Three-tier (alcohol distribution)

The three-tier system of alcohol distribution is the system for distributing alcoholic beverages set up in the United States after the repeal of Prohibition. The three tiers are importer or producers, distributors, and retailers. The basic structure of the system is that producers can sell their products only to wholesale distributors who then sell to retailers, and only retailers may sell to consumers. Producers include brewers, wine makers, distillers and importers.

Some states chose to become alcoholic beverage control jurisdictions after Prohibition. In these states, part or all of the distribution tier, and sometimes also the retailing tier, are operated by the state government itself (or by contractors operating under its authority) rather than by independent private entities.

The only state with a privately operated retailing and distribution system that does not require any form of three-tier system is the State of Washington. In Washington, retailers may purchase alcoholic beverages directly from producers, may negotiate volume discounts, and may warehouse their inventory themselves. However, the three-tier system remains a de facto reality in Washington despite the law.

In 1933 the 18th Amendment was repealed by the 21st Amendment. (Previously, the 18th Amendment had outlawed alcohol in the US in 1919 and led to Prohibition in 1920.) Section 2 of the 21st Amendment specifies that the power to control alcohol resides with the states, leaving each state to decide when and how to repeal Prohibition.

After Prohibition, the states began to seek methods to regulate and control the alcohol industry. The states were also eager to devise a method to levy and collect taxes on alcohol producers. Both of these concerns led to the states individually creating environments in which single ownership of all three tiers (production, distribution and retail) was entirely or partly prohibited. As states were left by the 21st Amendment to regulate themselves, alcohol laws and the nature of the three tier system can vary significantly from state to state.

States have various exceptions to this rule, the most prevalent one being the case of a brewpub, which is simultaneously a producer and retailer, and has no requirement to sell to a distributor. Some states allow an entity to have a part in two of the tiers, letting small breweries act as their own distributor, for example. Many states permit wineries to sell bottles of wine on-site to customers.

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