California lawmakers ponder freeing up direct shipping of beer, spirits
Recent changes to a pending bill allowing distilleries and breweries to ship products to consumers are viewed as a temporary setback for brewers and a partial victory for some distilleries.
In January, the California Senate Committee on Government Organization heard SB 620. If passed, it would have allowed distilleries and breweries within and outside the state to ship directly to consumers. California does not currently allow for direct-to-consumer interstate shipping of beer or distilled products or for direct shipments to consumers within the state.
Beer DTC interstate shipping is currently only available to 14.8% of the over-21 U.S. population, versus 96.7% of the legal-age population for wine. Simple parity in shipping availability would grow the potential consumer market 6.5 times for beer, according to a survey by Sovos ShipCompliant.
But on May 2, the bill was amended. Any reference to shipping beer to consumers in state was taken out, according to Gail Cole, a researcher, senior writer and guest blogger for Perficient, a digital consultancy, on behalf of Avalara, a software and business tax compliance company.
Why breweries were cut from SB 620
This removal of brewers from the current SB 620 revision was not an oversight by Sacramento lawmakers but one requested by the California Craft Brewers Association. That organization is supporting new legislation (SB 1198), introduced by Sen. Mike McGuire, D-Healdsburg, and amended in the Senate on March 16 and again on April 19.
Lori Ajax, association executive director, said that this bill focuses on craft brewers.
“We asked that breweries be removed from SB 620 in late January so it could be addressed separately by the legislature to establish procedures, controls and a fair process for brewers as well as to combine provisions of SB 1198 with another brewery-related bill, SB 517, also introduced by Senator McGuire, focused on beer manufacturers direct-shipper permits,” Ajax said.
As of March, brewers may ship beer directly to consumers in 12 U.S. jurisdictions that permit it, according to rules compiled by Sovos ShipCompliant. The states are Alaska, Kentucky, Nebraska, New Hampshire, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, Vermont and Virginia, as well as the District of Columbia.
Under a provision in SB 1198 (proposed Section 23661.4 for the state Business and Professions Code), licensed brewers or companies could sell or ship beer directly to a California resident who is 21 years of age or older for the resident’s personal use and not for resale.
The primary focus of the May 2 update to SB 620 was limited to distillery DTC shipping rights that would be granted to small craft distillers but not to large spirits distilleries.
The key revision limits DTC shipping to smaller craft distillers making less than 150,000 gallons per fiscal year and would only allow them to ship from “a premise at which the permit holder is issued a license by the California Department of Alcohol Beverage Control (ABC) or by another state to manufacture or produce distilled spirits.”
The amended bill also says sales of DTC spirits cannot be higher than wholesale sales. “Any amount of distilled spirits sold and shipped directly to residents of the state (California) in excess of 100,000 liters shall not exceed the volume of distilled spirits shipped or sold to wholesalers in this state.”
Pandemic provision for direct shipping
As the COVID-19 pandemic was spreading, DTC shipping of spirits was temporarily allowed by emergency regulations. Prior to March 2020, craft distilleries were not allowed to ship vodka, gin, rum and whiskey directly to consumers, and customers had to physically visit a distillery to purchase spirits straight from the producer.
The emergency provision was set to expire on Dec. 31, 2021, but was temporarily extended by the governor and the ABC until March 31 of this year.
Many believe such California alcohol laws are antiquated.
While strong safeguards were in place during this temporary period that required shipping company drivers to check the ID of the recipient before letting recipients take packages containing alcohol, ABC sting operations in April 2020 found that over 79% of drivers delivered packages to undercover agents without checking for a valid ID, according to the California Artisanal Distillers Guild.
Those violations led to a new SB 620 requirement in the May 2 amendment that prohibits distillers from using fulfillment houses to store and ship orders for spirits. Another change in this proposed legislation only allows common carriers to use employees, not contract employees or independent contractors, to deliver alcohol.