Distilled spirits

Texas Passes Brewery and Liquor Store Reforms

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Texas is known for its arcane alcohol rules, including its infamous “consanguinity exception,” which restricts the number of liquor stores an individual can own to 5 outlets, but then creates a loophole that allows family members to join together to own more. The state also was known for prohibiting breweries from selling to-go beer. Both those restrictions have no been loosened by recent legislation, as reported by the Texas Tribune:

Texas on Saturday joined the rest of the nation when Gov. Greg Abbott signed a law letting adults buy beer to go from home-grown craft breweries.

Smaller brewpubs already can sell beer to go. Abbott's action means that beginning on Sept. 1, the state's giving that right to breweries, too…

[The legislation also] expands the number of liquor store permits that an individual can own, getting rid of a loophole that favored blood connections. However, publicly traded companies like Walmart, Costco, Walgreens and Kroger still won't be permitted to sell liquor in Texas. That issue's now pending before the 5th U.S. Circuit Court of Appeals.

Also, a push to amend HB 1545 to let stores sell wine and beer on Sundays starting at 10 a.m. rather than noon failed, as did a separate proposal to allow liquor sales on Sundays…

Read more here.

Pennsylvania May Finally Scrap Flexible Pricing Authority for Spirits

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As covered before on these pages, Pennsylvania grants broad power to its liquor regulatory agency—the PLCB—to set the price mark-ups for distilled spirits sold in its state-run retail stores. R Street’s Jarrett Dieterle has previously pointed out that liquor mark-ups in control states function analogously to taxes, especially when the money they generate flows to the state’s general fund. This week in The American Spectator, R Street’s Kevin Kosar discusses an effort afoot in the Pennsylvania legislature to at least limit the unilateral power of the PLCB to set mark-up levels:

Keystone State legislators may abolish Pennsylvania’s stealth drinks tax. The House Liquor Control Committee is examining HB 1512, which would end the Pennsylvania Liquor Control Board’s “flexible pricing” power.

Rep. Jesse Topper, the measure’s primary sponsor, argues that flexible pricing power is not a power one should give to a monopoly. “[T]he PLCB is neither constrained by market discipline nor antitrust laws,” he wrote.

Topper’s bill would repeal the flexible pricing provision “in order to reinstitute some kind of consumer protection.” If enacted, the PLCB would revert to using a longstanding pricing system that set spirit prices by a formula

[F]lexible pricing is effectively a stealth tax and may therefore raise constitutional questions. Instead of elected officials setting income- or sales-tax rates to cover the cost of government, the pricing mechanism has enabled the state Legislature to outsource revenue-raising authority to an executive agency…”

Read Kevin’s whole piece here.

American Whiskey Gets a Partial Tariff Reprieve

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The Trump Administration’s ongoing tariff wars have roiled the American drinks industry, hurting producers of both beer and whiskey. Canada and Mexico’s retaliatory whiskey tariffs were recently lifted, but as the Chicago Tribune reports, producers are still concerned about European markets:

American whiskey producers feeling the pain from the Trump administration's trade disputes have gotten a shot of relief with an agreement that will end retaliatory tariffs that Canada and Mexico slapped on whiskey and other U.S. products.

The whiskey industry hailed the arrangement to ease trade tensions among the North American allies and said it hopes it's the first of several rounds of good news on the trade front. Distillers have suffered shrinking exports since the last half of 2018 due to tariffs in some key markets.

President Donald Trump last Friday lifted import taxes on Canadian and Mexican steel and aluminum and delayed auto tariffs that would have hurt Japan and Europe. In return, the Canadians and Mexicans agreed to scrap their retaliatory tariffs on U.S. goods, including American whiskey.

But U.S. whiskey makers still face significant trade hurdles in the European Union, the industry's biggest export market…

Read more here.

Illinois On the Brink of More Distillery Freedom

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Several years ago, Illinois lawmakers enacted legislation that allowed craft breweries to self-distribute a small portion of their beer without having to go through a distributor. (Illinois has generally been on a bit of a reform kick in recent years when it comes to their alcohol laws). Now, several lawmakers are proposing to do the same for craft distillers in the Land of Lincoln. Illinois Policy has the story:

Craft beer’s popularity is being joined by its distilled cousin to become the “next big thing,” and the Illinois House just passed an update to state liquor laws so Illinois doesn’t miss the party.

A bill removing major hurdles for craft distilleries passed the state House, 108-2House Bill 2675 was backed by a bipartisan group of lawmakers including chief sponsor Rep. Tom Demmer, R-Dixon, chief cosponsors Rep. Mike Zalewski, D-Riverside, and Rep. Jonathan Carroll, D-Northbrook…

Under the Liquor Control Act of 1934, Illinois mandates a “three-tier” liquor distribution system that separates producers, distributors and retailers. This bundle of laws protects the middle-man and ensures the functions of each tier don’t mix. Lawmakers moved to allow limited self-distribution for smaller beer brewers in 2011, and HB 2675 has a similar aim for craft liquor.

The ability to self-distribute has been vital to the craft brewery boom across Illinois, and craft distillers hope HB 2675 will bring them the same opportunities…

Read more here.

North Carolina Lawmakers Seek a Bevy of Reforms to ABC System

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North Carolina is one of about a dozen remaining states in which the government controls the retail sales of alcohol. The state’s ABC system has been mired in scandal recently after a state audit uncovered millions in waste, which has spurred calls for reforming the state’s antiquated alcohol laws. According to the Greenville Daily Reflector, several lawmakers have introduced an omnibus reform bill with numerous proposed changes:

A bill filed in the N.C. House would dramatically revamp how the state governs liquor sales and distribution, including a provision allowing for Sunday sales. Distillers, brewers, and consumers would be among the beneficiaries of the expansive measure, modernizing a system entangled in arcane laws dating back to the end of Prohibition.

Reps. Chuck McGrady, R-Henderson; James Boles, R-Moore; Susan Fisher, D-Buncombe; and Jon Hardister, R-Guilford, are primary sponsors.

Lawmakers have already introduced several items presented in Tuesday's bill, such as a move - House Bill 389 - to authorize public colleges and universities to allow the sale of alcohol at stadiums, athletic facilities, and arenas on school property, as well as a move paving the way for Sunday sales - Senate Bill 87.

The omnibus measure introduced Tuesday, H.B. 536, ABC Omnibus Regulatory Reform, would, for example, allow distillers to sell spirituous liquor directly to consumers in other states and removes a limit on sales to customers visiting one of the nearly 60 craft distilleries in the state. As it stands, customers can buy five bottles from a distillery per year. All sales now are recorded and tracked.

The bill also would allow tastings in state-run ABC stores and provides a local option for cities and counties to adjust store hours, including for Sunday sales…”

Read the rest here.

R Street's Jarrett Dieterle Interviewed About Nebraska Alcohol Taxes

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Nebraska’s legislature is considering increasing taxes on beer, wine, and spirits in an effort to raise more revenue and provide property tax relief. The Heartland Institute interviewed R Street’s Jarrett Dieterle about the proposal:

Local craft breweries that produce small volumes of beer are growing in popularity nationally and in Nebraska, says Jarrett Dieterle, director of commercial freedom policy at the R Street Institute.

“The craft beverage industry is booming cross the country,” said Dieterle. “In 2017, craft breweries created the second-most manufacturing jobs of any industry in America.

“Nebraska is no exception,” Dieterle said. “Nebraska has 3.5 breweries per 100,000 people, which puts it in the top 15 states for breweries per capita. Overall, breweries had a $465 million economic impact in the state.”

The craft beer industry will shrink if Nebraska moves forward with this tax hike, says Dieterle.

“Research has demonstrated that increasing taxes on products like beer can lead to a decrease in brewpubs and breweries in a state,” said Dieterle…

Governments shouldn’t focus on a specific product category to increase revenue, says Dieterle.

“Generally, state and local governments fund their operations through a combination of property, income, and sales taxes,” said Dieterle. “Singling out the alcohol industry to bear the brunt of revenue-generation in the state makes little sense,” Dieterle said…

Read the whole article here.

Washington State Craft Distillers Plea for More Tasting Room Flexibility

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In Washington State, distillers are currently allowed to operate only one on-site tasting room with serving limits of 2 oz. per customer. Crosscut.com recently ran a feature on the push among distillers in the Evergreen State to expand their flexibility in order to survive:

[P]roducers of Washington’s craft spirits say they’re not sure their industry has a future if they don’t get help from the state Legislature this year.

A proposal at the state Capitol would allow craft liquor distillers like Hembree to open two additional off-site tasting rooms, which they say would allow them to reach more customers. Unlike the single tasting room allowed under current rules, the two new tasting rooms would not be attached to a distillery’s main production center, allowing the business to expand to new locations.

Senate Bill 5549 also would allow craft distilleries more freedom to serve sample cocktails, so they can show customers how to use local spirits in mixed drinks at home…

Right now, the state’s craft liquor rules allow distilleries to serve half-ounce samples, which can be mixed with other spirits only if those, too, are produced on site. Under the bill, Washington’s craft distillers would be allowed to serve some craft spirits made by other local distilleries, expanding the variety of drink samples they can make.

Current law also sets a serving limit of 2 ounces of samples per person, per day. Senate Bill 5549 would keep that limit in place for straight alcohol, but abolish it for mixed drinks…

Read the while piece here.


R Street: It's Time for Texas to Permit Sunday Liquor Sales

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We recently discussed West Virginia’s passage of legislation legalizing Sunday liquor sales, and now Texas is considering doing the same thing. R Street’s Josiah Neeley, a resident of the Lone Star state, wrote for the American Spectator about why Texas lawmakers should embrace this reform:

Texas laws governing alcohol have their own quirks. Take Sunday sales, for example. Texas is one of a handful of states that maintains a ban on certain types of alcohol sales on Sundays. Whatever the original motivation of the Sunday sales ban, the current version is so shot through with exemptions as to make it arbitrary and senseless. Sales of hard liquor on Sunday are prohibited, but only if they are for off-site consumption. Bars can still serve hooch, and stores can still sell wine and beer. It goes without saying that you can still buy as much liquor as you want on Monday through Saturday and then drink it on Sunday…

Folks who favor economic liberty want these anachronistic rules wiped away. Meanwhile, voters worried about Texas’ public coffers can also take heart—permitting drinks sales each day of the week may generate more sales tax revenue. And consumers certainly would like these needless hassles eliminated.

While modest, bills like these are a sign that Texas’ attitudes towards liquor aren’t encased in amber. Times change, and the laws governing drinks should reflect that…

Read the whole piece here.

A (Small) Step Forward For Virginia Distilleries

Silverback Distillery CEO Christine Riggleman.

Silverback Distillery CEO Christine Riggleman.

Virginia distillers continue to labor under some of the worst distilling laws in America, but their outlook is set to get (at least slightly) better. Virginia has the the 3rd highest distilled spirits taxes in the country, requires all liquor sales to take place through government-run liquor stores, and restricts the amount of tastings and servings a distillery can provide to on-premise visitors to a mere 3 oz. of spirits.

Even worse, the state’s notorious “NET 30” payment scheme requires distillers who sell their own bottles in their tasting rooms to send 100% of the proceeds of the sale to the Virginia Alcoholic Beverage Control Authority (ABC). Then, only 30-45 days later, ABC sends back the distiller’s portion (which amounts to a mere 46% of the sale price after Virginia’s high mark-ups and taxes are factored in).

Unsurprisingly, this antiquated process creates tremendous cash flow problems for craft distilleries since they are not even able to touch the money they derived from bottles sales until over a month later. To add insult to injury, the state also charges distilleries handling fees even for bottles sold inside the distillery (and thus handled exclusively by the distillery’s own employees).

Despite these burdensome rules, the state legislature has been resistant to even small changes to the law. Finally, this year, a modest step forward was achieved. An effort led by Silverback Distillery CEO and Founder Christine Riggleman resulted in Virginia lawmakers passing legislation that ends the NET 30 payment scheme and eliminates on-site handling fees (although the law doesn’t take effect until 2020). The DrinksReform.org team reached out to Riggleman, whose distillery is located in Afton, Virginia, to get her reaction to the news.

“[The legislation] allows us to have the working capital on-hand to meet demand,” Riggleman said. “With the flow of tourism and customers, you can’t predict always what the demand for the products will be, so you need the funds on-hand to be able to gear up for busier times.” Riggleman specifically cited the need to have adequate cash flow to invest in bottles and labels in preparation for periods of heightened sales, like around the holidays—something that is hard to do when the Virginia ABC holds their sale proceeds for over a month.

While Riggleman was relieved that her efforts resulted in real change, she was quick to note that more work remained to bring Virginia’s laws on distilled spirits in line with how it treats beer and wine. “This is just a band-aid; I still want full parity [with beer and wine],” Riggleman said. “We’re still hemorrhaging every month in Virginia trying keep up with customer demand as well as all the laws.”

In fact, Silverback Distillery recently opened a new production facility in Pennsylvania rather than expanding in its home state of Virginia. Riggleman noted that, in contrast to Virginia, Pennsylvania has no on-premise tasting limits and even allows distilleries to serve beer and wine.

Ultimately, Virginia will need to continue to grapple with the fact that its many Prohibition era laws are continuing to hamstring a promising growth industry. Hopefully Riggleman’s efforts will lead to more Virginia distillers joining the push for reform.

(R Street’s Jarrett Dieterle has previously profiled Christine Riggleman and her family’s experiences dealing with Virginia alcohol laws).

Bourbon Left Out of Kentucky Alcohol Delivery Bill

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Kentucky may be known for bourbon, but its lawmakers may leave the state’s flagship spirit out of their latest round of alcohol reform efforts. Last year, Kentucky made news by passing legislation that allows visitors to visit Kentucky distilleries and then have booze shipped to their homes. This year, a bill allowing consumers to purchase alcohol online and have it delivered may exclude bourbon altogether, according to WAVE 3 News:

Those at the Kentucky Distillers’ Association would probably tell you a lot of things are better with bourbon, but it’s not just barbecue sauce and bourbon balls. Now, they want to see a shot of the spirit included in Senate Bill 99.

Distillers said they feel left out of a bill that would allow wineries to ship online and electronic orders straight to your door.

KDA leadership said current language doesn't allow bourbon producers to do the same thing.

President Eric Gregory said HB 400, passed last year, does allow distillers to ship if people buy on site, but if they go home and want more bourbon he said they're out of luck.

Right now, SB 99 would allow for each person to receive up to 24 cases of wine from a seller annually. Bourbon is excluded…

Read the rest here.