1. T HIRD P ARTY S ALES OF W INE BY A T EXAS W INERY OR D IRECT S HIPPER Sherry Cook, Executive Director Texas Alcoholic Beverage Commission 512-206-3366 Sherry.Cook@tabc.state.tx.us March 11, 2014 1

2. Customer orders wine from winery (phone, fax, e-mail, in person, winery’s website) and pays winery. Winery ships wine to customer. Winery makes wine or buys it from a Texas winery, Texas wholesaler or nonresident seller. The Traditional Model of Sales by Texas Winery A winery customer could be the ultimate consumer, a Texas winery, a Texas wholesaler or a qualified individual outside of Texas.

3. Customer orders wine from winery via a website run by unlicensed independent third party. Winery ships wine to customer. Third party sends order to winery. Third party sends payment to winery. Winery sends third party a fee. An Acceptable Model 3 The unlicensed third party represents the winery and the winery provides TABC with their written contract. Each discrete transaction must have a known seller and buyer when the order is placed. This model could involve a Texas winery or an Out of State Winery Direct Shipper.

4. T HE P ITFALLS Subterfuge: Winery’s loss of control over the sale, the inventory, the price, the shipping, etc. Unauthorized Activities: Nonresident seller accepting orders from the ultimate consumer. Inter-tier violation: An improper relationship between entities in different tiers. 4

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6. Distilleries Manufacturing Distributing Retailing Package Stores Ale, Wine and Distilled Spirits Wholesalers Ale, Wine and Distilled Spirits Wholesalers Beer/Ale Wine Spirits KEY Local Distributors Wineries Shipping Direct to Consumers Wineries Beer Distributors On-Premise Restaurants, Bars, Venues & Private Clubs Off-Premise Beer/Ale/Win e Stores T HE T HREE -T IER S YSTEM BEFORE THE 83 RD L EGISLATIVE S ESSION 6 Large Brewers & Manufacturers Brewpubs Small Brewers & Manufacturers

7. T HE T HREE -T IER S YSTEM AFTER THE 83 RD L EGISLATIVE S ESSION 7 Distilleries On-Premise Restaurants, Bars, Venues & Private Clubs Wineries Shipping Direct to Consumers Beer Distributor s Manufacturing Distributing Retailing Wineries Distilleries Off-Premise Beer/Ale/Win e Stores Ale, Wine and Distilled Spirits Wholesalers Ale, Wine and Distilled Spirits Wholesalers Beer/Ale Wine Spirits KEY Brewpubs Brewpubs who sell only their own brew. Brewpubs Package Stores Local Distributors Small Brewers & Manufactur ers Large Brewers & Manufacturer s Wineries Shipping Direct to Consumers

8. See Y’all in Texas June 16 – 20, 2014