Potential Consequences of Unlawful DTC Shipments to Texas Residents

The following discussion only concerns alcoholic beverage sales consummated over the internet, which are shipped Direct to Consumer (“DTC”) through a common carrier (such as UPS and FedEX). Local delivery of alcohol from a retailer is a separate and distinct concept with a different set of regulations, and outside the scope of the discussion.

DTC shipping of alcoholic beverage products to Texas residents is prohibited except for wine sold by in-state and out-of-state wineries holding proper permits with the Texas Alcoholic Beverage Commission (“TABC”). DTC shipment of spirits, malt beverage and beer products to Texas residents is illegal. See, Tex. Alco. Bev. Code § 11.01(c). This is because any activity not expressly authorized under the Code is prohibited. Any seller who ships spirits, malt beverage and beer products through a common carrier could be subject to civil and criminal action.

Wine manufacturers holding a Winery (G) permit or Out of State Winery Direct Shipper’s (DS) permit may ship wine to a Texas consumer through a common carrier. Any seller shipping wine without a TABC permit could be subject to civil and criminal action.

Potential consequences include seizure of illicit beverages, see Tex. Alco. Bev. Code § 103 et seq, injunctive actions in State and Federal Court under the Texas Alcoholic Beverage Code, see Tex. Alco. Bev. Code § 101.01, Texas Deceptive Trade Practices Act (“DTPA”), see Tex. Bus. Comm. Code §§ 17.46(b)(2) and (b)(5) and 17.47, 21st Amendment Enforcement Act, see 27 USC § 122a, substantial civil penalties under the DTPA, see Tex. Bus. Comm. Code § 17.46(c), as well as criminal prosecution for a litany offenses, such as unlawful shipment of alcohol, see Tex. Alco. Bev. Code § 11.01(c), deceptive business practices, see Tex. Penal Code § 32.42(b)(12), money laundering, see Tex. Penal Code § 34.02, and organized criminal activity, see Tex. Penal Code § 71.02(10).

The seriousness of potential remedies cannot be overstated. Each unlawful shipment of alcohol is a potential violation of the DTPA, which carries a maximum penalty of $10,000. Tex. Bus. Comm. Code § 17.46(c). Furthermore, money laundering and organized criminal activity, which go hand in hand with illegal shipping operation are also felonies. Felony criminal offenses can carry maximum penalties of 5 years to 99 years in prison and $10,000 fine, depending on the dollar amount of proceeds derived from the illegal scheme. See, Tex. Penal Code §§ 12 et seq, 34.02(e), and 71.02(b).

Unlawful shipment of alcohol is an area of concern for TABC, according to June 12, 2023 National Conference of State Liquor Administrators (“NCSLA”) presentation by TABC Executive Director Thomas Graham. The Commission estimated that 57% of wine was shipped illegally to the State last year alone. To automate detection and identification of bad actors, the Commission has implemented recent technological measures.

Consultation with a licensed Texas attorney experience in liquor law is strongly recommend before shipping any alcoholic beverage product to a Texas resident, regardless of where a participant is involved in the transaction, e.g. third party e-commerce site, industry member, or common carrier. Additionally, a Texas liquor law attorney may be able to help identify other permit designations, which would allow for local delivery of wine, spirits and beer to Texas residents located in areas that are wet for those categories of beverages.

from Texas Bar Today https://ift.tt/9FKwTqM
via Abogado Aly Website