The alcoholic beverage industry is composed of three tiers: Manufacturers, Importers and other Suppliers (Tier 1), Wholesalers or Distributors (Tier 2), and On and Off-premises Retailers (Tier 3). At the first two tiers, permits and licenses are required on both a federal and state basis to be authorized to manufacture, import or distribute alcoholic beverages. With respect to the retail tier, although there are no federal permits required, there is a need for state and, in many jurisdictions, local licenses.
Manufacturing (plant facility required to engage in brewing, vinting, distilling, etc.): Both federal and state permits and licenses will be required. Application requirements include furnishing details about the applicant entity and its principals as well as about the physical premises and how it will be operated. Further, there will be a requirement to post surety bonds in order to protect governmental tax revenues on the manufacture of product and to safeguard against violations of law.
Supplier/Importer: For importers and other suppliers (e.g., brand owners) who are US-based entities, federal permits will be required and, depending on the product and/or jurisdiction, so will a corresponding state license. In certain jurisdictions, an importer (typically considered a Tier 1 entity) may not qualify as a wholesaler (Tier 2). However, in some jurisdictions, an importer may choose to be a manufacturer but then it may not be a wholesaler, and vice-versa. As noted above, surety bonds will be required to protect both revenue and against violations.
Wholesaler: Federal and state permitting and licensing is generally required in every jurisdiction at the wholesale tier. Further, there may be a penal or surety (excise) bond requirement. Many states require that alcoholic beverages first “come to rest” at a licensed warehouse, either owned or controlled by the wholesaler in the state, prior to sale and delivery to local retailers. Note, in a “control” state or county, the state or local government is the responsible party for distributing certain alcoholic beverage products.
Retailer (On-Premise & Off-Premise Sales): State licensing, together with local township or community board approval, are generally among the prerequisites to operate as a retail licensee. Retail licensing may be restricted based on population census, or based on ownership limitations, or by other statutory or regulatory restrictions. Temporary permits may be available for new licensees or in a particular transaction, depending on location, deal structure and other factors.
With respect to all of the above licenses, a physical business premises is required; typically, this must be a commercial office space, retail space or warehouse, and not a residence. As part of the application process, agencies will conduct a personal history review of the key principals (Officers, Directors, LLC Managers, Principal Owners, etc.), often including fingerprinting, as well as a financial background review and source of funds investigation. Generally, applicants must be aware of ownership restrictions among the tiers and, on a personal level, if the agency investigation reveals a criminal history. Additionally, there are excise tax and FDA food facility registrations, bonding and other requirements that may apply.
Buchman Law Firm, LLP is experienced in reviewing applicant eligibility and obtaining licenses at all three tiers nationwide, including in cases of complex ownership structure and disclosure requirements, multi-state transactions and updating existing information on file. We represent small, start-up operations to large private or publicly-traded companies well-established in the industry.
For more information about the 3-tier system, please visit our Alcoholic Beverage Control Laws & Regulations [n1] page.