New Rules for RTDs in Vermont – Including DtC Shipping

Alex Koral
June 30, 2022

On July 1, 2022, Vermont Act 177 takes effect, creating new ways to sell Ready-to-Drink (RTD) spirits in the state, including permission for distillers to ship these products direct-to-consumer (DtC).

As defined in the act, “RTD Spirits Beverages” are alcoholic beverages obtained from distillation that contain no more than 12% ABV and are packaged in containers no greater than 24 fluid ounces. Additional water and flavoring from fruit juices, sugars and other ingredients are permitted. More generally, the category of RTD spirits is a developing area for the beverage alcohol industry, full of enticing products marketed as margaritas or Moscow mules in a can.

Act 177 also creates a new definition of cider products, as a type of vinous beverage made solely from fermented apples or pears and containing no more than 16% ABV. Further, the law establishes two different tax rates for ciders: those with an ABV less than 7% will be taxed at the beer rate of 26.5-cents per gallon, and those with an ABV of 7% or greater will continue to be taxed at the wine rate of 55-cents per gallon. The new, reduced tax rate for lower-ABV ciders does not become effective until July 1, 2023.

As a control state, the Vermont Department of Liquor Control (DLC) has historically played a direct role in the distribution and sale of spirits in the state. However, with Act 177, the state has recognized that RTD spirits do not readily resemble traditional spirits products, and so has established a more liberal system for how these specific products can be sold in the state.

Under Act 177, RTD Spirits Beverages:

  • Will now be sold in the private sector, like beer and wine products under 16% ABV.
    • Out-of-state distillers looking to sell their RTDs in Vermont will need to get a new Certificate of Approval (COA) to Distribute RTD Spirits Beverages. This license costs $985 and must be renewed annually by April 30.
    • COA holders will have to contract with licensed Vermont wholesalers to distribute these products within the state.
    • Like other spiritous products, they will be subject to Vermont’s Bottle Bill.
  • Will be subject to a reduced tax rate of $1.10 per gallon, which is to be paid either by in-state manufacturers or the wholesaler distributing products made out-of-state. Higher-ABV spirits will remain subject to the $19.80 per gallon tax rate.

Additionally, Act 177 extends Vermont’s existing DtC shipping laws to RTD Spirits Beverages. Under these rules in-state and out-of-state distillers with a Basic Permit can apply for a Direct Ship license to ship their products directly to Vermont consumers. Current Direct Ship licensees will also be able to ship their RTD Spirits Beverages under their existing license. This license costs $330 and must be renewed annually by April 30.

Licensed Direct Shippers in Vermont:

  • May ship no more than 12 cases (or 29 gallons) of RTD Spirits Beverages per individual per year.
  • Must make deliveries only through a common carrier that will check IDs at the time of delivery and collect a signature from the recipient.
  • Must retain five years of data for their shipments.
  • Must conspicuously label all packages that contain alcohol.
  • Must file a report to the DLC in January and July of each year, providing detailed accounts of their shipping activity in the state.
  • Must collect and remit to the Vermont Tax Commission all excise and sales taxes for their shipments, which shall be levied as if the sale occurred in Vermont.
    • Vermont’s sales tax rate is 6%, with no local rates.

RTD Spirits Beverages may not be self-distributed to Vermont retailers, even with a Direct Ship license; that privilege will remain only available for wine products.

What do Vermont’s new rules mean for RTDs in general?

In all, the steps taken by Vermont in Act 177 are a positive sign of states recognizing spirits-based RTDs as a new product type, one that does not fit easily into existing categories. Even though they often contain distilled alcohol, they have a lower ABV per serving and are often intended to be consumed more like a beer or wine cooler. As such, the existing stringent rules that most states impose on spirits products, as compared to rules on wine and beer, do not always make sense for spirits-based RTDs.

By reducing the tax burden, and by creating equal processes for distributing and selling RTD spirits within the state, Vermont has done a service to the industry and its residents who want greater access to these products.

Take Action

Check out our free ebook to learn more about the DtC alcohol shipping essentials.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.


Alex Koral

Alex Koral is Senior Regulatory Counsel for Sovos ShipCompliant in the company’s Boulder, Colorado office. He actively researches beverage alcohol regulations and market developments to inform development of Sovos’ ShipCompliant product and help educate the industry on compliance issues. Alex has been in the beverage alcohol arena since 2015, after receiving his J.D. from the University of Colorado Law School.
Share This Post

North America ShipCompliant
March 27, 2023
Working Toward a Larger Kentucky DtC Spirits Channel – And Beyond

Kentucky just entered its third year of DtC alcohol shipping, opening doors for wineries, breweries and distilleries to expand their product reach. The change was especially welcomed by the Kentucky Distillers’ Association (KDA), which helped craft and guide the landmark DtC bill in 2020 that established these permissions. Founded in 1880, the KDA is the […]

Latin America Tax Compliance VAT & Fiscal Reporting
March 22, 2023
Argentina: New Perception VAT Regime on Sale of Food and Products for Human Consumption

Argentina has recently expanded its perception VAT (Value Added Tax) collection regime to ensure efficient tax administration. It has included selling food and other products for human consumption, beverages, personal hygiene, and cleaning items under its scope. The Argentinian Federal Administration of Public Revenue (AFIP) established this through Resolution No. 5329/2023 in early February 2023. […]

North America Tax Information Reporting
March 22, 2023
What is the Combined Federal State Filing (CF/SF) Program?

The IRS created the Combined Federal State Filing (CF/SF) program more than 20 years ago to help alleviate the administrative burdens on small businesses reporting 1099 information to states. This program integrates federal and state filings. The IRS uses information filed in federal filings and then forwards relevant information to states on a business’ behalf. […]

Italy VAT & Fiscal Reporting
March 21, 2023
Pre-filled Italian Annual VAT return – an innovative change

On 10 February 2023, the Italian Tax Authority introduced the possibility for 2.4 million professionals and companies to view and download the pre-filled Annual VAT declaration related to transactions carried out in 2022. This return must be submitted by 2 May 2023. Who does this impact? The service is available for taxpayers defined by the […]

North America Unclaimed Property
March 16, 2023
California Begins Voluntary Compliance Program Rollout

The California Voluntary Compliance Program (VCP) is now available, according to an announcement from the California State Controller. For the first time, we are hearing from the State Controller’s Office (SCO) regarding the VCP authorized by the California legislature in September 2022. The announcement on the SCO’s website provides guidance concerning the upcoming program and […]