Virginia Winery Distribution Company
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FAQ
Please note that this web site is designed to provide only practical, and not legal, advice to those wineries and farm winery customers of the Virginia Winery Distribution Company.  Owners of wineries and farm wineries must seek outside counsel to support their required compliance with local, state and federal laws related to alcohol manufacturing and distribution
1.  How do I get started?
Wineries New to the VWDC

IF:

  • You don’t have Pocket Advantage yet OR you need help setting it up OR you need training on it:
    • Contact Lisa Woodard at Inventiv:
      • 901-766-0866 x203
      • lisa@inventiv.com
  • You do have Pocket Advantage, but you can’t download all of your data or some of it is incorrect: 
  • You have Pocket Advantage installed and all of your data is downloaded & correct: 
    • Practice with Pocket Advantage by sending at least a few test orders with the following Sunday’s delivery date.  Send a variety of orders, some with frontline prices & some with price overrides, discount amounts, or discount percents.  When you get your invoices and POs for the test orders, check them and report any problems via email to Techelle.  This phase is very important!  If you have price/discount problems on live invoices, there is an additional $5 charge per edited invoice.  There is no charge for test invoices.

2.  How can VWDC "give away" its rights as a wholesaler by agreeing to allow a winery to cancel its agreement with them at will when other wholesalers will not/cannot? 
   You are correct that all wholesalers (including VWDC) must comply with the Wine Franchise Act which prevents a winery from cancelling an agreement with a wholesaler unilaterally or over the objections of the wholesaler.  Such action is expressly prohibited by the Wine Franchise Act at Va. Code 4.1-406 which states that "[N]otwithstanding the terms, provisions or conditions of any agreement, no winery shall unilaterally amend, cancel, terminate or refuse to continue to renew any agreement, or unilaterally cause a wholesaler to resign from an agreement..." 
   However, the Operating Agreement between VWDC and each winery will not allow the winery to terminate the agreement unilaterally or over the wholesaler's objection.  It permits a winery, however, to request a release from VWDC and states the policy of VWDC to grant a release when requested, after 7 days notice.  Specifically, the Operating Agreement states that it "is terminable in the manner provided by Virginia law or pursuant to the mutual agreement of the Parties following written notice seven (7) days in advance to the other Party; notwithstanding the foregoing, Winery understands that it is the current policy of the Board of Directors of VWDC that it will not contest a request for termination sent to VWDC by Winery."  This language is the farthest VWDC can go to enable a winery's release without permitting a winery to unilaterally terminate an agreement with a wholesaler, which would be contrary to the Franchise Act.
 
3.  How should wineries designate a sales territory for VWDC?
   Va. Code § 4.1-404 states that "[E]ach winery which enters into an agreement with a wine wholesaler shall designate a sales territory as the primary area of responsibility of that wholesaler which is applicable to the agreement. The term "primary area of responsibility" shall not be construed as restricting sales or sales efforts by a wine wholesaler exclusively to retailers located within the designated sales territory, and any agreement to the contrary shall be void. No winery shall enter into any agreement with more than one wholesaler for the purpose of establishing more than one agreement for its brands of wine in any territory. However, the existence of more than one such agreement as a result of a sale of a winery as contemplated by § 4.1-405 shall not be prohibited. Notwithstanding any other provision in this chapter, a winery may enter into agreements with more than one wholesaler in a sales territory for new brands which are not clearly extensions of existing brands. ...Each winery shall notify the Board in writing of all designations of sales territories, the identity of the wholesaler appointed to serve such territory and a statement of any variations which exist in the designated territory in regard to a particular brand. Redesignations shall be reported to the Board within thirty days."
    Every winery entering into an agreement for distribution with any wholesaler must notify ABC of which Virginia cities and/or counties are designated as that wholesaler's sales territory.  (Virginia cities are NOT part of surrounding counties, but are independent, municipal corporations.)  Note that a winery is granting a wholesaler a "primary area of responsibility," not an "exclusive" area of responsibility.  In making this designation, wineries should think into the future and consider whether they anticipate needing other independent wholesalers, in addition to or instead of "virtually" self distributing through VWDC.
Note than a winery with no existing wholesaler may make a different decision about a sales territory for VWDC than a winery already using a wholesaler. 
   A winery with only one wholesaler (VWDC in this case) could grant that wholesaler the entire state.  However, since the Wine Franchise Act makes it more difficult to pull back sales territory from a wholesaler than to grant it, in practice, most wineries have opted to designate only one or two remote localities with few ABC licensees per wholesaler.  In that situation, the wholesaler is permitted to serve the designated territory as its "primary area of responsibility", as well as other parts of the state.  The law states that  it "shall not be construed as restricting sales or sales efforts by a wine wholesaler exclusively to retailers located within the designated sales territory."  In short, the Franchise Act permits "poaching" into a wholesaler's designated sales territory by another wholesaler, but it does not generally permit the winery to take steps to restrict either wholesaler's sales/actions within that sales territory.  As described below, the sales territory can be one designated by the winery with ABC or determined based on the prior course of conduct between the winery and the wholesaler.
    Wineries may also consider the VERY remote possibility that the right to pure self distribution may one day return.  In that case, a winery would benefit most from not having granted an adjacent or home county sales territory to a wholesaler.  If so, the winery would have to obtain a release from a wholesaler or go through the steps outlined in the Franchise Act to prove good cause for termination of the agreement. 
   Wineries with existing wholesalers must be aware of the limits on their actions related to VWDC resulting from a May, 2007 Virginia Court of Appeals decision.  In that case, Louis Latour  v. ABC & Country Vintner ("CV"), the winery designated two remote counties to CV, but also allowed CV to services many other areas of the state.  The winery then wanted to hire a new wholesaler and restrict CV back to its original two counties, so it limited the amount of wine it sold to CV to that which would serve only those two counties.  The Court ruled that it was the existing business relationship, the course conduct, between Latour and CV that established the territory and not just the designation with ABC.  The winery was, therefore, unilaterally amending the agreement/course of conduct with the wholesaler and in violation of the Wine Franchise Act.
 
   4.  I do not understand what has taken so long.  What is the process? 
     While the bills became law shortly after the General Assembly's Veto Session in April, funding was not available until July 1, 2007 and there were many structural decisions to be made by the Attorney General, VDACS and ABC. 
    The organizational meeting of the VWDC Board originally scheduled for July 11th was delayed by the Attorney General’s office until they were able to finalize appointment of Terri Beirne as special counsel to the VWDC.  After calls to the Attorney General from Delegate Rob Bell, and others, that appointment was finalized on July 25.  Terri's responsibilities include drafting and filing all incorporation documents, drafting contracts with vendors (for software and other services), preparing an operating agreement to govern all aspects of the relationship with participating wineries, assisting with licensure of the wholesaler and wineries, assisting with the education/training of participating wineries, and facilitating decisions of the VWDC Board in general. 
    The Board of Directors of the VWDC held its organizational meeting on August 15, 2007.  It affirmed those persons recommended by the Board of Agriculture and Consumer Services to serve on the VWDC Board as Commissioner Todd Haymore, David King with King Family Vineyards, Randy Phillips with Cave Ridge Winery, Jay Colston with Virginia Imports and Joe Gigliotti with Republic National Distributing Company.  David King was elected VWDC Chairman and Todd Haymore was named Board Secretary by virtue of his position as Commissioner.  VWDC's certificate of incorporation was issued by the Virginia State Corporation Commission on August 29, 2007.
    At its August 30 meeting, the VWDC Board saw a demonstration of the software that will enable wineries to place orders and receive the necessary invoices electronically.  The Board discussed the terms of an agreement to license that software, which is commercially available and is currently being used by salespeople for various wholesalers.   The Board also voted to approve their bylaws and to send a letter to all General Assembly members giving them an update on the status of the VWDC.  The VWDC Board is still negotiating the terms of a contract with Virginia Distributing Company, an existing wholesale wine licensee, to provide administrative services to VWDC.
    As January 7, 2008 the VWDC has not yet received approval for a Virginia ABC license.  The Virginia ABC is waiting to hear from the federal Department of the Treasury, Alcohol and Tobacco Tax and Trade Bureau (TTB) before issuing a license.  The Virginia ABC has committed to assisting in any way possible and will start processing the license application using the location of the first winery applicant; David King has offered his winery to be that location.  As they apply, other wineries will be covered under that initial "master" application.  Such processing includes the requisite criminal background checks,and  posting and publication requirements, as well as a review of the Operating Agreement that will govern all aspects of the relationship between the wineries and VWDC.  The Board is actively working on a draft of that Operating Agreement for approval by the Attorney General.  The VWDC Board is awaiting an opinion from the TTB as to how they intend to license this entity.  VWDC may either be exempt from all TTB licensure as a state agency, or be required to submit applications for each winery wholesale location.
    This has been a much slower process than any of us wanted, but it is still moving forward.  However, we are dealing with government and things are moving as fast as they possibly are able.

5.  Will I be able to sell to any retail licensee?
     Yes. Since the database is preloaded with all VA ABC retail licensee holders, there is no need to wait.  You can begin selling without updating your customer list to VWDC.

6.  Can I change the price of my wine for volume discounts, specials, etc?
    Yes. You will be able to change pricing at the time the order is placed.

7.  Can an "agent" be an"unpaid" employee? Must they be a part-time or full-time employee
      Both paid and unpaid, as well as full and part time "workers" of the winery can be designated by the VWDC as an agent.   The Operating Agreement contemplates that many winery owners, for example, are not "employees" of the winery.

8.  Can anyone under the age of 21 deliver wine (in closed containers) for VWDC?
     According to the ABC, the only age restrictions on those who can handle alcohol are limits on who may serve alcohol at retail establishments.  Therefore, there are no limits in ABC law about those younger than 21 acting as an agent of the VWDC and delivering wine.

9.  Is the agency vehicle one certain vehicle? Can private vehicles be designated "agency vehicles" while derlivering wine?
   More than one winery vehicle may be designated as the agency vehicle.   
 
10.  Can the paperwork associated with two deliveries be mailed together? Must it be received within 2 days?
    Yes, the paperwork for multiple delivery transactions, along with the accompanying checks, may be mailed together.   However, paperwork from each transaction must be postmarked within 2 business days. 
 
11.  Can wineries FAX changes in customer lists, etc. to VWDC?
    Yes, wineries may FAX the required changes in information to the VWDC to the attention of Jeff Lehmann at (434) 385-7826.  Note that a  master customer list of ALL ABC licensed establishments will be maintained within the order-placing software and placing orders will create a list of each winery's customers for their own use.

12.  Must the winery's "VWDC Licensed Space" be bonded space?
NO.  The VWDC Licensed Space is considered by TTB to be a tax paid area.  If the VWDC Licensed Space is within a bonded area, the winery's TTB floor plan must be amended to accommodate such change in use.  VWDC will be prompting and guiding wineries in how to best make that amendment to their TTB floor plans.

13. Can the winery's VWDC space be off-site of the licensed winery premises?
 YES.  Some wineries rent bonded or tax paid warehouse space off site via ABC permit and such space can be designated as the VWDC Licensed Space.  Note that ABC will inspect the VWDC Licensed Space regardless of its location.   

14. What should wineries know concerning problems with deliveries of wine to retailers?
TTB has stressed to VWDC that wineries must comply with federal law and statutes governing consignment sales, as well as exchanges and returns of wine.  TTB notes that at a minimum, this means wineries should be familiar with and follow the requirements in 27 U.S.C. 205d  and in 27 CFR 11.1 through 27 CFR 11.46.  Because this is an area of particular concern to TTB, VWDC recommends that any wineries facing this situation seek the appropriate legal assistance as soon as possible.   See the referenced US Code at: http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=browse_usc&docid=Cite:+27USC205  and the regulations at :  
15. How does the tax get paid?
VWDC will pay the $.40/liter state excise and submit the monthly form summarizing wine purchases and taxes paid for transfers of wine to VWDC from each winery.  However, the winery must continue to remit the $.40/liter state excise tax and monthly reports for transfers of wine made to its own retail location for retail sales.    
 
VWDC will provide each winery with purchase orders for each wholesale order placed by the winery, and VWDC will report those purchase orders monthly to ABC as wholesalers are required to do.  The winery must only keep copy of that purchase order as a record of sales to a wholesaler on file in the space leased to VWDC for inspection by ABC at any time.
 
Of course, the winery must continue to remit the state sales taxes collected on retail sales at the winery.   
 
The winery will continue to pay TTB the federal excise tax on all wine that leaves the winery's federally bonded area, regardless of whether that wine is transferred to VWDC or to the winery's retail operation. 
 
The wineries are encouraged to contact their ABC compliance agent or the ABC Division of Tax Management at 804-213-4556 with questions. 








  

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