Why New York is Positioned to Take the Wine Industry by Storm: A Legal Perspective

New York is home to over four hundred wineries as of March 2014. See New York Wine and Grape Foundation: Wineries by County. While this number may not compete with the amount of wineries currently housed by California, it makes New York home to the greatest number of wineries on the East Coast. See North American Winery Total Passes 8,000. As of Year 2013, the state boasted wineries in 53 of its 62 counties (this number includes both traditional wineries and satellite stores or branch offices). See New York Wine and Grape Foundation: Wineries by County. This is a significant increase from 1976, or the year the New York State Farm Winery Act was passed. See id. (compare with fourteen wineries in nine counties, circa 1976; compare also with 125 wineries in 24 counties as of Year 2000). 

In 2012 alone, New York State boasted that its wine industry had a state-wide economic impact of $4.8 billion. See, e.g., Economic Impact of Grapes, Grape Juice, and Wine: $4.8 Billion. Its nearest East Coast competitor, the state of Virginia, maintains that its wine industry had an economic impact of just under $750 million in Year 2010. See Virginia Wine Industry Jobs Grow by 50%; Economic Impact Doubles, New Study Finds.

While the aforesaid numbers speak considerably well of New York’s wine business, in an industry so highly regulated by federal, state, and local officials, one must not rely on numbers alone. The laws, rules, regulations, and state agencies must also be in favor of a growing industry, as well as support and cultivate development and expansion. That being said, there are a number of examples of how New York’s wine industry has significant backing from the state government, as well as from numerous private ventures.

New York’s Farm Winery License and Other Legislative Measures

Perhaps the most significant development in New York’s legal landscape with respect to fostering the growth of the state’s wine industry is the amendments to the farm winery license. The farm winery license, which (generally speaking) allows a licensee to manufacture wine and sell their wine to wholesalers or retailers, has a significantly reduced annual license fee ($175 as opposed to $1,075) and requires a lower surety bond ($1,000 as opposed to $10,000) than that for a full New York State winery license. While farm winery licenses are limited to businesses that produce 150,000 finished gallons of wine per year or less, the simplified requirements and costs of the farm winery license serves as a great initiator for smaller wineries in New York State. N.Y. ABC LAW § 76-a.

Further, in June 2011, Governor Cuomo signed a bill called the Fine Wine Bill, which significantly reduced the regulatory requirements for the state’s farm wineries. See Friendlier Legislation for New York State Farm Wineries. Since becoming law, the farm winery license now allows a licensed farm winery to open branches within the state without needing to apply for additional licenses (and such branches enjoy the same privileges, such as the ability to conduct tastings, as the licensed farm winery), among several other advantages and relaxed requirements. See Analyzing N.Y.’s New Wine Law. The aim of this new legislation was to foster and cultivate the growth of New York’s industry, especially among smaller producers. Effectively, the revised farm winery law places tools in the hands of smaller, local wineries and gives them the power to grow, expand, and promote their wines throughout the state with reduced entrance hurdles. (Note: Since the enactment of the Fine Wine Bill in 2011, the number of New York farm winery licenses has grown from 195 licenses in 2011 to 273 licenses in 2014. See Number of Farm-Based Breweries, Cideries, Distilleries, and Wineries Increase 72% since 2011.)

To another extent, there have been a number of legislative measures enacted in the last year or so that continue to encourage the growth and development of the state’s wine industry. Of particular and relevant interest are the following:

1. The sale of wine at roadside stands (the roadside farm markets bill); and
2. The rebranding and designation of the state’s wine trails.

The farm markets bill (now law) authorizes a roadside stand to sell wine from up to two licensed farm, special, or micro wineries within a twenty-mile radius of the stand. See S-2617/A-1512. This new measure increases the availability and awareness of locally-sourced wine, generates what the bill’s authors anticipated would be increased revenue for both the stand owner and the wineries, as well as contributes to the excise tax collection on behalf of the state. See, e.g., New Laws to Help New York Vintners; see also Legislative Gazette: New Laws to Help New York Vintners (NY). The roadside farm market license is currently available from NYSLA and costs $100 per year as of April 1, 2014. See Application for Alcoholic Beverage Control Retail License: Roadside Farm Market.

The rebranding and designation of New York State’s wine trails is supported by four bills, now law. One of the new laws expands the Shawangunk East Wine trail. See A.4616-a/A.2790. The other new laws include expansion and renaming of the The Niagara Escarpment Wine (now to be called the Niagara Wine Trail Ridge), The Niagara Wine Trail (to be renamed Niagara Wine Trail Lake), and The Chautauqua Wine Trail (to be renamed Lake Erie Wine Country Trail) and establishes establishes the Adirondack Coast Wine Trail. See A02024A/S01095-A; A05721/S03923-B; and A03758/S01013-B. Further, Governor Cuomo’s dedication to New York State wineries is also demonstrated through Taste NY, which is a program designed to promote awareness and availability of New York-made food and beverage products (including wines) among local residents and visitors to the state through retail venues and events.

From a more academic perspective, Cornell University has shown great initiative in the State with the introduction of its 3,900 square foot teaching winery on its Ithaca campus. See Cornell Shows Off New Teaching Winery. While the teaching winery aims to instruct students of the university using small-scale winemaking equipment and winemaking processes typical of small lot sizes, the true gem of Cornell’s commitment to the wine industry stems from its four-year viticulture-enology major that exposes students to both the theories and practices of grapegrowing and winemaking. Id. Cornell’s teaching winery facility remains the only university teaching winery in the Eastern United States.

Legislative Drawbacks

While the above highlights some of the major legislative (and academic) measures taken to support New York’s growing wine industry, the state is not without its faults (from a legislative perspective). For example, New York has a proposed “at-rest law” which would require alcohol beverages delivered to New York retailers to be “housed” or to “rest” at the premises or warehouse within the state, owned by a licensed New York State wholesaler, for at least twenty-four hours before delivery to a retail licensee. See S3849-2013; Regional Macroeconomic and Fiscal Impacts of New York’s Proposed At-Rest Legislation. While the State cites concerns regarding authenticity or legality of products and proper payment of taxes as reasons why such an amendment should be enacted, there is much opposition both intra and interstate. See, e.g., New York Alliance of Fine Wine Wholesalers: The Impact of Proposed “At Rest” Legislation on New York State’s Economy; see also New York Cork Report: Op-Ed: In New York, a David & Goliath Story Unfolds. Without getting into further detail, this is a significant proposal to amend New York’s legislation, one that (as many argue) has a serious potential to negatively impact many aspects of New York’s alcohol beverage industry. See, e.g., Baffling Wine Bill Leaves Sour Taste (arguing that the proposed at-rest law could increase the cost of wine and could cause smaller distributors to go out of business or avoid the New York market). Although this proposed law does not directly regulate the state’s winegrowers, the inevitable flow of wine products through the three-tier distribution model will impact growers and producers to the extent that the types of wines offered at retail to consumers could be more limited should the bill become law.

Further, although still pending a declaratory ruling, there seems to be much concern about NYSLA’s position with items like third party marketers and Internet wine sales. See, e.g., New York Crackdown on Internet Wine Sales Just Another Slap in the Face to the State’s Wine Lovers.

While the state’s wine industry is clearly booming from a growth perspective, many of its legislative initiatives must still be altered to recognize and respect that New York’s wine industry is a major contributing factor to the state’s economy. Further to the point, laws and regulations that foster the growth and expansion of a New York wine industry will only assist state producers gain additional international recognition, as well as remain one of the top domestic producers of grape wine. It seems indisputable that Governor Cuomo’s regime supports the advancement and prosperity of New York’s wine industry—this is evident through recent bills passed into law under his governorship—however, the development of counterproductive laws and bills, such as the “at rest” law, could be a restraining factor in the state’s successes.

In 2013, the American Wine Consumer Coalition graded states on the basis of how friendly each was to consumers with respect to wine accessibility. While California unsurprisingly received an A+, New York ranked number 28 in friendliness and received a grade of a D+. See New Report Reveals Which States Are Friendliest to Wine Consumers; see also The 2013 State-by-State Report Card On Consumer Access To Wine. The reasoning? New York’s prohibition of grocery store wine sales and refusal to allow retailers to directly ship to consumers. See Wine-Drinker Lobby Gives California Laws an A+; New York Gets a D+. Note: Virginia, New York’s closest East Coast competitor, received a grade of A+ for consumer accessibility to wine. For a state that boasts the third highest domestic production of wine, and is the greatest producer of wine on the East Coast, I have one word: Ouch.

In other words, New York, we have much work to do.

For more information on New York State wine or alcohol law, or establishing a winery, brewery, or distillery in New York, please contact Lindsey Zahn.

DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.