Oral arguments were held yesterday in the important Supreme Court case challenging Tennessee’s durational residency requirement for liquor licenses (for more on how the oral arguments went see here). The case involves the intersection of the U.S. Constitution’s 21st Amendment and the Dormant Commerce Clause, and R Street’s Jarrett Dieterle filmed the following short explainer video about the case for the Federalist Society:
On Wednesday, the Supreme Court heard oral arguments in the important alcohol case challenging Tennessee’s durational residency requirement (previously discussed on DrinksReform.org here). The Tennessee law at issue requires liquor retailers in the state to have had an in-state presence for 2 years before they will be granted a license (and an in-state presence of 10-years in order to be able to renew the license each year). According to the Washington Post, several of the Justices expressed skepticism toward the Tennessee law:
Supreme Court justices indicated Wednesday that they thought Tennessee’s tough residency requirements for those who want to run liquor stores have more to do with protecting in-state economic interests than guarding against the evils of alcohol.
But they also wondered how far they could go, since the Constitution gives states an especially pivotal role in regulating booze…
Several justices, most vocally Sonia Sotomayor and Samuel A. Alito Jr., were skeptical.
Under questioning, [Tennessee Wine attorney] Dvoretzky said neither a 10-year residency requirement nor a hypothetical requirement that an applicant’s grandparents be residents would be a violation of the dormant-commerce clause, nor even a statute that said the restriction was for the “exclusive purpose of protecting in-state retailers.”
Justice Brett M. Kavanaugh said the text of the constitutional amendment gives the states power over the “transportation or importation” of liquor into their states. “Why isn’t that most naturally read to allow states to remain dry . . . but not to otherwise impose discriminatory or, as Justice Alito says, protectionist regulations?” [More here].
As the popular SCOTUSBlog noted, however, it’s still unclear how the case will ultimately come out since several of the Justices were silent and Justice Ruth Bader Ginsburg was absent from the hearing. A final decision from the Court is expected by the summer.
For more on the case and what it entails, check out this explainer video R Street’s Jarrett Dieterle filmed with the Federalist Society.
As previously highlighted, the Supreme Court is considering a challenge to Tennessee’s residency requirement, which mandates that state liquor retailers must be residents of the state for 2-9 years before opening a store. As Liza Zimmerman recounts for Forbes, the case could have profound implications on interstate wine shipments:
For the first time in more than a decade, the U.S. government has shown a willingness to reevaluate how wine and spirits are sold, both within and between various states in the country.
In fact, the case of Tennessee Wine and Spirits Retailers Association v. Clayton Byrd (Tenn. v. Byrd) represents only the second such move by the high court since the repeal of Prohibition in 1933.
When Prohibition was repealed, the U.S. government decided that the safest way to regulate alcohol sales was by giving each state the right to decide how wine and spirits were sold within its borders. That resulted in a fractured legal arrangement in which almost every state handled the sale and shipment of drinks differently…
The biggest issue about the case is how the court may reevaluate the legal intricacies of interstate shipping. Retailers, with brick-and-mortar locations in distant states, had long been allowed to ship into other states. This was a right that most store owners thought had been set in stone by the 2005 Supreme Court case of Granholm v Heald.
However, as retailers in certain states and wholesalers began to worry losing a share of their revenue to out-of-state players, they put more pressure on shipping services such as UPS and FedEx to follow the letter of the law to the finest degree. As of a year ago, the bulk of major interstate shippers have been shipping into only 14 states and the District of Columbia….
Read the whole article here.
Tennessee law requires owners of retail liquor licenses to have resided in the state for multiple years before being able to obtain a license. A court case challenging this residency requirement has been working its way through the court system for several years, and last week the U.S. Supreme Court agreed to hear the case. Shanken Daily News reports:
The Supreme Court of the United States has agreed to take on the case involving Total Wine & More’s entry into the Tennessee market, which the Tennessee Wine and Spirits Retailers Association (TWSRA) is fighting on the grounds that Total hasn’t fulfilled the state’s residency requirements. Total Wine asserts that Tennessee’s residency requirement is discriminatory against out-of-state residents and therefore in violation of the Constitution’s Dormant Commerce Clause.
Under Tennessee law, corporations and other business entities may not obtain a retail liquor license unless every director, officer, and shareholder of the business has been a Tennessee resident for at least nine years. Total Wine challenged the law successfully on Commerce Clause grounds in both federal district and appeals courts, and noted in its brief to the Supreme Court that Tennessee’s own attorney general “twice opined that this residency statute violated the Dormant Commerce Clause and could not be enforced.” In the meantime, Total was granted a license by the Tennessee Alcoholic Beverage Commission and opened its first store in Knoxville earlier this summer...
Read the rest here.
Regulators in Tennessee are ramping up enforcement efforts against online booze sales on websites like Craigslist, according to The Tomahawk:
Law Enforcement Agents from The Alcoholic Beverage Commission conduct statewide sting operations targeting the online sale of liquor. No two states are alike when it comes to liquor laws, and most are changing from year to year. Anyone intending to sell alcohol through a home delivery service, whether by mail order or online, must hold a valid liquor license.
Seventeen suspects were charged with illegal sales of alcoholic beverages resulting from statewide sting operations targeting online ads on Craigslist and other social media outlets. Agents seized sixty-nine bottles of alcohol that were sold to them during the undercover operations which took place on street corners, parking lots, and places of business...
As booze expert Chuck Cowdery has explained, such crackdowns are the result of the absence--and illegality--of a secondary alcohol market in the United States:
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.
R Street's Kevin Kosar has also previously called for legalizing the secondary booze market.
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 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.
UPDATE: Tennessee's legislature appears to be close to passing a bill that will exempt state distilleries from the property tax on whiskey barrels.
UPDATE 2: Legislation exempting distilleries from the tax was officially signed by the governor.
Tennessee has a unique rule requiring would-be liquor store owners to live in the state for at least two years before being able to obtain a liquor license. According to Waller Blogs, a federal appellate court recently confirmed a previous decision striking the law down:
"The verdict is in. The two-year residency requirement for Tennessee liquor stores is officially dead. Again.
This week, the U.S. Court of Appeals for the Sixth Circuit upheld a lower court finding that Tennessee residency requirements violate the Commerce Clause of the U.S. Constitution. The court struck down portions of state law that require a liquor store owner to live in Tennessee for at least two years prior to applying and to be a resident for 10 years to renew a liquor store license.
This quote pretty much sums up the court’s finding: 'The Twenty-first Amendment gives a state the power to oversee the alcoholic-beverages business, but it does not give a state the power to dictate where individuals live.'..."
Read the rest here.
Tennessee has a unique version of a Sunday blue law: Beer is available for purchase on Sundays, but not wine and distilled spirits. Last year, several Tennessee lawmakers introduced a bill to change this, but it ultimately never passed. According to The Tennessean, they plan to try again in the current legislative session:
"Tennessee lawmakers are renewing a push to allow wine and liquor sales on Sunday, a move that could spur opposition from the state's liquor retailers.
The bill, sponsored by Rep. Gerald McCormick of Chattanooga, would align hours of liquor and wine sales with beer sales. Under current law, both grocery stores and liquor stores are not allowed to sell wine and liquor on major holidays and between 11 p.m. on Saturday and 8 a.m. on Monday.
The legislation, similar to a bill filed in 2017, comes less than two years after grocery stores were permitted to sell wine. Consumers celebrated the measure, but wine and liquor store owners fought against it, fearing revenue declines.
McCormick, a Republican, said the legislative efforts stem from consumer demand, as constituents are complaining about the inability to buy wine on Sundays.
'That’s what’s driving it,' McCormick said, expressing optimism his new bill will not see similar infighting as previous alcohol bills..."
Read the rest of the article here.
A year ago Tennessee changed its law to allow grocery stores in the state to sell wine. Madisen Keavy at WATE.com checks in on the results:
"Nearly one year after the state of Tennessee began allowing grocery stores to sell wine, liquor stores say they’ve seen a drop in wine sales while grocery chains say it’s helped customers. Meanwhile, a major convenience store chain has decided not to sell wine at all.
Stores applied to sell wine through the Tennessee Alcoholic Beverage Commission before sales began on July 1, 2016. Sales at stores like Kroger have gone up thanks to the addition of wine.
'The convenience factor of just being able to stop in and just pick up a bottle of wine with dinner was just a fantastic win for our customers,' said Farragut Kroger manager Lyn Cox..."