Kentucky’s new DTC law provides a welcome opportunity for wineries, breweries, and distilleries

With the majority of tasting rooms around the country closed, and on-premises retailers such as restaurants and bars severely limited, the direct-to-consumer (DTC) channel has been vital for U.S. alcohol producers to generate needed revenue. Kentucky’s new direct shipping law, HB 415, could provide a welcome boost for wineries, breweries, and distilleries with DTC programs.

HB 415 was passed by the legislature in the midst of a flurry of activity related to COVID-19 and became law on April 7, without a signature from the governor. The new law officially opens Kentucky to off-site and on-site shipments from licensed wineries, breweries, and distilleries, replacing the existing, problematic law that only allowed for on-site shipments. The final effective date of the new law is still pending, but it should be roughly the middle of July. Kentucky will then become the 45th state plus the District of Columbia to allow DTC shipments from wineries, leaving only Alabama, Delaware, Mississippi, Rhode Island, and Utah as states that prohibit winery shipments.

The rules are mostly similar to what other states that allow DTC shipments require:

1. Producers (wineries, breweries, and distilleries) must hold a direct shipping license, which will cost $100 annually
2. Wineries and breweries may ship up to 10 cases per consumer per month; distilleries may ship 10 liters per consumer per month
3. Shipments to consumers in dry areas are prohibited
4. Age verification must be performed
5. Licensees must pay three different types of taxes: sales tax, excise tax, and wholesale tax (an 11% tax on the wholesale price, calculated based on 70% of the retail price, of any beverage alcohol products shipped)
6. Products must be shipped from the “licensed premises described in its direct shipper license application;” the final rules will determine whether the Kentucky Department of Alcoholic Beverage Control (ABC) will allow licensed fulfillment houses to also serve as licensed premises for producers

Avalara for Beverage Alcohol customers interested in adding a direct shipping license in Kentucky should either submit a request in your online customer portal or contact your account manager directly. Even though the license applications are not yet available, we’ll begin preparing the application materials and will be ready to submit when possible.

If you’re not yet an Avalara for Beverage Alcohol customer and you’re interested in direct shipping in Kentucky or any other state, we make it easy to do so. Contact us at 877-855-9956 or visit our solutions overview to learn more.