Each of the fifty states has its own unique licensing system and within that system are entirely different requirements and costs for out-of-state importers. These can range from simple one-page forms with no fee, to extensive applications, surety bonds, non-resident seller permits, brand registrations and as much as thousands in annual fees. It is essential to comply with their requirements and to maintain the licenses in good standing or you may find yourself running afoul of the alcoholic board of that state and unable to ship. But there are other considerations which may help you negotiate the state licensing maze, and often save a considerable amount of money.
Your decision, at any stage of your business development, is whether to manage your licensing and state reporting from your office or to outsource to a compliance consultant. Initially, if you have taken on a brand or brands that have no previous history in the U.S., you will be able to start very slowly with one state and its requirements, then the next state and so on. Using the premise that you are carefully and conscientiously sourcing and appointing distributors, this may not be an onerous burden at first. But there are other considerations, even at this stage.
- Are you starting your business with little or no office assistance?
- Do you expect to be on the road most, or a significant part, of the month?
- Are you planning a strong push to assign distributors in several states at once?
- What is your budget?
- Do you have the patience for this type of paperwork, or are you likely to forget or procrastinate?
Since many states have requirements with timelines and monthly or quarterly reporting, it is essential that they are met and the money you save with doing it yourself, or with the assistance of employees, is not eaten up with penalties, late filings that delay shipments and issues that take this out of the realm of cost-effectiveness.
If you are on the road a significant amount and part-time help is unable to find the time or is unavailable to cope with meeting deadlines, I would suggest outsourcing, at least in the short term.
With the prospect of a rapid expansion of states, there are a huge number of disparate requirements to get up to speed on all at once. Budget for outsourcing should be weighed against your own ability to reasonably accomplish this on your own.
Some licenses are good for a year, others up to three. Occasionally states require a bond and this can be obtained from a surety bond company that handles bonds of all types for a nominal fee. One such agency is www.suretygroup.com. The purpose of a bond is to uphold the contract you have made with the state, to comply with their laws and to demonstrate credibility. The bond company is effectively guaranteeing your performance with the payment of a fraction of the bond issue.
Label or brand registrations are often required in addition to the actual license and may incur a fee per label. Consider which wines you plan to ship to that state, whether the available volume of wine is worth the expense and, most importantly, which wines the prospective distributor wishes to order, rather than just a wholesale registration of labels.
Some states require price posting each month or whenever a price changes, to set the price itself or the price range under which the wine will not fall. These states often prohibit variances in prices, or any discounts, and require uniform pricing for all retail outlets.
SAVING MONEY – USING OTHER’S LICENSES
License fees in certain states may appear prohibitively expensive, until you consider that, in Colorado, Arkansas, New York, New Jersey, and others, a common practice is to allow the distributor’s separate import company to “import” and register the brand for you in that state. Instead of a huge fee or unwieldy monthly price posting, the cost to you is nominal or none at all. This is standard in several states, but it is something that escapes the notice of novice importers. They end up spending far more in license fees than necessary by not investigating or talking to the distributor beforehand.
Another vital consideration in this scenario is when assigning an “importer” in a franchise state. This effectively means the wholesaler become the owner of your brand in that state. Investigate fully the implications of using another’s license in a franchise state. It may be the logical and cost-effective way to go, but doing your homework is important. Call the relevant state ABC and discuss your obligations with them, and ask another winery in your reference checking if they have any concerns about assigning the distributor as state importer.
Proficient compliance specialists will be intimately familiar with the requirements of each state and keep up to date on changes in laws and deadlines. Make sure to discuss fees and what these cover. Some compliance firms require a large minimum monthly payment, regardless of the scope of work. This may not be in your best interests when you have only one or a handful of states in the beginning. Look for flexibility and whether they are interested in saving you money, or just taking your money.
When I first started my import business, I was somewhat overwhelmed by state requirements, particularly in Georgia, where I initially resided. The licensing process, for an in-state importer, was lengthy and onerous and on top of that they required monthly reporting and the submission of all invoices. I thought the prudent thing to do was to free myself of the state obligations and concentrate on building the sales of my fledgling business. I did not take the time to acquaint myself with the reporting requirements and for a year I paid an outside compliance company a monthly fee to handle the paperwork. I moved to Colorado with the same arrangement for another year, until one day I received a notice from the State of Georgia that I owed stiff penalties for 12 months of non-reporting. The compliance company was either incompetent or unfamiliar with the reporting requirements of an out-of-state company and had filed the wrong paperwork for the entire year I had been in Colorado. When confronted, the compliance “specialist” refused to accept full responsibility, and I ended up paying half the penalties, in addition to the full monthly fees I had already paid the compliance firm to carry out the correct handling of the compliance matters.
Never relinquish all control over your own business, but in the initial stages, when it can seem overwhelming, some assistance, in-house or outsourced, can free you up to pursue the real reason you got into the wine industry – to represent and sell wine. Whichever route you choose, doing your due diligence is paramount. Eyes wide open in this area can save you time, money and aggravation.