Challenge to Minnesota's In-State Grape Growing Requirement Rejected

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Last year, two Minnesota wineries brought a case challenging the state's requirement that all state-based wineries use Minnesota grapes in their wine (a requirement that doesn't apply to breweries in the state who frequently purchase out-of-state hops and other ingredients). Represented by the Institute for Justice, the wineries argued that the restriction violated the U.S. Constitution. According to the Minneapolis/St. Paul Business Journal, however, a federal judge has rejected the challenge (although there are plans for an appeal):

A federal judge has rejected a lawsuit brought by a pair of Minnesota vineyards objecting to a Minnesota law that most state wineries must use mostly Minnesota grapes to make their wine.

The Star Tribune reports on the ruling, which dealt a blow to New Prague's Next Chapter Winery and  Alexis Bailly Vineyard in Hastings, which had claimed that the state rule unfairly hampered their business by blocking them from using, say, mostly California grapes in their Minnesota wine.

U.S. District Judge Wilhelmina Wright didn't rule on the merits of the state's law but said the wineries lacked grounds to sue because they had a way around it. Minnesota lets wineries that obtain a manufacturing license to make wine with any grapes they choose. But that would mean giving up direct sales to consumers, because of a separate state law...

More here.

 

Michigan's Repeal of Half-Mile Liquor Store Rule Upheld by Court

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As covered previously, Michigan's Liquor Control Commission recently repealed the state's half-mile liquor store rule, which prevented liquor stores in the state of Michigan from operating within a half-mile proximity of one another. Incumbent liquor store owners opposed the rule change, fearing increased competition. Ultimately, they filed a lawsuit to stop the reform, but a Michigan judge has now rejected the challenge, according to the Detroit News:

Michigan liquor store owners could face new competition next door as a result of a court ruling allowing the state to act on plans to lift a longstanding rule prohibiting licensees from operating within a half-mile of each other.

Michigan Court of Claims Judge Stephen Borrello on Monday dismissed a lawsuit filed by an association representing existing liquor store owners, who argued they paid to buy their businesses and licenses with the expectation the proximity rule would stay in place.

“There is no property right to be free from increased competition,” Borrello wrote in a summary opinion and order siding with the Michigan Liquor Control Commission. “Nor can plaintiff claim a property right in the continuation of an existing law or rule.”

The ruling is the latest development in a prolonged fight over the 1968 rule, which generally limits liquor stores from operating within 2,640 feet of each other. The Michigan Liquor Control Commission began efforts to rescind the law in 2017, calling it “protectionist and anti-competitive.”...

Read the whole piece here.

Tennessee Officially Approves Sunday Wine and Spirits Sales

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Tennessee's legislature has officially signed off on allowing Sunday wine and distilled spirits sales. According to the Tennessean, Gov. Bill Haslam will sign the bill into law:

Sunday wine sales are coming to Tennessee.

The Tennessee General Assembly this week approved legislation allowing Tennesseans to buy wine in grocery stores on Sundays and most holidays, and Gov. Bill Haslam said Wednesday he will sign it into law. 

The Senate on Wednesday voted 17-11 in favor of the bill — just two days after the House approved the measure. The bill would also allow liquor stores to open on Sundays.

Although the margin of the vote appears wide, the 17 votes in favor were the bare minimum needed to approve the bill. One less vote and the measure would have failed. 

There was a rare audible gasp inside the chamber after the vote was tallied. 

The Senate's passage of the measure sends it to Haslam's desk...

Read more here.

Tennessee Considers Personal Property Tax on Whiskey Barrels

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Tennessee is considering applying the state's personal property tax to whiskey barrels, even though traditionally such barrels have been exempt from the tax. Kris Tatum, president of the Tennessee Distillers Guild, recently penned an op-ed for the Tennessean opposing the idea:

A few short years ago, Tennessee had three working distilleries in the state. Today, there are more than 40 fully operating or under construction with 30 of those members of our Tennessee Distillers Guild.

The bourbon and American whiskey category is booming, and worldwide demand for our Tennessee Whiskey, which is a top export for our state, has never been higher...

So, what does a group of county tax assessors want to do to celebrate our success? 

Well, they want to levy a punitive personal property tax on our whiskey barrels, failing to understand that the barrels are nothing of the sort, but are rather manufactured products. 

For more than 150 years, barrels that whiskey makers use to mature whiskey have not been subject to property tax. We build or buy the barrels, fill them with our whiskey to mature, and then sell the used barrels to the Scotch, tequila and wine industries among others...

Read the whole thing here.

Upcoming Alcohol Policy Panel with R Street's Jarrett Dieterle

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The Mackinac Center for Public Policy, a state-based think tank in Michigan, is hosting a panel on the overregulation of alcohol on May 30th in Lansing, Michigan. R Street's Jarrett Dieterle will be one of the panelists, along with Prof. Anthony Davies of Duquesne University and former Michigan Liquor Control Commissioner Jim Storey. Here's the event description:

With backyard wineries, micro-distilleries and craft breweries popping up all over the place, Michigan is home to a diverse assortment of alcohol producers. But the local beer, wine and liquor industries have to navigate through a mountain of alcohol regulations, which are far above those used in most surrounding states.

Michigan’s rules about alcohol production, distribution and sales are complex. The state has restrictions on what can be produced, a strict monopoly system for distribution and imposes price controls on sellers. Many of these regulations were originally crafted some 80 years ago in the post-Prohibition era.

So what are the effects? Defenders of the status quo argue that the current system is necessary to protect the alcohol-consuming public from itself, while reformers say Michigan’s rules hamper competition, increase costs for consumers and provide no tangible positive health and safety effects. This panel will discuss Michigan’s current regulatory system, present research on state-by-state comparisons and offer different regulatory options Michigan policymakers might consider.

To RSVP or learn more about the event, click here.

Washington State Has the Highest Liquor Taxes in the Country

According to a recent report by the Tax Foundation, Washington State has the highest hard spirits taxes in the country, which continues to negatively impact craft spirit makers in the state. As KUOW from Washington reports:

You may want to think twice before you start a business making whiskey in Washington state. That’s because Washington’s liquor taxes are the highest in the country, according to a new report out today by the nonprofit Tax Foundation.

This year the tax rate on whiskey and other liquor in Washington state is $32.50 per gallon. That's 10 times more than in California, where it's $3.30 per gallon.

As master distiller Matt Hoffman at Seattle’s Westland distillery put it, "the difference is huge.” 

Wine is taxed at a much lower rate here than liquor. According to the Tax Foundation, Washington's wine tax rate was the 25th in the nation in 2017.   

Hoffman said the gap in tax rates is a big problem for local spirit makers like Westland, which hopes to sell to customers in Washington state the way winemakers do.  

More here.

Oregon and Virginia clocked in at number 2 and 3, respectively, when it came to the highest liquor taxes. Wyoming, New Hampshire, and Missouri had the lowest taxes.

Maryland Legislature Strikes Back Against Reform Advocate

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Maryland Comptroller Peter Franchot has led a well-publicized crusade against Maryland's outdated beer laws--a fight which has endeared him to much of the craft beer community but not to some state legislators. The Maryland legislature is now considering stripping Franchot's office of its power to regulate alcohol in the state as retribution for his reform advocacy:

The Maryland Senate on Wednesday approved a plan to study whether Comptroller Peter Franchot should continue to regulate the state’s alcohol industry — legislation inspired by a fight over beer policy between lawmakers and the Democratic comptroller.

Without discussion, the chamber voted 42-3 to create a task force to examine whether the comptroller’s office “is the most appropriate agency to ensure the safety and welfare of the residents of Maryland.” The House of Delegates approved the measure earlier this month, after rejecting a proposal by Franchot to eliminate many restrictions that craft brewers say are slowing their industry’s growth.

The passage is the latest blow in a yearlong battle over Maryland’s system of alcohol regulation, which dates to Prohibition and has established, powerful forces in Annapolis...

More here

R Street's Jarrett Dieterle Featured in Video About America's Craziest Drinks Laws

The Pacific Legal Foundation (PLF) recently announced that it had filed a lawsuit, on behalf of Chef Geoff Tracy, challenging Virginia's ban on happy hour advertising. Virginia's happy hour ban prohibits restaurants and bars in the commonwealth from advertising drink specials--even something as innocuous as "$3 beers from 4-7pm." Geoff Tracy owns a Virginia restaurant and is arguing that Virginia's advertising ban--something he doesn't have to put up with for his nearby Maryland and DC restaurants--violates the First Amendment. R Street's alcohol policy teamed up with PLF to host a launch party for the case, and R Street's Jarrett Dieterle appeared alongside PLF attorney Anastasia Boden in a video highlighting the many ridiculous alcohol laws in America:

Why is it becoming harder to buy wine online?

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We have extensively covered the ongoing crackdown on wine shipments taking hold across the country. The national media is starting to take note now, too, as Dave McIntyre of the Washington Post dedicated a recent column to the issue:

In a day when we can buy almost anything online and have it shipped to our door — from shirts to cabbage to replacement motors for our basement freezers (to be installed DIY after watching a YouTube video), it is becoming harder to buy wine.

Ask David Godolphin. The Concord, Mass., resident maintains a collection of about 350 bottles in his temperature-controlled cellar. That’s large enough to have fantastic wine on hand for any occasion, but still modest enough that he needs to indulge in the wine lover’s joy of shopping from time to time to maintain his stash. (The only thing wine fiends love more than drinking wine — and talking about it — is buying it.) Godolphin is especially fond of wines from Alsace, in France, such as grand cru Riesling and pinot gris, top Rieslings from Germany and the red wines from cru appellations of Beaujolais. But these aren’t typically available in his local shops, so he looks to stores outside Massachusetts.

“Fifteen years ago, wine could be shipped to me via FedEx with a wink and a nod,” Godolphin told me in an email. “Then that approach became too risky. I’ve been told I cannot receive wine from out of state.” ...

Read the whole column here.

How Antiquated Alcohol Shipping Laws Prevent Innovation

Our DrinksReform.org team is constantly looking to connect with alcohol producers, bartenders, and other industry participants to hear their on-the-ground experiences (for example, we've profiled brewers and distillers in the past). Recently, we had the chance to chat with Bevv founder and CEO Travis Benoit. Bevv is looking to modernize the alcohol market by providing direct delivery of beer and spirits—both on-demand and via shipping—from alcohol producers to consumers. But they’ve faced many legal obstacles in doing so, and we talked with Travis about these constraints.

DrinksReform.org: Can you start us off by providing an overview of Bevv?

Travis Benoit: So, what we set out to build was an Etsy meets Shopify for the craft beer and cider marketplace. What I mean by that is we wanted to build a discovery engine that focuses on a multi-vendor component, meaning every vendor—such as a brewer, distiller, or cidermaker—that works with us gets their own storefront on our platform. Very similar to like what you would see on Etsy. Or very similar to something you would see on Amazon, where a vendor gets their own storefront.

We've also built in a number of tools, which we'll be launching soon, that allow consumers to shop directly from alcohol producers in the same fashion that’s been happening with direct-to-consumer wine for years—meaning a consumer could actually purchase directly from a brewer’s website.

DrinksReform.org: Ok, so this means if someone goes online, using either your platform or a brewery website, they can pick whatever beer they want and get it delivered to them directly?

Travis: That's correct.  We do that in two ways. On the carrier side, meaning long distance carrier, we have partnered with UPS. Producers package the product and then UPS picks it up and delivers it directly to the consumer. We also offer, where possible by geo-zone, a last mile, on-demand local delivery option. So for example, let's take San Diego or Los Angeles, where there's 100 plus producers in a congregated, congested area. In those places, we allow the consumer to shop locally and our on-demand delivery partners will go pick up the product and deliver it directly to the consumer within the hour or so.

DrinksReform.org: In the day and age where you can order almost anything on the Internet and get 2-day shipping, this would basically do the same thing for booze, right?

Travis: That's spot on.

DrinksReform.org: There are other companies doing online booze delivery, but they operate as what is now being called the “fourth tier”—meaning they’re an add-on after the retail level. Your model cuts out the middle men and goes straight from producer to consumer?

Travis: That's right. Those other models are called last mile on-demand delivery, where companies work solely with retailers, meaning they've gone through the three-tier network, and then based on a subscription or however they work their relationship with these retailers, they pick up the Budweiser and the Smirnoff from the retailer, and then drop it off at your house. What we do is go straight from producer to consumer.

DrinksReform.org: Talk about the types of legal hurdles you face.

Travis: Mostly we face interstate and intrastate shipping restrictions. For example, a state like California is an intrastate state, meaning that for craft beer producers, California allows alcohol shipments within the state but not outside of the state. And then as we start to look at other states, some states don't even have shipping laws for beer at all. It's almost like saying, ‘Wow, we have a wine shipping law, we don't have a spirits law, we don't know how to qualify cider, and we don't have a beer law.’ So now we're kind of starting from scratch and asking: can we work within that state or not? These are the conversations that we have with the ABCs in some of these states, and even they don't have answers, because they don't know.

DrinksReform.org: So, some states don’t have a law either way—neither one saying it's okay to ship beer into the state, nor one saying it's not okay.

Travis: Right.

DrinksReform.org: In states where the law doesn’t clearly come down one way or the other on whether alcohol shipments are permissible—or the law is ambiguous—is there concern that state liquor regulators could later interpret those unclear laws in a way that would restrict booze shipments? No brewer or distiller wants to start receiving cease-and-desist letters, and ABCs are notorious for creatively interpreting vague statutory language in liquor laws. Is the best bet for more states to adopt explicitly pro-alcohol-shipping laws?

Travis: Yes, we need all states to. With that being said, we're currently only operating in green areas. So, when we say green areas, that means we have a definitive beer shipping law statute and we have the true definition of interstate and intrastate shipment and where we can operate. We have made the decision not to operate in the gray areas from the get-go. We've thought about it, but because we don't want to put our vendors at risk and we don't want those cease and desist letters, we decided that we were going to operate in the green to start, prove the concept, and then work on legislation on a state by state basis.  

DrinksReform.org: How many states currently are “green areas” for you?

Travis: For beer, we can ship out of 14 states and ship into 8.

DrinksReform.org: Wow, that leaves a lot of states where it’s not permissible.

Travis: On the cider side, for those states that qualify cider as wine, we can ship in and out of 43 states since wine shipping laws are more common. Now, for example, we decided not to ship into Pennsylvania, or out of Pennsylvania, because we simply can't find a definition. The ABC can't provide us a definition for cider—is it wine, is it beer? And that's another problem.

DrinksReform.org: Well, Travis, it’s been fascinating talking to you about the legal restrictions you face and how difficult it can be to ship alcohol into and out of certain states around the country. Thanks for chatting with us!

[R Street's Jarrett Dieterle has previously written about the many legal constraints that are preventing a true online, on-demand booze marketplace from taking off.]