How Does Alcohol Beverage Control Work?

The sale, creation, and distribution of alcohol are highly regulated in the United States. In fact, it’s one of the more complex systems within the consumer goods realm. Many business owners wonder, “How does alcohol beverage control work?”

Alcohol is regulated at the local, state, and federal levels. Understanding these laws can help business owners and employees comply with legal guidelines.

What Is Alcohol Beverage Control?

California Alcohol and Beverage Control (ABC) comprises the laws and agencies that govern how alcoholic beverages are manufactured, distributed, consumed, and sold. In California, there are 56,000 ABC-licensed businesses with on-premises sales privileges.

ABC aims to:

• Prevent underage drinking
• Promote public health safety
• Ensure the collection of taxes and fees
• Support fair market competition
• Control the availability of alcohol to reduce abuse

They achieve these goals by licensing, regulating, and enforcing these rules in cooperation with alcohol control boards and commissions.

U.S. states are either control states or license states. A control state means the government holds a monopoly over the wholesaling or retailing of alcohol. This might include state-run liquor stores, with pricing set specifically by the state.

License states, however, allow private businesses to sell alcohol with proper licenses from the state. State agencies issue various types of licenses for wholesalers, retailers, and distributors. California falls under this category.

Some of the benefits of being a license state include a more competitive marketplace, a wider variety of products offered, and the potential for innovation. However, license states are more difficult to regulate and often have a greater reliance on business compliance. In some cases, there is greater potential for over-saturation of the alcohol market.

The Three-Tier System

Across the U.S., alcohol control works on a three-tier system. This began after the Prohibition era to keep one entity from controlling all parts of the alcohol supply chain. The tiers are:

• Producers, such as breweries, distilleries, and wineries, that make alcoholic beverages
• Distributors or wholesalers, which include the companies that purchase alcohol from producers and then sell it to retailers
• Retailers, or businesses that sell alcohol to consumers, like bars, liquor stores, or restaurants

These tiers operate independently to encourage accountability and transparency. They also make tax collection more efficient for the government and prevent monopolies and market dominance.

Alcohol Licensure

In both control and license states, businesses must apply for and maintain licenses for selling alcohol. The type of license necessary depends on the alcohol sold, such as beer, wine, or spirits, etc. The location for consumption is also a consideration, as is the nature of the establishment, such as a restaurant, bar, or store.

Some of the most common types of licenses include:

• On-premise license. This works for bars and restaurants that serve alcohol at their location.
• Off-premise license. This suits liquor and grocery stores where alcohol is purchased and then taken somewhere else.
• Special event permits. A license of this nature fits temporary alcohol services, such as that of festivals or other special events.
• Manufacturer’s license. This applies to the creators of alcoholic beverages, including breweries, wineries, and distilleries.
• Wholesale or distributor license. Businesses moving alcohol between producers and retailers would need this type of license.

Obtaining a license can be a difficult and complicated process. Before granting a license, California’s ABC department requires the following:

• Zoning approval
• Background checks
• Inspections
• Public notice
• Applicable fees

Some jurisdictions also cap the number of licenses they allow, which can lead to higher prices within the secondary market.

Enforcement and Compliance

To ensure regulations are followed appropriately, ABC agencies may conduct routine inspections of establishments. These might even involve an undercover compliance check, such as posing as an underage drinker. Audits of tax and sales records will be routinely conducted. In addition, licenses must be renewed every year.

If a person or establishment is found to have violated the terms of their license, they may face fines, license suspension, or permanent license revocation. In more serious cases, criminal charges could be filed.

FAQs

Q: What Does Alcohol Beverage Control Do?

A: California Alcohol Beverage Control (ABC) is a government agency that regulates the manufacture, distribution, consumption, and sale of alcoholic beverages. They issue licenses to businesses that sell or serve alcohol, enforce state laws regarding alcohol sales, and enforce state laws. ABC also investigates any violations of these laws, such as underage sales. Between 2023-24, ABC investigated 3,607 establishments in Orange County alone. Of these investigations, 1,503 violations were filed.

Q: How Long Is the Alcoholic Beverage Control Exam?

A: To grant a Responsible Beverage Service certification, the ABC requires an exam that may require up to two hours to complete. The test comprises about 50 multiple-choice questions about state alcohol laws, how to identify intoxicated individuals, ID-checking, and how to prevent over-service. Exam-takers need a score of 70% to pass. The California Department of Alcoholic Beverage Control offers training for those looking to take the test.

Q: How Do You Control Alcohol Percentage?

A: Controlling alcohol percentage involves regulating the fermentation and distillation processes in alcohol production. During the fermentation process, yeast converts the sugars to alcohol, so adjusting the sugar levels and fermentation time impacts the alcohol content. The distillation process removes water in a way that increases alcohol concentration. Manufacturers have to follow guidelines to ensure consistency and safety by labeling beverages according to alcohol volume.

Q: How Does the Government Regulate Alcohol?

A: The government works at the local, state, and federal levels to regulate alcohol. Federally, the Alcohol and Tobacco Tax and Trade Bureau oversees production, labeling, and advertising. States manage licensing, sales, and distribution. Regulations cover who can sell alcohol, hours of sale, age restrictions, and server training requirements. Local governments can still impose additional rules, including zoning laws or restrictions for certain events in regard to alcohol serving and consumption.

Contact an Alcohol Beverage Compliance Attorney Today

If you’re wondering how alcohol beverage control works, an attorney can help you better understand California alcohol laws. The team at Blake & Ayaz can guide you through the complexities of licensure and legal regulations. We can provide clarity within the complex regulatory space.

Contact our office to schedule a consultation and learn more about how we can help you successfully navigate your business needs.