Supreme Court Enables Inter-State Wine Sales

by Mike Godfrey, for LawAndTax-News.com, New York

19 May 2005

In a 5-4 majority ruling, the US Supreme Court has struck down state laws that prevented direct wine sales across state lines, calling them discriminatory since the states involved (including New York and Michigan) do allow direct sales by in-state suppliers.

The ruling is seen as particularly important because it may impact prohibitions on inter-state direct commerce in a wide range of other sectors. "Wine is just the tip of the iceberg when it comes to protectionist laws and regulations in this country," said Robert Atkinson, director of the Technology and New Economy Project at the Progressive Policy Institute, citing cars and real estate as other markets in which e-commerce laws are producer-friendly.

The Supreme Court did not concern itself with the related issue of tax collection: currently sales taxes cannot be collected across state borders unless the out-of-state supplier has 'nexus' in the state of supply. Rulings which enable inter-state e-commerce will influence Congress in legislating away the decades-old sales tax rule, particularly if the SSTP (Streamlined Sales Tax Program) continues to garner support from states.

For the time being, though, states that experience high levels of 'imports' of wine and other products will in most cases be unable to collect sales taxes on the purchases. In the particular case of wine, there is also the question of liquor excise taxation.

The wine ruling does not give a blanket permission to wine suppliers to market their products direct, it just says that a state's policies must not discriminate between in-state and out-of-state suppliers. States remain free to ban alcohol sales if they choose.

"States may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state businesses," Justice Kennedy wrote for the majority. Two dissenting opinions were written, both focused on the special nature of alcohol as distinct from other articles of commerce; but it is the non-discrimination principle which will be powerful in tending to give more power to the e-commerce sector.

Recommended