Navigating the Regulatory Landscape for Private Label Alcohol

Private labels are not a new concept – many consumers have purchased private label products for years, but their use is becoming more prevalent and ubiquitous in the market as demand for private labels continues to rise.  Whether you are a retailer launching your own wine label or a brewery producing beer for a supermarket chain, the business opportunities are abundant, but so are the regulatory considerations.

What Are Private Labels?

While not formally defined at the federal level, according to the Alcohol and Tobacco Tax and Trade Bureau (TTB), “private labels” are labels “created for purchasers other than the ultimate consumer. They may bear a brand name or artwork that is specific to the purchaser, such as a retail store or restaurant, who is buying the product in order to sell it to consumers.”

With a private label, the intellectual property (IP) used to brand and market the product is owned or under the control of the retailer. The retailer then enters into a licensing agreement authorizing a producer (or multiple producers) to make products under specified trademarks and other IP owned by the retailer. Despite their nature, in most jurisdictions, sales pass through an independent wholesaler, often one identified by the retailer as willing to take a lower markup than is customary on the product. The products are subject to the same labeling requirements as any other TTB-regulated product.

Private labels are sometimes confused with control labels, primarily because of the issue of who owns the IP.  For a control label, as opposed to a private label, the brand name and trademark are owned by the supplier. The product is made to the retailer’s specifications, and it is sold to a specific retail account. With a control label, the retailer can influence marketing and pricing strategies as well. Control labels, in particular, are prohibited more often than private labels, with states taking issue with a manufacturer retaining ownership of a brand that a retailer is exerting control over.

Private labels are not expressly permitted or prohibited at the federal level, but TTB’s labeling regulations implicitly recognize that a retailer’s name may appear on a label and that a supplier may bottle a product for a retailer. At the state level, while private label arrangements are prohibited in a few jurisdictions (e.g., Arkansas), most states permit such arrangements. In some jurisdictions (e.g., New York), the supplier or wholesaler must restrict sales of the private label to the retailer that owns the IP. In others (e.g., Texas), the private label product must be available, at least in theory, to any retailer that wishes to purchase it. However, private label products present an obvious question: How do they exist without violating tied-house and anti-discrimination laws?

For example:

  • Private labels can pose tied-house  issues if the retailer is deemed to have disproportionate control over the production process (e.g., beyond quality control and IP protections). Or, conversely, the manufacturer has undue control over the retailer (e.g., quota sales, exclusive [...]

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The Next Wave of ADA Website Accessibility Lawsuits Against Alcohol Suppliers

The increasing popularity of online shopping has made e-commerce businesses – specifically those in the alcohol beverage industry – a frequent target for costly litigation. In lockstep with the continued prevalence of website accessibility cases, plaintiff firms are sending pre-suit demand letters to alcohol suppliers and, in some cases, filing a state or federal court lawsuit. These lawsuits, which are typically filed in California, Florida, or New York, involve claims that a supplier’s website is not accessible to individuals who are blind in violation of Title III of the Americans with Disabilities Act (ADA) and related state laws. In these cases, plaintiffs seek attorneys’ fees, damages (only under state law), and injunctive relief that would require the website to conform with the Web Content Accessibility Guidelines (WCAG) standards, which have been broadly adopted by courts and regulators.

While many e-commerce companies, including alcohol suppliers, have turned to “accessibility widgets” to improve WCAG compliance, these quick-fix solutions are not always what they seem. More than 25% of all website accessibility lawsuits in 2024 (more than 1,000) were brought against businesses that used widgets, with many plaintiffs explicitly citing widget features as alleged obstacles to accessibility. Widget developers have also faced scrutiny. The Federal Trade Commission recently leveled a $1 million fine against one such company for falsely claiming that its widgets “make any website complaint.” Therefore, relying solely on widgets to comply with WCAG standards has proven ineffective and could render e-commerce businesses vulnerable to website accessibility lawsuits.

To prevail on a website accessibility claim, plaintiffs must first show that a defendant is a private entity that owns, leases, or operates a “place of public accommodation.” Courts, however, are split on what it means for a website to be considered a place of public accommodation under Title III of the ADA. While some jurisdictions require a “physical nexus” between the website and a brick-and-mortar store, other jurisdictions have permitted these cases to go forward against a website-only company that does not own or operate any physical retail location. Even so, the “physical nexus” test is applied by a majority of federal courts and was recently adopted by the most active court for ADA website litigation in the country: the US District Court for the Southern District of New York. This development will likely add to an emerging trend of website accessibility plaintiffs resorting to state courts in search of more favorable laws.

In addition to establishing that the supplier’s website is a place of public accommodation, the plaintiff must satisfy certain jurisdictional requirements that will depend on whether products can be purchased directly from the website and whether the supplier ships to the state in which the suit was filed. Leveraging these defenses (among others) will be critical when it comes to either convincing the plaintiff to withdraw the claim, filing a motion to dismiss, or achieving an early resolution on favorable terms.

Due to [...]

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How Alcohol Exporters Can Use FDII and IC-DISC to Maximize Tax Savings

For US alcohol exporters – whether crafting bourbon, brewing craft beer, or bottling fine wines – selling to international markets is a significant opportunity for growth. Two US federal income tax regimes, the foreign-derived intangible income (FDII) deduction and the interest charge-domestic international sales corporation (IC-DISC), offer valuable ways to reduce tax liability and boost profits. Each has unique benefits and trade-offs, making them suited to different business needs. This blog post compares FDII and IC-DISC, helping alcohol exporters decide which tool – or combination – best fits their global ambitions.

Note that all discussions of tax rates are limited to US federal income tax. Additional state and local taxes and excise taxes may also apply.

FDII for Export Income

Introduced under the 2017 Tax Cuts and Jobs Act (TCJA), FDII incentivizes US C corporations to earn income from foreign sales while keeping operations stateside by providing a reduced effective tax rate on eligible export income derived from US-based corporations. It targets “intangible” income – profits exceeding a routine return on tangible assets – and applies a deduction directly on the exporter’s tax return.

How FDII Works

  • Eligible income comes from selling alcohol (e.g., whiskey or wine) to foreign buyers for use outside the United States.
  • The FDII deduction is 37.5% of qualifying income (dropping to 21.875% after 2025), reducing the effective corporate tax rate from 21% to 13.125% on that portion of income.
  • No separate entity is required. Claims are made on the existing C corporation’s Form 1120.

Example: A winery exporting $2 million in Pinot noir with $400,000 in net profit might qualify $300,000 as FDII. A 37.5% deduction ($112,500) lowers the tax from $63,000 to $39,375, saving $23,625.

IC-DISC: A Classic Deferral and Rate Reduction Tool

The IC-DISC, a legacy export incentive from the 1970s, operates as a separate “paper corporation” that earns commissions on export sales. It is available to any US business structure (e.g., C corporations, S corporations, and LLCs) and shifts income to shareholders at a lower tax rate or defers it entirely.

How IC-DISC Works

  • The exporter forms an IC-DISC and pays the entity a commission (up to 4% of export gross receipts or 50% of net export income).
  • The commission is deductible for the operating company, reducing its taxable income.
  • The IC-DISC pays no federal tax; instead, its income is distributed to shareholders as qualified dividends (taxed at 20% capital gains rate) or retained for deferral.

Example: A distillery owned by a closely held pass-through entity with $2 million in export sales and $400,000 in net profit pays a $200,000 commission to its IC-DISC. The operating company saves $74,000 in income tax (37%), while shareholders pay $47,600 in capital gains tax (20% plus 3.8% net investment income tax) on the dividend, netting a $27,600 savings.

Comparing Tax Benefits: FDII vs. IC-DISC

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Navigating the EPR Laws: What Alcohol Beverage Producers Need to Know

Extended producer responsibility (EPR) laws are relatively new – the first were signed into law in 2021 and 2022 – and are aimed at encouraging producers to package goods in a more environmentally conscientious manner and providing much needed revenue for in-state recyclers overwhelmed by the incoming volumes of recyclable material. In essence, EPR laws require producers whose products reach in-state consumers to register with a producer responsibility organization (PRO) or stewardship organization (SO), report the amount of material that enters the state, and pay fees for that material.

As detailed in this blog post, how and if these new laws apply to alcohol beverage suppliers is nuanced given both the developing nature of EPR laws as well as the interplay with preexisting container deposit or bottle bill laws.

Who and What Is Covered by the New EPR Laws?

As of the writing of this article, five states have passed EPR laws and 10 others have introduced bills during their most recent legislative sessions, including Connecticut, Hawaii, Nebraska, and New York. EPR programs are still evolving as the various regulatory processes continue; however, once passed by a state, the new rules typically require the state to designate a PRO/SO to administer the producer requirements and aid producers and state agencies with the necessary reporting and payment requirements. For those states that have passed EPR laws, the nonprofit organization Circular Action Alliance is the PRO/SO that has been selected to oversee the process.

Each EPR law has its own definition of “producer” (i.e., those required to report) and of “covered material” (i.e., the materials that must be reported). There are several specifics within each state but, generally, the producer is the entity who actually produces the subject goods or the owner of the brand that is contracting to have the item produced. Speaking broadly, the covered material contemplated by these laws includes the cardboard boxes and glass or aluminum containers that protect and contain the items purchased from retailers. In this regard, EPR laws apply to alcoholic beverages, non-alcoholic beverages, and nearly all other types of consumer goods.

However, exemptions exist for small producers and certain materials. The specifics as to when a producer is exempt from registering and making EPR payments vary by state but, in many instances, those producers shipping small amounts into a certain state will be exempt. For example, Minnesota exempts producers responsible for less than one metric ton of covered material or $2,000,000 in global gross revenue. However, it is important to remember that even if a small producer is, given its status, exempt from registering with a PRO/SO or paying the related EPR fees, it will likely still have reporting requirements to substantiate its claims of being exempt.

How Do These Laws Apply and Interface with Alcohol Beverage Laws?

In the world of beverage alcohol, there are numerous laws already in place, many of which have been in force for decades, that are aimed at sustainability and designed to fund and encourage recycling. These are [...]

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Key Takeaways | 2024 Recap and What’s on Tap for Alcoholic Beverage Companies

The alcohol beverage industry experienced a transformative year, marked by notable shifts in consumer behavior, innovative product launches, and regulatory changes. During a recent webinar, McDermott’s Alcohol Group provided a retrospective on the pivotal moments of 2024 that impacted the industry, a preview of what’s to come in 2025, and insights into how your company can stay ahead in this dynamic market.

Access the takeaways and webinar here.




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