On Dec. 14, the Kentucky legislature’s Interim Joint Committee on Licensing, Occupations, and Administration Regulations approved the final Direct Shipping Administrative Regulation allowing the Kentucky ABC to process requests for Direct Shipper Licenses authorized under legislation (HB 415) enacted earlier this year. While Kentucky’s new law allowing for the direct-to-consumer (DTC) shipping of wine, beer and spirits by producers became effective on July 15, 2020, the issuance of licenses was delayed until legislative approval of the associated regulations.
Wineries may apply for Direct Shipper licenses through the Kentucky ABC eServices Portal. The license has a $100 annual fee and authorizes the licensee to ship up to 10 cases of wine, 10 cases of beer or 10 liters of distilled spirits per consumer per month. Additionally, direct shippers must register all brand labels for products they intend to ship through the DTC channel with ABC and sell alcoholic beverages at a price no less than the cost of production.
After receiving a direct shipper license from ABC, direct shippers must contact the Kentucky Department of Revenue (DOR) to set up a revenue account and register to pay Kentucky excise, wholesale, sales and applicable local taxes. The wine wholesale equivalent tax is 10% of the wholesale price. If a wholesale price is not readily available, the direct shipper licensee is to calculate the wholesale cost to be 70% of the retail price of the wine. All applicable taxes must be itemized on the consumer’s invoice and collected by the direct shipper licensee from the consumer.
A direct shipper of alcohol tax return along with a detailed shipment report are due to DOR for each quarter even if there are no direct shipments that quarter. The default filing frequency for sales and use tax is monthly.
Applicants should note that the associated regulations prevent California wineries from using a fulfillment house to process and send shipments to consumers in Kentucky on their behalf. At this time, any wineries shipping wine to Kentucky residents should be doing so from their own licensed premises. Wine Institute will continue to work with the state in 2021 to cure the problems that currently prevent wineries from using a fulfillment house’s services to fulfill orders shipped into Kentucky.
More detailed information, guidance documents and linked forms are available on the Kentucky DTC page of Wine Institute’s website.