25,000 in unpaid taxes.

The MBWWA counted 496,376 bottles of alcohol that were shipped into Michigan from April 1-June 30. Of those, 245,289 were bottles of wine shipped by licensed direct shippers, leaving the remaining 251,087 bottles to cover spirits and illegally shipped wine.

Brett Visner, director of public affairs for the MBWWA, said while the association doesn’t know for certain what is in each box shipped into the state, the estimate is based on the International Wines and Spirits Record 2018 e-commerce report, which said between 60 to 70 percent of online alcoholic beverage transactions are for wine.

MBWWA President Spencer Nevins said based on the percentage, more than 150,000 bottles of wine were illegally shipped to Michigan consumers between April and June.

Visner said the MBWWA started collecting data in the second quarter of 2018 and noticed a marked discrepancy between the common carrier reports from shippers like FedEx and UPS and the Michigan Department of Licensing and Regulatory Affairs excise tax data.

“A lot of the transactions are perfectly legitimate,” Visner said. “If it’s a licensed transactor, they’re doing the right thing, but unfortunately, a lot of them aren’t taking the time.”

The MBWWA’s findings come on the heels of a federal judge’s decision to rule against a portion of state law on liquor sales (PA 520 of 2016) that prohibits out-of-state retailers from directly shipping wine to Michigan consumers. The ruling currently is on hold as the U.S. Supreme Court reviews a similar case in Tennessee.

PA 520 also includes licensing requirements for third-party delivery apps like Drizly and requires common carriers like FedEx and UPS to report to the state that it is shipping alcohol into Michigan.

But even with the law in place, the MBWWA’s findings showed out-of-state retailers still are ignoring state law and illegally shipping wine to Michigan residents. Nevins said the Michigan Liquor Control Commission now is tracking who is sending wine into Michigan and how much, which potentially will allow the state to crack down on the “bad actors.”

As far as a reason, Visner speculated it could be a blend of both ignorance and apathy on the part of out-of-state distributors.

“I think it’s a combination of not knowing, not caring or all of the above,” he said. “The direct shipping law that allows wineries to ship directly has been in place for a while, and there are several avenues that allow folks to legally ship into Michigan. It hurts not only the state, but it also hurts the mom-and-pop shops.”

Visner said the MBWWA will continue to monitor the state’s excise tax and common carrier data going forward.

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