What you need to know about beverage alcohol licenses
Beverage alcohol products are some of the most highly regulated items in the United States, right up there with tobacco and cannabis products. So while it’s legal for businesses to produce and sell alcoholic beverages in most parts of the country, doing so requires a bevy of beverage alcohol licenses.
It can be tricky to determine which licenses and registrations you need before producing your first vintage, pouring that first pint, or shipping the first case to customers. But it’s absolutely essential that you figure it out and have them in hand.
The precise requirements for your business will depend on what you do and where you do it. Do you produce alcohol, sell alcohol, or produce and sell alcohol? Do you sell and ship the alcoholic beverages you produce to wholesalers, retailers, consumers, or all three? Do you serve alcohol on-site? Deliver it in your own vehicles?
It would take more space than we have here to provide guidance for all possible scenarios in all parts of the country, so for the purposes of this post and for the most part we’ll be addressing beverage alcohol producers who ship directly to consumers (DTC) in one or more states.
At a minimum, it’s important to take the following five steps prior to producing and selling alcoholic beverages:
- Obtain a federal license
- Obtain an operating state license
- Register with states where you have customers
- Register your beverage alcohol products (federally and in applicable states)
- Register to collect and remit applicable federal, state, and local taxes
Let’s get started.
1. Obtain a federal license for beverage alcohol
Your first stop will be the Alcohol and Tobacco Tax and Trade Bureau (TTB), which operates under the Department of the Treasury. TTB ensures that only qualified businesses enter the alcohol and tobacco industries, and that those businesses collect and remit all applicable federal taxes on the products they sell.
For permit and license registrations, TTB breaks alcohol businesses down as follows:
Alcohol producers and manufacturers (breweries, distilleries, wineries)
Alcohol importers, wholesalers, and exporters
Alcohol users and dealers
TTB offers an online tutorial to help you figure out the permits you need. Once you sort that out, you’ll file the appropriate application(s) with TTB. Most applications can be filed online. Allow ample time for your application to be processed.
You must obtain a federal license before you start producing alcoholic beverages, and a federal license is required to apply for a state permit.
2. Obtain an operating state license for alcoholic beverages
Next you have to obtain a license to operate in your home state; this allows you to operate and produce alcoholic beverages in that state. Each state has an entity dedicated to alcohol licenses, regulations, and enforcement, though they go by different names. There’s the New York State Liquor Authority and the Texas Alcoholic Beverage Commission, to name just two.
As at the federal level, there are different state licenses for different business types.
For instance, the California Department of Alcoholic Beverage Control (ABC) has separate licenses for beer manufacturers, winegrowers, brandy manufacturers, distilled spirits manufacturers, etc. The ABC typically charges both an application fee and a license fee, and fee amounts can vary by production volume, shipping type (e.g., direct to consumer, wholesale, etc.), and other factors.
The Washington State Liquor and Cannabis Board offers two types of beverage alcohol licenses and numerous licenses under each category:
Retail licenses for businesses that sell alcoholic beverages at retail, such as grocery stores, nightclubs, restaurants, and theaters
Non-retail and out-of-state licenses for breweries, distilleries, wineries, distributors, and businesses in other states that ship alcoholic beverages into Washington
The cost of each license varies. A Washington craft distillery license is $100 but a distiller license will run you $2,000. The in-state winery license is either $100 or $400, depending on how many liters of wine are produced per year.
Different licenses come with different privileges
Every state operates differently. Some state operating licenses come with shipping privileges; other states require separate licenses for production and shipping. Licenses for small beverage alcohol producers generally authorize more activities than licenses for large beverage alcohol producers.
For example, the Arizona craft distillery license (for an in-state distillery that produces no more than 20,000 gallons of distilled spirits annually) has “on- and off-sale retail privileges”:
The licensee may serve spirits produced on premises for consumption on premises, sampling, or to go (in the original, sealed container)
The licensee may sell and deliver to consumers who order by telephone, mail, fax, catalog, or internet (some restrictions may apply),
Regardless of what your operating license permits, if you ship to consumers in another state(s) you’ll likely need to register to do business with that state(s).
3. Register with states where you have customers
Before shipping alcoholic beverages to consumers in another state, it’s critical to determine whether the alcohol you produce and sell can be shipped into that state. While most states allow DTC wine shipments, far fewer allow direct shipments of beer or distilled spirits. See our state-by-state guide for shipping beer DTC and state-by-state guide for shipping spirits DTC for more details.
Almost all states that permit DTC wine shipping require direct wine shippers to obtain a permit before shipping any wine into the state. Fees and expiration dates for DTC permits vary: A DTC permit in New York runs $375 and expires every three years on December 31, while a Texas DTC permit costs $500 and expires two years from the date of issue.
Florida, Minnesota, and Washington, D.C., offer exceptions to this rule: They don’t require DTC shippers to obtain a license to ship DTC.
Volume limits for direct wine sellers
Many states cap the amount of wine a producer can ship directly to a consumer. You can ship 12 cases per person into Nevada and Vermont, and 24 cases to a household address in Ohio. Direct wine shippers can ship up to 1,500 cases per year into Michigan. These aren’t the only states with limits, but they give a good indication of the types of caps that exist.
There are no volume limits in some states, such as Florida and Washington.
4. Register your beverage alcohol products
You’re also required to register your products with the federal government, your operating state, and perhaps even the states where you ship your products.
Registering products with the federal government
TTB must approve beverage alcohol formulas and labels. Registered industry members can apply online for a certificate of label approval (COLA), a certificate of exemption from label approval, or a distinctive liquor bottle approval. COLAs Online is TTB’s internal database for Alcohol Labeling and Formulation Division (ALFD).
Beverage alcohol producers can electronically draft, submit, and track formula applications through TTB’s Formulas Online system. There’s no application fee for COLA applications or formula submissions.
Registering products with a state
You’ll also need to register your products in your operating state, and most states require you to register the products you sell in the state.
Furthermore, many states specify which types of products can be shipped to consumers in the state and require direct wine shippers to register their products. For example, Connecticut’s out-of-state winery shipper’s permit for wine applies to wines manufactured by the permittee (licensee) on their premises; there’s a different permit for shipping wine imported by the winery, and yet another for out-of-state retailers shipping wine directly to Connecticut consumers. Once you have a permit that entitles you to ship alcoholic beverages into Connecticut, you must register your liquor brand.
Some states, such as Florida, Minnesota, and Washington, D.C., don’t have restrictions on wine products or require out-of-state wine shippers to register their products. Washington state doesn’t require product registration but does limit which products a winery can sell and ship into the state: The wines must be produced by the permittee.
5. Register to collect and remit applicable taxes
Once you have the permits required to ship wine into another state, you need to collect all applicable taxes and file and remit them on time. This may require additional registrations.
Tax requirements vary by state. Virginia requires DTC wine shippers to obtain a DTC permit, collect excise tax, and collect state and applicable sales tax (at the rate in effect at the delivery address). Massachusetts doesn’t impose sales tax on direct wine shipments, but Massachusetts excise tax applies to such sales.
While most states require direct wine shippers to collect applicable taxes (including sales tax) from the first sale, direct wine shippers are subject to economic nexus laws in Florida, Minnesota, and Washington, D.C.
Economic nexus in Florida, Minnesota, and Washington, D.C.
Florida, Minnesota, and the District of Columbia do require out-of-state wine shippers to register for sales tax only if they have economic nexus with the state — i.e., enough sales in the state to establish a tax obligation. All three states provide an exception for small sellers, as do all states with economic nexus.
Florida requires remote direct wine shippers to register for sales tax with the Florida Department of Revenue only if they made at least $100,000 in retail sales or 200 or more retail sales transactions in Florida during the previous 12-month period.
Minnesota requires remote direct wine shippers to register for sales tax with the Minnesota Department of Revenue only if they made at least $100,000 in retail sales or 200 or more retail sales transactions in Minnesota during the previous 12-month period.
Washington, D.C., requires remote direct wine shippers to register for sales tax with the Office of Tax and Revenue (OTR) if they made at least $100,000 in retail sales or 200 or more retail sales transactions in D.C. during the current or previous calendar year.
Neither Minnesota nor the district impose excise tax on direct wine shipments. However, Florida does. So while remote wine producers don’t need to register then collect and remit Florida sales tax unless they have economic nexus, they need to register for and collect and remit applicable excise tax from the first sale.
Economic nexus in California and Texas
California is another unique case study in economic nexus. Out-of-state direct wine shippers are required to collect and remit state sales tax as soon as they start shipping into the state. However, wine sellers aren’t required to collect and remit local (or district) sales and use tax unless they have nexus with California. For businesses with no physical presence in the state, that can be as simple as hitting California’s economic nexus threshold of $500,000.
Again, out-of-state wine shippers are required to collect and remit California’s state sales tax even when they don’t have nexus with the state. Once a remote wine shipper establishes nexus with California, they’re required to collect and remit local sales taxes in addition to the state sales tax.
The situation in Texas is similar but different. Wineries based in other states are required to collect and remit state and local sales and use tax on all wine shipped into the Lone Star State from the first transaction. However, wineries with no physical presence in Texas can opt to collect a single local tax rate rather than the various rates in effect at each delivery address.
Additionally, remote wineries are required to file and pay Texas franchise tax once they establish nexus with the state. As in California, the economic nexus threshold in Texas is $500,000.
You can find more state-specific information for DTC wine shipping at our state DTC wine shipping rules guide.
What are control states?
We’d be remiss not to mention control states, which are states where government agencies control wholesale sales of distilled spirits, and sometimes also beer and/or wine. There are 17 control states: Alabama, Idaho, Iowa, Maine, Michigan, Mississippi, Montana, New Hampshire, North Carolina, Ohio, Oregon, Pennsylvania, Utah, Vermont, Virginia, West Virginia, and Wyoming.
There are also control districts in Alaska, Maryland, Minnesota, and South Dakota.
Control states can affect licensing requirements; some control states don’t require suppliers to obtain licenses, for example. But perhaps the biggest difference between control and non-control states is that products have to go through a “listing” process in control states, as opposed to traditional registrations.
Listing processes vary from state to state, but as a general rule, beverage alcohol producers must apply for a listing through a broker and make a case to the state ABC that stocking their product would be beneficial to the state.
All of this should give you an idea of what you’re up against. It’s a lot, but lots of people do it. You can too.
Bear in mind that compliance requirements for beverage alcohol producers differ from state to state and even county to county, and city to city. Be sure you meet all federal, state and local mandates before embarking on production. Once up and running, comply with all production reporting requirements and state tax requirements.
When you’re ready to sell, learn about your markets and verify that you’re permitted to sell what, where, and how you want to. While there are still a few states that don’t allow direct-to-consumer alcohol shipping of any kind, there are no longer any truly dry states. However, there are plenty of dry jurisdictions to take into account.
And of course, be sure to register for then collect and remit all applicable taxes.
Avalara for Beverage Alcohol can help put you on the path to compliance. Our suite of products can help you navigate license and product registration requirements nationwide. Connect with our team to learn more about our beverage alcohol license services.
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