Distiller makes agreement with state ABC over alleged violation concerning online sales

A North Carolina distiller who got into trouble with N.C. Alcoholic Beverage Control Commission distributed more than 70 letters to colleagues warning them against running afoul of state laws.

The ABC alleges the distiller, Knightdale-based Gentry Lassiter, broke state statute when he posted on his website a link to online spirits retailer. It’s illegal — via statute 18b 102.1, which is confusing and seemingly contradictory — to ship alcohol directly to customers in North Carolina, although many other states allow the practice. The law exempts wholesalers.

The rule applies only to liquor, which has a higher alcohol content than wine and beer, which can be legally shipped to state residents.

Several distillers had similar violations, a source said, though it’s unclear whether they were punished. Lassiter’s letter was part of a settlement with the ABC.

Online spirits retailers, as practice, inform customers of shipping policies and state laws.

“Last month,” writers Lassiter in the July 17 letter, “Lassiter Distilling Company LLC, received a notice of Alleged Violation from the [Alcoholic Beverage Control] Commission. The genesis of the alleged violation was that our web site unintentionally allowed a potential pathway for North Carolina customers to buy our liquors from Washington, D.C.-based Federal Spirits, LLC, which previously owned and operated Ezra’s.com. Approximately a year and a half ago, Lassiter Distilling sold several cases  of our spirits to Ezra’s so that Ezra’s could sell our product to its customers outside of North Carolina. To help Ezra’s sell our products, Lassiter Distilling then added a ‘buy online’ link to our web site, which when clicked routed customers to Ezra’s. Due to oversight on our part, this created a situation where a North Carolina customer could potentially order a bottle of our rum that could be shipped from out-of-state into North Carolina.”

The websites for Ezra’s and Federal Spirits are no longer active.

“… While our intent in selling our products to Ezra’s certainly was not to flout North Carolina law, it created a situation that caught the attention of the Commission. … We learned during our discussion with the Commission that pursuing out-of-state companies can be difficult for the Commission to do, and thus transactions like that between Lassiter Distilling and Ezra’s have become a point of focus. I understand the Commission’s dilemma, and therefore I am writing this letter to try to help educate distillers and wholesalers on what you can do to help the Commission — as well as our company.”

Lassiter said he’s willing and pleased to work with the ABC toward a solution.

“Lassiter Distilling has has always been and is committed to be a compliant company,” whether that relates to distilling, packaging, shipping or any aspect of the business, he said. “We respect the law and rules of North Carolina in regard to how we conduct our business.”

The N.C. House last year stripped a provision in Senate Bill 155, the so-called Brunch Bill, that would have allowed North Carolina distilleries to sell directly to consumers, via the internet. Rep. Pat Hurley, R-Randolph, an opponent of loosening the state’s liquor rules, proposed the amendment to remove that part of the bill.

The ABC Commission falls under the Department of Public Safety, with, as stated on its website, an “overall objective to provide uniform control over the sale, purchase, transportation, manufacture, consumption, and possession of alcoholic beverages in the state.”

The word “control” is key, often popping up in legislative committee hearings and church pulpits. In other states, such as Virginia, alcohol regulation is left to commerce departments and special authorities.

Distillers jumped to Lassiter’s defense. In a letter to a group of lawmakers, one distiller, who asked not to be identified, called the Lassiter situation a “blatant overreach of the ABC Commission.”

“Here they accuse Lassiter Distilling of an ABC violation for legally selling their spirits to a wholesaler in another state and that wholesaler then sells it to someone in N.C. The ABC commission literally says ‘they created a pathway.’ Lassiter did nothing of the sort. Lassiter complied with all laws.

“Lassiter did nothing wrong. But they are forced to ‘accept’ their punishment because ABC licenses are suspended during the time any ‘violation’ is appealed. Consequently, you can never appeal. You just have to accept their ruling.

“There are many issues that this brings up but here are the two that really jump out at me:

“1) This is ridiculous on its face and the ham handed ABC process that doesn’t allow you to fight back needs to be changed.

“2) This would be a non-issue if the online sales component of the Brunch Bill had been passed because distilleries would be doing the online sales themselves instead of using an out of state wholesaler. BTW, the tax money would all stay here in North Carolina.”

George Smith, who founded Copper Barrel Distillery in Wilkesboro, likened the situation to punishing a distillery because an ABC store sold their liquor to a minor.

The ABC Commission, in an email, said, “All North Carolina distillers are advised when they initially meet with the ABC Commission (as a regular part of the process of listing their products for sale in the state), that the law requires liquor to be sold only at ABC stores in North Carolina or in limits of 5 bottles from the NC distilleries on-site. Online sales within and into North Carolina are prohibited.”

Questions by Carolina Journal about enforcement were referred to the Alcohol Law Enforcement, which is under the umbrella of the State Bureau of Investigation and is the lead enforcement agency for the state’s alcoholic beverage control laws. ALE told CJ it investigates “any complaint of this nature and turn over those findings to the ABC Commission,” and the ALE isn’t aware of this being a widespread issue.