Virginia General Assembly Passes Progressive Legislation to Support State’s Burgeoning Distilled Spirits Industry

Courtesy Revel Photography

2019 signals a new chapter in the commonwealth’s support for Virginia’s distilled spirits industry after several key pieces of legislation passed this year’s General Assembly Session and are set to go into effect July 1, 2019.

HB 1770 / SB 1668, championed by a partnership between the Virginia Alcoholic Beverage Control Authority (ABC) and the Virginia Distillers Association (VDA), contains two core components:

  • Increasing the commission paid to Virginia distilleries for onsite distillery store sales from 8 percent to 20 percent.
  • Discretionary opening of Virginia ABC stores as early as 10am on Sundays, expanded from 12pm.

“Sundays continue to be a popular shopping day for many of our customers,” said Virginia ABC Chief Executive Officer Travis Hill. “This legislation will allow us to better serve those who choose to shop on Sundays, and provide economic growth for the state and our burgeoning distilled spirits industry.”

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“Our partners at Virginia ABC understood the challenges that we face as spirited entrepreneurs, and through their support, legislation was passed that directly incentivizes growth,” said Gareth H. Moore, President of the VDA and CEO of Virginia Distillery Company in Lovingston, Virginia. “Our 64 licensed distilleries are a part of the fastest growing sector of the beverage business in the commonwealth, and improving the economics for direct sales and allowing expanded hours is good policy for Virginia distilleries, Virginia ABC, Virginia taxpayers, and of course, consumers of Virginia spirits.”

The formula for pricing distilled spirits in the commonwealth is the same whether the product is sold at a Virginia distillery, or at a local ABC retail store.  At distillery stores, in order to cover overhead expenses associated with retail sales – employee salaries, electricity, credit card processing machines, etc. – distillery store operators receive a commission.  The previous commission rate of 8 percent of gross sales exclusive of sales tax was too low to cover retail expenses; leading to a loss on sales where the spirits are made.  When the legislation goes into effective July 1, 2019, the commission rate will increase to 20 percent, enabling healthy growth of distillery operations.

Contributing to the success of HB 1770 / SB 1668 was ensuring that the legislation would be revenue neutral for the state. Since retail stores and distillery stores are regulated as government Virginia ABC stores, both will have the elective option to open on Sunday at 10am as opposed to the current 12pm – a schedule already used by many Virginia wineries and breweries. The additional revenue from the expanded hours is expected to cover the incremental commission increase without impacting budgetary goals set for Virginia ABC by the General Assembly.

The General Assembly also supported other progressive distilled spirits legislation this year, including HB 2634 / SB 1110, which is intended to ‘flip’ Virginia’s dry counties to wet unless the locality has a majority vote referendum to continue dry. Currently, Virginia has nine remaining dry counties (Bland, Buchanan, Charlotte, Craig, Grayson, Highland, Lee, Patrick and Russell), with portions of 31 counties dry. Distilled Spirits Council President & CEO Chris Swonger said, “Virginia has made tremendous progress in providing consumers with the convenience they demand and creating a more modern spirits marketplace. We commend the VIRGINIA ABC and state lawmakers for fostering a strong business environment for Virginia’s booming distilled spirits industry.”

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