The State of Tennessee requires those seeking to sell alcohol to reside in Tennessee for at least two years to obtain a retail license. The Sixth Circuit struck down the 2-year residency requirement.
Under the dormant Commerce Clause, if a state law discriminates against other States’ goods or nonresident economic factors, the law can be sustained only if the state shows that the law is narrowly tailored to “advance a legitimate local purpose.”
A later adopted provision takes precedence over an earlier, conflicting provision of equal stature.
No person or business may lawfully sell alcohol in Tennessee without first obtaining a retail license, which requires the person or business to demonstrate that he or she has resided in Tennessee for at least two years. The Court of Appeals struck down two provisions. One provision provides that a person may not renew a license unless the applicant has resided in the State for 10 consecutive years. Another requires all corporate stockholders to be residents of the State to obtain a license. The Sixth Circuit also struck down the 2-year residency requirement.
Can a State regulate liquor sales by granting retail license only to individuals who have met the State’s 2-year residency requirement?
No, Tennessee’s 2-year residency requirement for retail license applicants is unconstitutional because it favors the State’s residents over non-residents and has little relationship to public health and safety. Nor is there evidence that nondiscriminatory alternatives would be inefficient to further those interests. The Association’s requirement has the predominant effect of protecting its members from out-of-state competitions and the dormant Commerce Clause forbids this.
The country has adopted two constitutional amendments to adjust and readjust alcohol’s role in our society and throughout the changes, one thing has always held true: States may impose residency requirements on individuals who seek to sell alcohol in their States to ensure that retailers comply with local laws. In fact, States have enacted residency requirements for 150 years.
Importantly, the dormant Commerce Clause is not explicit written in the Constitution but is only an implication. The Constitution grants Congress the authority to regulate interstate commerce and therefore Congress may rebut any implication of unconstitutionality that might otherwise arise under the dormant Commerce Clause by authorizing States to adopt laws favoring in-state residents.
The dormant Commerce Clause dictates that if a state law discriminates against other States’ goods or nonresident economic factors, the law can be sustained only if the state shows that the law is narrowly tailored to “advance a legitimate local purpose.” The 2-year residency requirement facially discriminates non-residents and the challenged requirement cannot be justified as a public health or safety measure or other legitimate non-protectionist state interests. In addition, as opposed to the respondent’s argument, Section 2 of the Twenty-first Amendment does not shield the 2-year residency requirement. Section 2 was adopted to give each State discretion in choosing the alcohol-related public health and safety measures that its citizens find desirable. However, Section 2 is not a license to impose protectionist restrictions on commerce in alcoholic beverages.