You probably know that the regulatory system for alcoholic beverages is complex and largely unchanged since the end of prohibition, despite the significant cultural and economic changes that have occurred in the past 84 years. What you may not have considered is how one service that has become commonplace in urban areas fits into the whole scheme.

Over recent years, apps like Instacart, InstaShop, and have been growing in popularity.  These services offer delivery not only of food, but of alcoholic beverages as well.  For the retailer, this can mean an expanded customer base, individuals who would not have otherwise come to their store, but it could also bring some legal challenges.

Liquor licensing authorities in some states, such as New York, have issued advisories opining that if the delivery service is charging retailers a percentage of sales it would not be consistent with state liquor laws, and that only a monthly service fee could be charged to retailers.  Monthly processing fees have long been considered the safer option, given the strict regulation of the sale of alcoholic beverages.  Per the New York State Liquor Authority’s advisory opinion, by paying delivery apps monthly fees, instead of percentages, the retailers are always accountable for the entire profit from the sale of the alcoholic beverages.

In California, the State Senate recently passed legislation focused on a different issue arising out of the rise in delivery services, specifically, underage drinking.  The recent bill would prohibit delivery companies from, “delivering, providing, arranging, or in any way facilitating the delivery of”  alcoholic beverages unless it has a system, reviewed and approved by the Department of Alcoholic Beverage Control, that meets specified requirements, including that the company can verify that the products are delivered to a person who is 21 years or age or older. The bill would also prohibit a delivery network company from delivering alcoholic beverages to consumers on the grounds of a college or university. A proposed amendment to California’s bill also addresses the economics of the transaction, requiring that, “off-sale retail licensee must have exclusive and continuous control of the proceeds from the sale of alcoholic beverages.”   In other words, California too would prohibit the delivery service from receiving the funds for delivery of alcoholic beverages, or, presumably, any percentage thereof.

 Whether the potential profits from the delivery business model will ultimately drive companies to lobby for changes to the decades old structure of the regulations remains to be seen.  But for now, it seems legislatures are starting to catch up and find ways to stop companies from subverting the regulatory system.


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