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The state of Kentucky enacted a direct-to-consumer (DTC) shipping law for beer, wine, and spirits, effective July 15, 2020, and on December 14, 2020, finally issued the regulations to implement the new law. Here’s the new law in a nutshell:
Who is Eligible for the DTC Shipping License and What Can Be Shipped?
The law is applicable to producers of beer, wine or spirits with federal basic permits and state production licenses in their home state – it is not applicable to retailers. Producer licensees can ship up to 10 liters of distilled spirits, and up to 10 cases of wine or beer per month per Kentucky resident. The products must be produced by
the licensed shipper or produced or bottled by another producer exclusively for them under a brand name owned by, or licensed to, the direct shipper. Brands and labels must be registered with the Kentucky ABC.
What is Required to Obtain a License to Ship DTC?
In order to qualify to ship DTC, the out of state producer must obtain a direct shipper license from the Kentucky ABC, which currently costs $100/year. The applicant must first register to do business in Kentucky with the Secretary of State, and register with the Department of Revenue to collect and remit sales and alcohol taxes. Licensees can only ship product from their licensed premises and they must provide a copy of the deed or lease showing their right to occupy the licensed premises they will ship from. This is a significant limitation for licensees that typically operate their DTC program from fulfillment houses or third-party warehouses off their licensed premises.
Shippers must collect and pay a 6% sales tax, plus an alcohol wholesale tax and an alcohol excise tax. The wholesale tax is 11% of the wholesale price for spirits and 10% of the wholesale price for beer and wine. If there is no actual wholesale price for the products in Kentucky, it is deemed to be 70% of the invoiced retail price. The excise tax is currently $1.92/gallon for spirits, $0.50/gallon for wine, and ~$0.08/gallon for beer. Alcohol taxes are reported and paid quarterly.
Other restrictions apply and we recommend taking a look at the state’s direct shipping laws (KRS 243.027 et seq) and regulations (804 KAR 4:415) for details.
If you have questions about the new law or about direct shipping generally, please reach out to one of the attorneys at Strike Kerr & Johns.
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