ALCOHOL LAW ADVISOR
ALCOHOL LAW ADVISOR
Regulatory and Distribution Law Updates for the Alcohol Industry
ALCOHOL LAW ADVISOR
Regulatory and Distribution Law Updates for the Alcohol Industry

The Next Wave of ADA Website Accessibility Lawsuits Against Alcohol Suppliers

by and | Mar 17, 2025 |

The increasing popularity of online shopping has made e-commerce businesses – specifically those in the alcohol beverage industry – a frequent target for costly litigation. In lockstep with the continued prevalence of website accessibility cases, plaintiff firms are sending pre-suit demand letters to alcohol suppliers and, in some cases, filing a state or federal court lawsuit. These lawsuits, which are typically filed in California, Florida, or New York, involve claims that a supplier’s website is not accessible to individuals who are blind in violation of Title III of the Americans with Disabilities Act (ADA) and related state laws. In these cases, plaintiffs seek attorneys’ fees, damages (only under state law), and injunctive relief that would require the website to conform with the Web Content Accessibility Guidelines (WCAG) standards, which have been broadly adopted by courts and regulators.

While many e-commerce companies, including alcohol suppliers, have turned to “accessibility widgets” to improve WCAG compliance, these quick-fix solutions are not always what they seem. More than 25% of all website accessibility lawsuits in 2024 (more than 1,000) were brought against businesses that used widgets, with many plaintiffs explicitly citing widget features as alleged obstacles to accessibility. Widget developers have also faced scrutiny. The Federal Trade Commission recently leveled a $1 million fine against one such company for falsely claiming that its widgets “make any website complaint.” Therefore, relying solely on widgets to comply with WCAG standards has proven ineffective and could render e-commerce businesses vulnerable to website accessibility lawsuits.

To prevail on a website accessibility claim, plaintiffs must first show that a defendant is a private entity that owns, leases, or operates a “place of public accommodation.” Courts, however, are split on what it means for a website to be considered a place of public accommodation under Title III of the ADA. While some jurisdictions require a “physical nexus” between the website and a brick-and-mortar store, other jurisdictions have permitted these cases to go forward against a website-only company that does not own or operate any physical retail location. Even so, the “physical nexus” test is applied by a majority of federal courts and was recently adopted by the most active court for ADA website litigation in the country: the US District Court for the Southern District of New York. This development will likely add to an emerging trend of website accessibility plaintiffs resorting to state courts in search of more favorable laws.

In addition to establishing that the supplier’s website is a place of public accommodation, the plaintiff must satisfy certain jurisdictional requirements that will depend on whether products can be purchased directly from the website and whether the supplier ships to the state in which the suit was filed. Leveraging these defenses (among others) will be critical when it comes to either convincing the plaintiff to withdraw the claim, filing a motion to dismiss, or achieving an early resolution on favorable terms.

Due to [...]

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How Alcohol Exporters Can Use FDII and IC-DISC to Maximize Tax Savings

by and | Mar 5, 2025 |

For US alcohol exporters – whether crafting bourbon, brewing craft beer, or bottling fine wines – selling to international markets is a significant opportunity for growth. Two US federal income tax regimes, the foreign-derived intangible income (FDII) deduction and the interest charge-domestic international sales corporation (IC-DISC), offer valuable ways to reduce tax liability and boost profits. Each has unique benefits and trade-offs, making them suited to different business needs. This blog post compares FDII and IC-DISC, helping alcohol exporters decide which tool – or combination – best fits their global ambitions.

Note that all discussions of tax rates are limited to US federal income tax. Additional state and local taxes and excise taxes may also apply.

FDII for Export Income

Introduced under the 2017 Tax Cuts and Jobs Act (TCJA), FDII incentivizes US C corporations to earn income from foreign sales while keeping operations stateside by providing a reduced effective tax rate on eligible export income derived from US-based corporations. It targets “intangible” income – profits exceeding a routine return on tangible assets – and applies a deduction directly on the exporter’s tax return.

How FDII Works

  • Eligible income comes from selling alcohol (e.g., whiskey or wine) to foreign buyers for use outside the United States.
  • The FDII deduction is 37.5% of qualifying income (dropping to 21.875% after 2025), reducing the effective corporate tax rate from 21% to 13.125% on that portion of income.
  • No separate entity is required. Claims are made on the existing C corporation’s Form 1120.

Example: A winery exporting $2 million in Pinot noir with $400,000 in net profit might qualify $300,000 as FDII. A 37.5% deduction ($112,500) lowers the tax from $63,000 to $39,375, saving $23,625.

IC-DISC: A Classic Deferral and Rate Reduction Tool

The IC-DISC, a legacy export incentive from the 1970s, operates as a separate “paper corporation” that earns commissions on export sales. It is available to any US business structure (e.g., C corporations, S corporations, and LLCs) and shifts income to shareholders at a lower tax rate or defers it entirely.

How IC-DISC Works

  • The exporter forms an IC-DISC and pays the entity a commission (up to 4% of export gross receipts or 50% of net export income).
  • The commission is deductible for the operating company, reducing its taxable income.
  • The IC-DISC pays no federal tax; instead, its income is distributed to shareholders as qualified dividends (taxed at 20% capital gains rate) or retained for deferral.

Example: A distillery owned by a closely held pass-through entity with $2 million in export sales and $400,000 in net profit pays a $200,000 commission to its IC-DISC. The operating company saves $74,000 in income tax (37%), while shareholders pay $47,600 in capital gains tax (20% plus 3.8% net investment income tax) on the dividend, netting a $27,600 savings.

Comparing Tax Benefits: FDII vs. IC-DISC

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Navigating the EPR Laws: What Alcohol Beverage Producers Need to Know

by and | Feb 21, 2025 |

Extended producer responsibility (EPR) laws are relatively new – the first were signed into law in 2021 and 2022 – and are aimed at encouraging producers to package goods in a more environmentally conscientious manner and providing much needed revenue for in-state recyclers overwhelmed by the incoming volumes of recyclable material. In essence, EPR laws require producers whose products reach in-state consumers to register with a producer responsibility organization (PRO) or stewardship organization (SO), report the amount of material that enters the state, and pay fees for that material.

As detailed in this blog post, how and if these new laws apply to alcohol beverage suppliers is nuanced given both the developing nature of EPR laws as well as the interplay with preexisting container deposit or bottle bill laws.

Who and What Is Covered by the New EPR Laws?

As of the writing of this article, five states have passed EPR laws and 10 others have introduced bills during their most recent legislative sessions, including Connecticut, Hawaii, Nebraska, and New York. EPR programs are still evolving as the various regulatory processes continue; however, once passed by a state, the new rules typically require the state to designate a PRO/SO to administer the producer requirements and aid producers and state agencies with the necessary reporting and payment requirements. For those states that have passed EPR laws, the nonprofit organization Circular Action Alliance is the PRO/SO that has been selected to oversee the process.

Each EPR law has its own definition of “producer” (i.e., those required to report) and of “covered material” (i.e., the materials that must be reported). There are several specifics within each state but, generally, the producer is the entity who actually produces the subject goods or the owner of the brand that is contracting to have the item produced. Speaking broadly, the covered material contemplated by these laws includes the cardboard boxes and glass or aluminum containers that protect and contain the items purchased from retailers. In this regard, EPR laws apply to alcoholic beverages, non-alcoholic beverages, and nearly all other types of consumer goods.

However, exemptions exist for small producers and certain materials. The specifics as to when a producer is exempt from registering and making EPR payments vary by state but, in many instances, those producers shipping small amounts into a certain state will be exempt. For example, Minnesota exempts producers responsible for less than one metric ton of covered material or $2,000,000 in global gross revenue. However, it is important to remember that even if a small producer is, given its status, exempt from registering with a PRO/SO or paying the related EPR fees, it will likely still have reporting requirements to substantiate its claims of being exempt.

How Do These Laws Apply and Interface with Alcohol Beverage Laws?

In the world of beverage alcohol, there are numerous laws already in place, many of which have been in force for decades, that are aimed at sustainability and designed to fund and encourage recycling. These are [...]

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Key Takeaways | 2024 Recap and What’s on Tap for Alcoholic Beverage Companies

by and | Jan 9, 2025 | , , , , , , , , ,

The alcohol beverage industry experienced a transformative year, marked by notable shifts in consumer behavior, innovative product launches, and regulatory changes. During a recent webinar, McDermott’s Alcohol Group provided a retrospective on the pivotal moments of 2024 that impacted the industry, a preview of what’s to come in 2025, and insights into how your company can stay ahead in this dynamic market.

Access the takeaways and webinar here.



FTC Targets Price Discrimination With New Robinson-Patman Act Lawsuit

by , , and | Dec 26, 2024 | , , , ,

On December 12, 2024, following a nearly two-year-long investigation, the Federal Trade Commission (FTC) initiated its first litigation under the Robinson-Patman Act (RPA) in more than two decades. The FTC sued Southern Glazer’s, a large wine and spirits distributor, alleging the company charged higher prices to smaller retailer customers than it did to large chains, violating the RPA.

The litigation, filed in the last days of the Biden administration’s antitrust regime, may ultimately end with a whimper under the next administration. But for companies managing modern pricing systems, the complaint and the controversy surrounding it provide important insights into how complainants could seek to advance RPA suits in today’s retail environment. The complaint illustrates how current FTC leadership intended to operationalize its new focus on price discrimination and provides a roadmap for how state regulators and private plaintiffs can litigate the issue regardless of how the FTC proceeds under the new administration. Perhaps even more useful, the dissents filed by FTC Commissioners Melissa Holyoak and Andrew Ferguson suggest a blueprint for a legal response to future actions that may resonate with other regulators – and more importantly, with federal and state judges.

Read more here.



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