How to Sell Alcohol in California

The below guest post was written by Joe Wilson, an attorney with the Law Offices of Joseph C. Wilson. alcohol, liquor license, sell alcohol, ABC,

The ability to sell alcohol is critical to a variety of business, such as restaurants, bars, markets, and wineries.  Alcohol is a billion dollar industry, evidenced by the amount we as consumers drink.

In 2009 in California alone, consumers drank approximately 677,579,000 gallons of beer, 133,906,000 gallons of wine, and 50,522,000 gallons of beer.  Suffice to say, alcohol is a big business.

It’s also a business that relies on entrepreneurs to participate.  Indeed, some of the most profitable businesses in the alcohol industry were started right here in California.  For example, in 1992 an entrepreneur in San Francisco set out with a goal to make the world’s best vodka.  The result? He created Skyy Spirits LLC, maker of Skyy Vodka, and one of the largest spirits companies in the United States.

Whether you are a chef who wants to open up your own restaurant in San Francisco, a grape farmer who wants to start bottling your own wine, or a person who has the next big idea for a competitor to Trader Joe’s or Whole Foods, the ability to sell alcohol will be critical to your success.

How to Manufacture or Sell Alcohol in California

History of Alcohol Sale in the United States

As you probably know, especially if you are currently watching Boardwalk Empire on HBO, alcohol was once upon a time completely illegal to purchase, sell, or consume in the United States.

Thankfully, the 21st Amendment to the Constitution repealed Prohibition.  However, alcohol sales remain heavily regulated by both state and federal government agencies, and the ability to sell alcohol is contingent on being regulated, and possibly licensed, at both a state and federal level.

Federal Regulation of Alcohol

At the federal level, the regulatory department that one must deal with is the Alcohol and Tobacco Tax and Trade Bureau, more commonly known as the TTB.

The TTB has its authority from both Internal Revenue Code and the Federal Alcohol Administration Act.   Their main mission is to collect taxes from the sale of alcohol.

Anyone wanting to operate a business that engages in the production, importation/exportation, or the sale of alcohol must file an application for a permit, along with all necessary documents, with the TTB.  The Government does not impose a fee or charge for permits.  However, the applicant must obtain written approval from the TTB before engaging in business.

A quick review of the TTB website shows links to permits for both wine and distilled spirits, but not beer.  Do not be fooled.  Persons wishing to purchase beer at wholesale prices for resale at retail must have a basic permit, form 5100.24.

California’s ABC Regulates Alcohol Sales

Because this website focuses on California law, this blog will focus only on the regulatory authority for California.  However, California businesses engaged in the sale of alcohol to other states or other countries must check with the regulatory authorities to determine what the laws are.

A friend of mine learned this the hard way – two very nice bottles of wine he sent to someone in Massachusetts for Christmas one year were confiscated by the Massachusetts authorities, which told him that the bottles would be destroyed.  Hopefully by “destroyed,” they meant, “drank.”

If you are not planning on selling or shipping alcohol to any other states, and you are going to focus on California, the regulatory authority you must deal with is the California Department of Alcoholic Beverage Control, otherwise known as the ABC.

The ABC will issue the licenses you need to legally sell alcohol in California.  The nature of your business will dictate the type of license you need.

Restaurants and bars that want to provide their consumers with a choice of everything, from a vodka martini to a ‘97 Grgich Hills Cabernet Sauvignon would need an On-Sale General license, which authorizes the sale of all types of alcoholic beverages, for consumption on the premises.

Alternatively, a wine-bar that only wants to sell wine would need an On-Sale Beer and Wine license, which authorizes the sale of only beer (and other malt beverages) and wine for consumption on the premises.

Different licenses are required if the purpose of the business is to sell alcohol for consumption off the premises, import/export alcohol, or if there is a special event, such as a charity event, where beer and alcohol will be sold.

Final Word: Get the Right Permit First

This blog was meant to be an introduction into the world of alcohol sales, and provide a brief overview of the important first step that needs to be taken if you want to legally sell alcohol – get the right permit first!  Sales of alcohol can lead to a greater number of consumers for your business, and increase the profitability of your business.

However, alcohol continues to be a highly regulated industry, one that is enforced by state and federal authorities.  Your failure to follow the rules could subject you to civil, and even criminal, liability.

Before you want to “get a taste” of this business, be sure to check the rules with the proper state or federal agencies, and consult with an attorney.

Joe Wilson is a business and litigation attorney with the Law Offices of Joseph C. Wilson, with offices in San Anselmo and San Francisco. Joe has successfully represented clients in obtaining permits to sell alcohol with the TTB and the ABC both in Marin County and in San Francisco.  Joe can be reached via email at [email protected].

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Photo Credit: Flickr/Southern Foodways Alliance