So you think you want to sell your beer, wine or distilled spirit to consumers in another State? Here are some important things to know.
Expanding the geographical reach of your alcohol production makes perfect sense from a business perspective. As you might have guessed, nothing in the alcohol production business is terribly easy and the same holds true for your desire to expand. The federal government will issue a permit that effectively allows you to sell your product wherever you wish. That being said, there are federal laws that require you to abide by state law, and thus the state requirements for registration must be carefully observed or your operation could be subjected to enforcement action by both the federal and state government. There is no guarantee that you will be able to sell your product across state lines, or ship to retailers in far off states. The only thing that is certain is that the rules will vary from state to state. Nevertheless, the benefits of expanding your geographical reach are well worth the time and effort to obtain proper permission to operate in a new state.
Before getting to the regulatory issues of interest to alcohol producers, don’t forget the basics. You have very likely organized a business in your home state. Forming a business organization provides you with some general liability protections. In order to maintain those liability protections, you must make sure you registered your business with the state in which you want to expand. This notion of registering a “foreign” business entity will help to ensure that you are in a position to defend lawsuits and operate legally for qualification by the state alcohol regulatory body.
Now that you have reviewed the registration process for out of state businesses in your target expansion state just like all other businesses, you will next want to have a detailed conversation with the target state’s alcohol regulatory authority. After Prohibition ended, each state created its own version of a regulatory body that would regulate the alcohol industry in its borders, generally known as “alcohol beverage control.”
These regulatory bodies fall into two general categories: Control and License. In Control states, the actual state may act as a wholesaler and possibly even a retailer in a variety of ways. In License states, the state will issue a license to an alcohol producer to operate within state boundaries. Even within the states there are variations. For example, there is a single county in Maryland that is Control, while the remainder are License. Additionally, some states have delegated their regulation to the various counties within the state. This is true in Nevada and Hawaii, for example.
As you get closer to full licensing in your new territory, you should be looking at other requirements. A plan should be in place to report operations to the alcohol regulatory authority, if required. Excise taxes or sales taxes may need to be paid. Sometimes these are paid to the alcohol regulatory board and sometimes these are paid to the revenue collecting body of the state. Sometimes forms are readily available on the internet and sometimes they must be requested in paper form. Likewise, it should not be assumed that an electronic payment of tax is always possible. It is prudent to know all of these procedures ahead of time so that your reporting and tax payment requirements are met without penalty, fee or risk of loss of your license.
Should you have further questions about these issues, feel free to give us a call.