Tennessee “Residency” Case to be heard by U.S. Supreme Court

The U.S. Supreme Court will review a February, 2018 determination from the U.S. Court of Appeals for the 6th Circuit (Middle District of Tennessee) which held that residency requirements for alcohol beverage licenses are unconstitutional.  The Supreme Court’s ruling in this case could significantly impact the regulation of alcohol and state licensing throughout the country.  Under Tennessee law, an applicant for a retail liquor license must have been a resident of Tennessee for at least two years prior to making application for a license.  For corporations and other business entities, the 2-year requirement applies to any officer, director or shareholder of the company.  Two out-of-state applicants, including Total Wine, filed applications for licensure and the matter ended up in the federal court system captioned as Byrd v. Tennessee Wine and Spirits Retailers Association.  The U.S. Court of Appeals for the 6th Circuit ultimately determined the residency requirements violated the “dormant” Commerce Clause.  There has been a split in the federal courts over this issue in recent years, and it is expected the Supreme Court will resolve this split and provide more clear guidance on these residency requirements going forward. 

The decision will impact Pennsylvania which has similar requirements for retail licenses. Under the Pennsylvania Liquor Code, any individual applying to hold a retail (restaurant, hotel, club or retail dispenser) license must show he or she has been a Pennsylvania resident for at least two years preceding the application; however, if the applicant is a company, the applicant must only show the company was formed in Pennsylvania or holds a certificate of authority to transact business in Pennsylvania.  With respect to distributor licenses, Pennsylvania law requires applicants to be Pennsylvania residents at the time of making application and, in the case of corporations, all the officers and directors must be residents of Pennsylvania and at least 51% of the company must be owned by individuals who are residents of Pennsylvania.  Individuals who are not residents are limited to ownership of no more than 49% of the company.