Hidden Costs of Expanding Your Direct Shipping Program

At what point does it make sense to get a direct shipping license for a particular state? Common business sense dictates you will wait until (at a minimum) the benefits of gaining market access outweigh the licensing costs. But are you fully aware of the costs involved? Make sure you are ready to grow your business by understanding these “hidden” fees you may encounter.

Bonds

Bond fees are commonly overlooked by wineries calculating the cost of shipping to a new state. A bond is a written guaranty that all taxes owed will be paid to the state. A bond fee is essentially an insurance premium—you pay an annual or biannual “premium” to secure a bond. Bond premiums typically average around 10% of the total bond price, or $50-$180 out-of-pocket for the winery on a recurring basis . Different bonding agents may quote different rates, so it pays to shop around.

Connecticut, Idaho, Illinois, Indiana, Kansas, Oregon, Texas and Wisconsin all require a bond in order to obtain a direct shipping license. In all of these states (except Oregon) you will need to secure a bond before submitting your license application. Oregon issues the bond documents after the license application has been received but before the license is issued.

Label Registration

Though not as common as bond fees, some states charge for label registrations. Ohio, a state that 26% of direct shippers have in their program, requires wineries to register all the labels that will be shipped into the state for a one-time registration fee of $50 per label. This can add up if you plan on shipping multiple labels into the state so you will want to consider this in your budget.

And if that sounds pricy to you, consider Connecticut. Connecticut charges $200 per label and you must re-register labels every 3 years if you continue to ship that product to Connecticut.

Georgia, Louisiana, New York, North Carolina and Virginia require label or brand registration, but there is no charge in these states.

Application Fees

Depending on your business structure, some states may require business registration, tax registration or other application fees. This depends entirely on how your business is set up and varies state to state. You may encounter some of these additional fees if you plan to start shipping to Arizona, Connecticut, Hawaii, Kansas, Maine, Michigan, North Carolina, Ohio, Tennessee, Virginia or Wisconsin.

The key to ensuring a profitable direct shipping program is to do your research in order to avoid getting caught off-guard with unexpected costs. If you are responsible for your company’s direct shipping program, you can stay on top of all required license, bond, registration and application fees at EasyWineLicensing.com or you can use this online break-even calculator to help you determine true costs. Knowledge is power!

ShipCompliant has a newsletter they send out, and this article made me sit up and take notice. While SC has been a sponsor of the show in the past (though not currently), I will say that you are not likely to find a firm more knowledgeable of the regulatory Gordian Knot that is beverage compliance than these guys.