Alcohol & Interstate Shipping Laws - LeNell it All

by LeNell Smothers, Posted Jun 2nd 2010 @ 5:00PM

After Prohibition, individual states were allowed to set up their own legislation to regulate "demon drink," resulting in 50 different sets of rules for production and distribution. In most states, retailers (bars, restaurants, and liquor stores) and individual consumers were not allowed to purchase directly from producers in other states. Distilleries and wineries could only get their products to customers in other states by selling their merchandise to a wholesaler, meaning that wholesalers controlled what selections were available to the public in each state. Nothing could be sold without the wholesaler's willingness to purchase it and resell it. This system is known as the three-tier network: producer to wholesaler to retailer.

One of the ironies of this system is that that some members of the middle tier of the distribution chain were bootlegging before Prohibition. After Prohibition, their controlling power was still locked in place as the wholesale middleman in the three tier network. The situation becomes more alarming with about ten large wholesalers controlling more than half of the US market.

In 2005 the Supreme Court's ruling in Granholm vs. Heald shook up the distribution network that had formerly prevented wineries from shipping directly to many customers. Before this ruling, some states would allow their own wineries to ship directly to retailers or individual consumers without a wholesaler, but an out-of-state winery would have to sell their products first to a wholesaler who would then sell the wine to a retailer (each marking up the price). The decision forced states that allowed in-state wineries to ship wine directly to customers without a wholesaler to also allow shipments of wine into the state from wineries across state boundaries. Granholm vs. Heald opened the door to questioning the interstate shipping status quo as well as the power of the wholesaler in the three-tier distribution system.

So what happens when you want to buy a case of muscadine wine (like grandma used to drink) from a winery you visited during your vacation or that odd liqueur made of pine sap that you read about in a food mag -- can you have it shipped? Regulatory compliance is a moving target, so many small shops and wineries find it hard to keep up with 50 states constantly in transition over liquor being sent across state lines. Some groups like Ship Compliant exist to assist retailers keep up with the chaos of changing interstate shipping laws in all 50 states. You may even find that your state allows that out of state winery to ship wine directly to you, but not their distilled products. Hard liquor is still considered a different category by many states.

Securing interstate shipping options for retailers has been the goal of groups like the Specialty Wine Retailers Association. Groups such as the Wine and Spirits Wholesalers of America (WSWA) argue to protect the control of the three-tier system, pointing out difficulties in preventing underage internet purchases and in collection of taxes. States like New Hampshire have tried to deal with both of those concerns by issuing licenses to out-of-state shippers who are required to collect appropriate sales taxes and ship through agencies that check identification for proof of age.

All you, as a consumer, need to worry about are the laws that apply in your own state. Check with your own state regulatory agency and visit sites like Free the Grapes that keep up to date on interstate shipping changes.

Alabama-born LeNell Smothers defines herself first and foremost as a bartender, but she's been called many things -- most recently, the proprietress of Casa Cóctel with partner Demián Camacho Santa Ana. She's owned her own whiskey label, called Red Hook Rye, and has been recognized by her home state as an honorary Colonel. Other interests include gin, sin and men.

Filed Under: Drinks
Tags: alcohol shipping laws, interstate shipping laws, prohibition, shipping laws