OUR REGULATORY ENVIRONMENT
South Carolina ’s beer wholesalers operate in a unique regulatory environment that was established by the 21st Amendment to the U.S. Constitution, as well as the federal and state governments, in the wake of the repeal of Prohibition. Beer wholesalers occupy the middle tier of a three-tier system established for the distribution and sale of beer. This system was designed to insulate retailers from control by suppliers, encourage moderation in consumption, guarantee full collection of state and federal taxes and permit states to impose rules and regulations on the licensed beverage industry that reflect their own practices and beliefs. This three-tier system has far exceeded its creators' expectations. It is highly efficient and extremely responsive to local concerns. Because of the three-tier system , beer is one of the best deals in the marketplace today.
A Brief History of the Creation of the Three-Tier System
Acting like a safety net, the three-tier safeguard system provides for “checks and balances” in the way that alcohol is distributed and sold to retailers as well as consumers. Producers sell to licensed beverage distributors, wholesalers sell to properly licensed retailers, and retailers sell alcoholic beverages to the public . Taxes are collected through each tier of the distribution system. This philosophy of distribution was created in the wake of Prohibition in order for alcoholic beverages to be made available to the public in a controlled and safe manner. The strength of this system is its licensed nature. Anyone who wants to brew, distribute, deliver merchandise or promote alcohol must be licensed. Our State system has established that you can only operate within one tier of the three tier system.
The Supplier manufactures the product. It sets the standards for freshness and ensures that the product is made with the finest available ingredients.
Tax Dollars Collected:
Distributor. The wholesaler is usually a local family business that distributes product in compliance with state and local laws. As part of the three-tier system, the wholesaler provides competition, innovation and selection for the consumer; ease of entry for new products and small manufacturers; and tax benefits for our state. As a local business, each wholesaler participates in many local civic and charitable activities.
Tax Dollars Collected:
- Applicable State and Local Taxes
- Payroll Taxes
- Federal Income Tax
- State and Local Income Taxes
- State and Local License Fees
Your local retailers include both On-Premise and Off-Premise establishments.
An example of On-Premise would be restaurants, bars and taverns where licensed
alcohol products are purchased and consumed by the public. Off-Premise examples
include grocery, supermarket, club stores, convenience stores and package goods
stores where licensed alcohol beverages are purchased to be consumed by the
public.
Tax Dollars Collected
A Long Tradition
 The tradition of beer dates back more than 10,000 years. When archeologists discovered a Mesopotamian clay tablet, they were naturally curious to decipher its cryptic markings. It was history's first known recipe for beer! The recipe had been handed down from the Mesopotamian God Enki himself. This probably came as no surprise to the archeologists, since the subject of beer pops up regularly in their work. Images of people brewing, storing, and drinking beer are found in ruined cities and tombs scattered throughout the ancient world.
 The
Babylonians made sixteen kinds of beer, using everything from black barley
to wheat and honey. Egyptians made it from barley, Incas made it from corn.
The passengers of the Mayflower, hoping to land in the more mild Southern climate,
were forced ashore, in part, due to a shortage of beer. An entry from the journal
of a Mayflower passenger, dated December 19, 1620 reads: "We could not
now take time for further search or consideration, our victuals being much
spent, especially our beer." By 1770 the American brewing industry was
so well established that George Washington, Patrick Henry, and other patriots
argued for a boycott of English beer imports. The Boston Tea Party almost became
the Boston Beer Party.
The Present Regulatory System
At the turn of the 20th century, the beer industry was booming. Local brewers often had ownership ties to the taverns - selling to them on extended credit terms, furnishing them with equipment and supplies, charging low or no interest, and paying rebates for pushing their brand or carrying it exclusively. This relationship became known as "tied-houses." Competition for control of the retail outlets was fierce and tremendous pressure was exerted on retailers to maximize sales without regard to the well being of customers or the general public. These abusive practices led to a campaign for laws prohibiting all drinking. In 1919, the 18th Amendment to the United States Constitution was passed beginning a 14-year dry spell known as Prohibition.
In 1933, the 21st Amendment to the United States Constitution repealed Prohibition and also gave states the authority to regulate the production, importation, distribution, sale and consumption of alcohol beverages within their own borders. A new regulatory system known as the Three-Tier System was created. This system was established to eliminate tied-house abuses. "Tied-houses" would no longer exist - instead beer would be sold through independent distributors.
While each state has its own set of laws governing the three-tier system,
the separation of the three-tiers by inserting an independent distributor between
the brewers and the retailers is a common thread. The three tiers (brewer,
distributor, retailer) are also further separated by other laws and regulations
prohibiting suppliers and distributors from having any financial interest or
influence with retailers - for example, beer sales on credit are not allowed
and consignment sales are banned.
This system has four primary goals:
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To avoid the overly aggressive marketing and sales practices of the pre-Prohibition era;
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To generate tax revenues that can be collected efficiently from the beer distribution industry;
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To facilitate state and local control of alcoholic beverages; and
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To encourage moderate consumption (temperance).
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The three-tier system allows the state to control alcoholic beverages through licensing. Without the three-tier system, increased government regulation and enforcements efforts would be needed resulting in increased costs.
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