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Maryland Reform on Tap Bill: A New Way Forward

The Reform on Tap Task Force process is concluding today with the introduction of the long awaited “Reform on Tap Act of 2018.” The model reform bill seeks to significantly change how the beer industry is regulated in Maryland. While the Comptroller does not have the authority to introduce the bill into the General Assembly, a number of committee members with jurisdiction over alcohol regulation were part of the Task Force and are likely to introduce some version of this bill in January.  We will be following up with their offices to confirm those details.

There are a number of important reforms being put forth in this bill, among them:

  1. Removing all limits on volume of taproom sales for both on-premise consumption and to-go bottles, for all types of breweries (currently 2000 BBL/year for a Class 5 and 4000 BBL/year for on-premise sales for a Class 7);
  2. Removing all limits on how much beer a brewery can sell to a single customer per visit (current limit is 288 ounces or one case);
  3. Removes the existing (and vaguely worded) requirement that a brewery may only sell to-go beer to a customer that has participated in a guided tour or “organized activity/promotional event” at the brewery;
  4. Removes the limits on barrel production for farm breweries (Class 8, currently 15,000 BBL) and microbreweries (Class 7, 22,500 BBL);
  5. Gets rid of both the “buy-back” provisions of HB 1283 for Class 5 breweries and reverts control of operating hours back to local jurisdictions1;
  6. Restores the automatic right of Class 5 (general production) breweries to have a taproom and sell through it, i.e. removes the ability in HB 1283 for individual counties to deny a taproom;
  7. Breweries who produce less than 300,000 BBL/year will no longer be bound by a Beer Franchise law. Such laws legally wed a brewery to a wholesaler, regardless of that wholesaler’s actual performance, or what the parties may privately negotiate. Distribution agreements would now be governed by standard contract law for all craft breweries in Maryland;
  8. All breweries who produce less than 300,000 BBL/year will now have unlimited self-distribution rights. Currently, self-distribution is limited to micro and farm breweries, and with a limit of self-distributing only 3,000 barrels per year;
  9. Producing beer under contract, and selling that beer through a taproom, would now be permitted without restriction for any brewery makes at least 50 BBL/year;
  10. Finally, a new two-year provisional license will be established for any start-up brewery that begins as a “gypsy”/contracting brewery.

Taken together, these are an impressive set of reforms that would fundamentally change the legal landscape for breweries operating in Maryland. It would make Maryland among the most brewery-friendly states in the country from a regulatory standpoint. For consumers, it would most likely result in greater access and ability to buy beer, without the brewery that customer is supporting have to worry about as many regulatory issues. If enacted into law, these reforms may also stymie the efforts of Virginia to recruit Maryland brewers across the Potomac.

Of course, the introduction of the Reform on Tap Act, let alone its passage, is far from assured. It will require a significant effort on the part of craft beer fans to call and contact your state representatives in Maryland, making them aware that you are following this issue and care about it as a voter. Without such citizen activity, the same process that governed the passage of HB 1283 last year, and with it the killing of the Brewery Association of Maryland’s (BAM) modernization bill, may very well repeat itself in the 2018 legislative session. For more information on how to get involved, please visit BAM’s website.

The buy-back provision currently states that in order to sell more than 2,000 BBL/year through a tap-room, a Class 5 brewery must sell any beer above that limit to a wholesaler first. The wholesaler will then take the beer, transport it to their distribution facility and off load it. The wholesaler would then sell the beer back to the brewery at their standard mark-up, put the beer back on a truck, and deliver it to the brewery.

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