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Panel studies plan for direct wine shipments in South Dakota

PIERRE — Wine might become the first alcohol product that can be sold and shipped straight to South Dakota consumers. A legislative committee considered a proposal Monday. It would allow South Dakotans to purchase wine straight from manufacturers and have the products delivered directly to their homes or businesses. Delivery of all alcohol products currently is prohibited.

The committee will discuss the plan again in September before deciding whether to submit it to the full Legislature in the 2015 session. State senators gave an OK to a somewhat looser proposal in the 2014 legislative session. A House committee ultimately killed the measure, despite its support by Gov. Dennis Daugaard’s administration.

Business lobbyists representing beer and liquor wholesalers, distributors and retailers fought against that legislation. Sen. Corey Brown, R-Gettysburg, was its prime sponsor. He worked to arrange for the interim study.

Three of the main lobbyists who fought to kill Brown’s bill were Jeremiah Murphy of Rapid City, Tim Dougherty of Sioux Falls and Bob Riter of Pierre. At the interim committee’s first meeting last month, Brown, the panel vice chairman, invited them to bring a version acceptable to their clients. They used Brown’s bill as the framework for the compromise they offered Monday.

Their plan calls for registration of wine carriers, such as Federal Express and UPS. Carriers would be required to submit to the state Department of Revenue reports of all shipments.

The plan also would require that tax rates be consistent for wine shipped directly from manufacturers to consumers or purchased by consumers from retailers.

Brown legislation’s requirement that manufacturers be licensed as wine shippers also is part of the compromise proposal.

The proposal under consideration doesn’t address direct sales of liquor or beer.

Diana Miller, a lobbyist who represents people wanting direct shipment of wine, described the compromise from Murphy, Dougherty and Riter as “somewhat unpalatable.”

Miller said she wasn’t involved in drafting the compromise and she continues to favor the Brown bill for which she lobbied. She spoke against the licensing of carriers. “I think you’re being extremely restrictive,” Miller said. “We seem to be building in much more regulation than we had before in Senate Bill 114 (Brown’s legislation).”

Brown didn’t attend the committee meeting Monday. Murphy and Dougherty said 38 states allowed direct shipment of wine to consumers in 2013 and 19, including North Dakota, licensed the carriers. There is a dispute between FedEx and North Dakota regulators, however. UPS is the only licensed carrier in North Dakota.

Placing requirements on carriers helps with tax collection and with deterring delivery of alcohol to minors, Dougherty said.

“We feel this is very important because it provides a system of checks and balances,” Dougherty said. Murphy said the business people in the established distribution network recognize they can “only carry so many” wines. Allowing direct shipping creates “a clear avenue” to get more wines into South Dakota, he said.

“This makes it clear the exception is created for those wines that have no other avenue,” Murphy said. “There are a lot of wines that are not in distribution in South Dakota.”

The wine legislation could become the model for artisan distillers of liquor and for custom beer-makers to directly market their products in South Dakota. Paul Lewis, a Rapid City lawyer, presented a proposal for small liquor makers such as his company, Black Hills Dakota Distillery at Sturgis. He and his brother, Michael Lewis, have been in commercial-level production since last summer. They use barley from the Belle Fourche area and honey from the Hermosa area to make Sturgis Shine “moonshine.” He wants permission to open one additional location in South Dakota, because he doesn’t want customers visiting the building where the still is operated.

“We are looking for something as simple as possible and something is better than nothing to get to the marketplace,” Lewis said.