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F I S C A L I M P A C T R E P O R T

SPONSOR Taylor

ORIGINAL DATE

LAST UPDATED

2/13/07

HB

SHORT TITLE

Direct Wine Shipment Permits

SB 1047

ANALYST C. Sanchez

REVENUE (dollars in thousands)

Estimated Revenue

Recurring

or Non-Rec

Fund

Affected

FY07

FY08

FY09

Indeterminable

Indeterminable Recurring General Fund

Indeterminable

Indeterminable Recurring Alcohol Board

(Parenthesis ( ) Indicate Revenue Decreases)

Duplicates, HB 1018

SOURCES OF INFORMATION

LFC Files

Responses Received From

Regulation and Licensing Department (RLD)

Attorney General’s Office (AGO)

Tax and Revenue Department (TRD)

SUMMARY

Synopsis of Bill

Senate Bill 1047 creates a direct shipping permit and provides for the collection of permit fees.

An eligible party, defined as “a licensee with a winegrower’s license or a retailer’s license or a

person licensed in a state other than New Mexico that holds a winery license or a retailer’s

license that allows the winery or retail licensee to sell wine directly to consumers", may apply

for and receive a direct wine shipment permit. The proposed permitee would be required to

submit an application for permitting and would be required to renew the permit on an annual

basis. The fee for the permit would be $50.00 per year.

The direct wine shipment permit would allow shipment of not more than twenty-four nine liter

cases of wine annually to a New Mexico resident who is twenty-one years of age or older, for

personal consumption and not for resale. The shipments would be required to carry a label

stating “CONTAINS ALCOHOL SIGNATURE OF PERSON 21 YEARS OR OLDER

Senate Bill 1047 – Page

2

REQUIRED FOR DELIVERY".

The permitee would be required to register with the taxation and revenue department for the

payment of liquor excise taxes and gross receipts taxes; submit to New Mexico jurisdiction for

legal action arising out of the shipment of wine; pay the liquor excise taxes due by July 25 of

each year; pay the gross receipts taxes due by the twenty-fifth day of each month; report the

amount of wine sold annually to the director and to the taxation and revenue department; and

submit to an audit by taxation and revenue upon notice and during usual business hours.

SB 1047 would also amend Section 60-7A-3 of the Liquor Control Act to remove and replace

paragraph E, which provides that any individual or licensee in a state that permits reciprocal

shipping may ship for personal use, but not for resale, not more than two cases of wine per

month, each case containing no more than nine liters, to any individual not a minor. The

shipping container is required to be labeled to indicate that delivery cannot be made to a minor or

to intoxicated persons. The replacement paragraph E states that the holder of a direct wine

shipment permit may ship up to twenty-four nine-liter cases of wine annually to a person twenty-

one years of age or older for personal consumption and not for resale.

FISCAL IMPLICATIONS

Senate Bill 1047 would slightly increase revenues for the Tax and Revenues Department and the

Alcohol and Gaming Division. However the amount of revenue is indeterminable.

SIGNIFICANT ISSUES

SB 1047 creates a new type of permit that would allow direct shipment of wine into and out of

the state of New Mexico upon submission of an application and payment of an annual fee of

$50.00.

SB 1047 creates a new section, Section 60-6A-11. In paragraph E of the new material, the

definition of “eligible party" includes the holder of a retailer’s license in the class of persons who

would be able to apply for and receive a permit. Under current definitions in the Liquor Control

Act, a retailer is a person licensed under the Liquor Control Act who sells, or offers for sale

alcoholic beverages in unbroken packages for consumption and not for resale off the licensed

premises. In New Mexico, holders of a retailer’s license include liquor stores, grocery stores and

convenience stores. The language of the bill would seem to permit liquor stores, grocery stores

or convenience stores that hold a retailer’s license to ship directly to the consumer both in New

Mexico and to other states. The language of the bill does not prohibit a liquor store, grocery

store or a convenience store from “shipping" wine to a New Mexico resident by directly

delivering the wine from the licensee’s premises to the consumer’s home.

New Mexico currently utilizes a three-tier system for the distribution of alcoholic beverages.

The manufacturer is required to sell only to a licensed wholesaler, the wholesaler sells only to

licensed dispensers, retailers and restaurants, the dispenser’s, retailers and restaurants may sell to

the public. The creation of a direct shipment permit would seemingly circumvent this system

although it does provide a mechanism for the collection of previously uncollected revenue in the

form of liquor excise and gross receipts taxes. Revenue would also be generated through the

collection of the $50.00 annual permit fee. Exact dollar amounts generated are unknown as this

would be dependent upon the number of applicants requesting licensure.

Senate Bill 1047 – Page

3

ADMINISTRATIVE IMPLICATIONS

The permit applications would need to be carefully reviewed for compliance and collection of

required fees. Additionally, renewal applications would need to be generated and reviewed for

compliance and collection of taxes and fees.

DUPLICATION,

HB 1018

OTHER SUBSTANTIVE ISSUES

Current law allows liquor licensees in other states to ship up to two cases of wine to New Mexico

residents for their personal consumption, if the state affords New Mexico licensees equal

reciprocal shipping privileges. NMSA Section 60-7A-3E. The Liquor Control Act does not apply

to those shipments. This bill would repeal that section and implement a permitting requirement

in order to ship properly labeled wine into New Mexico.

Current law does not appear to allow the shipment of wine within this state by New Mexico

licensees. This bill would also allow New Mexico winegrower’s or retailers licensees to conduct

that activity pursuant to a “direct wine shipment permit".

WHAT WILL BE THE CONSEQUENCES OF NOT ENACTING THIS BILL

Status Quo

POSSIBLE QUESTIONS

How will this bill affect wine consumption in New Mexico.

CS/mt