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How We Got Here

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Governor Hochul and the New York Legislature empaneled the NYSLA Commission to Study the Reform of the Alcoholic Beverage Control Law.  This is in part because every year, people complain that the laws governing the sale of alcoholic beverages seem to defy logic and common sense.   What laws have outlived their usefulness, and which should endure is a matter of personal opinion. However, it is worth remembering why these laws were enacted and how they changed life in New York State.

THE THREE-TIER SYSTEM

A review of the factors that lead to Prohibition resulted in a finding suppliers had too much power over retailers. By their nature wineries, distilleries and breweries have a fixed location, which is usually remote from population centers, while bars, restaurants and the like are almost always located in the center of business and residential areas. Before Prohibition, it was common for distilleries and breweries to provide saloons with loans on the condition that the saloon carry its products and sold a stated specified amounts each week. If the saloon failed to meet its quota, the distillery or brewery could call in the loan and put the saloon out of business.  This led to massive over consumption, as well as price wars. In response both federal and New York state laws were based upon a three-tier system. Tier One consists of suppliers and importers, who make the products or import them into the Country.  Tier One is responsible to make certain that all excise taxes are paid as soon as the alcoholic beverages are placed in the stream of commerce. The second tier is made up of wholesalers or distributors. Wholesalers are pay New York State excise taxes based upon the goods that are delivered to the retailers.  Because suppliers and importers are usually in a more remote location, wholesalers consolidate alcoholic beverages from various suppliers, store them in an accessible location and see that they get to the retailers so that an orderly market is maintained.  The Third Tier is the retailers. They are restaurants, bars, package stores, bodegas and grocery stores. Because they sell directly to consumers, they are the most responsive to public pressure. This is the Tier that is responsible to make certain underage people do not obtain or consume alcoholic beverages.  They are also responsible to make certain that people are not served to the point of excess, which in turn makes them responsible to prevent drunk driving and similar evils. Also, the retail tier collects and remits sales taxes.

To prevent over consumption and other evils that gave rise to Prohibition, retailer’s must be completely independent from the supplier and the wholesaler. For this reason, with very limited exceptions, both federal and state law make it illegal for any supplier or wholesaler to give or lend to any retailer anything of value in order to persuade the retailer to purchase its products to the full or partial exclusion of any other products.

SEPARATION OF ON AND OFF PREMISE LICENSES

When Prohibition was repealed, it was believed that men would be less likely to overconsume or become rowdy, if they drank at home, under the watchful eye of their wives. To discourage drinking in saloons and bars and to encourage drinking at home, New York State established a two-channel licensing system. Restaurants, bars, and taverns could only sell for on premise consumption. Liquor stores could only for off premise consumption.  Moreover, by limiting the items a liquor store could sell to wine and spirits, there could be no good reason for a person under the legal drinking age to ever enter a liquor store. Beer, which had a lower alcoholic beverage content and which had historically been considered less problematic than wine and spirits could be sold in grocery stores; where the sale of wine or spirits was forbidden.  One may argue that the sale of wine and spirits in a package store is more convenient, but that was the primary reasons it was forbidden.

THE RESULT

The current plan worked so well that people no longer remember the “evils” that gave rise to Prohibition. Drinking in bars has been severely curtailed.  Drinking at home has become much more social and drinking in general is much less anti-social. At the same time, excise taxes on alcohol, one of the state and federal governments’ principal source of income are collected with a minimum of effort or evasion. In addition, the Three tier system helps guaranty the alcoholic beverages you serve and drink are safe an unadulterated.

This article is not intended to give specific legal advice.  Before taking any action, the reader should consult with an attorney familiar with the relevant facts and circumstances.

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