Collectors, Taxes and the Modern Day Bootleggers


June 15, 2015

The U.S. government wants its booze taxes.

Last week, the TTB updated its TTB Tip Line to encourage citizens to report the illegal transactions of “alcohol and tobacco products into domestic commerce without the payment of taxes.”

Does this mean the TTB will start cracking down on people selling liquor without a license or paying taxes?

I think it’s safe to assume yes, and the liquor distribution trade is likely the main reason why.

U.S. alcohol sales are set up through a three-tier system: the manufacturer, distributor and retailer / bar. In this system, every liquor drop must move through a distributor, who serves as a de facto government official for collecting excise taxes. There are some exceptions to this rule, but generally that’s how alcohol is sold in America.

Interestingly, a Wine and Spirits Distributors of Illinois study illustrates actual stores are selling wine, spirits and beer purchased outside of the distribution system. According to this WSDI study, Illinois loses $30 million a year in lost tax revenues to modern-day bootleggers.

Meanwhile, North Carolina passed a bill that will allow licensed beverage establishments to “obtain antique spirituous liquor” permits. This essentially means North Carolina has created a way for bars to sell collector-level whiskey, brandy, rums, wines, etc.

So where will this trend go for collectors?

I’ve talked to several distributors about collectors selling and buying historic products at legitimate auctions, such as Christie’s auctions and Bonhams. They tend to ignore these transactions and want something similar to what North Carolina has proposed.

Distributors and the government essentially care about stopping deathly alcohol from entering the market, underage drinking and of course, collecting taxes.

But in the coming months, you can expect the distributor lobbies to beef up their lost taxes arguments and the TTB to expand its investigative net. Uncle Sam wants his taxes.


Fred Minnick is the author of the upcoming Bourbon Curious.