Alcohol beverage payments 101: what you need to know

Do you know what your state’s laws are for paying alcohol orders, and how they vary based on type of alcohol? It can be a confusing process for merchants to understand how to stay in compliance with their distributors’ terms.

In “cash”/COD states, businesses are required to pay immediately upon receipt of the product delivery. Term states allow you to rely on credit for a period of time, which are based on each state’s individual laws. For combination states, the payment regulations will vary based on whether the product is beer, wine, or spirits. 

Make sure you understand the regulations in your own state before ordering an alcohol shipment.

Understand your compliance requirements

Compliance requirements also vary from state to state, with a three-tiered system for suppliers, distributors, and retailers. In tier one, suppliers sell to distributors. In tier two, distributors sell to retailers. And in tier three, retailers sell alcohol to consumers via outlets including restaurants, bars, liquor stores and many other types of retail locations. There are 17 “control” states in which the sale of distilled spirits, and sometimes wine and beer, are controlled through government agencies on a wholesale level, as well as in some cases for retail sales for off-premises consumption. This variety of regulations makes it even more confusing to understand what you’re supposed to do in each circumstance. 

Regardless of the tier you fall under, it’s essential to get a license from the Alcohol and Tobacco Tax and Trade Bureau (TTB), as well as a state license and any local permits and licenses. Be prepared to collect and pay federal and state excise taxes as required.

You’ll also need to register all products and report all sales, and modify your license to report changes, such as a change in ownership or premises address. 

Failure to comply with any of the federal or state regulations that govern your business can result in steep fines and penalties, or even a loss of your license to sell alcohol. 

Discover your options for invoice processing

For generations, manual payments for alcohol sales, either via check or cash payment, have been the status quo.

That was fine when it was the only option – but today, you have much more efficient and secure alternatives for processing payments to your alcohol beverage distributors.

Manual invoice payments have a high chance of potential fraud or errors such as accidentally sending suppliers duplicate payments, taking a big chunk out of your bottom line if they’re not caught and corrected on a timely basis.

Paper invoices also take more work to process as they must be manually entered into your bookkeeping solution, taking up valuable administrative time and making it harder to reconcile accounts. And because that’s not always done efficiently, it can result in missed or late payments, which may damage your relationships with distributors. Like your other important data systems, you want to consider cloud-based invoice processing and storage.