(Wines&Vines) - Steve Gross, vice president of state relations for the Wine Institute, reported on changes to state laws and shipping regulations at the Direct to Consumer Wine Symposium on Jan. 14. “It was a year with a lot of ministeps” and not many big changes, he said.

Gross noted that the direct-to-consumer (DtC) wine business now amounts to nearly $2 billion, according to Wines Vines Analytics and ShipCompliant. “That’s the reason we’re getting more scrutiny. We’ve especially seen more enforcement in Illinois, New York and Michigan.” This includes cease-and-desist letters sent to shippers and carriers, and he warned that other states are looking to step up enforcement.

Illinois qui-tam lawsuits

The most vexing efforts have probably been the qui-tam lawsuits filed in Illinois by attorney Steven Diamond. He sued wineries and retailers over tax on freight. Unlike many states, Illinois’s rule on whether sales tax is due on freight is confusing.

For example, if a winery offers the option to pick the wine up, no tax is due—even though it’s not practical for most Illinois consumers to pick up the wine at a winery in California.

In the case of Diamond, the attorney ordered wine, and then sued if the winery didn’t charge sales tax. The state attorney general dismissed suits against retailers after determining that the law didn’t apply to them.

The suits against wineries continued, however, and some wineries paid fines to end them. The Wine Institute and individual wineries sued the Illinois attorney general and state Department of Revenue in July. The DOR issued proposed clarifying rules in August, and many of the suits have been dismissed.

The industry is waiting for new DOR rules and action on the litigation. In the meantime, Gross recommends wineries watch out for orders from Diamond. “This has cost a lot of wineries a lot of money,” Gross said. “It’s a big deal to those involved.