09 Nov Florida bills to eliminate restrictions on the number of bottles a craft distillery can sell face to face
In October of 2015, the Florida House and Senate each introduced bills to eliminate restrictions on the number of bottles a craft distillery can sell face-to-face to a customer. If passed, the new law would be effective July 1, 2016. Here’s a draft of the house bill, which appears substantially identical to the senate bill:
This article will summarize the historical background in order to provide context on the relevancy of this exciting development.
- The manufacture, distribution, and sale of alcohol in the United States was illegal during the prohibition years of 1920 to 1933. Prohibition was repealed by the 21st Amendment to the constitution.
- Following the repeal of prohibition in 1933, the individual states (and not the federal government) were granted the power to regulate the manufacture, distribution, and sale of alcohol.
- States that chose to legalize alcohol (Mississippi was the last to do so, in 1966) adopted what is referred to as the “three-tier system”.
- The three-tier system requires that manufacturers of alcohol (breweries, wineries, distilleries) sell only to distributors or wholesalers. In turn, distributors or wholesalers may only sell to vendors (such as bars, liquor stores, grocery stores, etc.). Finally, vendors are only allowed to sell to consumers.
- Thus, the three tiers are (1) the manufacturer, (2) the distributor, and (3) the retailer.
- The three-tier system was implemented for several reasons (including, for example, efficient tax collection). A primary reason for the system was to prevent manufacturers from becoming too powerful in the marketplace.
- There was a fear that manufacturers would have the ability to monopolize the sale of alcoholic beverages in their region. This would have the potential for manufacturers to impose undue influence over alcoholic vendors (so-called “tied house” evil in Florida).
- For example, if a local bar relied on a single manufacturer to provide its beverages, the manufacturer could put a bar out of business by refusing to sell product to it. Therefore, the manufacturer would have all the negotiating power with respect to pricing, signage, etc.
In the case of sales of distilled spirits, the three-tier system was the law in Florida for 80 years following the repeal of prohibition. But starting in 2013, major changes have taken place, which demonstrate how the state of Florida is moving away from strict adherence to the three-tier system.
- Effective July 1, 2013, Florida “craft distilleries” (distilleries which produce 75,000 gallons or less of alcohol per year) were, for the first time, permitted to sell directly to customers for their own personal use. The ability to sell was limited though, to two bottles per person, per year.
- Effective July 1, 2015, the restriction on sale was expanded. Under current law, Florida craft distilleries are permitted to sell up to four bottles of a single branded product to a customer per year. Alternatively, a craft distillery may sell two bottles of each branded product to a customer per year. For example, if a craft distillery produces a gin, rum, and whiskey, it can sell up to six bottles to a customer (two bottles of each), per year.
The merits of the three-tier system today are debatable. Indeed, there are valid arguments in support of and against the system.
- An argument for the three-tier system can be found here: https://fbwa.com/licensing-regulation/three-tier-system/
- An argument against the three-tier system can be found here: https://fermentationwineblog.com/2014/03/coming-repeal-three-tier-system-wine-beer-spirits/
The policy of the three-tier system today may be debatable. What’s clear is that the system, for better or worse, benefits the distributors, and any law that deviates from the three tier system benefits the manufacturers.
While a writing that analyzes the pros and cons of the three-tier system is for another day, Big Cypress Distillery is excited about the fast-changing Florida craft distillery laws that will allow us to more easily share our passion with family, friends, and all customers who appreciate Florida craft in distilled spirit form!