California beer and spirits DTC bill gets major overhaul

For a while, it looked like California Senate Bill 620 would authorize direct-to-consumer (DTC) shipments of beer and spirits for breweries and distilleries large and small. But the latest version of the bill cuts all language related to beer and limits spirits DTC shipping to producers making less than 150,000 gallons.

Here are five key takeaways from the May 2, 2022, amendment:

  1. Beer DTC shipping is out

  2. Big spirits is out

  3. Fulfillment houses are out

  4. DTC sales now cannot exceed wholesale sales

  5. Common carriers cannot use contract employees to deliver alcohol

Beer is out

All references to beer were cut from the May 2 version of the bill. Out-of-state beer manufacturers win no new DTC shipping privileges.

This won’t affect existing law. Additional information can be found at the California Department of Alcoholic Beverage Control website.

Big spirits is out

The January 12, 2022, version of SB 620 would have allowed all licensed distillers to ship their products directly to California consumers. 

In the May 2 version, direct shipping privileges apply only to a licensed California craft distiller and “a distilled spirits producer or craft distiller licensed in any other state that complies with the conditions necessary for the issuance of a craft distiller’s license, as set forth in subdivisions (a) and (b) of Section 23502.” This caps production to 150,000 gallons of distilled spirits per fiscal year. 

Any hope that SB 620 would expand DTC shipping rights to all distilleries were squashed with the May 2 amendment.

Fulfillment houses are out

Under the May 2 version of the bill, a distilled spirits direct shipper is only allowed to ship from “a premises at which the permitholder is issued a license by the department or by another state to manufacture or produce distilled spirits.”

According to Jeff Carroll, General Manager of Avalara for Beverage Alcohol, this means distillers cannot use fulfillment houses to store and ship products on their behalf.

DTC sales cannot exceed wholesale sales

A new section added to the May 2, 2022, version specifies that if a permit holder or its agent is a party to any agreement with a licensed distilled wholesaler in California to sell the permit holder's distilled spirits brands, then “any amount of distilled spirits sold and shipped directly to residents of this state in excess of 100,000 liters shall not exceed the volume of distilled spirits shipped or sold to wholesalers in this state.”

Or, as Carroll puts it, “Your DTC sales can’t exceed your sales to wholesalers.”

Common carriers cannot use contract employees to deliver alcohol

Another unexpected addition to the May 2, 2022, version is that it requires common carriers to utilize employees when shipping distilled spirits to consumers in the state. Presumably, common carriers would not be able to use contract employees or independent contractors to deliver spirits to consumers.

Still waiting to see what happens

We’ve been waiting for the most recent version of the bill to drop since late January, when the California Senate held a hearing on the measure. There have been conflicting reports since then. The Distilled Spirits Council of the United States (DISCUS) favored the January 12, 2022, amendment, which “would permanently allow distillers to ship their spirits products directly to California consumers.” But on January 31, 2022, The California Teamsters tweeted its support for Senate Bill 620, as amended. This is the first we’ve seen the version the Teamsters mentioned.

In any case, we now know the direction California is heading. Whether they’ll succeed in getting there remains to be seen.  

Visit the Avalara Tax Desk for the latest beverage alcohol news. 

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