State-by-state guide for shipping spirits DTC
Though wine makes up the lion’s share of the direct-to-consumer (DTC) market in the United States, a handful of states allow DTC shipments of spirits. A few states are thinking about amending their policies, but for now, most state efforts to expand DTC shipping rights to distilleries seem to have stalled.
As of this writing, distilleries can make interstate DTC shipments to the following states:
- Alaska (allowed by state law but prohibited in dry communities)
- New Hampshire (allowed by state law but prohibited in dry communities)
- North Dakota
- Washington, D.C.
Alaska sets new license and tax requirements for direct shippers
Under current law, distilled spirits producers with no physical presence in Alaska don’t need a license to ship directly to consumers in the Last Frontier. That will soon change. Due to the enactment of Senate Bill 9, manufacturers licensed in other states must obtain an Alaska direct shipment license to ship to Alaska consumers on and after January 1, 2024.
However, not all manufacturers are eligible for Alaska’s new DTC license. The Alaska Alcoholic Beverage Control Board (ABC) will not issue a license to a manufacturer producing more than 50,000 proof gallons in total of distilled spirits annually.
Direct shipments of beverage alcohol will also be subject to the Alaska alcoholic beverage tax starting January 1, 2024. The tax rate depends on alcohol content:
- For malt beverages, the rate is $1.07 per gallon or fraction of a gallon
- For cider with 0.5% to 7% alcohol by volume, the rate is $1.07 per gallon or fraction of a gallon
- For wine or other beverages with 21% alcohol by volume or less, the rate is $2.50 per gallon or fraction of a gallon
- For beverages with more than 21% alcohol by volume, the rate is $12.80 per gallon
DTC shippers cannot ship alcohol into dry areas, where the sale of alcohol is prohibited. The ABC is required by law to publish a list of zip codes that are located within local option areas, and to notify direct shipper licensees when any change is made to the list.
For now, direct shippers may continue to ship to Alaska consumers without a license and without collecting the state’s alcoholic beverage tax. The Alaska Alcoholic Beverage Control Board is expected to start accepting applications for the new license around September 1, 2023.
California may or may not allow craft distillers to ship directly to consumers
California took a step toward authorizing DTC shipments of spirits earlier this year with the introduction of Senate Bill 620, then amended the measure and took a step back.
The January 12, 2022, version of the bill would have let any licensed distiller apply for a license to ship their products to California consumers. The May 2022 amendment extends DTC shipping privileges to licensed California craft distillers and distilled spirits producers or craft distillers licensed in any other state that produce no more than 150,000 gallons of distilled spirits per fiscal year.
Larger producers cannot make DTC shipments in California as the measure now stands.
There are other problematic provisions in SB 620, as well:
- Common carriers cannot use contract employees to make deliveries
- Distillers cannot use fulfillment houses to store and ship products on their behalf
- DTC sales of spirits cannot exceed sales to wholesalers
We’re still waiting to see what will happen in California. A June 29, 2022, hearing scheduled to discuss SB 620 was postponed.
Nevada closed market to distilleries and retailers
Nevada used to be on the short list of states where distilleries could ship directly to consumers. However, as of July 1, 2021, distilled spirits can no longer be shipped directly to consumers in Nevada.
Breweries and retailers also lost DTC shipping rights in Nevada, though wineries may continue to ship wine to Nevada consumers.
New York market still closed to distilleries
During the height of the COVID-19 lockdowns in 2020, New York considered creating a new DTC license for distilleries and farm distilleries. However, the bill never made it out of the Committee on Economic Development.
Another bill was introduced in January 2022. Like its 2020 predecessor, Senate Bill 4245 would authorize direct shipments by distilleries or farm distilleries licensed in the state of New York. As introduced, it would not have opened the market to out-of-state manufacturers. It, too, is stuck in committee, as is its companion bill A3275A.
A measure seeking to allow direct interstate and intrastate cider shipments is seeing more success; the Senate passed Senate Bill 556 on May 5, 2022.
DTC shipping is not the same as alcohol delivery
It’s worth noting that DTC shipping is different from alcohol delivery.
DTC shipments are generally shipped across state lines via a common carrier. As noted above, direct shipments of spirits are only permitted in a handful of states.
Alcohol delivery generally occurs within state lines. It became popular during the early months of COVID-19, after many state and local governments restricted in-house dining and drinking. Think cocktails to go.
Approximately 20 states have permanently authorized delivery and takeout sales of alcohol. Another 15 states, including New York, are temporarily allowing alcohol delivery and takeout sales but aren’t ready to make their policies permanent. For state-specific details, check out States decide fate of cocktail-to-go laws.
There is one thing all alcohol shipments and deliveries do have in common, whether we’re talking about a margarita from a local Mexican restaurant or a bottle of whiskey from an out-of-state distillery: Alcohol cannot be delivered to minors.
Age verification is a must for direct shippers
Where direct shipments of spirits are allowed, the direct shipper is generally responsible for ensuring products aren’t delivered to minors. This is true even if the delivery is made by a third party.
There are four ways to verify the age of consumers:
- Affirm the age of the consumer by restricting access to digital content
- Collect the purchaser’s date of birth (DOB)
- Verify the purchaser’s age with an online verification service or by inspecting a government-issued ID
- Require the deliverer to inspect identification and obtain a signature at the point of delivery
Some states specify how age verification must be done. Other states are more vague, requiring age be verified but not specifying how.
Enforcement also varies by state. The California Department of Alcoholic Beverage Control sometimes runs sting operations, and the Massachusetts Alcoholic Beverages Control Commission is conducting Minimum Purchase Age Compliance Checks on direct wine shippers through September 2022. (Direct shipments of spirits are prohibited in California and Massachusetts).
If and when additional states open DTC shipping to manufacturers of spirits, age verification will be paramount for that industry. Using an age verification service like Avalara Age Verification for Beverage Alcohol allows you to obtain the information you need to verify the age of consumers without the added burden of storing that information in your business systems. Visit Avalara for Beverage Alcohol to learn more.
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