Reed Smith Client Alerts

On June 26, 2019, the U.S. Supreme Court ruled in a 7-2 decision that Tennessee’s residency requirements for retail liquor store licenses were unconstitutional.  Relying on the Commerce Clause of the U.S. Constitution and analyzing the Twenty-first Amendment, the Court found that Tennessee’s rules discriminated against out-of-state goods and nonresidents by adopting protectionist measures. Although the ruling itself is about liquor sales, the opinion could have implications for state licensing and the interstate commerce of cannabis after federal legalization.

Tennessee’s residency requirements

The state of Tennessee historically imposed residency requirements for persons and companies seeking to obtain a license to operate a liquor store in the state for off-premises consumption.1 To obtain a license, an individual had to show that they were “a bona fide resident” of Tennessee for the previous two years; and to renew, show continuous residency for 10 consecutive years.2 Corporations could not obtain a retail license unless all of their officers, directors, and owners of capital stock satisfied all of the same durational-residency requirements, effectively precluding any publicly-traded companies from operating a liquor store in Tennessee.3 Notably, out of concern that these requirements were unconstitutional, the Tennessee legislature later included a statement of intent that protection of “the health, safety and welfare” of residents required “a higher degree of oversight, control and accountability for individuals involved in the ownership, management and control of such outlets.”4