California’s New Alcohol Payment Law: What It Means for Distributors and Breweries

California recently passed AB-2991.  With this new law, the alcohol industry in California is about to experience a significant shift starting on January 1, 2026.   This new law will impact retailers, restaurants and bars as well as any wholesaler that sells to these businesses including alcohol distributors, breweries, wineries, cideries, and distilleries.  Here’s what you need to know:

• All alcoholic beverage transactions between retailers and wholesalers must primarily be settled through electronic funds transfers (EFT).
• Credit card payments will be allowed but only under specific conditions, 
• Traditional payment methods such as checks will be largely phased out.
• This transformative legislation is designed to streamline payments, reduce ambiguity, and bring the industry into the digital age.
• There is an opportunity now to invest in the right solutions that will not only help you comply with the new law, but also improve cash flow and save time on manually processes

To help break down the implications of the new law, we consulted Tom Kerr of Strike Kerr & Johns, a legal expert specializing in alcohol beverage law. His insights shed light on what this means for businesses and why preparing now is essential.

Context: Alcohol Payment Regulations

For those unfamiliar with the industry, payments for alcohol are already subject to strict regulations compared to other sectors. Many states, including California, have laws designed to prevent practices like extended credit terms, which could be used as indirect discounts. These regulations often require payment within a specific timeframe—commonly 30 days—and strictly prohibit wholesalers from offering financial incentives or rebates to retailers. The shift to electronic payments builds on these rules, adding modern infrastructure to an already highly regulated landscape.

California isn’t alone in this trend. Michigan recently introduced a similar law mandating electronic payments for alcohol deliveries to retailers, underscoring a growing push across states to modernize payment practices in the beverage industry.

Key Requirements of the New Law

The new California law establishes strict rules around how payments between retailers and wholesalers must be conducted. Here are the highlights:

• Mandatory EFT: Payments for beer, wine, or spirits must be made via EFT, defined as “the electronic transfer of money from one bank account to another, either within a single financial institution or across multiple institutions.” ACH is a common EFT payment method.
• Credit Card Payments: Wholesalers may accept credit card payments, but retailers must bear the cost of the transaction.  This means retailers need to cover any credit card surcharges if they choose to pay with a credit card.  This ensures no undue benefits are realized by the retailer.
• Initiated by vendor: The wholesaler needs to initiate the electronic funds transfer by initiating the withdrawal of funds from the retailer's bank account.
• EFT Timing: EFT payments must be completed by the 30th day after delivery.
• Cost Responsibilities: Each party is responsible for any costs they incur for using electronic payment services. Wholesalers cannot pay for retailers’ payment service fees, and vice versa.
• Third-Party Payment Processors: Wholesalers are responsible for selecting the payment processor. If a retailer uses a third-party processor as of July 1, 2025, the wholesaler must accommodate that processor.

By requiring EFT for most transactions and limiting the scenarios in which traditional payments are allowed, this law fundamentally changes the payment landscape in California. It ensures that payments are faster, more transparent, and less prone to disputes, but it also introduces significant operational changes for wholesalers and retailers alike.

Limited Exceptions to EFT

While EFT is the default, the law allows for alternative payment methods under specific conditions:

• Insufficient Funds: If an EFT is attempted but fails due to insufficient funds, payments can be made via cash, check, or money order.
• Temporary Permits: Retailers operating under interim or temporary permits may use cash, check, or money order.
• Service Interruptions: Payments can revert to traditional methods during temporary outages of the third-party payment processor.
• New Licensees: Retailers newly licensed within the past 30 days may use cash, check, or money order.

These exceptions highlight the importance of maintaining flexibility while ensuring that EFT remains the standard.

Challenges and Opportunities

The transition to electronic payments comes with challenges:

1. Operational Adjustments: Businesses must adopt EFT systems and train their teams to manage new processes.
2. Third-Party Processor Coordination: Wholesalers and retailers must align on payment processors, which could cause friction if preferences differ.
3. Compliance Monitoring: Both parties must stay vigilant to ensure they adhere to the law’s cost-sharing and processor-selection rules.

At the same time, the new law offers opportunities for wholesalers:

• Improved Cash Flow: Faster payments reduce working capital burdens.
• Streamlined Processes: Automation can reduce errors and administrative overhead.
• Stronger Relationships: Transparent payment systems build trust between wholesalers and retailers.

How Wholesail can help you navigate the new rule

Our platform simplifies compliance with the new law while improving your overall payment processes.

Here’s how we help:

• Autopay: Wholesail's Autopay solution enables buyers to pay within their terms automatically, complying with requirements related to payment terms and wholesaler initiated payments.
• Compliant Credit Card Payments: Support credit card transactions while ensuring surcharges are passed appropriately to retailers.
• Easiest retailer enrollment - Wholesail doesn’t require retailers to create an account or pay for Wholesail unlike other alcohol-industry payment solutions. Retailers are automatically enrolled in automated statements & invoices which makes accessing the Wholesail portal easy. 
• Save time with Automated Reconciliation - Wholesail payments are automatically applied to invoices and deposits are recorded in your ERP so your books are always up-to-date.
• Dedicated Support - Wholesail provides dedicated support for your team and all of your customers.  We also pair you with a Customer Success Manager who is available to ensure you are accomplishing your objectives.

Preparing for 2026

The new law gives businesses a clear roadmap, but it’s important to plan for the transition now to have disruption to you and your customers. By adopting EFT and digital payment solutions early, wholesalers and retailers can avoid disruptions, build efficient processes, and position themselves as leaders in this evolving landscape.

Follow these five steps to prepare your customers for this transition: 

1. Get a solution in place to give customers the ability to setup automated electronic funds transfers via ACH or Credit card.  The more customers that transition earlier the less disruption you’ll have in early January 2026.
2. Communicate to all your customers starting in Q2 that this will become a rule in 2026 and you have adopted a new solution that enables them to comply with the law. 
3. Communicate to any customers that still need to setup an automated electronic payment solution in October and November that they will need to transition to automated, electronic payments by January 1, 2026 to avoid a disruption in service. 
4. In mid-December before the holidays send a final reminder that they will need to transition to automatically pay electronically. 
5. In January notify customers paying with check that they will not be able to pay with check any further and will need to adopt electronic payments. If you use Wholesail, you can call them to setup credit card payments over the phone to avoid a disruption in service.

With Wholesail, you can start preparing for the 2026 deadline today. Our platform not only ensures compliance but also unlocks efficiencies that drive long-term success. We can send these communications on your behalf to set you and your customers up for a smooth transition. 

Ready to future-proof your payment systems?

For details on the law, visit the California Department of Alcoholic Beverage Control’s official site.