When it comes to direct-to-consumer (DtC) shipping of alcohol, one of the first things producers or other DtC shippers need to consider is becoming properly licensed. Almost every state that permits DtC shipping to its residents requires the shipper to hold a license, so becoming properly licensed is an essential first step toward DtC shipping compliance. This ensures that you agree to abide by the state-by-state regulations for all types of alcohol shipments.
However, individual state licensing processes can vary, along with renewal deadlines. Some states may also have varying requirements when it comes to the types of documentation needed to apply for a license. We’ve outlined the essentials for how to get licensed with DtC shipping, including what information you may need to gather ahead of time and what the risks of non-compliance can be.
What do you need to become licensed for DtC alcohol shipping?
If you’re looking to become licensed for DtC alcohol shipping, you likely already have some sort of alcohol license (e.g., you are a winery or retailer). But now you must ensure you are working within the proper structures for the bev alc industry in the context of the consumer shipping market. Here are some basic questions to ask yourself:
- What states do I want to ship to?
- What are the specific forms for getting licensed in each state?
- Am I prepared to apply for the necessary licenses?
- Do I have the appropriate information gathered to submit with each form?
- What background checks and disclosures of ownership is required? Do I have the appropriate documentation and information?
States often require you to provide copies of your existing alcohol licenses, to help prove that you are the right type of entity for that specific type of license. For example, if a state only licenses wineries for DtC shipping, you will need to prove that you are a winery (provide TTB license, home state license, etc.).
By gathering all paperwork and details of your business ahead of time, you can help to ensure a smooth process. It may be required to provide a full list of owners, corporate officers, and managers, as well as their personal information. If one owner is on vacation and unavailable to provide their information, it could delay the licensing process.
When states review the information, they may be examining dozens or hundreds of applications at one time. The process can take several weeks to months to complete, which is why having all necessary information ahead of time can keep the process moving forward.
Why do I need a specific DtC alcohol shipping license?
Having a specific DtC alcohol shipping license allows you to legally ship to a state. For example, if you are a brewery looking to obtain a DtC beer shipping license for Ohio, that license is for breweries shipping into Ohio. A winery that wanted to obtain a DtC wine shipping license would need a different form.
The license will also come with restrictions and requirements, dependent upon which state you are looking to operate in. Your license requires you to abide by the jurisdiction of that specific state, and you agree to abide by state rules. There are specific state requirements (and restrictions) for DtC beer shipping, DtC wine shipping, and DtC spirits shipping.
It’s important to remember that the consequences of non-compliance with DtC shipping requirements can be serious and will continue to grow the longer that you wait. The risks can include:
- Cease and desist letters
- Fines and monetary penalties
- Licenses not being renewed or being revoked
Additionally, the loss of one license could affect other licenses, including your production licenses.
More states are cracking down on non-compliant DtC alcohol shipping. Especially in the wake of the COVID-19 pandemic, more attention is being paid to this channel. States are using the 21st Amendment Enforcement Act, which allows states to file for federal injunctions against out-of-state businesses that ignore their laws. Furthermore, compliance failures by your partners in DtC shipping could be imputed onto you.
DtC shipping laws can be complicated, and it is easy to become overwhelmed. Working with the right partner can help ensure that your licensing questions are addressed from the onset, allowing you to focus on running your business.
How can you manage licensing?
There are three main ways to manage licensing for DtC shipping. First, there is the manual option. This means you complete everything on your own, including any research, compiling of necessary paperwork and filing your license applications.
Another option is to hire a consultant. This is a hand-off approach and can be more expensive. The entire process is outsourced, with your compliance consultant completing everything from research to filing your license with the state.
Finally, you can adopt a hybrid approach, employing a cloud-based software solution like License Management to guide you through identifying and compiling all requirements for each state. You would then file with each individual state manually.
Once you start to ship to several states, it can quickly become complicated to organize and apply for all necessary licenses. A hybrid approach can be greatly beneficial in accurately managing the increasingly complex DtC shipping requirements.
Ready to take your DtC shipping to the next level? Find out how ShipCompliant Direct can help with your DtC compliance processes, from license management to real-time compliance checks and tax determination and reporting.