Alaska Passes New DtC Alcohol Shipping Laws

On June 16, Alaska Governor Mike Dunleavy signed SB 9, an omnibus beverage alcohol bill that includes new provisions to regulate direct-to-consumer (DtC) shipping of alcohol in the state. As set out in SB 9, the new DtC shipping laws are set to take effect on January 1, 2024.

While Alaska currently does allow for DtC shipping of alcohol, SB 9 provides welcome clarity and stability to the DtC market in the state. Currently, DtC shipping in Alaska operates under a single-page letter from the Alcohol and Marijuana Control Office (AMCO) indicating that the state does not regulate the personal importation of alcohol by its residents. This effectively has kept the state open to DtC shipping of alcohol by all legitimate sellers, as long as shipments are not made into communities that prohibit the sale of alcohol.

Such loose regulations may seem appealing, but relying on an informal ruling by state regulators left the market vulnerable if future regulators were to decide that they could find justification in Alaska statutes to restrict DtC shipping. Anchoring DtC shipping permissions clearly in the state code allows the industry to grow there without fear of abrupt change in the state’s disposition.

However, SB 9 does contract the current DtC shipping market in Alaska by setting out specific parameters for who can ship to the state and how. Specifically, once the DtC shipping provisions in SB 9 take effect, DtC shippers operating in Alaska will have to comply with the following rules:

• Must apply for and hold a Manufacturer Direct Shipment License, issued by the Alaska AMCO.
  • This license will cost $200 and will be effective for two years.
  • This license is only available to licensed manufacturers that hold production licenses issued by the TTB (Tax and Trade Bureau) and their home state, and to holders of retail licenses issued by the Alaska AMCO.
  • This license will only be eligible for breweries that produce less than 300,000 barrels of beer per year, or distilleries that produce less than 50,000 proof gallons of distilled spirits per year. There are no production caps for wine producers.
• Pay Alaska state excise tax on all shipments to the state.
• May not ship to any individual purchaser:
  • More than 1.5 liters of distilled spirits per transaction, or more than 4.5 liters of distilled spirits total in a calendar year;
  • More than 18 liters of wine per transaction, or more than 108 liters of wine total in a calendar year;
  • More than 288 ounces of brewed beverages per transaction, or more than 13.5 gallons of brewed beverages total in a calendar year.
• May not use a common carrier that is not approved by the AMCO.
• May not ship to any address in a zip code identified by the AMCO as having adopted a local option rule prohibiting the sale of alcohol.
• Must, at the time of purchase, verify that the purchaser and recipient (if different) of the order are at least 21 years old.
• Must provide written or electronic information on the dangers of fetal alcohol syndrome at the time of purchase.
• Must properly label all packages as containing beverage alcohol and require an adult signature upon delivery.
• Must retain records for two years on all shipments and make those records available to the Alaska AMCO upon request.

Notably, Alaska does not maintain a state-level sales tax. However, the state does permit individual communities to assess their own sales tax and has adopted economic nexus rules, extending liability for those local sales taxes to remote sellers. As such, any DtC alcohol shipper that does meet the state’s threshold for economic nexus ($100,000 in annual gross sales in the state or 200 individual transactions per year), will be required to register with the state’s Remote Seller’s Sales Tax Commission and remit those local taxes.

What this means for Alaska DtC alcohol shipping

Perhaps the biggest change to current DtC shipping in Alaska is that out-of-state retailers will no longer be permitted to ship into the state. Under SB 9, only beverage alcohol manufacturers, or retailers licensed by the Alaska Alcohol and Marijuana Control Office, will be eligible for the Direct Shipment License. While Alaska may not have been the biggest state for DtC shipping by out-of-state retailers, this is a blow to the retailer industry, which has been trying to expand their reach in the DtC market.

It is also interesting to see Alaska adopt production caps for breweries and distilleries that want to ship DtC into the state. That shipping of beer and spirits was retained in SB 9 should be seen as something of a win for those industries, which have not been having much success passing DtC shipping permissions in other states so far this year, but it is disappointing to see states continue to restrict their residents’ access to the full national beverage alcohol market. Historically, the DtC shipping channel is not made up of major, widely available brands, but is instead a place for rare, highly-allocated, or more boutique brands, which can still be made by larger producers.

In all, SB 9 will establish several new compliance requirements for DtC shippers, while also imposing new restrictions on from whom Alaska residents can receive DtC shipments. In exchange, though, the DtC market will benefit from the stability of having clear rules fixed in the state’s statutes.