In response to the end of the Prohibition Era, the state of Texas adopted a three-tier system to regulate alcohol distribution and sales. This three-tier system clearly defines the roles of the three separate entities of the industry—the breweries, distributors and retailers—while also creating a path for the efficient collection of taxes by the state. With the help of a liquor license consultant in Dallas, TX, you can better understand the individual tiers of the system, and how they each play their role to keep the marketplace fair and safe for all.

Tier 1 – Breweries, wineries and distilleries

Manufacturers that produce alcoholic beverages are in the first tier of the system. This group is responsible for crafting a quality product and packaging the product for safe transportation. These manufacturers enter into contracts to have their product picked up and delivered by licensed independent distributors, which is the second and arguably most pivotal tier in the system.

Tier 2 – Licensed distributors and wholesalers

It is the distribution tier that plays a key role in ensuring that the entire system works. The distribution warehouse stocks and stores the packages that are to eventually be delivered to retailers, and they are responsible for the marketing of the product to the different retailers as well. Distributors are also in charge of collecting and remitting the state excise tax. These distributors and wholesalers are then responsible for the final delivery to the vendor.

Tier 3 – Retailers

The retailers are the last stop in the three-tier system before the product reaches the end consumer. Retailers must have the shelf space required to stock the products, and must also maintain enough storage space for deliveries from distributors and wholesalers. The retail group is also responsible for the collection of the sales and/or mixed beverage tax enacted by the state that is to be charged to their patrons.

These three tiers were created to draw distinct lines between the several moving components that are a part of the alcohol industry, which in turn adds stability and fairness to the post-Prohibition marketplace. The system has worked well, and has helped to reduce the extreme marketing and sales ploys that dominated the pre-Prohibition era. This system has also helped to stave off anti-competitive practices that result from “tied-house” collaborations between established breweries and retailers, which make it harder for new up-and-coming breweries to break into the industry and get their footing.

If you would like to learn more about how the three-tier system works, and how it relates to your specific business, contact us at LaBarba Permit Service. Over the past 52 years we have developed a great working relationship with both the Texas Alcoholic Beverage Commission and the retailers from all over the state for whom we have secured licensing. If you are in need of a premier liquor license consultant in Dallas, TX, give us a call today. We look forward to assisting you in making sure your business is fully compliant with every aspect of Texas liquor laws.