Winemakers can almost taste Internet sales

Court ruling could open up market for Kansas vineyards

Greg Shipe, owner of Davenport Orchard, Vineyard and Winery in Eudora, recently got a call from a New York restaurant wanting to buy 10 cases of his wine.

“I had to tell them, ‘Sorry, our state law doesn’t allow it,'” Shipe said.

But that law in Kansas and 23 other states, which generally prohibits out-of-state shipments of wine directly from a supplier, could become history.

Winemakers are challenging the various state statutes in a set of appeals before the U.S. Supreme Court. The dispute has come to a head as winemakers seek to tap into potentially lucrative telephone and Internet sales.

A majority of Supreme Court justices Tuesday appeared sharply critical of states that prohibit consumers from buying wine directly from out-of-state wineries.

The case centers on a complex legal issue: the true intent of the 21st Amendment of the U.S. Constitution, which repealed Prohibition in 1933. But it has 21st century implications for consumers who want to purchase wine over the Internet.

Two powerful forces are fiercely fighting over the question: the fast-growing wine industry, particularly in California, which salivates at unfettered access to customers in every state, versus alcoholic-beverage wholesalers, who fear elimination of their role as profit-making middlemen in a three-tiered regulation system set up after Prohibition ended.

Bans on out-of-state wine shipments stem from the 21st Amendment, which outlawed the “transportation or importation” of “intoxicating liquors” into any state in violation of its laws.

Attorneys for New York and Michigan rested their arguments largely on the text of the amendment, making an argument that could resonate with “textualists” on the court, such as Justice Antonin Scalia, who interpret the Constitution from its exact wording, not the intent behind specific sections.

Greg Shipe, owner of Davenport Orchard, Vineyard and Winery in Eudora, displays some of the wines he makes at his vineyard, which currently cannot be sold online. A case before the U.S. Supreme Court may make Internet wine sales possible, which could boost businesses like Shipe's.

Shipe said removal of the Kansas law would help the fledgling Kansas wine industry.

Many visitors to Kansas wineries are tourists from out-of-state, who may, after they get home, want to buy some more of the wine they first sampled in Kansas.

“We’ve had calls from all over the place,” Shipe said.

Before Prohibition, Kansas had a thriving wine-making industry, but it nearly disappeared.

Now amid a resurgence, state officials are trying to promote Kansas vineyards, which produce about 50,000 gallons of wine per year, or about 1 percent of the total amount of wine consumed in the state.

In July, the Kansas Department of Agriculture established a new board to advise state officials on ways to improve the wine industry. And in September, for the first time in several years, Kansas wine-makers conducted a competition at the Kansas State Fair.

But regulators defended the ban on direct interstate shipments.

Phil Wilkes, a staff attorney with the Kansas Department of Revenue, said the ban was needed for law enforcement reasons.

Alcohol is just the latest regulated product to be sold on the Internet in an attempt to circumvent the normal regulatory powers of the state, Wilkes said.

“People have no way of knowing who they are sending it to and whether they are entitled to buy it,” Wilkes said. “You have to be 21 years old to purchase alcohol. How do they verify that they aren’t selling to minors?”

But supporters of removing the prohibition on direct shipment sales say it is unconstitutional to have a law that discriminates against out-of-state businesses.

— Journal-World wire services contributed to this report.