summit cocktails to go koenig 2021

Kentucky Representative Adam Koenig moderated the Legislative Summit session “Cocktails to Go: How COVID Changed Alcohol Regulation.” To his right is David Christman, vice president of state affairs, National Beer Wholesalers Association.

Booze to Go, Yes or No? Industry Warns of Tax Ramifications

By Mark Wolf | Nov. 3, 2021 | State Legislatures News | Print

It’s unlikely we’ll see a car scream up to James Bond to deliver a martini in a to-go cup from his favorite bar, but the cocktails-to-go movement has shaken—not stirred—the nation’s alcohol landscape.

Instituted to help struggling bars and restaurants during the COVID-19 pandemic, the notion of home delivery of spirits is a concern to the traditional three-tiered—producer, wholesaler, retailer—structure of the alcohol industry.

We saw no issues with it, and in fact heard from a lot of bars and restaurants that it was a lifeline that kept them open. … Now we need to figure out how to tax it properly. —Kentucky Representative Adam Koenig

States that embraced cocktails-to-go as an economic lifeline during the pandemic need to consider the ramifications of making the model permanent, a trio of beverage industry executives told an opening day session of NCSL’s Legislative Summit on Wednesday.

“We are very supportive of a number of temporary measures to help bars and restaurants stay open, but we wonder why the push (to make cocktails-to-go permanent),” said Matt Dogali, president and CEO of the American Distilled Spirits Alliance, which represents 27 leading domestic and international companies.

Impacts on state alcohol tax revenue are a prime concern, he said.

“Spirit taxes are very substantial,” Dogali said, adding that under the current structure the wholesaler pays the taxes to the state.

“We hear wine has been shipped for years in 40 states, and that’s not a problem,” Dogali said. However, he cited a study showing that over a third of the 2.2 million bottles of wine coming into Michigan in 2019 were shipped illegally.

“The reality is, there will always be some bad actors,” he said. “So when you’re crafting direct-to-consumer law, enforcement absolutely matters.”

David Christman, vice president of state affairs for the National Beer Wholesalers Association, detailed the effect of the pandemic on the industry.

“We lost 40,000 beer retail accounts, mostly restaurants and bars, since the start of last year,” he said. Before the lockdowns began in March 2020, 60% of beer sales were in cans, 31% were in bottles and 9% were draft.

“Overnight, draft beer went to almost zero,” he said.

Consumption Stable

Despite a rise in home drinking, he said, U.S. alcohol consumption was generally stable during the pandemic.

“The rise in alcohol consumption was roughly one extra drink per consumer per month for 2020,” he said. “Yes, there is a lot more drinking at home. But that replaced a lot of other things, like drinking at the bar or going out to the ballgame.”

COVID changed some things but not everything, said John Bodnovich, executive director of American Beverage Licensees.

“When it comes to state alcohol laws, consumers are good with regulations, and we think they should be preserved for public safety reasons,” he said.

Bodnovich said blanket extensions of cocktails-to-go without careful consideration could lead to unintended consequences.

“We’re seeing the growth of third-party delivery,” he said. “Restaurants and bars are concerned liability is going to follow them. They have no control over what that third-party driver is going to do. Is he going to ask for ID? Leave it on the doorstep?”

Kentucky Representative Adam Koenig (R) said Kentucky enacted direct-to-consumer sales during the pandemic.

“We saw no issues with it, and in fact heard from a lot of bars and restaurants that it was a lifeline that kept them open,” he said. “A lot of us didn’t see it as a problem going forward, and now we need to figure out how to tax it properly.”

Mark Wolf is a senior editor at NCSL.

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