On August 18, 2024, Governor Kathy Hochul signed into law SB 2852-A, adding spirits, ciders and meads to the list of products that are permitted to be shipped direct-to-consumer (DtC) in New York.
This makes the Empire State the ninth to permit their consumers to receive direct shipments of spirits and removes a technical barrier that blocked apple- and honey-based alcoholic beverages from enjoying existing DtC wine shipping privileges as they can in most other states.
What are the rules?
SB 2852-A mimics the rules for DtC shipping of wine, which have been in place in New York for nearly two decades. Under these rules, distilleries, cideries and meaderies that will DtC ship their products to New York consumers must:
- Receive a special license issued by the New York State Liquor Authority prior to shipping.
- Ship no more than 36 cases per person per year, with no more than 9 liters per case.
- Only ship alcoholic beverages that they produce themselves.
- Register for, collect and remit New York alcohol excise tax along with all applicable state and local sales taxes, as if the sales occurred in the state.
- New York taxes cider at $0.0379 per gallon; mead at $0.30 per gallon; and
- spirits at $0.67 per liter if 24% ABV or less and $1.70 per liter if above 24% ABV.
- New York’s state sales tax rate is 4% with local rates ranging from 0-5%.
- Conspicuously label all packages to identify that they contain alcoholic beverages and that they may not be delivered to persons under 21 years of age.
- Take affirmative steps to prevent any sales to minors, including using only approved common carriers that will check IDs and get signatures from package recipients at the time of delivery.
A not entirely open market
There are, however, two provisions in these laws that will limit the number of brands that New York consumers will have access to.
First, New York will only issue DtC permits to distilleries that produce less than 75,000 gallons per year. New York restricts shipping of spirits to only in-state craft distillers (Class A-1, B-1, C or D Distiller licensees) and a provision of SB 2852-A similarly restricts DtC shipping to only out-of-state distillers of an equivalent size. There are no production caps for cideries or meaderies.
Second, New York will impose reciprocity restrictions on out-of-state shippers, meaning that only distilleries, cideries and meaderies that operate in states that themselves grant New York producers equal DtC shipping permissions will be permitted to DtC ship to New York consumers.
The reciprocity rule is a carryover from the existing wine law, though its effect on DtC spirits shipping will be much more restrictive. This is because only eight other states permit New York distilleries to DtC ship. As such, New York consumers will only be able to receive shipments from distilleries in those eight states. In contrast, reciprocity is nearly a moot issue with wine (and cider and mead) as almost every state in the U.S. permits DtC shipping of those products—only wineries in Delaware, Mississippi and Utah are blocked from the New York market, whereas most distilleries from California to Maine will remain out of reach to New York consumers.
While reciprocity rules may make some sense in theory (why grant permissions if you can’t receive equal treatment?), they remain a controversial part of the DtC channel. Notably, New York is currently the only state with reciprocity rules, ever since Oregon removed its reciprocity restrictions for beer DtC shipping after facing a lawsuit from Washington brewers.
The main reason that New York’s reciprocity rules for wine were never challenged was that most other states quickly jumped onto the DtC wine bandwagon, limiting their negative effect. In the case of spirits, however, there might come a point when a Tennessee distillery wonders why they are ineligible to ship DtC when their neighbors in Kentucky are free to and decide it’s worth challenging New York’s law in court.
Certainly, we can hope that Tennessee, and many more states, will soon adopt DtC spirits shipping laws, mooting New York’s reciprocity restrictions and granting their consumers greater access to the national spirits market. But until that does happen, New York consumers will be limited in the distillers they can access.
DtC shipping is wildly popular among craft drinkers, with large majorities supporting efforts to make it more available (even most non-craft drinkers think the laws should be modernized). A state the size of New York represents a huge new market for craft distilleries, which is especially welcome as so many craft distilleries continue to struggle to get their products distributed through the “standard” three-tier channels. Even with the production cap and reciprocity restrictions, New York consumers themselves can greatly benefit from being able to buy and receive more products from their favorite producers across the country.