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A decades-old state law could threaten kombucha and non-alcoholic beer makers, distributors

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Lil Duck Kombucha, which started almost eight years ago, could be impacted if the state's Department of Revenue begins enforcing a decades old law. Photo by Hannah Wade.

When a national non-alcoholic brewing company announced in an email newsletter to subscribers that they would no longer be shipping to South Carolina, alarm bells went off in Brook Bristow's mind. 

Bristow, an attorney at Bristow Beverage Law in Johns Island, realized that the decision by Connecticut-based Athletic Brewing Co. to pull products from shipping to the state could mean other kombucha and non-alcoholic businesses and wholesalers in South Carolina were about to be impacted as well. 

That's because current statutes dictate that non-alcoholic beverages are subject to the same licensing requirements as alcoholic beverages. And Bristow said that's concerning.

"This is definitely going to create a lot of uncertainty for a lot of different types of businesses and, you know, ultimately, the question is, 'Are we going to apply the alcohol rules to companies who don't necessarily, you know, the alcohol is so minimal?'" said Bristow, who served as the state's Brewer's Guild's executive director for seven years. 

There are two decades-old state statutes that could affect companies that produce or sell non-alcoholic beer or kombucha, like family-owned Lil Duck Kombucha in West Columbia or the upcoming Peak Drift Brewery on North Main.

In simple terms, the two statutes essentially mean two things — the first one determines what defines a non-alcoholic beverage, effectively making any fermented drink under 5% ABW, or around 6.5% ABV, classified as non-alcoholic. Many beers fall under 5% ABW.

The second one, a related statute, requires that any business selling or producing drinks that fall under this definition be licensed in the same way that businesses that sell or produce alcoholic beverages are licensed. 

This arose because in mid-March, Athletic Brewing Co., a Connecticut-based non-alcoholic beer company, said in an email statement to subscribers they would no longer be shipping to South Carolina due to "the recent legal interpretation by state officials on the unique definition of non-alcoholic beer."

According to the S.C. Department of Revenue, which is responsible for enforcing the statutes that prompted concern for Bristow, the non-alcoholic beer company was required to halt direct shipping to S.C. customers because of a different statute that prohibits it for both alcoholic and non-alcoholic distributors — who are regulated under the same rules by the statute definitions.

According to the Department of Revenue, it received a complaint about Athletic, which caused them to look into it.   

However, Bristow and Peak Drift's Jason Snyder said the statutes could still cause problems for already operating kombucha producers and sellers and for the upcoming brewery complex on North Main. 

This matters because the process and cost of applying for a license to sell beer is lengthy and expensive, according to Bristow. The fee for wholesale distributors of beer and wine and for breweries is $300, and $400 every two years for wine and beer producers, according to the Department of Revenue's website.  

And this puts some already operating businesses at risk of having to wait to be approved for permits in order to keep operating. Meaning that spots like Lil Duck Kombucha, a nearly eight-year-old business in West Columbia, would have to halt operations until approved for a license, even though they don't sell alcoholic products.

"It would be a huge damper on us because I mean, if we were required to have it, even though we didn't have alcohol. We would still probably not serve alcohol, but I would just really be concerned about the price, the cost of the licenses," Debey Hancock, who owns Lil Duck Kombucha with her husband, Wil. 

Hancock said that although her kombucha is fermented, making it technically alcoholic, it would take consuming 20 gallons of her kombucha in 15 minutes to get the same amount of impact as one wine cooler. 

The interpretation of the law could also affect an upcoming brewery, Peak Drift Brewing on North Main.

The 66,000-square foot brewery and entertainment complex will produce and can non-alcoholic beers, one of the first in the area to do so, according to the brewery's Director of Sales and Operations Jason Snyder. 

"It could drastically affect us, you know. Our plan all along, was to self distribute our (non-alcoholic) beer. Because it's not alcoholic, we, in theory, should be able to do that," Snyder said, "If non-alcoholic beer now requires the same type of permit as if it's alcoholic, then that ... means we can't self distribute it like a normal non-alcoholic product, which would be bad."

The two statutes have been state law for over two decades and seem to be relatively loosely enforced. Kombucha producers like Lil Duck still operate without having to obtain alcohol licensing.

The Department of Revenue didn't indicate that there would be a sudden crackdown on businesses like that, but regulation of state laws is the role of their office. 

And unless the South Carolina General Assembly decides to change or update the laws, the Department of Revenue will continue to regulate non-alcoholic producers and distributors in the same way they do alcohol. As of April 1, there are no bills filed in the House or Senate that would change the law requiring non-alcoholic beverage producers to have alcohol licensing. 

But, the South Carolina Brewer's Guild meets on April 5 and 6 for their annual trade show and conference and it's certain to be a topic of conversation. Its executive director Lisa Sweatman declined to comment because she had not yet had the opportunity to hear from local breweries on the matter.