After his state won a court appeal earlier this year to maintain its ban on out-of-state direct-to-consumer wine sales, New York Gov. George Pataki has reversed his position on the ban in a budget proposal that hopes to raise $2 million in sales tax revenue in the 2004-05 fiscal year by allowing such sales, a spokesman for Pataki’s office says.
Pataki estimates that New York will gain about $3 million annually in sales tax revenue in subsequent years, the spokesman says. Pataki also figures that New York’s own winemaking industry stands to gain in direct-to-consumer wine sales through web sites and catalogs to other states that have reciprocal agreements for out-of-state direct wine sales, the spokesman adds.
The governor’s proposal comes after the Second U.S. Circuit Court of Appeals in Manhattan overturned in February a lower court ruling that had found New York’s ban on out-of-state, direct-to-consumer wine sales unconstitutional because it interfered with interstate commerce. New York law requires out-of-state wine sellers to sell their products through a network of wine wholesalers who distribute to wine retailers.
Wine-selling groups had sought to overturn New York’s ban, arguing that many out-of-state winemakers are unable to break into the state’s wholesaler network. “It’s Internet or die for many small winemakers,” says Kenneth Starr, a Washington, D.C., attorney representing wine groups.
Pataki’s budget plan is undergoing three-way negotiations among the state’s Senate and Assembly legislative houses and the Governor’s Office, the spokesman says. The state budget was supposed to have been approved in time for the beginning of the current fiscal year April 1, but state officials expect to finalize a budget plan in the coming weeks, the spokesman says, adding that the state is routinely late with its budget plans.