Was it constitutional for Tennessee to allow distilleries to sell liquor on Sundays and holidays while requiring retail liquor stores to close?

Plain-English summary

Tennessee retail liquor stores were barred from selling on Sundays and several holidays, but Tennessee distilleries and manufacturers could make retail sales of their own products on those same days. A state representative asked whether that split treatment violated the federal Commerce Clause or the equal protection guarantees of the federal and state constitutions.

The AG concluded that it did not. On the Commerce Clause question, the AG observed that both restrictions applied only to in-state businesses (Tennessee retailers and Tennessee distillers); the statute did not discriminate against out-of-state interests, so dormant-Commerce-Clause review did not bite. On the equal protection question, the AG concluded retailers and distilleries were not "similarly situated" (they differ in function, customer base, and product mix), and that even if they were, the General Assembly had several rational, non-suspect reasons for the disparity, including promoting in-state alcohol manufacturing and supporting tourism at distilleries.

Currency note

This opinion was issued in 2016. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

At the time of the opinion, Tenn. Code Ann. § 57-3-406(e) and (h) limited retail liquor stores to sales between 8:00 a.m. and 11:00 p.m. Monday through Saturday and required them to close on Sunday, Christmas, Thanksgiving, Labor Day, New Year's Day, and the Fourth of July. Tenn. Code Ann. § 57-3-202(i)(1) allowed in-state distillers and manufacturers the same weekday window plus Sunday sales from noon to 7:00 p.m., with no holiday restriction.

The state's authority over alcoholic-beverage sales is grounded in the Twenty-first Amendment, but as the Sixth Circuit recognized in 37712, Inc. v. Ohio Dept. of Liquor Control, 113 F.3d 614 (6th Cir. 1997), that authority does not override federal constitutional rights. The AG analyzed two such rights.

The Commerce Clause analysis turned on whether the in-state/out-of-state distinction was triggered at all. The "dormant" Commerce Clause polices state laws that benefit local economic interests at the expense of out-of-state competitors. Bacchus Imports, Ltd. v. Dias, 468 U.S. 263 (1984) involved a Hawaii excise-tax exemption that favored Hawaii-made liquor over imports. Here, by contrast, the operating-hour rules applied identically to all in-state retailers and all in-state distilleries. There was no in-state-versus-out-of-state line being drawn, so the AG concluded the Commerce Clause was simply not implicated.

The equal protection analysis turned first on whether liquor retailers and distilleries were "similarly situated." The AG concluded they were not, citing 37712, Inc., which held that a manufacturer and carry-out retail stores are not similarly situated. The opinion also emphasized customer expectations: people drive to a local liquor store for routine alcohol purchases, while visits to a distillery are essentially tourism, with on-site sales being a souvenir component of the visit rather than the distillery's main line of business.

Even assuming similarity, rational basis review applied because economic legislation of this sort touches no fundamental right or suspect class. State v. Tester, 879 S.W.2d 823 (Tenn. 1994); Doe v. Norris, 751 S.W.2d 834 (Tenn. 1988). The AG identified at least two conceivable legitimate state interests that survived that test: encouraging private investment in local alcohol manufacturing, and supporting tourism revenue at distilleries by allowing them to sell to weekend visitors.

Common questions

Q: Did this opinion strike anything down?
A: No. AG opinions in Tennessee are advisory; they predict how a court would rule. The AG predicted that a Commerce Clause or equal protection challenge to the disparate Sunday/holiday rules would fail.

Q: Why didn't the Commerce Clause apply?
A: Because the operating-hour statutes did not distinguish between in-state and out-of-state actors. They applied evenhandedly to Tennessee retailers and Tennessee distillers. The dormant Commerce Clause targets interstate economic discrimination, and there was none on the face of the statute.

Q: How did the AG distinguish Bacchus Imports v. Dias?
A: Bacchus involved a tax exemption that lowered the price of Hawaii-made liquor relative to imports, encouraging consumers to pick local products and creating interstate-trade harm. Tennessee's hours rule was not a price advantage at all and did not change the price of in-state versus out-of-state product on the shelf.

Q: Were liquor stores and distilleries treated the same in any respect?
A: Both were restricted to weekday sales between 8:00 a.m. and 11:00 p.m. The dispute was about Sunday and holiday sales, which the statute permitted for distilleries but not for retail stores.

Q: What rational bases did the AG identify?
A: Encouraging investment in Tennessee alcohol manufacturing (citing the Sixth Circuit's reasoning in 37712, Inc.), and supporting tourism: visitors are more likely to visit distilleries on weekends and holidays, generating state revenue and jobs.

Citations and references

Statutes (as cited in the opinion):

• Tenn. Code Ann. § 57-3-406(e), (h)
• Tenn. Code Ann. § 57-3-202(i)(1)
• U.S. Const. art. I, § 8, cl. 3; amend. XIV
• Tenn. Const. art. I, § 8; art. XI, § 8

Cases:

• 37712, Inc. v. Ohio Dept. of Liquor Control, 113 F.3d 614 (6th Cir. 1997)
• Oregon Waste Sys. v. Dep't Envtl. Quality, 511 U.S. 93 (1994)
• Bacchus Imports, Ltd. v. Dias, 468 U.S. 263 (1984)
• Tennessee Small Sch. Sys. v. McWherter, 851 S.W.2d 139 (Tenn. 1993)
• Calaway ex rel. Calaway v. Schucker, 193 S.W.3d 509 (Tenn. 2005)
• Northville Downs v. Granholm, 622 F.3d 579 (6th Cir. 2010)
• State v. Tester, 879 S.W.2d 823 (Tenn. 1994)
• Craig v. Boren, 429 U.S. 190 (1976)
• Doe v. Norris, 751 S.W.2d 834 (Tenn. 1988)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2016/op16-008.pdf

Original opinion text

STATE OF TENNESSEE
OFFICE OF THE ATTORNEY GENERAL
March 1, 2016
Opinion No. 16-08
Constitutionality of different operating hours for retail sales at liquor stores and distilleries
Question 1
Does Tennessee's disparate treatment of liquor stores and distilleries with regard to the
days on which retail sales of closed bottles of alcohol are permitted violate the Commerce Clause
of the United States Constitution?
Opinion 1
No. The statutory provisions that prohibit retail sales by Tennessee liquor stores on
Sundays and holidays but permit Tennessee distilleries to make retail sales on Sundays and
holidays do not violate the Commerce Clause because the restrictions do not apply to out-of-state
entities or affect interstate commerce.
Question 2
Does Tennessee's disparate treatment of liquor stores and distilleries with regard to the days
on which retail sales of closed bottles of alcohol are permitted violate the equal protection
guarantees of the United States or Tennessee Constitutions?
Opinion 2
No. The statutes likely do not violate the equal protection guarantees of the United States or
Tennessee Constitutions because distillers and retailers are not similarly situated, and even if they
are deemed to be similarly situated, different days of retail operation are rationally related to
conceivable, legitimate state interests.
ANALYSIS
The General Assembly has prohibited retail liquor stores in Tennessee from selling liquor
on Sundays and certain specified holidays but has allowed Tennessee liquor manufacturers and
distillers to make retail sales of their products on those days. In particular, a retail liquor store may
sell to the general public between 8:00 a.m. and 11:00 p.m. Monday through Saturday. No retail
sales by liquor stores are permitted on Sunday, and the retail stores must be closed on Christmas,
Thanksgiving, Labor Day, New Year's Day, and the Fourth of July. Tenn. Code Ann. § 57-3-
406(e), (h). On the other hand, manufacturers and distillers of alcoholic beverages are permitted
to retail their products not only between 8:00 a.m. and 11:00 p.m. Monday through Saturday, but
also on Sunday between noon and 7:00 p.m., and face no restrictions on holiday sales. See Tenn.
Code Ann. § 57-3-202(i)(1).

While states generally possess, in addition to their inherent police powers, broad powers
under the Twenty-first Amendment to the United States Constitution to regulate, restrict, or ban
the sale of alcoholic beverages within their borders, they cannot do so in violation of a person's
federal constitutional rights. 37712, Inc. v. Ohio Dept. of Liquor Control, 113 F.3d 614, 618 (6th
Cir. 1997). You have asked whether the stricter days-of-operation limitation placed on Tennessee
retailers of alcoholic beverages compared to the limitation placed on Tennessee distillers and
manufacturers violates any right guaranteed under the Commerce Clause or the Equal Protection
Clauses of the United States and Tennessee Constitutions.

1. Commerce Clause Analysis

The Commerce Clause of the United States Constitution gives Congress the power to
"regulate Commerce with foreign Nations, and among the several States, and with the Indian
Tribes." U.S. Const. art. I, § 8, cl. 3. "Though phrased as a grant of regulatory power to Congress,
the Clause has long been understood to have a 'negative' aspect that denies the States the power
unjustifiably to discriminate against or burden the interstate flow of articles of commerce."
Oregon Waste Sys. v. Dep't Envtl. Quality, 511 U.S. 93, 98 (1994). Often referred to as the
"dormant" Commerce Clause, this limitation on the authority of state and local governments
applies "even when Congress has failed to legislate on the subject." Oklahoma Tax Comm'n v.
Jefferson Lines, Inc., 514 U.S. 175, 179 (1995). It is designed to protect against "economic
Balkanization" of the United States. Camps Newfound/Owatonna, Inc. v. Town of Harrison, 520
U.S. 564, 577-78 (1997).

State regulations that discriminate against interstate commerce are subject to a "virtually
per se rule of invalidity." City of Philadelphia v. New Jersey, 437 U.S. 617, 624 (1978).
Discrimination in this context means "differential treatment of in-state and out-of-state economic
interests that benefits the former and burdens the latter." Oregon Waste Sys., 511 U.S. at 99. For
example, when Hawaii imposed a 20% tax on sales of liquor at wholesale but exempted certain
locally distilled liquor from the tax, the tax was held to violate the Commerce Clause because it
discriminated in favor of products manufactured in Hawaii and against competing products
manufactured in other states. See Bacchus Imports, Ltd. v. Dias, 468 U.S. 263 (1984).

The Commerce Clause is simply not applicable here because the statutory limits on days
of operation apply solely to in-state liquor stores and in-state manufacturers and distilleries.
Although the statutes may "discriminate" against in-state retail stores and in favor of in-state
distilleries, there is no discrimination against any out-of-state retailer or distiller and, therefore,
there is no Commerce Clause problem.

2. Equal Protection Analysis

The federal Equal Protection Clause provides that "no State shall make or enforce any law
which shall . . . deny to any person within its jurisdiction the equal protection of the laws." U.S.
Const. amend. XIV. Likewise, article I, section 8, and article XI, section 8, of the Tennessee
Constitution "guarantee equal privileges and immunities for all those similarly situated."
Tennessee Small Sch. Sys. v. McWherter, 851 S.W.2d 139, 152 (Tenn. 1993). Tennessee's equal
protection guarantee is coextensive with the equal protection provisions of the United States
Constitution. Calaway ex rel. Calaway v. Schucker, 193 S.W.3d 509, 518 (Tenn. 2005).

In essence, the equal protection guarantee "protects against arbitrary classifications, and
requires that similarly situated persons be treated equally." Northville Downs v. Granholm, 622
F.3d 579, 586 (6th Cir. 2010) (citation and internal quotation marks omitted). The entities likely
to launch an equal protection challenge here are, if any, in-state liquor stores that claim they are
entitled to the same retail operating days as in-state distilleries. But a court is highly likely find
that these potential challengers are not "similarly situated" to liquor manufacturers or distilleries,
in which case the equal protection guarantees do not apply.

It would appear that a retail liquor store is not similarly situated to a distillery in function
or customer base. There is a material difference between local distillers who sell their own
products merely as an incident to their manufacturing operations and retail stores whose only
business is to sell alcohol produced by various manufacturers for off-premises consumption. See,
e.g., 37712, Inc., 113 F.3d at 621 (finding manufacturer and carry-out retail stores are not similarly
situated).

Moreover, common sense and experience dictate that customers do not perceive distilleries
to be reasonable substitutes for local liquor stores. People generally do not drive to a distant
distillery to make the kind of regular alcohol purchases they make at a local liquor store.
Distilleries are open to the public primarily as a marketing tool to promote goodwill by giving
tourists an opportunity to learn about the distilling process and the distillery's products. Sale of
those products at the distillery is far from the distillery's primary business. The distillery offers
only its own products for sale, and a limited number of visitors may actually purchase those
products incident to a tour, much as they would purchase a souvenir. Any future purchases of the
distiller's product by the tourists will likely occur at a retail liquor store, where the vast majority
of these products are sold.

In short, equal protection guarantees are not implicated unless there is discrimination
between similarly situated persons. Thus, to the extent that retailers and distilleries are not
"similarly situated," disparate restrictions on their respective days of operation with regard to the
sale of closed bottles of alcohol would not be viewed as an equal protection violation.

Even if liquor retailers and distillers are viewed as similarly situated so as to trigger equal
protection concerns, the disparate treatment imposed by the statutes would almost certainly survive
an equal protection challenge, because it should pass constitutional muster under the "rational
basis" test. Depending on the nature of the right asserted, both the United States Supreme Court
and the Tennessee Supreme Court apply one of three levels of scrutiny when analyzing equal
protection claims: strict scrutiny; intermediate scrutiny; or "rational basis" scrutiny. Tenn. Small
Sch. Sys., 851 S.W.2d at 153. Equal protection "requires strict scrutiny of a legislative
classification only when the classification interferes with the exercise of a 'fundamental right'
(e.g., right to vote, right of privacy), or operates to the peculiar disadvantage of a 'suspect class'
(e.g., age or race)." State v. Tester, 879 S.W.2d 823, 828 (Tenn. 1994). Rights "are fundamental
when they are either implicitly or explicitly protected by a constitutional provision." Tenn. Small
Sch. Sys., 851 S.W.2d at 152. Intermediate scrutiny only applies when the classification involves
a quasi-suspect class, such as gender or illegitimacy. Craig v. Boren, 429 U.S. 190, 198-99 (1976).

If the classification does not interfere with the exercise of a fundamental right or does not
disadvantage a suspect or quasi-suspect class, "judicial inquiry into the legislative choice is limited
to whether the classifications have a reasonable relationship to a legitimate state interest." Doe v.
Norris, 751 S.W.2d 834, 841 (Tenn. 1988). "Under this standard, if some reasonable basis can be
found for the classification, or if any state of facts may reasonably be conceived to justify it, the
classification will be upheld." Tenn. Small Sch. Sys., 851 S.W.2d at 153.

Thus, when disparate treatment between similarly situated persons is shown, social or
economic legislation that does not target a suspect class or burden a fundamental right will
withstand an equal protection challenge if the classification or disparate treatment is rationally
related to a legitimate state interest. This "rational basis" analysis presumes the challenged statute
to be valid "if any conceivable basis rationally supports it." Northville Downs, 622 F.3d at 586;
37712, Inc., 113 F.3d at 622.

Because the statutes in question here are social or economic legislation and do not involve
fundamental rights or suspect classes, a court would apply the rational basis standard of review.
There are conceivable, legitimate state interests that could justify the disparate treatment. A
legislative decision to encourage and protect private investment in local alcohol manufacturing
facilities, or a policy to promote domestic production of alcohol, each provide a rational basis for
treating Tennessee liquor manufacturers and distilleries more favorably than liquor retailers. See,
e.g., 37712, Inc., 113 F.3d at 621 (finding that legislative policy to promote local investment and
production of beer was rationally related to Ohio statute exempting breweries from local option
allowing a ban on retail sales). The State also has a legitimate interest in encouraging and
facilitating tourism, which brings with it economic benefits for the State in the form of increased
revenues and job opportunities. Allowing retail sales at popular tourist destinations like distilleries
on Sundays and holidays when tourists are especially likely to visit is rationally related to the
State's interest in fostering tourism.

In sum, the statutory scheme that favors Tennessee distilleries over Tennessee retail liquor
stores with respect to the permitted days of operation would almost certainly survive an equal
protection challenge under both the federal and the Tennessee Constitutions.

HERBERT H. SLATERY III
Attorney General and Reporter

ANDRÉE SOPHIA BLUMSTEIN
Solicitor General

LINDA D. KIRKLEN
Assistant Attorney General

Requested by:
The Honorable Martin Daniel
State Representative
109 War Memorial Building
Nashville, Tennessee 37243