New Virginia Law Eases Distillery Sale Regulations at Festivals and Events

A new Virginia law regulating distilleries will go into effect on July 1, 2017. The law, which was signed by Gov. Terry McAuliffe in late February, will loosen restrictions on consumer sales at certain in-state events.

Prior to the law, Virginia distilleries were prohibited from selling their product directly to consumers at in-state festivals and events. Their bottles could only be sold through Virginia Alcohol Beverage Control ("ABC") tables or stands manned by ABC employees. The new law allows distilleries the same opportunity as wineries and breweries to personally sell their product to the public at these events.

The Virginia Distillers Association (“VDA”) has been key in advocating for the recent changes to Virginia’s strict distillery laws. Curtis Coleburn, a former Virginia ABC executive and now government affairs director for the Virginia Distillers Association remarked, “I think the VDA is trying to do it smart. We’re trying to pick battles that we can win, and show we’re responsible so legislators will trust us on future things we ask for.”

These changes appear to reflect a growing trend in the distilled spirits industry. Unlike craft breweries, which are generally less regulated at the state and federal level, distilleries are held to a very high regulatory standard. Additionally, there is still no “small producer” excise tax rate at the federal level, as there is for beer. The federal permit process is also far more complicated and involved than for breweries. Lastly, federal reporting compliance for distilleries is far more tedious and thorough than for other producers of alcohol.

Despite the new Virginia law, Virginia distilleries are still ensnared by significant taxes. Virginia currently imposes a 20% excise tax on the sale of distilled spirits. The federal government also collects an excise tax of $13.50 per proof gallon through the Alcohol & Tobacco Tax & Trade Bureau (“TTB”). Local governments also impose a sales tax on products as well.

This recent legislative action by Virginia appears to be a step in the right direction. Only time will tell if other states will follow suit with equally impactful deregulation of the industry.