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Texas Legislature Approves Direct Shipping Bill

After years of contention, the state's wineries and distributors settle their differences

Nick Fauchald
Posted: April 27, 2005

A battle that has been fought deep in the heart of the Texas wine industry for several years was resolved today as the state legislature near-unanimously passed Senate Bill 877, which allows Texas wineries to ship their wares directly to out-of-state consumers and opens the state's borders to wineries wishing to ship directly to Texas wine drinkers.

The law's passage was not a surprise, as Texas wineries and wholesaler, distributor and retailer groups--which have historically been at odds over the right to circumvent the three-tier distribution system--had reached an agreement on the bill's language and provisions after the existing legislation, which bans direct shipping, was overturned by a federal court of appeals in 2003.

Under the new legislation, Texas wineries will each be allowed to ship 35,000 gallons (about 14,700 cases) every year directly to consumers (at a maximum of 3 gallons per month per consumer). Out-of-state wineries will be allowed to ship in the same amount. Any winery shipping directly to consumers will be required to hold direct-shipping and Texas sales tax permits, and recipients of wine shipments will have to present proof of identity and legal drinking age at the point of delivery.

Robert "Butch" Sparks, executive director of the Licensed Beverage Distributors of Texas, said the three-tier distribution groups were finally presented with legislation they could swallow. "There are a lot of safeguards built into it," he said. "We finally got some controls on the wineries. Before, they just wanted to open up the floodgates."

The bill's author, Sen. Frank Madla (D-San Antonio), had worked on similar legislation for each of the previous five legislative sessions. Sherry Muller, Sen. Madla's chief of staff, said that several factors, including the Supreme Court's pending decision on direct-shipping laws--as well as rumors that big-box retailers Costco, Wal-Mart and HEB Foods are lobbying for legislation that would allow them to bypass the three-tier distribution system--greased the legislative wheels and allowed the bill to pass with ease. "There are just a lot of things happening in Texas right now," Muller said. "[E]veryone is just tired of fighting this battle. And we came up with a bill that everybody can live with."

Muller predicts the bill will be signed by governor Rick Perry by the middle of next month.

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