Emails: Georgia officials catered to distributors’ wishes over those of craft brewers

State bureaucrats gutted Georgia’s craft brewing law. Now, brewers must change their tasting room policies or face suspension.

On July 1, a little bit of Georgia history was made: For the first time in decades, Georgia brewers were permitted to sell some of their beer more or less directly to consumers, bypassing a long-standing state rule that said that all alcohol sales must first go through a distributor. The new law was a master class in legislative nuance: Technically, consumers weren’t paying for the beer they were taking home (up to 72 ounces, the equivalent of a six-pack), but rather the tour. The beer was a…souvenir! (No kidding: That’s the legal term for it in the law.) Depending on the beer the customer wanted to take home, the brewers began charging different amounts for the tour.

It was too good to last. At the end of September, the Georgia Department of Revenue sent out “clarifying language” that said brewers must charge the same amount for tours, regardless of what kind of beer (if any) the customer wanted to take home. The move essentially defeated the point of the whole legislation.

It placed brewers like Monday Night Brewing’s Joel Iverson in a bind. His company had invested $85,000 into its tasting room, which included the purchase of a five-barrel system intended to make experimental small-batch beers for his guests. Before the bulletin, MNB justified the cost given the projected increase in revenue from tours sold at three or four different price points, like the $20 “Now and Later” package that consisted of six six-ounce beer samples, a brewery tour, and either a six-pack or bomber to go. However, Iverson’s brewery has reverted to back to its standard $12 tour, sans the road beers.

“We’ll continue doing it that way until there’s more clarity,” Iverson told us. “It’s not worth even giving the impression that the amount of alcohol included is somewhat tied to the tour.”

Amid the confusion, one thing has been made clear to craft brewers: Starting on December 1, they must comply with DOR regulations or else face a citation that could result in the suspension of tasting room privileges for an entire year. This week, in response to numerous Open Records requests filed by media outlets, including us, the DOR released dozens of emails that give some clarity to why the change came about and whether officials showed political favoritism toward distributors.

Following a public hearing on June 26, DOR Deputy Commissioner Sean Casey told state Sen. Hunter Hill, a Republican from Atlanta who sponsored the bill, that his department would not tinker with its rules for brewery tours. “[A] craft brewery can offer different tours at different price points,” Casey wrote to Hill on June 30. As you’d expect, brewers offered a variety of tours, which allowed visitors to buy up to 36 ounces for an on-site tasting and up to 72 ounces for off-site consumption. Everything went according to plan for more than two months.

Over the summer, DOR officials were in constant contact with Georgia Beer Wholesalers Association lobbyist Martin Smith. In addition, Casey corresponded on a regular basis with Canby Laird, a lobbyist with Eagle Rock Distributing Company. Casey and Laird discussed DOR potentially attending an educational class about Georgia’s three-tier system. On August 18, he asked Laird for his advice about a potential policy about alcohol distribution.

“Can you give me an idea on what you see DOR presenting to make this as informative as possible?” Casey wrote to Laird.

“I see the DOR’s presence [as] a confirmation and validity to the 3 tier system, how the system as is makes your job of enforcement and tax collection that much easier and efficient…what do you think?” Laird replied the following day.

In early September, DOR officials emailed with one another about “clarifying language re: tours”—giving distributors advanced notice about the forthcoming bulletin. DOR Commissioner Lynne Riley approved the policy revision. Then the department posted the bulletin that subsequently restricted brewers from selling tours at different price tiers tied to the amount of beer being given away. In effect, though, the regulatory agency tasked with enforcing a law had effectively revised the rules altogether, doing so without another round of public comment.

“A manufacturer must charge the same rate for a tour where one tour attendee elects to sample free beverage alcohol during a tour and the second attendee elects to sample free beverage alcohol and receive a free beverage alcohol souvenir,” the bulletin noted.

Unsurprisingly, craft brewers who had tailored their business models around the new law grew angry over the unexpected change. In response, Nancy Palmer, executive director of the Georgia Craft Brewers Guild, snapped back a lengthy statement, saying the change would hurt small brewers who had sunk hundreds thousands of dollars into their businesses given DOR’s past assurances.

“The new and different interpretation will open my brewers to financial damages and loss of business if it is maintained,” Palmer wrote to DOR officials on September 28.

On September 30, Iverson, who serves as GCBG’s current president, sent an email to Riley demanding an explanation about the last-minute memo that “re-interprets the law and even contradicts the regulations they released” last June.

“Even reasonable reform and our best efforts to legislative change are being overturned by political forces and special interests that seem to be above the law,” Iverson wrote to Riley. “Georgia deserves better.”

According to Iverson’s email, Georgia’s revenue department refused to meet with craft brewers to offer an explanation about the unforeseen restrictions. Since then, GCBG has met with Gov. Nathan Deal’s staff and Riley to share their concerns, which led to DOR holding an “informative seminar” with brewers and distillers to discuss the bulletin. Participants weren’t allowed, however, to inquire about the necessity of the restriction. As of today, Palmer told us, GCBG has still not received a sufficient explanation from the state’s revenue department on the matter.

William Gaston, a spokesperson with the Georgia Department of Revenue, wrote in an email that the basic principle of the law enacted in July remains the same. “It is still a true statement that breweries can offer different tours at different price points,” But he didn’t elaborate about the memo’s intent when asked for further explanation.

Where does that leave craft brewers now? Since the memo came out, Palmer has chatted with numerous legislators, some of who expressed concerns about the changes, and plans to revisit their lobbying strategy ahead of the 2016 legislative session. But until further changes take place, most craft brewers are operating as if the game-changing legislation never passed in the first place. Better safe than sorry as far as they’re concerned.

“It’s disheartening,” Iverson told us. “There’s potential for the craft beer business in our state to boom. Now the overall market is hurting.”