2022 promises to be a big year in alcohol compliance changes. Make sure you know the latest by following our Compliance Check blog series
Reaching for a bottle of wine with greater frequency to cope with stress, especially during a global pandemic, has become a meme-generating common practice over the past two years. But in the United States, how individuals successfully procured their desired stockpile of beer, wine, and spirits changed significantly during this period.
The regulation of Direct-to-Consumer (DtC) alcohol commerce has largely been decentralized in the US. Individual states have wielded power effectively with regards to the sale of beer, wine, and spirits within their respective borders, resulting in a web of compliance red tape. Arguably no group has been more impacted by this murky sea of licensing, taxation, and prohibitions than independent alcohol producers in the US.
But, like many aspects of economic life, the COVID-19 pandemic disrupted this status quo. Shuttered bars, restaurants, and tasting rooms cut off the primary revenue stream for these businesses. Not equipped to enter ‘big box’ retail, DtC eCommerce became the burgeoning way to keep sales up and meeting a heightened level of demand from quarantined customers. According to Rabobank, an investment bank focused on the industry, U.S. online alcohol sales reached $6.1 billion in 2021, a 131% increase since 2019.
Hearing the need from both supplier and consumer in this market, state and local regulators eased restrictions. For example, states that previously disallowed out-of-state DtC shipments of wine, such as Kentucky and Alabama, brought down their walls to allow the free flow of interstate alcohol commerce. States like California began permitting in-state DTC shipments of liquor as a way to buttress its spirits producers. Delivery and to-go alcohol options for bars and restaurants previously thought taboo became commonplace. Corporate giants such as DoorDash got into the new, unregulated market.
But the future of this new laissez faire easing of alcohol regulation looks mixed. On the one hand, many states that adopted more liberalized frameworks have no doubt enjoyed the tax revenue from such trade, and their new openness seems here to stay. Kentucky saw 17,358 cases of wine shipped into its state in 2021 after approving DtC shipping of alcohol in December 2020. For each transaction, the state gets to collect sales tax, excise tax, and licensing fees. Others may be getting into the game. Delaware, a long-time hold out on this type of reform, has a similar bill out of committee.
On the other hand, certain states and localities are rolling back permission granted for alcohol commerce. California allowed its provision on DtC shipping of spirits to expire, eliminating distilleries and spirits retailers from the market (beer and wine are still permitted). And New York, North Carolina, and Pennsylvania also expired delivery and takeout measures on alcohol.
On top of all the rules on the state level, changes may be happening at the federal level as well. From the executive branch, the Biden Administration ordered a Treasury report regarding the erosion of fair play in the production and sale of alcohol, which it delivered in February. While much of its focus remained on stopping competition-eliminating consolidation in the market, it recognized the practical burden this uneven regulatory landscape has on small businesses in the industry. Though the report ends by largely making suggestions to states, it does drop in the possibility of new regulation coming from the Alcohol and Tobacco Tax and Trade Bureau (TTB). And while the US Supreme Court has largely declined to weigh in, six states currently have lawsuits challenging state prohibitions against off-premise DtC alcohol sales, which could make their way to the top of the judicial system.
Thus, the regulatory landscape looks sorted for 2022, and alcohol producers and retailers will be forced to stay abreast on the latest changes at each level of government. Luckily, industry software companies provide tools and information to remain compliant. In addition to the latest analysis you’ll find here, Vincipia provides software tools for compliant alcohol commerce across channels. Easily set up compliance state-by-state in Vincipia to ensure all general and club sales remain in line with your business’ licensing. An easy-to-use software platform designed by the industry, for the industry, Vincipia focuses on independent alcohol producers and retailers looking to manage their business in a way that’s efficient, reliable, and secure. Grow revenue through in-person, eCommerce, and club sales using the latest technology with Vincipia. To find out more, visit www.vincipia.com.