It's a Federal Crime to Sell Booze Secondhand

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Spirits writer Chuck Cowdery continues writing about the absence of a legalized secondary booze market in the U.S., including pointing to the particular federal regulation making it illegal:

"There is, on the internet, a very active secondary market in rare bourbons and other alcoholic beverages. People offer bottles for sale or indicate bottles they would like to buy. Transactions are arranged by email or other private messaging. This happens on Facebook and Craigslist, and probably many other places. I’m not going to point you to any of them. They aren’t hard to find.

Unfortunately, in the United States the secondary market in alcoholic beverages is illegal. I’ve written about this before, as recently as October.

It is illegal to sell alcohol if you don’t have a license to sell alcohol. It is against Federal law and it is against state law in every state.

There has been some question, at least in my mind, as to whether, in a given transaction, both buyer and seller are in legal jeopardy. Clearly the seller is in violation, but is the buyer? I couldn’t point to a law that said the buyer was in trouble too. Now I can.

At the Federal level, laws regulating alcoholic beverages can be found in Title 27 of the Code of Federal Regulations. I’ve spent a lot of time in the early parts of Title 27, Chapter I, Subchapter A, especially Part 5, which gets into the labeling and advertising of distilled spirits, but I never made it down to Part 31, which regulates alcohol beverage dealers. There we find a section (27 CFR 31.141) titled “Unlawful purchases of distilled spirits.” It says that it is “unlawful for any dealer to purchase distilled spirits for resale from any person other than” a licensed dealer..."

The whole piece is worth reading. R Street's Kevin Kosar has previously called for legalizing the secondary alcohol market in the U.S. 

Baylen Linnekin on Repeal Day and the Future of Alcohol Regulations

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Food policy expert Baylen Linnekin dedicated his latest Reason.com column to the anniversary of Prohibition being repealed, as well as the burdensome booze regs alcohol producers still endure:

"Next week will mark the 84th anniversary of the ratification of the Twenty-First Amendment, which repealed alcohol Prohibition. The repeal of Prohibition is worth celebrating, even if the amendment was (and remains) a deeply flawed vehicle.

The chief flaw with the Amendment is, as I wrote earlier this year, that it "simply shifted much of the power to prohibit and incessantly regulate alcohol from the federal government to the states."

States have truly made the most of their teetotalitarian authority for decades, to the detriment of both alcohol producers and—much more so—consumers.

Much of the negative impacts of states' approach to alcohol regulation can be tied to what's known as the three-tier system, a Prohibition relic under which states generally prohibit direct alcohol sales from a brewer, vintner, or distiller to a consumer. The three-tier system mandates these alcohol producers first sell to a distributor or retailer—a mandatory middleman—who can then sell to actual drinkers..."

Read the whole column here. R Street's Jarrett Dieterle also interviewed Baylen Linnekin earlier this year about drinks laws and regs (here).

Indiana's Warm Beer Law Survives Again

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We've been monitoring the latest efforts to reform Indiana's alcohol laws--particularly the state's infamous warm beer law and its strict prohibition on Sunday booze sales. A state legislative commission recently passed a recommendation to allow Sunday sales, but a vote on whether to recommend allowing gas stations and grocery stores the ability to sell cold beer failed by the narrowest of margins:

"The prospect of getting a cold six-pack at your local grocery store has once again fallen flat.

After a nail-biter vote, a panel working to revise Indiana’s alcohol laws will not recommend allowing pharmacies, grocers and convenience stores to sell cold beer — something that has long been the well-protected province of liquor stores. 

The recommendation failed even though the vote was 8-7 in favor. That's because 9 of the 17 members had to vote in favor of the recommendation for it to pass. Two members — Gina-Gail Fletcher and Alex Huskey — were absent. 

The tight vote was even more dramatic because one member — Judge William Boklund — switched his vote in the middle of the roll call, joining proponents of cold beer access.

The result was a big blow for consumers who want to be allowed to buy cold beer for carryout at convenience, grocery and drug stores. Right now, only liquor stores are permitted to sell cold beer for carryout in Indiana, with few exceptions...."

Read the rest here.

Following the Money in Maryland Beer Politics

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Maryland has been at the forefront of beer reform news given its passage of the controversial HB 1283 beer bill last year (which was criticized by many craft brewers), as well as a newly-proposed reform package that would substantially liberalize the state's beer laws. Many reform advocates are cautious about the new bill's chances of passage, however, given past experiences of stalled reform efforts in the state. Liz Murphy of Naptown Pint has been extensively covering the Maryland beer and politics scene, and her latest article traces the money in Maryland beer politics--particularly for the key state legislators who seem most resistant to reforming the state's beer laws:

"There is one question I got asked following last year’s legislative embarrassment around House Bill 1283 more often than anything else — either packaged directly as such, or as an inquisitive or snarky aside:

What happens when you “follow the money” in Maryland politics and the brewing industry?

It’s a topic I’ve researched periodically, but it’s always been one I’ve approached with an overabundance of caution...

As I mentioned at the start of this, campaign contributions can be a tricky topic, because the “why” behind a contribution is not explained in these records — only the fact that these contributions exist.

That said, the presence of these contributions makes it difficult to take the claims of above-board legislative dealings at face value.

Because while Maryland brewers have recently formed their own PAC to begin contributing to candidates that support their cause, at the time events surrounding HB 1283 began to unfold, Maryland brewers seem to [be] the only party not donating any money.

Yet they somehow are also the only ones being targeted with punitive legislation, as well as combative posturing and demeaning comparisons to children."

The entire article is well worth a read.

Does Cutting Alcohol Taxes Cost Lives?

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The current tax reform plan working its way through Congress includes cuts to alcohol excise taxes, which in turn has reignited the debate over whether slicing such taxes is dangerous for public health. Publications like Vox and the Washington Post have recently published articles arguing that reducing booze taxes would lead to more alcohol-related deaths, while organizations like the National Taxpayers Union have pushed back against this claim. The Post cited one source who predicted 3,100 more people would die over a 2-year period from the proposed alcohol taxes cuts:

"Record numbers of Americans are drinking themselves to death each year, in part because booze is now cheaper than it's been at any point in the past half century.

Historically low federal taxes on alcohol are partly responsible for this trend. In 1951, the federal excise tax on a standard shot of 80-proof whiskey was about 90 cents in today's dollars. Today that number is closer to 13 cents, and falling every year because of inflation.

For years, experts have been calling on Congress to raise the alcohol tax on public health grounds. “Higher alcohol taxes save lives,” as Duke University's Philip Cook summed it up in 2015. But the lawmakers behind the Senate's tax bill have decided instead to lower it even further.

Those cuts 'will lead to more drinking and thus more alcohol-related deaths and violence,' according to the Brookings Institution's Adam Looney..."

The National Taxpayers Union called the Post's article the "most outrageous story to date," since, among other things, it doesn't sufficiently take into account the elasticity of demand for alcohol and consumers' responses to price changes:

"As demonstrated by this meta-analysis of 182 studies on the subject, the article fails to properly address the elasticity of demand (how the change in price will change demand). Individuals who are most likely to die from alcohol-related health problems tend to be abusers of alcohol. Research shows these individuals have an inelastic demand (meaning a change in price will only slightly affect demand) and will continue to drink no matter how high or low the price of alcohol becomes. As the meta-analysis states, “While many moderate drinkers probably respond to changes in prices of most alcohol beverages, it does not follow that an across-the-board price or taxation policy will directly reduce heavy drinking.” Because of this, higher taxes are an ineffective approach to trying to stop alcohol abuse..."

 

The Many Restrictions on Transporting and Shipping Alcohol

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As has been covered extensively here at DrinksReform.org, states are more aggressively cracking down on interstate shipments of wine and other alcohol. The Beverage Media Group has published a guide looking at these and other restrictions on transporting alcohol--whether by plane, train, automobile, or mail:

"Sometimes, being 'in the biz,' one forgets just how different wine is from the bulk of consumer products. We all know why: alcohol. Beyond the fundamentals—age restriction and tax collection—however, the general public is barely aware of how deeply and disparately wine is regulated.
 
Nowhere is this more evident than with shipping. When Americans order clothes or send gifts on the internet, parcels are dispatched with minimal fuss. But for those used to instant gratification, alcohol is a frustrating exception. Sending a bottle of local gin home from vacation or ordering vintage Champagne for an anniversary can be complicated—or impossible.
 
And unfortunately, this reality check is apt to happen at the point of sale, leaving the retail merchant responsible for explaining the frustrating truth. Here are the legalities of getting alcohol from one place to another, to help retailers understand the options from a consumer perspective..."

Read the rest of the breakdown here.
 

Shipping Interstate Wine is a Class 4 Felony in Illinois

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In recent months, states have begun aggressive crack downs on interstate wine shipments from retail stores. According to Crain's Chicago Business, Illinois even passed a law earlier this year that made interstate wine shipments a felony:

"Say you live on the North Shore and frequent Pantheon Wine Shoppe, where you plan to buy a nice, rare Bordeaux for a valued New York client. Sorry, but unless you plan to deliver it yourself, you're out of luck.

For years, regulators have looked the other way while wine shops skirted a law prohibiting interstate liquor shipments. Many shops and wine auction houses here operated in a fuzzy gray area that allowed them to ship without consequence. But the gray area went black at the start of the year, after Gov. Bruce Rauner signed a bill that stiffened the penalty for interstate liquor sales, making it a Class 4 felony. For those of you keeping track, that puts the 'crime' on par with aggravated assault and stalking.

As if the fear of a felony charge and confiscation of the wine weren't enough, the nail in the coffin of interstate wine sales came when, in recent months, FedEx and UPS stopped accepting liquor shipments unless the booze is bound for one of only 14 states that permit it..." 

Read the rest here.

Illinois Policy, a think tank based in Illinois, also chimed in on the law:

"[P]unishing Illinois consumers’ demand for wine sold by out-of-state retail merchants isn’t just ill-advised for its counter-productive protectionism. The state, by repelling imports, will also forego millions in potential tax revenues, the National Association of Wine Retailers estimates.

At a time when Illinois ought to be working to attract businesses and facilitate commerce, it instead cements its position among states hostile to out-of-state alcohol shipping.

Consumers and retailers alike are fighting back against the sweeping interstate prohibition trend, including in Illinois. A Cook County resident, for example, was listed as a plaintiff in one lawsuit filed against the state by an Indiana-based wine merchant. The suit was dismissed by a U.S. District Court judge in Chicago; however, lawyers plan to appeal, according to Crain’s.

Perhaps Illinois retailers and consumers should ring in 2018 with a toast to efforts to repeal these restrictive laws..."

More here.

R Street's Jarrett Dieterle previously wrote about interstate wine shipments, the internet, and the alcohol industry for Forbes (here).

 

Maryland Comptroller's Much-Awaited Beer Reform Proposal Unveiled

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DrinksReform.org has been closely tracking the debate over beer laws in Maryland, including the recent findings of a state task force headed by Comptroller Peter Franchot. According to the Baltimore Sun, the comptroller's office has now officially unveiled a legislative reform proposal that would eliminate restrictive state beer regulations like the limit on taproom brewery sales:

"Maryland Comptroller Peter Franchot unveiled a legislative package Monday that would make sweeping changes to the state’s regulation of craft breweries.

Franchot’s 12-point 'Reform on Tap Act of 2018' would eliminate limits on sales from taprooms and for take-home consumption for the state’s breweries. It also would eliminate limits on beer production for breweries that faced caps and let localities set taproom hours.

The proposal is intended to do away with regulations Franchot said have stifled one of the state’s most promising economic engines...

 

The proposal would follow legislation approved earlier this year that quadrupled the amount of beer breweries can serve — up to 2,000 barrels, or close to 500,000 pints. The legislation, designed to pave the way for a new Guinness brewery and taproom in Baltimore County, also stipulated that breweries could serve an additional 1,000 barrels if they sold the beer to a wholesaler, then bought it back, and limited operating hours for new taprooms. Micro-breweries attached to restaurants can serve up to 4,000 barrels on-site.

Franchot’s proposal could set up lawmakers for another lengthy debate about breweries for a second consecutive year..."

Read the whole article here.

Greg Parnas of DCBeer.com, who has been covering the Maryland beer reform efforts extensively, describes the legislation as "an impressive set of reforms that would fundamentally change the legal landscape for breweries operating in Maryland" and make it "among the most brewery-friendly states in the country from a regulatory standpoint." 

Earlier this year, R Street's Jarrett Dieterle interviewed Jim Caruso, CEO of Maryland's Flying Dog Brewery, about the state of beer laws in Maryland.

 

Montana Changes Liquor Licensing System to Auctions, But Quotas Remain

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Montana is one of several states with a liquor license quota system, meaning that the number of liquor licenses available are capped based on population. The Montana legislature wants to move to competitive bidding auctions for licenses in an effort to raise more revenue, but the quota system appears to be here to stay--which ensures liquor licenses will remain artificially inflated, costing up to $750,000 in the stateThe Missoulian reports:

"Montana lawmakers drastically changed the system by which liquor licenses are obtained from a lottery to a competitive bidding auction during the recent special session...

Montana has had a lottery-based system for obtaining liquor licenses since about 1945. New licenses were essentially free, although fees were attached.

Under the new system, anyone who wants to buy a license must bid at an auction held by the state. The minimum bid will be three-quarters of the market value, as determined by the DOR. In Missoula, that could be more than half a million dollars, as several liquor licenses were recently listed for sale for $750,000..."

Read the rest here.

 

Court Rebuffs Challenge to New Arkansas Wine Reform

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Arkansas recently enacted reforms that would allow grocery stores in the state to sell wine (they can already sell beer), but some incumbent liquor store owners sought to challenge the new law via litigation. According to The Arkansas Times, however, a federal judge has rejected a preliminary injunction in the case:

"Federal Judge Brian Miller has denied a request for a preliminary injunction in a lawsuit by retail liquor stores attempting to block a state law taking effect Thursday that allows permitted grocery stores to sell all types of wine, not just Arkansas and so-called small batch wines. 

The judge also dismissed the liquor store claims of a U.S. constitutional equal protection violation — that is, that differences in regulation for liquor stores and grocery stores were unfair.

The state Alcoholic Beverage Control Board has more than 200 applications for grocery store wine sales under the 2017 law. It was a product of some dickering between grocery stores and so-called county line liquor stores. Those liquor stores went along with the new law in return for a promise that retail grocers wouldn't continue a county-by-county effort to vote "dry" counties wet and thus open them to competition to liquor stores perched at their borders — such as the Conway County liquor stores that do huge business with people from "dry" Faulkner County..."

Read the rest here.

A previous white paper by R Street's Jarrett Dieterle was cited in another article about the Arkansas grocery store battles.