OLR Research Report



Representative Kathy Tallarita

Edward Berthiaume, Owner, B's Discount Liquors


Mark Abrahamson Co-Owner, Mo's Wine and Spirits

Dr. Ian Ayres Yale Law School

Chief James Cetran Wethersfield Police Department

Edward Crowley COO, Dichello Distributors

Brian Durand Office of Policy and Management

Representative Mary Fritz

David Leon Simsbury Owner, Super Cellar Warehouse Liquors

Dr. Stanley McMillen University of Connecticut

Representative Sandy Nafis

Representative Rosa Rebimbas

Commissioner William Rubenstein Department of Consumer Protection

David Rutigliano Co-Founder, SBC Restaurant Group

Commissioner Kevin B. Sullivan Department of Revenue Services


Public Act 12-17 (14), An Act Concerning Competitive Alcoholic Liquor Pricing and Hours of Operation for Permittees, established a task force to examine, review, analyze, and compare Connecticut's alcoholic liquor taxes, quantity and volume discounts, existing liquor permit restrictions, and minimum pricing and price posting laws with those in surrounding states. It also required the task force to examine the impact of these issues on Connecticut's consumers and alcohol industry.

The act required the task force to submit a report on its findings and recommendations to the General Law Committee by January 1, 2013. It terminates when it submits its report or on January 1, 2013, whichever is later.


The task force began its work in July 2012 and met six times as a full task force. It met on (1) July 11 to introduce task force members, (2) August 1 to hear presentations from the departments of Consumer Protection (DCP) and Revenue Services (DRS), (3) September 12 and October 10 to review and discuss its research, (4) November 14 to discuss the final report, and (5) December 12 to approve the final report. In addition to the committee and subcommittee meetings, on September 12 the task force heard from several liquor industry representatives who were not represented on the task force.

The task force also established four subcommittees to study more extensively: (1) existing permit restrictions, (2) alcohol taxes, (3) quantity and volume discounts, and (4) minimum pricing and price posting. Members were assigned to subcommittees based on interest (see Appendix A for a list of subcommittee membership). The co-chairpersons of the task force each chaired two subcommittees. All subcommittees were required to report their findings to the full task force by October 1.


1. Connecticut and its neighboring states (Massachusetts, New York, and Rhode Island) have some basic similarities in the way each regulates alcohol. They are all license states, which means retailers must obtain a state permit to sell alcohol. Additionally, all of these states restrict retailers who sell alcohol for off-premises consumption, either by limiting ownership of retail stores by population, permit type, or both.

2. Connecticut and Rhode Island generally do not allow convenience stores that do not primarily sell groceries to sell alcohol. But both Massachusetts and New York allow convenience stores to sell alcohol.

3. An "exclusive territory" is a geographic area in which a manufacturer uses only one wholesaler to distribute its product. Connecticut and its neighboring states allow, rather than mandate, exclusive beer territories.

4. Connecticut, New York, and Rhode Island currently impose both an excise and sales tax on beer, wine, and liquor. Massachusetts imposes an excise tax but no sales tax.

5. Connecticut law generally prohibits off-premises retailers from selling alcoholic beverages below a minimum price set by the wholesaler, but they may discount one alcoholic item in any month for sale below such minimum price. The law describes the minimum price as "cost," although it is does not reflect the actual cost paid by a retailer.

6. Price posting laws require alcohol wholesalers to post their future prices with a state agency and keep these prices for a specified period of time. Connecticut and New York, but not Massachusetts and Rhode Island, have price posting laws. Connecticut requires prices to be posted for wine, liquor, and beer, while New York requires prices to be posted for wine and liquor.

7. For the most part, Connecticut law prohibits alcohol manufacturers and wholesalers from offering quantity and volume discounts, which are price reductions sellers offer to buyers as incentive to buy more of a product. Massachusetts, by contrast, allows alcohol wholesalers to provide quantity discounts to retailers as long as the prices are posted with the state in advance.

8. State bottle bills require retailers to charge consumers a small deposit on certain bottled drinks at the time of purchase. The deposit is returned to consumers when they return the empty bottle. Connecticut, Massachusetts, and New York all have bottle bills, which all require retailers to collect a five-cent deposit per bottle. Rhode Island does not have a bottle bill. For alcoholic bottles, these bottle bills apply only to beer, not wine or liquor. Unredeemed bottle deposits, known as escheats, are returned to the state.  Connecticut currently receives $31.5 million from escheats, of which $9.6 million comes from beer bottles.


The task force report does not contain any recommendations, but Appendix B contains written comments from individual task force members.

Appendix C lists documents submitted at the September 12 task force hearing.

Appendix D lists documents that the task force received.



Alcohol is a heavily regulated substance. The Twenty-First Amendment to the United States Constitution and federal law largely give states the responsibility for regulating the alcohol industry. As a result of this delegation of power to the states, there are 50 different regulatory schemes. Though there are similarities in the regulatory schemes, it is often difficult to make direct comparisons.

Three-Tier System of Alcohol Distribution

All the states, except Washington, use some form of the three-tier alcohol distribution system. The three-tier system requires the separation of manufacturers from retailers. The basic structure requires manufacturers to sell their products to wholesalers, who in turn sell to retailers, who sell to consumers.

Generally, under the three-tier system, only retailers may sell to consumers. But most states, including Connecticut, have certain exceptions to this system for smaller manufacturers. Connecticut allows manufacturer permittees for (1) farm wineries, (2) brewpubs, and (3) beer and brewpubs to both manufacture alcohol and sell at retail (CGS 30-16(e-g)).

Alcohol Permits

States have taken two regulatory approaches to alcohol distribution, one known as the control model and the other, the license model. Control states operate a monopoly over wholesale alcohol sales with some, such as Pennsylvania, also operating alcohol retail stores. License states, including Connecticut, regulate alcohol sales by granting permits to allow private entities to sell alcohol.

Connecticut has established multiple permit categories within each of the three tiers (i.e. manufacturers, wholesalers, and retailers). Permit categories are based on the type of alcohol sold as well as the nature of the business. Retail permits fall into two categories, one for on-premises consumption (usually restaurants and cafes) and one for off-premises consumption (primarily package and grocery stores).

In 2004, the Legislative Program Review and Investigations Committee (LPRIC) studied Connecticut's alcohol permitting system and concluded that the system is too complex and should be simplified. The recommendation was not enacted (see LPRIC study, State Liquor Permits, December 2004).

According to DCP, there are currently 7,884 alcohol permits in Connecticut, of which over 75% are retail permits. Of the retail permits, 66% are for on-premises and 34% for off-premises stores. Over 60% of the on-premises retail permits are for restaurants. Approximately 58% of the off-premises retailers are for package stores and 42% are for grocery store beer permits.

Off-Premises Permit Restrictions

States place numerous restrictions on alcohol sales, particularly sales for off-premises consumption. The main reason for these restrictions is generally to limit access to alcohol for public health or safety reasons, particularly by minors and intoxicated persons. Some states attempt to reduce alcohol availability by limiting the (1) types of alcohol that a retailer may sell and (2) number of liquor stores.

Connecticut limits the types of alcohol that retailers may sell by allowing (1) only package stores to sell liquor and wine and (2) grocery stores to sell only beer (CGS 30-20). This limits what types of alcohol can be purchased at a particular type of store, but not the alcohol amount. According to the U.S. Dietary Guidelines, a standard serving of beer, wine, and liquor all contain the same alcohol amount (http://www.cnpp.usda.gov/Publications/DietaryGuidelines/2010/PolicyDoc/Chapter3.pdf).

State law also limits the number of package stores a (1) permittee may own and (2) town may have. The law limits a town to one package store for every 2,500 residents and allows only three package stores per owner (CGS 30-14a & 30-48a(a)). Towns may also elect to prohibit alcohol sales entirely (CGS 30-9 & 30-10).

Table 1 compares these Connecticut permit restrictions with surrounding states.

Table 1: Alcohol Permit Comparison for Off-Premises Sales


Premises Type; Alcohol Sold

Permit Limitations for Off-Premises Ownership

Population-Based Limits


Package Store: All alcohol types (liquor, wine, beer)

Grocery Store: Beer

Three package stores per owner

No restriction on grocery stores

One package store per town for every 2,500 residents

Package Store: All alcohol types

Grocery Store: All alcohol types

For all off-premises permits:

Currently, five per owner, but will increase to seven in 2016, and nine in 2020

One per town for every 5,000 residents


Package Store: liquor and wine

Grocery Store: beer

One package store per owner

No restrictions on grocery stores

None, but the State Liquor Authority requires applicant to prove public convenience and that the area is not oversaturated


Package Store: All alcohol types

Grocery Store: no alcohol sold


One per town for every 6,000 residents; one for every 4,000 if the town has less than 20,000 residents

Source: Office of Legislative Research (OLR) Report 2012-R-0370

Convenience Stores

States define convenience stores differently. Some, including Connecticut, do not define them statutorily. But convenience stores are generally smaller than grocery stores, sell a higher percentage of non-grocery items than grocery stores, and are distinct from package stores because they sell more food items.

Currently 40 states, including Massachusetts and New York, allow convenience stores to sell alcohol. Massachusetts allows convenience stores to sell liquor, wine, and beer, but a city or town, during the local permit approval process, may limit the license to beer and wine sales (Mass. Gen. Laws ch. 138, 15). New York allows convenience stores to sell beer and wine products (N.Y. Alco. Bev. Cont. Law 54a).

Rhode Island does not allow convenience stores to sell alcohol. Connecticut generally does not, but it permits such sales if a convenience store primarily sells groceries and has a grocery beer permit. This requirement generally disqualifies convenience stores that sell gasoline due to the disparity of gross sales of gasoline compared to groceries.

In 2011, the General Law Committee raised and voted out of committee SB 864, which would have allowed all convenience stores to sell beer. The Office of Fiscal Analysis (OFA) estimated that allowing convenience stores to sell beer would increase sales by roughly 10%, resulting in an annual gain of $1.7 million from the alcoholic beverage and sales taxes (see fiscal note). The legislation did not pass.

Exclusive Beer Territories

An "exclusive territory" is a geographic area in which a manufacturer uses only one wholesaler to distribute its product. Certain states statutorily mandate exclusive territories, while others allow them. Connecticut and its neighboring states allow, rather than mandate them.

Proponents of exclusive territories argue that they force wholesalers to provide better services, which could include maintaining proper temperature control or performing merchandising and advertising services. They say that wholesalers in exclusive territories have the incentive to provide these services because they alone benefit from any profits, which would not be the case if they shared the territory. In addition, proponents argue that beer is a unique product that is different from other alcohol. It has a relatively short shelf life and may spoil, thereby increases a wholesaler's responsibility for product freshness (Latrobe Brewing Co. v. Connecticut, 1996 WL 737466 at 3-4 (Conn. Super. 1996).

Proponents also argue that administration of the state bottle redemption law (bottle bill, see below) is easier in exclusive territories. Without such territories, beer wholesalers may suffer economic hardship when they have to pick up and redeem bottles they did not originally sell, according to the Connecticut Beverage Coalition

Opponents of exclusive territories say they eliminate competition and force retailers to buy from just one wholesaler. Because there is only one wholesaler per brand, price competition only occurs from wholesalers of other brands. Exclusive territories make it easier for wholesalers to set higher prices because they can do so without being undercut by intrabrand competitors. Proponents respond to this lack of intrabrand competition by stating the importance of interbrand competition. They argue there are sometimes hundreds of different beers that one particular brand must compete with.


Taxes are part of the cost consumers pay for alcohol. Currently, Connecticut has both an excise and a sales tax on beer, wine, and distilled spirits. The excise tax applies to the wholesalers and the sales tax applies to the retailer; in practice, both are passed on to the consumers by the retailers. The collected tax revenue goes into the state's General Fund.

Excise Tax on Alcohol

According to DRS, the most effective way to compare state excise tax rates is on a per-gallon basis. Table 2 compares Connecticut's excise tax rate for various alcohol types with neighboring states.

Table 2: Excise Tax Comparison







Still Wines – not in excess of 21% alcohol by volume

Wine Gallon

(128 oz.)

$ 0.72

$ 0.55

$ 0.30

$ 0.60

Still Wines Produced by Small Wineries – not in excess of 21% alcohol by volume

Wine Gallon





Fortified Wines in excess of 21% alcohol by volume and Sparkling Wines

Wine Gallon





Beer and Other Malt Liquors – Draft barrels only


(3,840 oz.)





Beer and Other Malt Liquors – other containers

Wine Gallon





Distilled Liquors

Wine Gallon





Source: DRS

The comparison shows that the excise tax for most alcoholic beverages is higher in Connecticut than in surrounding states. The excise tax on still wines produced by small wineries is lower in Connecticut than in neighboring states. New York's excise tax on distilled liquors, fortified wines, and sparkling wines is higher than Connecticut's excise tax for such beverages. In all other categories, Connecticut's alcohol excise tax is higher than Massachusetts, New York, and Rhode Island.

Sales Tax

Like the majority of surrounding states, Connecticut imposes a sales tax on alcohol sales. Connecticut's current alcohol sales tax rate is lower than New York's (not including additional sales tax at the local level) and Rhode Island's. Massachusetts no longer has a sales tax.

Table 3 compares Connecticut's sales tax rate with surrounding states.

Table 3: Sales Tax Comparison






Sales Tax Rate





Source: DRS

Massachusetts enacted a sales tax on alcoholic beverages on August 1, 2009 (FY 2010) but voters repealed the tax in 2010, effective January 1, 2011 (FY 2011). Chart 1 presents the collections from the excise taxes in Massachusetts from FY 07 to FY 12. The data provides a baseline to measure alcohol sales before and during the sales tax enactment. According to OFA, the collections from the alcohol beverage tax indicate that the volume of alcohol sales in Massachusetts declined by 1.2% from FY 09 to FY 10, when the sales tax applied. From FY 10 to FY 11, when the sales tax was repealed, the volume of sales increased by 2.5%.

Chart 1: Massachusetts Alcohol Excise Tax Collections

There does not appear to be any consensus on the role taxes play on the final consumer price. Some argue that there is little evidence of a relationship between taxation and underlying product pricing for consumers, while others say that the higher Connecticut consumer prices are largely due to the higher taxes.

Impact of Sunday Sales Legislation on Alcohol Sales

Connecticut retailers have been allowed to sell alcohol on Sundays since May 20, 2012. DRS compared total alcoholic beverage sales for May through August in 2010, 2011, and 2012. From May through August 2010 to May through August 2011, alcohol sales decreased by 1.6% (476,453 gallons). Alcohol sales increased in May through August 2012 by 4.4% (1,251,202) in comparison with May through August 2011. The increase in 2012 suggests that consumers are taking advantage of Sunday alcohol sales and that total alcohol sales have increased as a result. Proponents of expanding Sunday alcohol sales point out that these results are consistent with results in other states that repealed prohibitions on Sunday sales. Furthermore, they suggest that based on the increase in alcohol sales, Connecticut should allow stores to maintain normal business hours on Sunday.


Other factors besides taxes affect alcohol pricing, including minimum pricing and price posting laws, as well as state bottle bill deposits and handling fees.

Minimum Pricing Laws

Connecticut law generally prohibits off-premises retailers from selling any kind of alcoholic beverage below a minimum price and prescribes how such minimum price must be calculated for this purpose. The one exception allows retailers to sell one alcoholic item a month below the otherwise minimum price, but not for less than 90% of the minimum (CGS 30-68m).

The law describes the minimum price as "cost," although it is does not reflect the actual cost paid by a retailer. The law provides different formulas for calculating this minimum price: one for beer and one for other alcoholic beverages. The minimum price for alcohol, other than beer, is the wholesaler's posted "bottle price" plus shipping and handling. "Bottle price" means the price of a bottle of alcoholic liquor, determined by dividing the case price by the number of bottles and adding at least two, four, or eight cents depending on the bottle size. So long as the posted bottle price is in excess of such amount, a wholesaler has total discretion in what to set as the bottle price. The minimum price for beer is the lowest posted price for the month in which the beer is being sold plus any shipping or delivery charges. This means that a retailer can sell beer below actual cost if the lowest posted price during the month is below the price at which he or she bought the beer.

Proponents of minimum pricing laws believe that they allow smaller stores to compete with larger ones. In theory, without minimum pricing, larger stores may be able to sell certain alcohol at a loss to attract consumers and drive smaller stores out of business. Once the competition is gone, proponents are concerned that these stores could raise their prices. In addition to concerns over job loss, certain studies have concluded that higher prices lead to lower alcohol consumption (The Effects of Price on Alcohol Consumption, available at http://pubs.niaaa.nih.gov/publications/arh26-1/22-34.pdf). Opponents respond by citing evidence that indicate that heavy drinkers do not reduce alcohol consumption as much as light to moderate drinkers (Sin Taxes: Do Heterogeneous Responses Undercut Their Value?, available http://www.nber.org/papers/w15124).

Opponents of minimum pricing laws argue that requiring retailers to sell at a certain cost restricts the free market and ultimately results in higher consumer prices and interferes with consumer brand selection. Because price restrictions limit the price at which a retailer may sell alcohol, they may result in higher prices than in a free market system. Additionally, opponents argue that minimum prices are set (1) arbitrarily by wholesalers and (2) as high as 30% above actual cost on certain products. Opponents note that Connecticut's minimum allowable price is often several dollars per bottle above the lowest price offered by retailers in surrounding states. Opponents also argue that no other industry has these restrictions to protect smaller businesses and industries such as trucking, railroads, and air transportation have flourished when price restrictions were removed. Additionally, since it costs the same amount to deliver a single bottle as it does multiple cases, the minimum pricing law acts as an operating subsidy for smaller retailers. Opponents add that if the state wishes to subsidize smaller stores, it should do so directly through state payments. Finally, as stated above, there may be some correlation between lower prices and higher alcohol sales. A large part of these new sales are likely to come from repatriated cross-border sales, which would result in higher tax revenue for the state.

Connecticut law also defines “cost” for a wholesaler, which has one definition for alcoholic liquor bottled in state and another for outside.  Opponents of minimum pricing argue there might be a Commerce Clause issue because of the differences in cost definitions. Additionally they believe these definitions lead to higher prices for consumers.

Price Posting Laws

Price posting laws require alcohol wholesalers to post their future prices with a state agency and keep these prices for a specified period of time. Connecticut and New York, but not Massachusetts and Rhode Island, have post and hold laws (CGS 30-63(c), N.Y. Alcoholic Beverage Control Law 101-b). Connecticut requires price posting for wine, liquor, and beer, while New York requires posting only for wine and liquor.

Connecticut law requires liquor and wine manufacturers and wholesalers to post their bottle, can, and case prices each month with DCP. Except for beer, the prices are the controlling prices for the entire month in which they are posted. For beer, manufacturers and wholesalers may post additional prices for the following month and such prices are controlling for the portion of the following month. The law allows manufacturers to amend their prices for a month to a lower price posted by another manufacturer or wholesaler with the same product (CGS 30-63(c)).

Similarly, New York law requires manufacturers and wholesalers to file a schedule of prices for wine and liquor with the State Liquor Authority (SLA). In order to facilitate transparency, SLA posts the prices online 10 days after they are filed. Wholesalers then have three business days to amend prices to meet their competitor's prices (N.Y. Alcoholic Beverage Control Law 101-b).

The rationale for price posting laws is that they prevent wholesalers from discriminating against different retailers because their prices are publically posted. It eliminates special deals and allows retailers, regardless of type, to purchase at the same price.

Opponents of price posting laws argue that they increase prices. Under these post and hold laws, wholesalers have less incentive to have the lowest price because they get to see and match their intrabrand competitor's prices. If wholesalers did not have a chance to lower their price, they would have to start with a more competitive price. Opponents argue that the hold period exposes wholesalers to fluctuations in supply and demand, which could negatively impact their business if there were a sudden rise in cost. Opponents also argue that requiring prices to be determined in one month and held for the following months limits the wholesaler's ability to lower prices in response to supply and demand or other competitive conditions.

Quantity and Volume Discounts

Quantity and volume discounts are price reductions sellers offer to buyers as incentives to purchase more of a product. Connecticut law prohibits manufacturers and wholesalers from discriminating among purchasers when offering price discounts. However, in this context, "discrimination" only occurs if all retailers purchasing similar amounts were not offered the same discount. Connecticut law also prohibits manufacturers and wholesalers from allowing any discount, rebate, free goods, allowance, or other inducement to make sales or purchases (CGS 30-63(b)). DCP regulations prohibit alcohol permittees from offering or giving quantity prices or discounts to other permittees (Conn. Agencies Reg. 30-6-A29(a)).

Additionally, the law prohibits all alcohol permitees from offering, among other things, quantity prices or discounts (CGS 30-94(a)). However, the law makes an exception for depletion allowances. A "depletion allowance" is a rebate, discount, or other inducement given to a wholesaler for a sales promotion based on the amount of alcohol (other than beer) sold. The law allows liquor manufacturers and out-of-state shippers to give liquor wholesalers depletion allowances with prior DCP approval. Depletion allowances must be offered and provided on a nondiscriminatory basis to all authorized wholesalers. The rate or percentage used to calculate the discount may not be based on volume. The law prohibits manufacturers and out-of-state shippers from requiring wholesalers to participate in a depletion allowance program (CGS 30-94(b)).

In contrast, Massachusetts allows liquor wholesalers to provide discounts to retailers based on the quantity of alcohol purchased, but the wholesaler must post such discounts with the Massachusetts Alcoholic Beverage Control Commission (204 Code Mass. Reg. 6.04).

Quantity and volume discount opponents say that such discounts give large retailers and grocery stores with more space and money to purchase liquor in large quantities an unfair advantage over smaller retailers and restaurants. Some opponents in Connecticut feel that the current system is safe and efficient and should not be changed. They are specifically concerned about allowing cooperative purchasing because of its possible ramifications on the current system. It could disrupt how beer wholesalers (1) administer the bottle bill, (2) ensure their product quality and freshness, and (3) submit their reports to DRS for tax collection purposes. There are other concerns about how retailers that cooperatively purchase product will store and deliver them. Finally, there are concerns about how all of this would affect union contracts for both drivers and warehouse workers.

Proponents say that quantity and volume discounts would enable retailers to acquire merchandise at a lower price and, in turn, pass the savings on to consumers. They argue that it is more efficient to purchase inventory items in bulk. They also suggest that smaller retailers could counter the quantity and volume discount disadvantages through cooperative purchasing. Additionally, proponents argue that there is no legitimate public policy purpose behind protecting one group of retailer at the expense of another.

Bottle Bill

State bottle bills require retailers to charge a small deposit on certain bottles at the time of purchase. The deposit is returned to consumers when they return the empty bottle. Connecticut, Massachusetts, and New York all have bottle bills with a five-cent redemption fee. Rhode Island does not have a bottle bill. For alcoholic bottles, these bottle bills apply only to beer, not wine or liquor.

In addition to the five-cent deposit, wholesalers must pay a handling fee in addition to what they reimburse the retailer or redemption center. In Connecticut, wholesalers must pay 1.5 cents per bottle for beer. Massachusetts and New York do not differentiate between beer and other products and charge 2.25 and 3.5 cents per bottle, respectively.

Unredeemed bottle deposits, known as escheats, are returned to the state. According to OFA, if the bottle redemption law is repealed, the estimated General Fund revenue loss from escheats would be approximately $ 31.5 million. Of this amount, $9.6 million would come from beer bottle escheats.

Table 4 compares Connecticut's bottle bill with neighboring states.

Table 4: Bottle Bill Comparison


Beverages Covered

Amount of Deposit

Handling Fee

Unredeemed Deposits


Beer, malt, carbonated soft drinks, and bottled water

5 cents

Beer and malt : 1.5 cents

Other (i.e., soda, water, etc.): 2 cents

Returned to the state


Beer, malt, carbonated soft drinks, and mineral water

5 cents

2.25 cents

Property of state General Fund


Beer, malt, carbonated soft drinks, water, wine coolers

5 cents

3.5 cents

80% to the state General Fund, 20% retained by distributor


No bottle bill




Source: http://www.bottlebill.org/legislation/usa/allstatestable.html

Task Force Report Prepared By:

Duke Chen & Katherine Dwyer

Office of Legislative Research

Connecticut General Assembly

Report # 2012-R-0502