Direct-to-consumer shipping law keeps circling back to the same question: does a producer selling directly to a customer get treated as a producer or as a retailer? In front of the Ninth Circuit this week, that distinction was the entire case.
Shady Knoll Orchards & Distillery, a New York producer, is challenging a Washington law that requires liquor producers to maintain an in-state presence before they can sell directly to consumers. In-state distilleries get that access without restriction; out-of-state producers don’t. Shady Knoll argues that’s the exact scenario the Supreme Court struck down in 2005’s Granholm v. Heald, which barred states from allowing local wine producers to ship directly while blocking out-of-state producers from doing the same.
Washington’s defense hinges on a different precedent. A lower court sided with the state by applying Day v. Henry, a 2025 Ninth Circuit ruling about wine shipping by out-of-state retailers — not producers. Shady Knoll says that’s the wrong case entirely: Day governs retailers, Granholm governs producers, and Washington law forces distilleries into the producer category while regulating them like retailers.
The panel didn’t let either side off easy. Judges pressed Washington on why the state extends direct-shipping licensing to out-of-state wine producers but has no equivalent system for spirits producers — a gap the state’s attorney struggled to justify, citing only the complexity of liquor regulation. Shady Knoll countered that out-of-state wine producers already comply with permitting, age-verification, and tax-reporting requirements without incident, undercutting the state’s public-safety rationale.
Washington’s counterargument rests on the 21st Amendment’s broad authority to regulate alcohol within its borders, as well as practical enforcement concerns: without an in-state presence, the state says it loses the ability to conduct unannounced inspections or seize noncompliant products.
The outcome matters well beyond one distillery. A ruling for Shady Knoll would put spirits producers on the same direct-shipping footing as wine producers nationally, reopening a legal fight over interstate alcohol shipping that many assumed Granholm had already settled two decades ago. A ruling for Washington reinforces just how much discretion states still hold to draw the producer-retailer line in ways that suit their regulatory systems — even when that line looks arbitrary from the outside.