Repeal of Prohibition

Alcohol Compliance

The 21st Amendment to the Constitution resulted in 50 sets of complex laws.

By Louis Terminello

Dec. 5, 1933 is another day that will live in infamy for the modern alcohol industry. Prior to that day, drink flowed freely, but illegally, in the United States.

Accompanying such cocktails as the Old Fashioned, the Sidecar and the Brooklyn were men the likes of Al Capone, Bugsy Siegel and Frank Costello. And where such men went, so did their finely tuned crafts of extortion, kidnapping and murder. The business of alcohol was perfectly paired with crime.

Bootlegging was once a thriving business in the United States, as well as organized crime thrived and the general public’s disillusionment with the effectiveness of Prohibition. It was time for bathtub gin to make its way out of the tub and into the mainstream and turn the illegal into the legal. In general, the public had enough and Congress responded.

On Dec. 5, 1933, Congress took action with the introduction of the 21st amendment. Congress repealed the 18th amendment and turned much of the manufacture, distribution and sale of alcoholic beverage over to the individual states.

The amendment states:

Section 1. The eighteenth article of amendment to the Constitution of the United States is hereby repealed.

Section 2. The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.

Section 3. This article shall be inoperative unless it shall have been ratified as an amendment to the Constitution by conventions in the several States, as provided in the Constitution, within seven years from the date of the submission hereof to the States by the Congress.

Although simple in language, the 21st Amendment laid the groundwork for the current state of the alcohol beverage bureaucracy. Much of this bureaucracy is controlled by the 50 states with limited authority resting in the hands of the federal government. Therefore, in addition to federal laws and regulations, each state has its own set of complex laws and regulations that stakeholders in the industry must adhere to remain in compliance.

TTB and State Agencies

The Alcohol Tax and Trade Bureau (TTB) is the agency that oversees the manufacture, distribution and sale of alcoholic beverages at the federal level. Its role and influence varies depending on the tier the stakeholder occupies (the concept of tier will be explained a bit later in this article). Title 27 Code of Federal Regulation Parts 1-31 is where one would find all the federal regulations pertaining to the manufacture, distribution and sale of alcoholic beverages.

Since the author makes Florida his home base, the Division of Alcoholic Beverages and Tobacco (DABT) is the state agency that oversees and regulates the alcohol in his state. Section 561-569 of Florida statutes is where one would find the state laws (not to mention a separate code section) that regulate the industry. It is important to note that certain laws codified by statute are nearly identical state by state, if not in exact language, then certainly by the spirit of the law.

Common to the States

The three-tier system is one such concept. The system establishes three levels of stakeholders. Manufacturer and importer occupy the first tier, distributors the second tier and retailers the third tier. The system dictates that one tier shall not operate in the tiers of the other stakeholders.

There are exceptions in the laws that are shared by some states but not all. As an example, in certain instances manufacturers may conduct sales to consumers at the retail level, but this does not exist in the laws and codes of every state.

Compliance and Non-Compliance

Non-compliance can be a very painful exercise for a stakeholder. As with almost all states, Florida operates on a permitting and licensing scheme. Lengthy applications must be prepared and fees paid before a license or permit is issued. For example, in Florida, and the other states, full disclosure is required. If by chance a potential retail permitee or licensee fails to disclose an interest in a manufacturing facility, say a winery, the penalties can be severe. When DABT learns of the infraction, high monetary fines may result and even license revocation is possible.

As illustrated above, there are complex alcohol beverage laws and regulations in place as well as numerous bureaucracies that regulate the industry that have the power to impose penalties. As such, compliance at all times is called for or a hefty price will be paid. It is imperative that all stakeholders put a complete and thorough compliance program in place to avoid severe penalty.

Louis J. Terminello is a partner, chair of the hospitality, alcohol and leisure industry group and member of the firm management committee at Greenspoon Marder. He concentrates his practice on administrative law and providing legal services to all tiers of the alcohol beverage industry, including retailers, suppliers and wholesalers. Terminello can be reached at louis.terminello@gmlaw.com.

Check out our latest Edition!

 

janice blog lhi

Contact Us

Leisure and Hospitality Magazine
100 Cummings Center, Suite 250-C
Beverly, MA 01915

  312.676.1100
  312.676.1101

Click here for a full list of contacts.

Latest Edition

Spread The Love

Back To Top