A state wishes to tax alcohol to raise revenue while at the same time protecting their local producers. They have settled on accomplishing this by prohibiting the sale of liquor in privately-owned stores while allowing the sale of liquor in government-owned outlets only.

They are able to do this under the 21st Amendment. However, constitutionally, taxing out-of-state alcohol while leaving in-state-alcohol exempt goes against the dormant commerce clause.

Are the state-run outlets safe from the Dormant Commerce Clause as a market participant even though they are a state-run monopoly? And if so, can they levy a "tax" by making in-state alcohol cheaper than out-of-state alcohol?

NOTE: I will not accept answers that rely on alternatives to the hypo like "why don't they just give subsidies to the local producers?"

  • I'm not sure I understand what kind of taxing scheme you think gets in-state producers taxed less.
    – pboss3010
    Dec 28, 2018 at 13:10
  • @pboss3010 Anything they can legally get away with.
    – S J
    Dec 28, 2018 at 21:39
  • Do you have an example of a state (or county) that only allows the sale of spirits in state (or county) owned stores, has a sales tax or alcohol specific sales tax, but does not levy the tax on local stuff? Or do you just mean that they Local Whiskey for $20 and Neighbor Whiskey for $25?
    – Damila
    Jan 3, 2020 at 20:09
  • I just realized -- this may be a homework question! Jan 3, 2020 at 22:06


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