From Sales Pitch to Cease and Desist in Tennessee’s Wine Market

There is a particular type of sales pitch that shows up in inboxes when a market matures. One that promises growth without friction, national reach without regulatory headaches, and new customers without any need to rethink the way you do business. Tennessee’s Alcoholic Beverage Commission (“TABC”) has again warned wineries that a version of that pitch dressed up as “turnkey” direct-to-consumer shipping, can walk them straight into fines, license revocation and even felony convictions.

When the Sales Deck Says “Nationwide” but Tennessee Says No

In the latest WDS and NRS Newsletter, TABC describes a surge of outreach from marketing companies and technology platforms targeting wineries and other suppliers. The script likely sounds familiar to anyone in the industry:

A platform offers to launch or upgrade your direct-to-consumer channel. It will host the online shop, manage the shopping cart, vet the carriers, and oversee shipping. In some cases, it suggests that it will hold whatever licenses are needed in destination states. In others it claims to operate under a structure that doesn’t require a Tennessee license at all, because the company is only a neutral intermediary or an “agent” working for the consumer.

Strip away the marketing gloss and the law is very clear. Direct shipment is a privilege reserved only for wineries with a Tennessee winery direct shipper license – but the promise is still alluring. A single partner that unlocks Tennessee, among an extensive list of other states, lets you promise “national DTC reach” without hiring a team of regulatory specialists to navigate fifty different licensing, tax, and shipping regimes. The platform’s fine print disclaims responsibility for state law and insists that compliance is the consumer’s problem. Meanwhile, revenue projections look better, investor decks look cleaner, and internal conversations become easier.

The problem, which the Newsletter bluntly spells out, is that many of these programs depend on legal theories the state has repeatedly rejected in written instructions for prospective licensees, email notices, and a high-profile lawsuit.

Calling a structure an “agency relationship” does not erase statutory requirements. The law still asks who is selling the wine, who is causing it to be shipped into the state, and whether those parties have the required licenses. TABC’s written guidance is unambiguous: “A winery direct shipper licensee may not avoid liability by subcontracting with a third party to perform its obligations to comply with license restrictions.”

To this point, on July 14 2023, the State of Tennessee filed a federal lawsuit against six operators of retail alcohol websites for violation of the Twenty-First Amendment, the Tennessee Consumer Protection Act (“TCPA”), and Tennessee liquor laws.

Reinforcing that enforcement posture, in a December 2024 email TABC wrote:

Licensure is Non-Negotiable: No Contractual Language Can Replace It

Tennessee Code § 57-3-217 mandates that every winery shipping to consumers in Tennessee must hold its own direct shipper license. Certain marketing entities have promoted a misleading strategy suggesting that contractual language identifying the winery or shipper as the “agent of the consumer” after a payment is received could exempt businesses from this requirement. This is categorically false. Compliance with Tennessee’s licensure rules cannot be waived through contracts. Violating this provision could lead to cease-and-desist orders, financial penalties, or criminal charges.

Tennessee does, however, make room for third-party logistics through the fulfillment house license, which is where the confusion often starts. A licensed fulfillment house may store wine for a licensed winery direct shipper, pack consumer orders, and hand those packages to a common carrier. However, it does not sell to the consumer, it does not replace the winery as the licensed direct shipper, and it does not relieve the winery of its statutory obligations under section 57-3-217. It is a logistics arm that operates alongside, and never instead of, the winery’s direct shipper license.

E-commerce platforms can supply technology, marketing support, and even operate as licensed fulfillment houses if they meet Tennessee’s requirements, but they cannot take the winery’s place as the licensed direct shipper. Tennessee law does not create any license category that lets a platform substitute its approvals for the winery’s own direct shipper license.

How “Creative” Shipping Structures Collapse Under Tennessee Scrutiny

TABC has already shown it will issue cease-and-desist orders, work with carriers to block shipments from specific senders, and publicize enforcement actions, as shown in various press releases. Should the state find that wineries or platforms have engaged in unlicensed wine shipping, violators fall into the same penalty box as any other illegal shipper. Three recurring structures show how quickly these theories turn into the same set of sanctions:

Scenario 1: Unlicensed Winery Shipping Through a Platform

In practice, TABC’s first move is often a cease-and-desist and carrier-blocking, but the statutory ceiling is much uglier than just a nasty letter. Under Tennessee law, each illegal shipment without “a license authorizing such activity” can be treated as a Class E felony for the shipper, punishable by heavy fines. TABC can seek administrative penalties, including suspension or denial of any future Tennessee licenses, and require reimbursement of investigation and enforcement costs.

If their own site implies that this is “legal” when it is not, the Attorney General can layer on TCPA claims as well.

Scenario 2: Licensed Winery Using Third Parties to Evade Volume Caps

Now the core problem is twofold:

• They are violating the per-consumer shipment limits in Tennessee Code 57-3-217(d), which says that no winery direct shipper may ship more than nine liters to any individual per calendar month, or more than twenty-seven liters to any individual per year, unless they are under the small-producer threshold, in which case they can go up to fifty-four liters per year.
• The company is trying to use a third party to do what the statute says you cannot: use a third party to essentially outsource taxes and reporting requirements.

In this second scenario the company is inviting a pattern of documented violations that lets the commission escalate to five-figure fines, license suspension or revocation, and full cost reimbursement in accordance with 57-3-217(e)(4). Should they approve multiple unauthorized shipments within a two-year period, the commission has authority in related provisions to fine up to $10,000 dollars per shipment in addition to suspension or revocation.

Scenario 3: Platform Relying on “Agent of the Consumer” Without Any License

As outlined in earlier scenarios, the likely punishment profile is:

• Class E felony exposure for unlicensed shipping under the statute and TABC rule;
• Civil penalties and injunctive relief;
• Carrier blocking, public press releases, and a record that makes any future attempt to obtain Tennessee licenses extremely difficult.

Recent enforcement history shows what this can look like in the real world. The 2023 case started with undercover test buys, moved to cease-and-desist letters, and then ended in a federal injunction and $58,320 dollars in civil penalties plus an agreement to stop shipping.

For an online platform or winery that depends on DTC sales, that combination of press and permanent shipping bans can hurt more than any individual statutory penalty.

The Tax Hangover from Noncompliant Shipping

On the tax side, the Tennessee Department of Revenue has published ALC-17 to underscore that the winery direct shipper is responsible for collecting and remitting Tennessee sales tax and for paying gallonage tax on its DTC sales into the state, tying those obligations explicitly to section 57-3-217.

Unauthorized wine-shipping violations are especially nasty on the tax side because “creative” shipments often involve unreported, untaxed Tennessee sales that the state can later reconstruct and tax in excruciating detail:

1. Uncollected Tennessee taxes allow the state to treat every shipment as an underpayment, putting wineries on the hook for back sales tax and gallonage tax, plus interest, plus civil penalties for failure to file and failure to pay.
2. Because the transactions are structured to hide or blur who the “seller” really is, violations create a nexus and audit nightmare. Tennessee can decide that the winery, the platform, or both have sales-tax nexus and then audit using carrier data. If they pull UPS/FedEx records and see hundreds or thousands of unreported consumer deliveries, they can reconstruct gross receipts and assess tax on that reconstructed base.
3. Finally, once TABC and the Attorney General frame the scheme as deceptive, tax issues become leverage, allowing the state to scroll back through shipping records to hand the Department of Revenue a roadmap for tax assessments.

In that light, the actual cost of a “creative” Tennessee strategy is not the cleverness of the structure but the size and lifespan of the tax shadow it leaves behind.

A Quick Self Audit for Tennessee Direct Shipping

If your wine is landing on Tennessee doorsteps, you should be able to answer a few questions without hesitation:

• Who holds the Tennessee winery direct shipper license that authorizes those shipments? Is it your company, as required by Tennessee law, or are you relying on a representation that a platform or affiliate is “covered” or “licensed everywhere” without providing a Tennessee license number.
• If you’re selling and shipping via an online platform, how does the platform describe its role in its own terms of use? If it leans heavily on “agency” language, or if it holds itself out to consumers as a seller that can legally ship to “all fifty states,” you should assume that TABC will read those materials with a very cold eye.
• From what physical locations are Tennessee orders leaving the dock? If the answer is anything other than the licensed winery address or a Tennessee-licensed fulfillment house that you can identify by name and license number, you are staring at the problem the Newsletter describes.
• Who is collecting and remitting Tennessee sales and gallonage taxes on those sales, and is that process tied to your Tennessee direct shipper license? If you cannot map the tax flows back to your own license, you are not in the structure contemplated by ALC-17.

Dickinson Wright Helps Wineries Stay Ahead of the Curve

If any of those answers make you hesitate, that is the moment to bring in counsel, not the moment to hope the platform has it right.

Dickinson Wright advises wineries, importers, and e-commerce operators on the full life cycle of direct shipping into regulated markets like Tennessee. Our work in this space includes:

• Reviewing existing DTC structures, platform and fulfillment agreements, and website terms to flag where marketing promises or “agent of the consumer” language collide with statutory requirements.

• Helping clients secure and maintain Tennessee winery direct shipper licenses, confirm the status of claimed fulfillment partners, and align sales and gallonage tax practices with ALC-17 and related guidance.

• Designing Tennessee-compliant DTC models and internal playbooks, including template contract provisions, routing rules, and practical checklists for business and compliance teams.

• Assisting with responses to TABC inquiries, audits, and enforcement actions, including negotiating resolutions, consent orders, and corrective action plans when issues have already surfaced.

• Coordinating multi-state strategies so that Tennessee compliance fits into a broader DTC footprint rather than sitting as an outlier that creates operational and regulatory friction.

If you have questions about how Tennessee’s current enforcement posture or TABC’s recent guidance affects your DTC strategy,

please contact Rachel Schaffer Lawson at RLawson@dickinsonwright.com or 615-620-1715