Alaska modernizes alcohol laws, creates new DTC licenses for wineries, breweries, and distilleries

Today, wineries, breweries, and distilleries can ship their products directly to consumers in Alaska without a special permit. With the enactment of Senate Bill 9, manufacturers and wholesalers of beer, wine, and spirits will be subject to new layers of compliance, including the requirement to obtain a permit to ship to consumers in the Last Frontier. 

This has been a long time in coming. Over 100 representatives from the beverage alcohol industry, local governments, and public health and safety entities worked more than 16,000 hours over a period of nine years to revamp the licensing statute and regulations for alcohol-related businesses in Alaska and bring SB 9 to the table. According to the Alaska Beverage Control Board, Governor Dunleavy signed SB 9 on June 16, 2022.

It’s a big bill that affects in-state sellers as well as manufacturer direct shippers. Policy changes include extending the operating hours of tasting rooms (but not the daily drink limits), regulating how often certain events could be held at tasting rooms, and allowing municipalities to petition the Alaska Alcoholic Beverage Control Board for more licenses (currently, licenses are capped based on population). According to Alaska Senator Peter Micciche, the bill’s sponsor, “SB 9 updates antiquated, burdensome alcohol laws” and cuts bureaucratic red tape.

This article focuses on new requirements SB 9 places on wineries, breweries, and distilleries that ship directly to consumers in Alaska.

SB 9 creates a manufacturer direct shipment license, with a biennial fee of $200. The Alcoholic Beverage Control Board (ABC) may start accepting applications and collecting fees for the new license starting September 1, 2023, but may not actually issue any direct shipping licenses until January 1, 2024, when the SB 9 takes effect. Until that time, direct shippers may continue to ship into Alaska without a license under the current rules. 

The new manufacturer direct shipment license authorizes the holder of a manufacturer license issued in another state to sell and ship their products to consumers in Alaska (for personal use only, not for resale).

Any brewery, winery, or distillery found selling products to consumers in Alaska without a manufacturer direct shipment license after January 1, 2024, could be found guilty of a Class A misdemeanor. It will also be unlawful for consumers to purchase alcohol online from a seller lacking a manufacturer direct shipment license; anyone who does could be found guilty of a class A misdemeanor.

There’s no mention in SB 9 of a new license for out-of-state retailers shipping directly to consumers in the state, but in-state package stores will be able to apply for endorsements to ship and deliver alcohol to Alaska residents and social events.

In addition to the new licensing requirement, SB 9 will impose new tax obligations on direct shippers.

Direct shippers of alcoholic beverages with no physical presence in Alaska currently have no tax filing or payment obligations in the state — the state excise tax on alcoholic beverages is paid only by in-state businesses. That will change starting January 1, 2024, when the holder of a manufacturer direct shipment license will be subject to the Alaska alcoholic beverage tax. Rates vary depending on the type of alcohol.

Licensees will have to send monthly statements and payments to the Alaska Department of Revenue, on or before the last day of each calendar month, with the following information:

• The total number of gallons sold or consigned
• The name and Alaska address of each buyer and consignee
• The gallonage of each kind of beverage sold or consigned to the respective buyers or consignees

In fiscal year 2021, the Tax Division collected roughly $5.9 million in taxes on wine alone. Extending the state excise tax on alcoholic beverages to direct shipments of beer, wine, and spirits by out-of-state sellers would increase collections, though at this point, it’s unclear by how much.

Economic nexus and local tax obligations

Many if not all local governments in Alaska where alcohol sales are permitted levy an alcohol retail sales tax, but the measure doesn’t address local tax obligations. Alaska is a home rule state, so local governments administer local taxes independently from the state. How they’ll react to SB 9 remains to be seen.

Numerous municipalities and boroughs in Alaska already require certain out-of-state sellers to collect and remit local sales taxes on their sales into those jurisdictions. This local sales tax obligation applies to out-of-state businesses whose sales into the state have met the statewide threshold of $100,000 in gross sales or 200 individual transactions during the current or previous calendar year. Such businesses establish economic nexus with Alaska and must register with the Alaska Remote Seller Sales Tax Commission.

In addition to licensing and tax requirements, the measure requires direct shippers of beverage alcohol to:

• Avoid shipping into dry areas
• Verify the age of consumers
• Warn consumers
• Maintain records 
• Use approved common carriers
• Respect volume limits

Keep dry areas dry

Direct shipper licensees may not ship alcoholic beverages to zip codes located in areas where the sale of alcohol is prohibited (aka, dry areas). More than 75 communities have “banned the importation or possession of alcoholic beverages.” There are also “damp” communities in Alaska, which limit the alcoholic beverages that can be brought into the community. 

The Alaska Alcohol and Marijuana Control Office can provide additional information about dry and damp communities.

Verify the age of consumers

Before shipping an order, direct shipping licensees must verify that the person submitting the order is at least 21 years of age, “using an age verification service or otherwise.” If not the purchaser, the recipient must also be 21 or older. The deliverer is required to obtain the signature of a person who is at least 21 years old upon delivery.

Additionally, the shipper must label packages as containing alcohol.

Warn consumers

To help prevent some of the health risks associated with the consumption of alcohol, direct shipper licensees will have to “provide written or electronic information to the person submitting the order on fetal alcohol syndrome and fetal alcohol effects resulting from a woman's consumption of alcohol during pregnancy.”

Maintain records

SB 9 requires manufacturing direct shipment licensees to keep a record of sales made in Alaska for at least two years. These records must be made available for inspection and audit upon request by the Alaska Department of Revenue.

Use approved common carriers

Direct shipper licensees are prohibited from using a common carrier not approved by the ABC to ship alcoholic beverages to persons in the state under   AS 04.09.750(b)

Respect volume limits

Direct shipper licensees must abide by different volume limits: per transaction and per purchaser. They cannot sell more than the following:

• 1.5 liters of distilled spirits to a purchaser in one transaction, or 4.5 liters of distilled spirits to a purchaser in a calendar year
• 18 liters of wine to a purchaser in one transaction and 108 liters of wine to a purchaser in a calendar year
• 288 ounces of brewed beverages to a purchaser in one transaction, or 13.5 gallons of brewed beverages to a purchaser in a calendar year

Not all manufacturers will be eligible for Alaska’s new direct shipment license. Per SB 9, the ABC will not issue a license to any manufacturer that annually produces:

• More than 300,000 barrels in total of brewed beverages 
• More than 50,000 proof gallons in total of distilled spirits

There’s no capacity cap for wine.

Alaska is not the first state to introduce legislation with capacity caps for spirits manufacturers. A new California legislation (Senate Bill 620) would extend direct shipping privileges to distilleries that produce no more than 150,000 gallons of distilled spirits per fiscal year. Distillers whose production exceeds the 150,000-gallon cap would be prohibited from shipping directly to consumers in California. 

Alaska’s production cap is even smaller than California’s proposed level, meaning only the smallest producers will be authorized to ship into the Last Frontier.

The measure also requires the ABC to create and maintain a statewide database cataloging the alcohol purchased by, and shipped to, persons residing in the state, including areas where the sale of alcoholic beverages has been restricted. The ABC will report the total volume of alcohol received in each municipality or established village each year.

For privacy purposes, all personally identifiable information will be “purged” after a year, unless needed for criminal investigation or prosecution. All other information must be kept for 10 years after entry, at which point it too is to be “purged.” That said, the information is confidential and can only be shared with certain individuals (e.g., a law enforcement officer) or entities (e.g., the board).

This could be costly. A fiscal analysis of the bill notes that “the aged alcohol licensing database needs to be replaced with licensing workflow/database software to comply with data collection, research, new endorsements, and reporting requirements.”

SB 9 also creates a shipping endorsement for in-state package store licensees. A package store shipping endorsement authorizes the holder of a package store license to make direct shipments of alcoholic beverages to Alaska residents. 

The fee for the package store endorsement license is the same as the fee for out-of-state direct shippers: $200 every two years. As with out-of-state direct shippers, in-state package stores may not ship to dry areas.

It can be difficult for alcohol manufacturers to keep up with changing requirements, such as the new licensing and tax obligations that will take effect in Alaska under SB 9. Avalara for Beverage Alcohol can help.