Montana Alcoholic Beverage Control Division briefs committee on warehouse expansion, licensing and online-shipment enforcement

The Department of Revenue's Alcoholic Beverage Control Division presented an overview of Montana's liquor regulation and distribution system to the Business, Labor, and Economic Affairs Committee, emphasizing the state's role as the wholesale liquor operator and the operational and enforcement challenges the division faces.

Deputy Director Scott Mendenhall introduced the department's biennial report and directed members to the publication on the department website. Becky Schlauch, administrator of the Alcoholic Beverage Control Division, told the committee Montana is a control-state wholesaler and described the division's three core functions: licensing, liquor distribution and outreach. "Being a controlled jurisdiction simply means that the state participates in the distribution channel," Schlauch said.

Schlauch walked members through licensing types and recent changes, including the "co-located licensed premises" option that allows a manufacturer (for example a brewery, distillery or winery) to stack a retail license at the same location to sell more product. She also described a delivery endorsement for retailers that permits beer and wine delivery under conditions that include a delivering employee aged 21 or older and that the delivery include food whose cost exceeds the alcohol portion.

On enforcement, Schlauch outlined the division's most common violations (sale to underage buyers, sales to an intoxicated person, manager/location issues and undisclosed ownership). Enforcement tools include reprimand, civil penalties up to $1,500, license suspension for up to three months, refusal to renew or revocation. She noted that when law enforcement conducts stings, a licensee must have three violations before a formal sanction can be issued.

The division gave specific figures on operations and finance: the State Liquor Warehouse maintains about 1,650 regularly stocked liquor and fortified-wine products and another 4,400 products available case-by-case (more than 6,000 varieties overall); cases shipped rose from roughly 777,000 in 2015 to almost 1.1 million in 2024. Gross sales for fiscal year 2024 were about $211.7 million; after commissions and operating costs, the division transferred roughly $19.2 million in net profits to the general fund.

Schlauch and Liquor Distribution Bureau Chief Jay Gaughn described a legislatively funded expansion of the state liquor warehouse: the Legislature provided approximately $22 million to add about 30,000 square feet to the existing 100,000-square-foot facility, with an automated storage and retrieval system that will add capacity for roughly 4,500 pallets. Construction began last March and the division expects the addition to be complete by July.

On revenue and pricing, Schlauch explained the posted-price formula is statutory and applied uniformly to agency liquor stores; retailers may charge individuals above the posted price. The department also described the competitive-bid licensing process adopted after the November 2017 special session and said nearly $20 million has been generated from competitive bidding since that change.

Committee members pressed the division on delivery logistics, local price differences, tribal/reservation rules and illegal shipments. In response, Schlauch said the department contracts with third-party carriers for deliveries and supplies weekly shipments to each of the 95 agency liquor stores. On reservations, she explained reservations must follow the federal Code of Federal Regulations and tribal laws may impose additional limits; she cited multiple reservations that are "dry."

The division identified illegal online shipments as its most significant enforcement problem for illicit product entering Montana. Schlauch said the division receives shipment reports from carriers such as FedEx and UPS and contacts senders when shipments appear unlicensed, but the division does not have authority to impose criminal penalties; enforcement would require law enforcement or an attorney general action. "The biggest issue that we have with the illegal alcohol in Montana is online purchases," Schlauch said.

Members also asked about emerging intoxicating products. Schlauch told the committee that THC beverages (intoxicating cannabis beverages) exist in marketplaces and in Montana are currently sold only at licensed cannabis dispensaries; she warned that other intoxicating products that resemble liquor bottles are not explicitly covered by current Montana code and could merit policy attention.

The division highlighted outreach efforts, including in-person "lunch and learns," a bottle-pick service that lets small stores order single bottles, and a scholarship program offering five $2,000 awards for high-school seniors who enter the "How Alcohol Responsibility Matters in Your Community" contest; deadline Jan. 26.

No formal motions or votes were taken. Committee members were invited to schedule a tour of the warehouse and encouraged to follow up via the department's website and the division's reports. Chair Nolan closed and adjourned the committee after the presentation and Q&A.