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If They Only Had a Brain

With one piece of mail, New York government aimed to further limit wine shoppers' choices instead of expanding them—and the state's coffers

Posted: Oct 15, 2013 10:30am ET

By Robert Taylor

This past August, the New York State Liquor Authority (SLA) quietly issued a cease-and-desist letter to New Jersey's Wine Library, one of the largest retailers in the Garden State and a popular wine source for many New Yorkers.

The SLA ordered Wine Library to stop shipping wine to New Yorkers, a practice that is technically illegal but that has been happening for years without complaint or repercussion. Cease-and-desist letter or not, the ban is practically unenforceable—the SLA simply doesn't have the manpower to adequately monitor interstate sales.

Because of the letter, Wine Library and a few other out-of-state retailers indicated they would stop selling wine to New Yorkers. New York retailers worried that they would start receiving similar letters from alcohol authorities in other states, as a form of retaliation.

Since then, however, there's been nothing but silence from the authorities, and Wine Library has continued shipping wine to New York. Counsel to the SLA Jacqueline Flug, who issued the cease-and-desist letter, has been referring all inquiries to the SLA's director of public affairs, William Crowley. He has repeatedly declined to answer any questions about the issue, leaving consumers and retailers to speculate.

"It's quiet out there now," said Daniel Posner, owner of Grapes the Wine Co. in White Plains, N.Y., and president of the National Association of Wine Retailers. "I don't think [the SLA] realized what they were doing." Posner suspects an unanticipated public backlash against the SLA's letter—news of it spread from wine blogs and message boards to national coverage on FoxNews.com within a week—has dissuaded other state agencies from issuing similar orders.

The SLA's letter did encourage consumers to act—by joining the American Wine Consumer Coalition, which promotes direct shipping from wineries and retailers. "When news hit of New York's crackdown on out-of-state retailers, AWCC's New York membership doubled," said Tom Wark, the association's executive director, though he declined to give exact numbers. "It is now the second-largest source of members at AWCC after California."

"What we're all seeking, of course, is that you open the landscape up … and we get to have a level playing field where we all get to [compete] in every market," said Chris Adams, CEO of Sherry-Lehmann, a New York-based retailer, which once received and honored a similar cease-and-desist letter from Iowa.

Today, only 14 states allow interstate retail wine sales, down from 18 in 2005. Adams and Posner said states like New York would be much better served adopting a permit system similar to that of New Hampshire, which charges a $500 permit fee to out-of-state retailers and collects the taxes on each bottle purchased by one of its residents. New Hampshire is one of just 10 states that allow retailers in any state to apply for a shipping permit; California, Idaho, New Mexico and Missouri are "reciprocal states," accepting only shipments from other states that also allow retailer shipping.

"If New Hampshire can charge $500 … New York could charge at least $5,000 per license. If you've got 200 retailers willing to sign up, that's a million dollars not even counting the tax you could collect," Posner said.

However, no New York politicians have proposed legalizing out-of-state retailer shipping, no matter how obvious its benefits to consumer choice and the state budget. Lawmakers don't expect consumers to make much noise over alcohol laws, so they vote on these complex issues the way the local retail and wholesale interests that fund their campaigns tell them to—usually with the cover that they are protecting their constituents from harm.

If wine drinkers want the freedom of choice they have with other products, said Posner, "At some point, consumers are going to have to wake up and say this isn't about drunk driving, this isn't about underage kids. Those purchases aren't made over the Internet; they're made at the local store. It's going to take consumers to step up. Retailers have been apathetic for years, and consumers likewise."

Perhaps no one wishes New York lawmakers would come to their senses more than Sasha Vaynerchuk, owner of Wine Library. "Every state is broke, right? That's the easiest thing in the world: Put the sales tax on [out-of-state wine sales] and let's move on," Vaynerchuk said. "It's ludicrous a customer [in New York] can't order a bottle of wine ... Other states [that permit shipping], I collect sales tax and send a check every goddamn month—other states who got a brain!"

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