Understanding Restrictions on Business Arrangements with Unlicensed Marketing and Fulfillment Companies
Working with Unlicensed Marketing, Fulfillment, Logistics, Shipping, and Delivery Companies
Only licensed businesses can sell alcoholic beverages. Unlicensed third-party providers cannot sell alcohol or exercise license privileges.
Unlicensed third-party marketing and fulfillment companies have become ubiquitous in the alcoholic beverage industry. Third parties often receive orders from customers, then contact a licensee to accept or reject the order. If the licensee accepts the order, then the third party processes the payment (at prices set by the licensee) and arranges for delivery or shipment.
California’s Alcoholic Beverage Control Act and Marketplace Facilitator Act both regulate business arrangements with unlicensed third-party providers. Licensees and third-party providers must segregate funds from alcohol sales, with the sales tax going to the third-party providers and all other money from the sales going to the licensees. Licensees must pay and account for fees to third-party providers separately.
You can review the ABC’s guidance on third party providers here.
Licensees are responsible for violations committed by third parties they hire. Licensees should consult an alcohol attorney to make sure their agreements with marketing, fulfillment, logistics, shipping, and delivery companies comply with applicable laws.
Why Choose Gillian Garrett Law, PC for Alcohol Law Advice
Gillian frequently advises clients about how to maximize compliant opportunities with unlicensed third parties.
Frequently Asked Questions:
It depends on the state. In California, the answer is yes, if the transaction is set up to comply with applicable alcohol laws.
Arrangements with third party providers need to comply with California’s Alcohol Beverage Control Act and Marketplace Facilitator Act.
Retailers can pay reasonable marketing fees for promotion services, so long as they comply with alcohol laws, including tied house laws.
In California, “third party provider” means “unlicensed entities that are involved with the promotion, marketing, and facilitation of sales of alcoholic beverages by licensees over the Internet. Third Party Providers are involved in one or more of the steps in the transfer of title of an alcoholic beverage from a licensee to a consumer, such as placement of advertising, making recommendations to consumers, directing consumers to licensees, receiving orders and passing them on to licensees, processing payments, and assisting with shipping arrangements.”
Yes, you should consult an attorney before signing any marketing or logistics agreements.
It depends. Persons involved can face criminal prosecution, fines, and jail time, depending on the severity of the conduct. The ABC can also disqualify individuals and businesses involved from holding or managing licenses in the future.
Yes.