Can Distilleries Ship Spirits Direct-to-Consumer in California? California’s New Spirits Shipping Law Explained

Yes, as of January 1, 2026, distilleries will be permitted to ship spirits direct-to-consumer in California under the state’s groundbreaking new alcohol shipping law, Assembly Bill 1246, signed by Governor Gavin Newsom on Oct. 3. This landmark legislation creates a one-year pilot program that could fundamentally reshape spirits distribution in the nation’s largest consumer market. Distilleries must act quickly to understand compliance requirements and prepare for this significant market opportunity.

The law goes into effect on January 1, 2026 and expires January 1, 2027—giving the industry exactly one year to demonstrate compliance and viability.

WHAT IS DIRECT-TO-CONSUMER (DTC) SHIPPING? 

Direct-to-Consumer (“DTC”) shipping allows producers—such as wineries, breweries, and distilleries—to ship their products directly to consumers without going through wholesalers or retailers. This business model bypasses the traditional three-tier distribution system (producer → wholesaler → retailer → consumer) and enables craft/smaller producers to sell directly to their customers.

While DTC wine shipping has become common (legal in 48 states), DTC spirits shipping remains highly restricted. As of 2025, only about 10 states —including California, New York, Kentucky, Arizona, Alaska, and Washington D.C.—permit some form of direct spirits shipping to consumers. California’s AB 1246 represents a major expansion of the DTC spirits market, given California’s size as the nation’s largest consumer market.

WHAT CALIFORNIA’S NEW SPIRITS SHIPPING LAW DOES 

Effective January 1, 2026, “qualifying out-of-state distillers” may ship directly to California consumers. (Bus. & Prof. Code § 23504.5(a)) This opens California’s massive consumer base—approximately 39 million residents—to craft distilleries across the United States.

A “qualifying out-of-state distiller” is defined as “a distiller licensed in any other state that satisfies the conditions necessary for a craft distiller license under the laws of this state.” (Bus. & Prof. Code § 23504.5(e)(eff. January 1, 2026) This means out-of-state distillers must meet California’s craft distillery production requirements, even if shipping from another state.

One-Year Pilot Program 

The law includes a sunset provision, expiring January 1, 2027. (Bus. & Prof. Code § 23504.5(f)) This temporary authorization serves as a pilot program, allowing California regulators and lawmakers to evaluate:

• Industry compliance rates
• Consumer safety outcomes
• Tax collection effectiveness (once implemented)
• Impact on the existing three-tier distribution system

The California legislature is expected to consider extending or making permanent the DTC spirits shipping framework based on the pilot year’s performance.

COMPLIANCE REQUIREMENTS FOR DISTILLERIES 

Businesses seeking to capitalize on this opportunity must navigate several regulatory requirements:

1. Production Volume Limitation 

Only distilleries that meet California’s “craft distillery” definition qualify:

• Maximum production: 150,000 gallons of distilled spirits per fiscal year (Bus. & Prof. Code § 23502(a)(5))
• Manufacturing requirement: At least 65% of total volume must be manufactured by the licensee (Bus. & Prof. Code § 23502(a)(5))
• These thresholds apply to total production, not just California-destined products

Key Point: Out-of-state distillers must meet these same requirements to qualify. (Bus. & Prof. Code § 23504.5(e)) (as amended by AB 1246).

2. Permit Requirements 

Distilled Spirits Direct Shipper Permit

• Issued by: California Department of Alcoholic Beverage Control (ABC)
• Required for: Both California craft distillers and qualifying out-of-state distillers (Bus. & Prof. Code § 23504.5(a)(5))
• Fee: Same as direct shipper permit (Type 82) (Bus. & Prof. Code § 23504.5(b)(2))
• Application requirement:
  • California license number (for in-state distillers), OR
  • True copy of current distiller license from home state (for out-of-state distillers) (Bus. & Prof. Code § 23504.5(b)(3))

Criminal Penalty: Selling and shipping distilled spirits directly to consumers without a valid permit is a misdemeanor. (Bus. & Prof. Code § 23504.5(d))

3. Transaction Limits 

• Maximum per shipment: 2.25 liters per consumer per day (Bus. & Prof. Code § 23504.5(a)(1)). The state is expected to clarify whether this 2.25 liter per day limit will be applied as an aggregate.
• Purpose restriction: Personal use only, not for resale (Bus. & Prof. Code § 23504.5(a)(1))

Note: Unlike the on-premises sales limit (increased to 4.5 liters by this same law under § 23504), the direct shipping limit remains at 2.25 liters per day.

4. AB 1246 Packaging and Labeling Mandates 

All spirits containers must be conspicuously labeled with exactly this language:

“CONTAINS ALCOHOL: SIGNATURE OF PERSON AGE 21 YEARS OR OLDER REQUIRED FOR DELIVERY”

(Bus. & Prof. Code § 23504.5(a)(4))

5. Delivery Protocols 

Distilleries must:

• Use common carriers
• Require carrier to obtain signature of person age 21 or older before delivering spirits (Bus. & Prof. Code § 23504.5(a)(3))

Risk Management: Distilleries should establish contractual requirements with carriers to ensure delivery protocol compliance and maintain documentation of carrier qualifications. The statute makes violations a criminal offense, so compliance is critical.

6. Record-Keeping and Reporting 

Ongoing Obligations:

• Maintain adequate records of all California shipments (Bus. & Prof. Code § 23504.5(a)(2))
• Provide records to the department upon request (Bus. & Prof. Code § 23504.5(a)(2))
• Permit ABC to audit records (Bus. & Prof. Code § 23504.5(b)(6))

Annual Reporting Requirements Differ by Location:

Out-of-State Distillers:

• Report to ABC no later than January 1, 2027the total amount of distilled spirits shipped into California during the preceding calendar year (Bus. & Prof. Code § 23504.5(b)(4))
• This means the first (and potentially only) report is due January 1, 2027, covering all 2026 shipments

California Distillers:

• Must provide “any necessary additional information not currently provided to ensure compliance with this section” (Bus. & Prof. Code § 23504.5(b)(5))
• Likely will report through existing renewal processes

Action Item: Implement robust tracking systems now to capture required data elements, particularly for the January 1, 2027 reporting deadline.

7. Jurisdictional Consent 

All permitholders are “deemed to have consented to the jurisdiction of the department or any other state agency and California courts concerning enforcement of this section and any related laws, rules, or regulations.” (Bus. & Prof. Code § 23504.5(b)(7))

Important for Out-of-State Distillers: Any administrative hearing will be held in Sacramento, California. (Bus. & Prof. Code § 23504.5(c))

OTHER CALIFORNIA COMPLIANCE REQUIREMENTS DISTILLERS MUST CONSIDER BEFORE SHIPPING SPIRITS DTC 

California Proposition 65 Warning Requirements 

Alcoholic beverages sold in California must comply with Proposition 65 (California Health & Safety Code § 25249.6), which requires warnings about chemicals known to cause cancer, birth defects, or reproductive harm. The required Prop 65 Warning for Alcoholic Beverages language (on product and/or on e-commerce website) is:

“WARNING: Drinking distilled spirits, beer, coolers, wine and other alcoholic beverages may increase cancer risk, and, during pregnancy, can cause birth defects. For more information go to www.P65Warnings.ca.gov/alcohol.”

California Redemption Value (“CRV”) Label Requirement 

Beginning July 1, 2025, ALL distilled spirits containers filled after January 1, 2024 and sold in California must display CRV labeling.  

STRATEGIC CONSIDERATIONS FOR DISTILLERIES 

Market Opportunity 

California represents the largest state market for alcoholic beverages in the United States. For qualifying craft distilleries, AB 1246 provides:

• Direct customer relationships: Build brand loyalty without intermediary markup
• Premium pricing potential: Specialty and limited-edition products can command higher margins
• Market testing capability: Introduce new products directly to consumers
• Geographic expansion: Access consumers in areas without traditional distribution

Timing and Preparation 

Q4 2025 Priorities:

• Verify eligibility: Confirm production is under 150,000 gallons and meets the 65% manufacturing requirement
• Apply for Distilled Spirits Direct Shipper Permit (applications expected to open November/December 2025)
• Review and revise packaging to meet exact labeling requirements specified in § 23504.5(a)(4)
• Establish relationships with qualified common carriers capable of age-verification delivery
• Implement compliance tracking systems for shipment records
• Develop tax collection protocols in anticipation of regulatory guidance

January 1, 2026 Launch Preparation:

• Update e-commerce platforms for California compliance
• Train staff on California shipping restrictions
• Create California-specific terms and conditions
• Establish age verification protocols
• Prepare record-keeping systems for January 1, 2027 reporting deadline

Demonstrating Compliance 

The one-year pilot creates enormous pressure on the industry to demonstrate responsible practices:

• Compliance failures could jeopardize extension: High-profile violations may provide ammunition to opponents of DTC shipping
• Industry self-regulation: Consider additional voluntary safeguards beyond minimum legal requirements
• Documentation: Maintain comprehensive records to demonstrate good faith compliance efforts
• Criminal exposure: Remember that violations can result in misdemeanor charges under § 25617

LOOKING AHEAD: WILL THE LAW BE EXTENDED? 

Assuming reasonable industry compliance and absence of major problems, extension is probable. California’s action follows similar expansions in New York and Kentucky, suggesting a broader policy trend. However, the law’s permanence is not guaranteed, and the industry has exactly one year to prove the model works.

California AB 1246 represents a watershed moment for craft spirits distribution. The one-year pilot program creates both substantial opportunity and significant uncertainty. The statute provides a clear framework but leaves important questions—particularly regarding taxation—unanswered. Distilleries should act now to position themselves for this market opportunity while maintaining the compliance rigor necessary to ensure the program’s extension beyond January 1, 2027.

FREQUENTLY ASKED QUESTIONS: CALIFORNIA DTC SPIRITS SHIPPING LAW 

Q: When can distilleries start shipping spirits direct-to-consumer in California?

A: January 1, 2026, through January 1, 2027 under the AB 1246 pilot program. (Bus. & Prof. Code § 23504.5(f))

Q: How much does the California direct shipper permit cost?

A: The same fee as a Type 82 direct shipper permit. (Bus. & Prof. Code § 23504.5(b)(2)) Industry sources indicate this is $25.

Q: Can any distillery ship DTC to California?

A: Only distilleries producing less than 150,000 gallons annually, with at least 65% self-manufactured. This applies to both California and out-of-state distilleries. (Bus. & Prof. Code §§ 23502(a)(5), 23504.5(e))

Q: How much can I ship to a single customer?

A: Maximum 2.25 liters per consumer per day for personal use only. (Bus. & Prof. Code § 23504.5(a)(1)). Again, the state is expected to clarify whether this 2.25 liter per day limit will be applied as an aggregate.

Q: Do out-of-state distilleries need a California distillery license?

A: No, but they need a Distilled Spirits Direct Shipper Permit and must meet California’s craft distillery qualifications. They must provide a copy of their home state distiller license. (Bus. & Prof. Code § 23504.5(b)(3))

Q: What are the labeling requirements?

A: Containers must be conspicuously labeled with exactly: “CONTAINS ALCOHOL: SIGNATURE OF PERSON AGE 21 YEARS OR OLDER REQUIRED FOR DELIVERY” (Bus. & Prof. Code § 23504.5(a)(4)). Note the Prop 65 Warning and CA CRV requirements as well.

Q: What happens if I ship without a permit?

A: It’s a misdemeanor criminal offense under Section 25617. The ABC can also pursue administrative enforcement. (Bus. & Prof. Code § 23504.5(d))

Q: When is the first annual report due?

A: Out-of-state distillers must report by January 1, 2027, covering all 2026 shipments. (Bus. & Prof. Code § 23504.5(b)(4))

Q: Is the law permanent?

A: No, it’s a one-year pilot program expiring January 1, 2027. The legislature is expected to consider extension based on the program’s performance during 2026.

Q: What states currently allow DTC spirits shipping?

A: California (starting 2026), New York, Kentucky, Arizona, Alaska, Washington D.C., and Rhode Island (on-site only). The list is growing as more states modernize their alcohol laws.

Q: Are there any tax obligations?

A: The statute doesn’t specify tax requirements, but distilleries should anticipate California excise tax and potentially sales tax obligations. Guidance is expected through rulemaking or legislative correction.

Q: Can retailers ship spirits DTC in California?

A: No, AB 1246 only authorizes craft distillers (California and qualifying out-of-state distillers) to ship DTC. Retailers are not included in this law.