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North Carolina Loosens Controls on Distillery Sales

October 22, 2019

The ABC Regulatory Reform Act changes a number of state alcohol control regulations.

North Carolina has loosened some of its strict regulations on the sale, consumption, and pricing of alcoholic beverages.

The ABC Regulatory Reform Act grants distilleries the same right as breweries and wineries to sell beer, wine, and mixed drinks for on-site consumption if they receive a permit from their local Alcoholic Beverage Control board. The law also removes the limit on liquor sales to an individual customer at a distillery, which was five bottles per year.

Bartenders may now serve each patron two mugs of beer or glasses of wine at a time. Retailers are now allowed to sell malt beverages and wine at discounts of up to 35 percent of the retail price, up from a previous maximum discount of 25 percent.

The law also allows spiritous liquor tastings in ABC stores, malt beverage tastings at Farmers’ Markets, and the sale and consumption of alcohol at bingo games.

The law took effect on September 1.

Long History of Controls

North Carolina has long had excessive controls on alcohol, says Jon Sanders, director of regulatory studies at the John Locke Foundation.

“North Carolina has historically maintained extensive regulations on alcohol, even passing state prohibition in 1908, well before the 18th Amendment was even introduced,” Sanders said.

State regulation was originally intended to discourage alcohol consumption, but it is now a source of income for the state government, says Sanders.

"Already there is a tension between the ABC system’s original design to control liquor sales and a later justification of maximizing government revenues from liquor,” Sanders said.

Monopoly, Market Distortions

North Carolina is one of 17 “control” states that strictly regulate the distribution of alcohol, and one of the seven ABC states where government-owned package liquor stores have a monopoly on retail sales of bottled spirits. Grocers and other retailers in the Tar Heel state may sell beer and wine.

“These restrictions, like other regulations, have market distortions that create winners and losers, and the winners have a lobbying interest in maintaining the status quo,” Sanders said.

“The North Carolina Beer and Wine Wholesalers Association has been a powerful lobby against reform not only regarding liquor but in freeing up smaller craft brewers from onerous state rules,” Sanders said.

Government Price Markups

North Carolina and some other states control what brands of alcohol are sold and determine markups for customers, says Jarret Dieterle, a senior fellow at the R Street Institute.

“When control states implement high markups on the alcohol that they sell, this operates as a stealth tax on people that often goes simply to fund general government operations at the expense of people’s choice and pocketbooks,” Dieterle said.

Leveling the Playing Field

The new laws will allow local establishments to serve their communities better, says Dieterle.

“It’s important to allow craft brewers to serve directly to their customers,” Dieterle said. “People visit them, buy samples, and spread the word to their friends.

“In many ways, breweries and distilleries are becoming cultural centers,” Dieterle said. “Instead of the taverns of yesteryear, social clubs, charities, religious groups, and bands meet at distilleries. Where these places become civic institutions, these laws have not just immediate economic but cultural impacts on their communities.”

Brandon Best (bbest@cedarville.edu) writes from Cedarville, Ohio.

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Regulation
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Brandon Best writes from Cedarville, Ohio.
bbest@cedarville.edu