Dear Governor Lee,
Rather than send a letter by mail, I think Substack is the best place for the discussion, because I’d rather have this conversation in the open, with transparency, with you and with anyone else who ships wine, sells wine, or just wants to buy the bottle they actually want. The topic is direct sales of wine, and for that matter, any product in the beverage alcohol space.
Tennessee is a genuinely lovely place. Great barbecue, great music, fireflies in the summer, and great people. I am stating this first because nothing below is an attack on the state itself. It’s an open discussion on one piece of state policy that doesn’t hold up to scrutiny and common sense, and I believe you’re in a position to influence and fix it.
Let’s start with what everyone actually agrees is needed to operate safely in the beverage alcohol industry. When it comes to direct-to-consumer shipping, the state’s goals are simple:
No sales to minors
Sellers must be licensed
Taxes get collected and reported
Protect the health and safety of citizens
That's it, and none of it is hard. Worth noting upfront: goal four folds into goal one. Keeping wine out of the hands of minors is the health and safety concern here.
A handful of straightforward rules can satisfy all four:
Require adult signature on delivery
Require a state shipping license
Require regular tax reporting and remittance
This is easy to comply with and meets the actual goals legislators and their constituents care about. In other states around the country that keep it this simple, these three rules already cover all four stated goals.
So, what are the additional obstacles trying to protect?
Tennessee doesn’t stop at those four things. It layers on a set of rules that add cost and friction without moving the needle on minors, licensing, tax collection, or health and safety. It’s worth asking, line by line, what public benefit they actually produce.
Quantity limits. Tennessee currently caps direct shipments at one case per month and three cases per year per adult consumer (six for smaller wineries producing under 30,000 cases annually). How does a case limit stop sales to minors? It doesn’t touch licensing. It doesn’t affect tax collection either; if anything, a lower limit means less tax collected, not more. And it does nothing for health and safety, since the wine still ends up in the same adult hands, just spread across more months. The only thing a quantity cap protects is the volume of business that flows through the wholesale tier instead of direct to the consumer.
Fulfillment house licensing. Since 2022, fulfillment facilities have had to be separately licensed by the state before they can handle a winery’s shipments. This is a redundant burden. The mechanism to track and verify shipments already exists through the winery’s own direct shipper license and reporting requirements. Adding a second license for the warehouse that packs the box doesn’t catch a single additional sale to a minor, doesn’t make the product any safer, and doesn’t collect a dime more in tax. It just adds another gate a winery has to pay to pass through.
Worldwide exclusive brand ownership. Tennessee only allows a winery to ship wine that it produces, that is produced for it under contract, and for which it exclusively owns the brand. Ask yourself what that has to do with keeping wine out of the hands of minors, keeping sellers licensed, getting taxes paid, or protecting anyone’s health and safety. Nothing, on all four counts. It has everything to do with narrowing who’s allowed to ship and keeping that business inside a controlled lane.
State-level COLA registration. Requiring wineries to separately register federal label approvals (COLAs) with the state adds a paperwork step and a cost, for zero verification value. The TTB already manages this at the federal level, including the safety and labeling review that actually protects consumers. Tennessee re-doing that work doesn’t make a bottle safer, a seller more licensed, or a tax dollar more collectable. It just makes the state a second toll booth on a road the federal government already built. Honestly, those reviewing it often don’t know what they’re looking at or what it’s actually telling them.
The real cost of all this
Governor, the impact of these rules doesn’t stop at the Tennessee border. It impacts domestic Tennessee businesses for sure, but it also hits wineries and shippers nationwide who want to do business with Tennessee residents and can’t justify the falsely inflated compliance overhead to reach the consumers in your market. Most of all, it hits your constituents: the consumers who have fewer choices and less access to the products they want from the sellers they’d choose, because the rules were written to protect a distribution toll-taking tier rather than help those consumers.
I think if you cared for the agricultural business and consumers in your state, you would take a close look and see if you are supporting a system that protects a single sales channel: the wholesale tier, which doesn’t need protection. The rules that you currently support are not producer or consumer friendly. The wholesale tier directly restricts consumer choice: wholesalers can’t offer retailers in the state the wide range of products that’s actually available around the country, so consumers suffer, and the state’s rules prop up that structure.
An additional item worth considering: Tennessee’s old three-tier system, built under the powers granted by the 21st Amendment, effectively ended the moment the state opened the door to direct shipping. Once that door opened, the three-tier system stopped being “the system” and became one of three parallel sales channels: wholesale, retail, and direct. You can’t defend the old model’s exclusivity while simultaneously operating a system that competes with it. You should continue opening all lanes, and let the one that serves consumers best win on its merits. What you are likely to find is all three can work harmoniously together, as they do in other states.
None of this costs the state anything to fix. Keep the three rules that actually do the job (signature on delivery, a state license, tax reporting), cut the rest, and hold every future rule to the same four-part test: does it stop sales to minors, does it ensure licensing, does it ensure tax collection, does it protect health and safety. Anything that fails all four isn’t policy, it’s protection for one industry player at the expense of everyone else. Applying that test would take Tennessee from one of the more difficult states to ship wine into to one of the more straightforward ones, without giving up a single goal the legislature claims to care about.
The TABC needs to become friendlier to business so the residents who want the freedom to choose their products can. It is easy to do, providing they are not left to interpret the rules in a biased fashion to protect a single sales channel.
If you or your staff want help talking through what a simplified system, one that would lower operating costs and increase state tax income, would look like in practice, let me know. I’m very happy to help. This isn’t a complicated fix.
Respectfully,
Steven
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