John Thorn understands better than most people what Pennsylvania consumers can face when they want to buy wine.
His California-based business pursued and received a Pennsylvania limited winery license and opened a Lancaster County store last year so Thorn and his wife, Amy, who are Pennsylvania residents, could get their own product shipped into the state.
So easing restrictions on direct out-of-state wine purchases by Pennsylvania customers would be a move in the right direction, said Thorn, CEO and co-owner with his wife of Thorn Hill Vineyards.
But he definitely takes issue with the plan to assess the 18 percent Johnstown Flood Tax, already tacked onto purchases at state stores, on the proposed new sales and to extend the tax to the same type of transaction between buyers and Pennsylvania limited wineries.
The state’s limited wineries — defined by production size instead of where they make or sell wine — today are allowed to ship directly to an in-state customer’s residence, and sales are not subject to the 18 percent tax.
Requiring a wine shipper permit fee and assessing the state’s sales tax on a purchase would be reasonable, but a nearly 20 percent levy on top of everything else is not, Thorn said.
“Stop trying to add on and add on and add on,” he said.
House Bill 845, which is sponsored by state Rep. Curt Sonney, R-Erie County, passed the House Liquor Control Committee in May.
It contained the provision to have limited wineries obtain the same license and remit the same taxes as out-of-state wineries to continue shipping to customers.
Another bill on the topic, Senate Bill 790, is sponsored by state Sen. Jane Earll, R-Erie County, and cleared the Senate earlier in the year. It remains listed before the House committee.
Legislation in Pennsylvania follows laws enacted in other states after the U.S. Supreme Court decision on Granholm v. Heald, said Terri Cofer Beirne, Eastern counsel for the California trade and advocacy group The Wine Institute.
It ruled that a state must allow out-of-state wineries the same privileges that in-state wineries have to ship to customers in the state, Beirne said.
“It’s an interstate commerce issue,” she said.
The Pennsylvania workaround in lieu of the proposed legislation becoming law has been to grant limited winery licenses to out-of-state wineries that qualify, she said.
A limited winery license may be held by an in-state or out-of-state winery that produces no more than 200,000 gallons of alcoholic ciders, wines and wine coolers per year, according to the Pennsylvania Liquor Control Board’s website.
But the procedure to get a limited winery license to ship into Pennsylvania is too burdensome and includes disclosing what the institute feels is proprietary information, Beirne said.
As a result, the institute considers the commonwealth effectively closed to out-of-state direct shipping, she said.
The legislation would be a big step forward and would allow a conservatively estimated 600 to 700 wineries to get permits to sell and ship into Pennsylvania, Beirne said.
But the tax should be dropped from the legislation because of how much expense it would add to a consumer’s purchase, she said.
“We’re concerned that a tax of that magnitude would have a chilling effect on (consumer) participation,” Beirne said.
Sonney said the bill would extend the Johnstown Flood Tax levied at state stores to wine shipped to a person’s residence because of the Granholm v. Heald ruling, which calls for parity in sales processes.
Judith Nissley said she isn’t crazy about the proposed extension of the Johnstown Flood Tax and agrees it should be left out, but she’ll live with it if that’s what the state needs to reform shipping laws.
Nissley, co-owner and president of Lancaster County-based Nissley Vineyards, heads a Pennsylvania limited winery that grows grapes and makes wine of a certain amount in Pennsylvania.
It sells at its main location and retail stores in Pennsylvania as well as takes orders over the phone, she said. The latter account for about 3 percent of the business’s normal sales, Nissley said.
The state industry has long seen the need for a reform to shipping laws, and consumers should have the right to buy the wine they want, Nissley said.
In addition, the current workaround of letting out-of-state wineries get Pennsylvania limited winery licenses can create confusion about what products customers can buy if they seek to support local wineries, she said.
It also could lead a fair number of wineries to come into the state and set up retail locations or sell at farmers markets in the same manner and niche as many in-state wineries, Nissley said.
If they could ship directly without having to try for a limited winery license and then use it to access the state market, out-of-state wineries might be less inclined to do that, she said.
Thorn Hill did not get its limited winery license and open its Lancaster County store strictly for profit right off the bat, Thorn said.
It was the only viable option the business found to get wine shipped to the state after considerable time, effort and investment — and after he said he was going to stand up for freedom and individual rights.
“That’s why we started this to begin with,” Thorn said.