With the passage of the 21st amendment ending national prohibition, states were given the authority to regulate alcohol as they saw fit. The states developed a structure of checks and balances that provided safe alcohol to the consumer while ensuring a simple method to collect
tax revenue. This is known as the three-tier system.
The three-tier system is simple in theory: manufacturers provide alcoholic products to wholesalers, who distribute the products to retailers, who sell to the consumers. No one entity can be involved in more than one tier under most state models and each tier is regulated and
licensed separately.
Benefits of the Three-Tier System
The three-tier system offers many benefits to society with the most prominent falling into four categories: regulatory, economic, commercial, and public health.
Regulatory Benefits
Within the three-tier system, each tier becomes responsible for ensuring that the laws and regulations set forward by the government are executed. All parties must comply with those laws and each is responsible to the other. These laws and regulations provide safeguards that there are lawful trade practices and safe handling of alcoholic beverages before it gets to consumers. This transparent regulatory scheme elevates consumer confidence because the three-tier system ensures that only licensed distributors and retailers will be able to provide and sell alcoholic beverages.