Alcohol Industry, Regulation and Taxation of

The Three-Tier System

While the ratification of the Twenty-first Amendment ended federal Prohibition, it did not mandate the legalization of alcohol across the country. Rather, it returned the legislative authority to regulate production, sales, and distribution to state governments. At the time, all 50 states enacted what is known as the three-tier system, designed in large part to prevent the formation of industry monopolies, which were widely blamed for the excesses and abuses that prompted national Prohibition, and to facilitate industry supervision and tax collection.

The system, still in place today, requires the legal separation of producers (i.e., brewers, ...