More consumers than ever are looking to avail themselves of the market for direct-to-consumer (DtC) shipped beverage alcohol. What was once more a niche market for prized domestically produced wines has gone on to pique consumer interest in accessing the broad range of alcoholic products made within the United States that are not also widely distributed.
However, most state laws prevent consumers from fully accessing that market by restricting the shipping of select product types. Currently, 47 states and the District of Columbia permit some amount of DtC shipping of alcohol, but most restrict it to shipping of wine (largely by wine producers only), though there are efforts to expand access for shipping beer and spirits. A lay consumer may struggle to identify which alcoholic beverages they can actually have shipped to their doorsteps.
Unless you have spent years steeping in alcohol regulatory law, you may not realize that there even are laws on DtC shipping of alcohol. But even then, understanding what specific products may be DtC shipped can require some complex statutory analysis.
To help we provide some advice on how to read a DtC law and understand what products it applies to.
Can I ship it?
The first, and most important, rule about DtC shipping of alcohol is that it may only be done by approved entities and persons. Most states that do permit DtC shipping of alcohol require the shipper (meaning the party who is responsible for the sale and ensuring the package is sent through a carrier) to be licensed. This party will also be responsible for managing the compliance burden related to their shipments, from preventing sales to minors to remitting all due taxes.
But before applying for a DtC license, a prospective shipper should ensure that their products can legally be shipped into the state, which requires parsing the state’s laws.
This generally means starting with the state’s DtC statutes and simply reading what it says. This can be a high hurdle in itself as it’s not always intuitive to find those statutes. In some states, the beverage alcohol laws are their own chapter; in others, they are hidden within a chapter for taxation or public health. Even then, the specific provisions for DtC shipping are not always clearly identified by the name or heading of a statute.
But once you have found the statute, it should identify in the first few paragraphs which products it allows to be shipped. Some states (like New Hampshire) make it rather obvious by permitting the shipping of all alcoholic beverages—simply by using a catchall term like that, they open their market up completely. There may be further specific rules for different products (such as different tax rates), but a producer can be assured that their products may be shipped DtC in the state.
Most states, though, limit their DtC permissions to only wine. On its face, it may be clear from that language that certain products could not be shipped—if only wine may be shipped, then stouts and vodkas would be excluded. But it is not always so obvious. How should a cidery or saké brewer react to that language? Or what if a product is made from a combination of wine and spirits? To fully grok these scenarios, it’s necessary to go beyond the DtC statutes and seek out the specific definitions states apply to the different product types.
Yes, you can!
For most states (and the federal government), all alcohol is divided into three parts: malt beverages, vinous beverages and distilled spirits beverages. Malt beverages are those that are produced from fermented grains and cereals; vinous beverages are produced from fermented fruits, vegetables and other agricultural products; and distilled beverages are the product of, naturally, distillation.
However, these are not hard and fast rules. New York, for one, sets out cider under 8.5% ABV and mead as distinct product types. Several states classify ciders under a certain ABV as a type of “malt beverage,” and most states include sakés with wines, largely because of their alcoholic content and how they are sold.
These distinctions matter as different rules apply to different product types. Beer products are universally taxed at a lower rate than spirits, but franchise rules are also more common when distributing beer than spirits. The same consideration applies to DtC shipping rules.
If you are a cidery, you stand a good chance that your products will be considered a wine, and therefore are, literally by definition, included in that state’s DtC laws. But that would not work in a state like New York, so you need to be careful about how the state defines and regulates your products specifically, and not just assume that your products are good to ship.
The rise of the ready-to-drink (RTD) cocktails market also provides opportunity for confusion, since they can derive their alcoholic content from almost any source. A “margarita” could include tequila proper, or it could be made with fermented neutral grains (so a “beer”), or, perhaps, even with fermented limes (so a “wine”), each regulated differently. Depending on how a state defines a given RTD, whether or not it could be shipped DtC varies widely.
Through all of this, it is critical to recognize the specific way each individual state defines and regulates the different alcoholic products sold within its borders. What works in one state is never guaranteed to work in a different state.
As more products that straddle the divides between different product categories enter the market, these distinctions are becoming more important to recognize. Some may question whether the definitions and product categories as applied today will necessarily work in the future—would perhaps a system based on the alcoholic content of a product rather than what it’s made out of make more sense? But these definitions and regulations do still matter today, and shippers and consumers alike should make sure to apply them properly to avoid any improper shipments, along with the scrutiny, fines and other consequences those improper shipments can entail.
Download our free ebook to learn more about the ins and outs of DtC shipping and how Sovos ShipCompliant can help.