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How It Works

Three-Tier System

Tennessee thrives utilizing a three-tier system, which maintains market access and consumer choice, provides public safeguards, and ensures proper payment of taxes of hundreds of millions of dollars annually, and supports communities across the state.

Tennessee's independent beer distributors are a critical link in the three-tier system of alcohol distribution. The three-tier system is made up of brewers and importers, distributors and retailers. 


The system prevents vertical integration of the alcohol industry, thereby providing the benefit of a healthy competitive and robust marketplace with tremendous variety for consumers, while ensuring the proper collection of taxes on all alcohol products.




This promotes: 

  • Competition: Preserves a fair and competitive market and ensures access to product that would not be present without a three-tier system.

  • Taxes: Tennessee beer wholesalers collect and remit the state beer excise tax, the local wholesale beer tax, as well as assist with proper collection of Tennessee sales tax (more below).

  • Variety: Consumers see a higher level of choice with the three-tier system. Without it, one brand could dominate the market space which would lower choices for the consumer and retail outlets.

  • Safety: The three-tier system provides a way to know where the product came from, who’s responsible for it, and to whom and where it was sold instilling consumer trust.

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Importantly, the same controls that provide accountability in beer sales also ensure that states can efficiently collect taxes on beer. Because distributors are able to monitor the beer from the time it leaves the brewery until it arrives at a licensed retail outlet, they are best equipped to collect state and local beer taxes. It’s more efficient for Tennessee to collect beer taxes from a limited number of licensed beer distributors rather than from thousands of retail establishments.

The system creates checks and balances to ensure our members go above and beyond accounting for every cent owed to the state and communities. This includes:

  • Collect and Remit Taxes: Beer wholesales collect and remit the beer barrel tax ($4.29) to the state.

  • Direct Benefit to Local Governments: Beer wholesalers remit the Local Wholesale Beer Tax revenue ($35.60 per barrel) each month, directly to the city or county where they sell beer to a retailer.

  • Retail Accountability Program: Beer wholesalers’ participation in the Tennessee Department of Revenue’s Retail Accountability Program has helped in the collection of an estimated  $144 million in sales tax revenue in 2019 that would not have otherwise been reported or captured.

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