As the California Department of Alcoholic Beverage Control (ABC) continues to modernize, retail licensees should prepare for a major shift in the timelines and format for paying wholesale licensees. Starting January 1, 2026, California Assembly Bill 2991 (AB 2991) requires retailers to pay wholesalers by electronic funds transfer (EFT). EFT uses a computer or other electronic terminal to directly debit or credit financial accounts of the counterparties. Essentially, the ABC is moving away from checks, cash and other “older” means of payment to more technologically sophisticated methods.
AB 2991 allows wholesalers and retailers to agree on a third-party EFT processor. If they can’t do so, then the third-party processor used by the retailer as of July 1, 2025 will be the EFT processor. If the retailer does not have a third-party processor in place on July 1, 2025, then the parties will use the wholesaler’s preferred third-party processor.
Under this new law, wholesalers (not retailers) must initiate the electronic funds transfer from the retailer’s bank account, but each party bears its own costs and service fees associated with the transfer.
The transfer must occur by the 30th day from the date of delivery of the inventory. If payment is not received within 30 days, the wholesaler must require payment in advance for any future deliveries until the past-due amount is resolved. If a retailer fails to pay within 42 days of delivery, then there is 1% interest charge on the unpaid balance on the 43rd day, with another 1% for each subsequent 30-day period.
A retailer may still pay by cash, check, or money order:
- if the wholesaler is accepting payment after an EFT failed for insufficient funds;
- if the retailer holds an interim operating permit or temporary permit;
- if the third-party processor’s service was interrupted; or
- during the first 30-days after the ABC issues a license to the retailer.
Payments may also be by credit card if the wholesaler agrees and the retailer pays the credit card company charges.
Finally, to avoid tied-house issues, retailers cannot accept any rebates, incentives or other things of value from third-party payment processors.
Retailers and wholesalers should begin planning ahead of AB 2991’s start date. A retailer should assess its current internal payment policies and procedures (and, if those are deficient or non-existence, consider working with a third-party EFT processor), all to ensure the retailer can make payments to wholesalers within AB 2991’s 30-day window. Both retailers and wholesalers should review any contracts or agreements with third-party processors and begin coordinating with each other on their payment systems.
