A “Spirited” Supreme Court Decision on Liquor Laws Opens the Door for Alcohol Retailers to Expand Business across State Lines - Food, Beverage and Hospitality Alert

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On June 26, 2019, the Supreme Court gave persons and companies wishing to open retail liquor stores a reason to raise a glass. By a vote of 7-2 in Tennessee Wine and Spirits Retailers Association v. Thomas, the court struck down a Tennessee law that requires anyone who wants a retail license to sell alcohol in Tennessee to have lived in-state for at least two years.

The court’s majority opinion, authored by Justice Alito, held that the Tennessee law’s two-year residency requirement “expressly discriminates against nonresidents” in violation of the Constitution’s Commerce Clause.  

All nine justices on the court seem to agree that a similar discriminatory residency requirement would be unconstitutional if it were imposed on retailers selling something other than alcohol, like food or car parts. However, the court split over whether the 21st Amendment, which repealed Prohibition and gives each state some leeway in imposing alcohol-related public health and safety measures, saved the Tennessee law. The majority held that the 21st Amendment did not save the Tennessee residency law because the law “has little relationship to public health and safety.”

How does this affect retailers?

The court’s ruling will have significant implications for alcohol markets across the country. The first, and most direct, is that the ruling will make it easier for chain stores to establish multi-state footprints because they will no longer be constrained by residency requirements. Next, and more broadly, the opinion indicates that the Constitution bars states from discriminating against “all out-of-state economic interests,” which makes it likely that states that allow in-state retailers to ship alcohol to customers in-state may no longer be permitted to bar similar sales from out-of-state retailers as well.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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