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THIRD PARTY SALES OF WINE BY A TEXAS WINERY OR DIRECT SHIPPER Sherry Cook, Executive Director Texas Alcoholic Beverage Commission 512-206-3366 [email protected] March 11, 2014 1 The Traditional Model of Sales by Texas Winery Winery makes wine or buys it from a Texas winery, Texas wholesaler or nonresident seller. Customer orders wine from winery (phone, fax, e-mail, in person, winery’s website) and pays winery. Winery ships wine to customer. A winery customer could be the ultimate consumer, a Texas winery, a Texas wholesaler or a qualified individual outside of Texas. An Acceptable Model This model could involve a Texas winery or an Out of State Winery Direct Shipper. Customer orders wine from winery via a website run by unlicensed independent third party. Third party sends order to winery. Winery ships wine to customer. Third party sends payment to winery. • The unlicensed third party represents the winery and the winery provides TABC with their written contract. • Each discrete transaction must have a known seller and buyer when the order is placed. Winery sends third party a fee. 3 T HE P ITFALLS Subterfuge: Winery’s loss of control over the sale, the inventory, the price, the shipping, etc. Unauthorized Activities: Nonresident seller accepting orders from the ultimate consumer. Inter-tier violation: An improper relationship between entities in different tiers. 4 Comparison of the Authority of Manufacturers 1/1/14 (After 83rd Legislature) Distillery Brewer / Manufacturer On-Site sales of own product direct to consumer For on-premise consumption For off-premise consumption (To Go) On-Site sales of other products direct to consumer For on-premise consumption Yes Yes Yes NO NO Yes Yes NO NO NO Brew Pub [Retailer] Produce <10K b Winery Out of State Winery Yes Yes n/a Yes Yes n/a Yes up to 35,000 gallons n/a Yes Yes n/a Yes Yes n/a Depends on For off-premise consumption (To Go) NO NO their permit up to 35,000 gallons n/a Ship direct to Texas consumer NO NO NO up to 35,000 gallons up to 35,000 gallons Own product NO NO NO Yes Yes Others product NO NO NO Yes NO Sales to Wholesaler/Distributor for Resale Yes Yes Yes Yes Yes Yes if only sell Yes if production is own product at Self Distribution / Sales Direct to Texas Retailers NO under 75k barrels brewpub; <1K b. Yes NO Distiller's Beer Agent's Manufacturer's Agents Agent's Permit License n/a Agent's Permit Agent Yes, only one sample of each Yes, more than one brand, 1/2 oz, sample, free or for Conduct samplings at Licensed Premises free only Yes Yes fee Yes Yes, using a Yes, using a Beer Yes, using a Distiller's Agent Agent or Yes, using an Agent Manufacturer's or Promotional Promotional or Promotional Agent or Promotion Conduct samplings at another Retailer's Premises Permit Holder. Permit Holder. NO Permit Holder. Permit Holder. Winery Festival Festival Permit to sell at Farmers Markets, etc. NO NO NO Permit NO Yes only if Yes with multiple hosting brewpub wineries Festivals to promote the industry at premises NO NO sells all brands. participating. n/a Code is silent Code is silent Private Label but it occurs NO n/a but it occurs n/a Alternating Proprietorship Code is silent Yes n/a Yes n/a Code is silent Contract Brewing/Distilling/Fermenting Code is silent Yes n/a but it occurs n/a 5 THE THREE-TIER SYSTEM BEFORE THE 83RD LEGISLATIVE SESSION KEY Manufacturing Large Brewers & Manufacturers Small Brewers & Manufacturers Distilleries Brewpubs Distributing Wineries Beer Distributors Ale, Wine and Distilled Spirits Wholesalers Local Distributors Retailing Off-Premise Beer/Ale/Win e Stores Beer/Ale Wine Spirits Package Stores On-Premise Restaurants, Bars, Venues & Private Clubs Brewpubs Wineries Shipping Direct to Consumers 6 THE THREE-TIER SYSTEM AFTER THE 83RD LEGISLATIVE SESSION KEY Manufacturing Large Brewers & Manufacturer s Distributing Beer Distributor s Distilleries Brewpubs Small Brewers & Manufactur ers Brewpubs who sell only their own brew. Wineries Ale, Wine and Distilled Spirits Wholesalers Local Distributors Retailing Off-Premise Beer/Ale/Win e Stores Beer/Ale Wine Spirits Package Stores On-Premise Restaurants, Bars, Venues & Private Clubs Brewpubs Wineries Wineries Shipping Shipping Direct Direct to to Consumers Consumers 7 Distilleries See Y’all in Texas June 16 – 20, 2014