Are you worried about everything legal related to the opening or the expansion of your brewery, distillery, or winery? The craft beer, craft cocktail, and local wine industries are booming. But, the complex legal regulations that govern craft alcohol is a hurdle to overcome.
The permitting, licensing, and taxation obligations would make anyone’s head spin. Every brewery, brewpub, distillery, or winery that operates in Wisconsin must comply with all local, state, and federal laws.
History of the three-tier system
After Prohibition most states, including Wisconsin, passed complex regulations related to the production and sale of alcohol. The goal was to create a system to avoid the dangers and abuses of an unregulated alcohol industry, like the system that many felt led to Prohibition in the first place.
Many called the pre-prohibition salon “a menace to society” and demanded they be banned forever. In a salon, alcohol was simply made in the backroom, bottled, and sold out front. This left little room for government regulation and taxation.
For that reason, a three-tier regulatory system was developed. Governments wanted to reap the benefits of alcohol regulation through aggressive taxation, licensing, and permitting.
The three-tier system attempts to separate the manufacture, distribution, and sale of alcohol. In a pure three-tier system, manufacturers make the alcohol, distributors deliver it, and retailers sell it to the customer. And, perhaps most importantly, all three of those actors are completely separate people or businesses.
This three-tier system poses challenges for local small-scale craft beer and craft cocktails producers who desire to both make alcoholic beverages as well as sell them directly to consumers. While separation of the three-tier system is fundamental to Wisconsin’s alcohol distribution laws, thankfully there are exceptions.
Alcohol manufacturers fall into three general categories: breweries, distilleries, and wineries. Each of these types of manufacturers triggers different licensing and permitting obligations with the state and local governments.
In the classic three-tier structure manufacturers sell alcohol products to distributors and never see the products again; the manufacturer would not sell directly to a consumer. But, what if a brewery wants to sell their own beer in a taproom? Well, there are limited statutory exceptions that allow a manufacturer, such as a brewery, to “self-distribute.”
But self-distribution is heavily regulated. Whether a brewery, distillery, or winery qualify for self-distribution rights depends. And the amount of alcohol they may self-distribute? It depends. The permit and licensing required to do so? It depends.
A distributor’s job is to pick up a finished product from a manufacturer and get it to a retailer, like a grocery store, liquor store, tavern, or restaurant. Distribution laws vary depending on whether the product is beer or liquor/wine.
Beer distributor rights are powerful and protected. Wine and liquor distributor rights are different in some respects. For example, like beer, all wine and spirits must be unloaded at a distributor’s dock but, unlike beer, wine and liquor distribution territories are not exclusive.
Some exceptions allow breweries, brewpubs, and wineries to self-distribute to retailers. Self-distribution removes the traditional distributor’s role from the three-tier system.
Breweries and brewpubs are restricted to self-distribute up to statutorily imposed barrel quantities. Wineries may self-distribute either in connection with a wine cooperative or via direct mail up to 12 cases per consumer. However, there are no exceptions that permit distilleries to self-distribute.
The production and sale of alcohol in Wisconsin is heavily regulated. The system is especially difficult for small scale local craft brewers and distillers to navigate.
Murdock Law is a resource to help you better understand the regulations, including permitting, licensing, and taxation, related to craft alcohol production, distribution, and sale.