Industry: Donor threatens wine-shipment legislation
Martinez backer opposes bill; veto could mean violation of federal law

Steve Terrell | The New Mexican
Posted: Tuesday, April 05, 2011
- 4/5/11
     
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The New Mexico Legislature last month passed two bills designed to help the state wine industry. But opposition from an Artesia oil company — which was a major contributor to Gov. Susana Martinez's campaign — has some supporters wondering whether the governor will sign the bills into law.

Senate Bill 445, sponsored by state Sen. Phil Griego, D-San Jose, and House Bill 487, sponsored by Rep. Ken Martinez, D-Grants, would allow wineries in the state to ship directly to New Mexico residents of legal age. The legislation also would allow any out-of-state winery willing to pay an annual $50 fee to ship wine to New Mexicans.

Supporters of the bills fear that because of a U.S. Supreme Court decision, New Mexico's laws on shipping wine could be struck down. That would make it illegal for wineries to ship directly to people anywhere.

A fiscal impact report on Griego's bill notes direct wine shipments in New Mexico aren't regulated but are occurring in the state.

"The state is not receiving any tax revenues on these sales," according to the report by the Legislative Council Service. "Moreover, the state has no way of tracking businesses that are shipping wine illegally to the state, and it has no mechanism for dealing with dispute or taxation issues."

Websites of several area wineries show consumers can buy wine via the Internet. However, sales to residents in some states aren't allowed. States such as Utah, Kentucky and Alabama forbid direct sales from wineries in other states.

Some individual wineries choose not to sell to residents outside of New Mexico. Richard Reinders, owner of Estrella del Norte Vineyard in Nambé, said he doesn't sell to North Dakota residents because that state requires out-of-state wineries to file quarterly reports.

The bills passed the New Mexico Legislature by large, bipartisan margins. But both Griego and a lobbyist for the wineries said this week the Mack Energy Corp., an Artesia oil company, has been lobbying against the legislation.

Dan Weaks, a lobbyist for the New Mexico Wine Growers Association and The Wine Institute, told The New Mexican that some Mack executives were concerned the bills would hinder sales from wineries in other states — something which both Weaks and Griego deny would happen.

Why would an oil company be concerned about legislation dealing with wineries?

"Apparently, (Mack employees) have some kind of a wine club and they were concerned that the bills would stop them from getting their wine from out-of-state wineries," Weaks said. "That's not what (the bills) do."

Dan Girand, who heads Mack Energy's legislative and regulatory affairs, declined to comment Monday.

The governor has until Friday to act on bills passed during the 2011 legislative session, which adjourned last month.

According to the fiscal impact reports prepared by the Legislative Finance Committee for both bills, the legislation would require out-of-state wineries to pay New Mexico excise and gross-receipts taxes on wines shipped directly to New Mexico consumers, just like the local wineries currently are required to do. The bill would impose an annual application fee of $50 per permit for out-of-state wineries, but no fee for in-state wineries.

Reinders at the Nambé winery said he hopes the governor signs the bills because the measures encourage out-of-state sales. But he said he doesn't agree with a section that requires out-of-state wineries to pay for a permit. Noting that his winery and other wineries in New Mexico won several medals at the recent Finger Lakes International Wine Competition, Reinders said, "I'm not afraid of competition. The competition should be afraid of us."

The bills have origins in a 2005 U.S. Supreme Court decision, Granholm v. Heald, which struck down New York and Michigan laws that permitted in-state wineries to ship wine directly to consumers, but prohibited out-of-state wineries from doing so.

"States have a broad power to regulate liquor," Justice Anthony Kennedy wrote in the majority opinion. "This power, however, does not allow States to ban, or severely limit, the direct shipment of out-of-state wine while simultaneously authorizing direct shipment by in-state producers. If a state chooses to allow direct shipment of wine, it must do so on evenhanded terms."

Before the decision, several states, including New Mexico, required "reciprocal" agreements in order for wineries to sell to residents of other states. But, according to The Wine Institute's website, New Mexico is the only state that still requires reciprocal agreements. SB 445 and HB 487 would change that.

Gov. Martinez on Tuesday signed another bill related to the wine industry, HB 315, which will allow wineries in other states to use New Mexico winegrowers' licensed facilities.

According to the New Mexico Wine Growers Association's website, the state has 42 wineries and tasting rooms, producing nearly 700,000 gallons of wine per year.

UPDATE: 8:20 a.m. The original version of this article named an incorrect agency that produced the fiscal impact statements for the bills. That has been corrected.

Contact Steve Terrell at 986-3037 or sterrell@sfnewmexican.com. Read his political blog at roundhouseroundup.com.





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