Overview
In August 2024, New York Governor Kathy Hochul signed legislation allowing distilleries in New York State to ship directly to consumers, reviving a capability temporarily granted during the COVID-19 pandemic but rescinded by the previous administration. This legislation, effective November 19, 2024, opens direct-to-consumer (DTC) shipping for NY distilleries, both intrastate and to seven other states: Arizona, Washington DC, Kentucky, North Dakota, Nebraska, New Hampshire, and New York.
The Impact on Distilleries
For distilleries, this legislation presents significant new opportunities to expand market reach, particularly as DTC alcohol sales have seen strong demand in recent years. According to a report from Sovos ShipCompliant, DTC alcohol sales grew by 27% in 2020 and continue to represent a major channel for distilleries and wineries. The flexibility of shipping directly allows producers to cultivate stronger relationships with consumers, bypassing traditional retail distribution models.
Some suppliers in other states already have limited DTC capabilities, often restricted to local deliveries or within-state shipments. AccelPay's technology enables distilleries to manage these shipments more efficiently. AccelPay allows producers to carve out zip codes or states where shipping is permitted, while also using a hybrid approach by leveraging AccelPay's network of licensed third-party retailers to fulfill orders across 40+ states. This gives distilleries the best of both worlds — direct fulfillment where possible, and broader reach through retail partners. Producers considering self-fulfilling alcohol orders even to a limited footprint of states should consider using the AccelPay platform to simplify their customer's ecommerce experience, manage order routing and even taxes.
Key Dates
- Legislation Passed: August 19, 2024
- Effective Date: November 19, 2024
Eligible Producers for Self-Fulfillment
- Class A-1: Micro Distillery (up to 75,000 gallons annually)
- Class B-1: Micro Rectifiers License (up to 75,000 gallons annually)
- Class C: Fruit Brandy Distillery
- Class D: Farm Distillery (up to 75,000 gallons annually, using at least 75% NY-sourced ingredients)
Shipping Reach
Eligible NY distilleries can ship to customers in:
- Arizona (AZ)
- Washington DC (DC)
- Kentucky (KY)
- North Dakota (ND)
- Nebraska (NE)
- New Hampshire (NH)
- New York (NY)
This reach is subject to state reciprocity and may roll out in phases. Initial shipments will likely be intrastate (NY), similar to what was permitted during the pandemic.
Licensing and Tax Requirements
As of September 2024, producers must navigate several regulatory steps before shipping out-of-state. These include:
- Licensing: Producers must obtain a certificate of authority from the New York State Department of Taxation and Finance and register as a distributor under New York tax law.
- Tax Obligations: Distilleries must calculate and remit taxes based on the destination of each shipment. They will also pay an annual $125 licensing fee to the state.
Additional compliance requirements, such as record-keeping and labeling standards, ensure transparency and consumer protection.
Key Takeaways for NY Distilleries
- Carrier Approval: Producers need to partner with an approved carrier (e.g., UPS) to set up fulfillment accounts, ensuring the correct packaging, labeling, and compliance with shipping regulations.
- Shipping Limits: The legislation allows distilleries to ship up to 36 cases of liquor per year to a single New York resident. It is likely this restriction will apply to out-of-state recipients as well.
- Record-Keeping: Producers are required to maintain detailed records for three years, including data on total product shipped, value of shipments, destination states, purchaser and recipient details, date of purchase and delivery, and carrier used.
Considerations for Distilleries
To maximize the opportunity of self-fulfilling DTC orders, distilleries should evaluate their operational readiness.
- Order Management Systems (OMS): Utilizing an OMS like ShipStation can streamline the fulfillment process, linking carrier accounts and tracking shipments. It's crucial to include adult signature and ID verification for customers aged 21 and over.
- Carrier Relationships: Producers should engage with UPS or other carriers to establish fulfillment accounts. They should estimate shipping volumes and negotiate preferred rates when possible.
- Tax Management: Consult an accountant or tax professional to navigate the complex tax implications, especially for out-of-state orders. Software solutions like Avalara or Stripe Tax (TaxJar) can simplify tax calculation and remittance.
- Operational Readiness: Ensure adequate staffing to manage order fulfillment and customer support, especially during high-demand periods like the holiday season. Consumers increasingly expect fast shipping (2-3 business days), so it's critical to align fulfillment capabilities with customer expectations.
Next Steps
To learn more about how to implement this DTC shipping model for your distillery or brewery, reach out to AccelPay's sales team at sales@accelpay.io or your account manager at success@accelpay.io. Special pricing is available for NY producers looking to self-fulfill orders.