States Revisiting Covid-Inspired Cocktail-to-Go Laws and Taxes

Alcohol-to-go laws in many states have been a lifeline to restaurants and bars throughout the COVID-19 pandemic. Now that restrictions have for the most part lifted, states must decide whether to extend alcohol-to-go policies or allow them to expire. Their decisions can affect tax compliance for businesses in the industry.

New York closes lid on takeout cocktails

New York was the first state to allow bars and restaurants to make takeout and delivery alcohol sales. Then it was among the first to prohibit them. New Yorkers like to move quickly.

Certain alcohol licensees were authorized to sell qualifying alcohol for off-premises consumption from the moment the Empire State suspended on-premises dining and drinking at bars and restaurants, at 8:00 p.m., March 16, 2020. The New York State Liquor Authority (SLA) had guidance ready the same day.

The alcohol-to-go rules were in place “for the duration of this Executive Order.” Shortly after Governor Andrew Cuomo announced the end of the state disaster emergency on June 23, 2021, the SLA tweeted, “the temporary pandemic-related privileges for to-go and delivery of alcoholic beverages will end after June 24.” The one exception is beer, which restaurants and bars were permitted to sell for delivery and takeout prior to the pandemic.

Alcohol-to-go sales have helped make up some lost business during the pandemic, but the industry is still struggling. New York City Comptroller Scott M. Stringer reports, “Through June 2021, the restaurant industry has recovered only 41% of its pandemic job losses, despite five months of steady gains.”

The New York restaurant industry is dismayed by the end of the relaxed restrictions, but New York liquor stores may not be: The former spoke out in favor of continuing takeout alcohol sales, while the latter lobbied against it. Several bills seeking to extend the policy stalled, including Assembly Bill 3116, Assembly Bill 3806, Assembly Bill 7732, and Senate Bill 589.

States allowing alcohol-to-go sales on a permanent basis:

In June 2020, Iowa became the first state to permanently authorize delivery and to-go sales of alcohol. Other states have followed Iowa’s lead. States where delivery and takeout sales of alcohol are permanently allowed include:

Different rules and regulations may apply in different states. For example, the purchase price of delivered beer and wine may not exceed the purchase price of food in Montana, while alcohol delivery and pickup sales may be prohibited if the retailer is too close to a school in Georgia.

States where alcohol delivery sales are temporarily permitted:

Numerous states are continuing to allow delivery and takeout sales of alcohol but aren’t ready to make the policy permanent. These include:

As above, regulations and requirements vary from state to state. For example, restaurants in Tennessee can sell beer and wine for consumption off premises until July 1, 2023. It also authorizes delivery services to charge a fee based on the percentage of the sales of alcoholic beverages or beer delivered, and it stipulates that “the delivery service licensee is not responsible for remitting applicable taxes on alcoholic beverages or beer delivered by the licensee.” In Maryland, employees making alcohol deliveries must be at least 21 years of age and be “certified in an alcohol awareness program.”

States where alcohol delivery and to-go sales are banned:

The following states do not permit bars or restaurants to sell alcohol to go:

Alaska
Idaho
Minnesota
New York
North Carolina: Temporary alcohol delivery and takeout measures expired June 1, 2021
North Dakota: Temporary alcohol delivery may be permitted for a time in certain jurisdictions
Pennsylvania: Temporary alcohol delivery and takeout measures expired June 15, 2021; Governor Tom Wolf supports House Bill 1154, which would permanently allow alcohol-to-go sales
South Carolina: Bills (H 3575 and S 0367) that would permanently authorize curbside pickup are under consideration
South Dakota: Local governments may grant an off-sale license to businesses selling alcoholic beverages by the package for consumption off premises
Utah
Wyoming: Wineries and breweries may now make sales for limited off-premises personal consumption

In most of the above states, pressure is building to legalize takeout and delivery sales of beer, wine, and cocktails.

Alcohol delivery policies complicate tax compliance

One issue facing states as they establish or extend alcohol-to-go policies is whether (or to what extent) to allow third parties to deliver alcohol on behalf of licensed sellers.

For example: Arizona has authorized the use of registered alcohol delivery contractors; Indiana allows delivery by third-party providers; Iowa now permits third-party delivery providers to deliver alcoholic liquor, wine, or beer on behalf of a licensee or permittee; Louisiana allows alcohol retailers to contract with a third-party delivery company or third-party platform provider; and Texas will permit third-party food delivery services to deliver certain alcoholic beverages starting January 1, 2022.

In Virginia, beer and wine licensees may not need a delivery permit to deliver wine or beer they’re authorized to sell. Conversely, a bill that would have allowed third-party vendors to deliver alcoholic beverage products from certain licensees died in Oklahoma.

These and other policies related to alcohol delivery and takeout sales may change as states develop and refine them. In trying to balance the often-conflicting preferences and concerns of consumers, legislators, and businesses in the industry, compliance is sometimes overlooked. It won’t be for long.

For more information about the multiple issues surrounding alcohol marketplaces, and more, check out this blog series by Jeff Carroll, general manager of Avalara for Beverage Alcohol, and Rebecca Stamey-White, partner at Hinman & Carmichael LLP. The 2021 sales tax changes report: Midyear Update, Beverage Alcohol Edition offers additional insights.

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Gail Cole is a Senior Writer at Avalara. She’s on a mission to uncover unusual tax facts and make complex laws and legislation more digestible for accounting and business professionals.

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