Montana is one of only 17 states that has a liquor control or “quota system” in the United States, but that wasn’t always the case. The the state of Montana placed no restrictions on the distribution or selling of liquor until prohibition began in 1920. At that time the state's population was just over 500,000 and there was roughly one saloon for every 343 people. As Montana prepared to repeal prohibition the state opted for a control system and in 1933 saloons were only allowed to sell beer by the glass and hard liquor could only be purchased at state liquor stores and consumed elsewhere.
By 1937, due to illicit liquor trafficking becoming prevalent, taverns were allowed to sell liquor by the glass after purchasing a full beverage liquor license. Opponents argued that more opportunity to purchase liquor would increase consumption, while supporters argued that the high cost of liquor licenses ($200 to $600 annually) would cause saloon owners to protect their investment and obey state liquor laws. The supports of the quota system won and now Montana believes that moderation can be achieved not by promotion or marketing but by controlling liquor distribution.
The legislature has changed over the years and in 1947, as part of the reform movement, installed a quota system limiting the number of licenses to each town based on population. In 1975 beer and wine were amended into the quota system as well.
There are a few different types of licenses for on-premise liquor sale. Full Liquor Licenses allow bars and restaurants to sell both beer and hard liquor from 8am - 2am for on site consumption. Full Liquor licenses can also sell alcohol for off-site consumption in its original packaging. Beer and Wine licenses allow retail location to sell on site beer and wine only. Liquor sales at these locations is prohibited.
A specialty Beer and Wine license, commonly called a “Cabaret License“, was created in 1997 specifically for restaurants whose main source of income was food sales. This provided them the opportunity to sell beer and wine with their meals.
How many of these licenses that are available per city or county are based on population. For example, in a city of more then 3,000 they are allowed 5 All Beverage licenses for the first 3,000 people and 1 additional license for each additional 1,500 residents. Communities are allowed 4 Beer and Wine licenses for the first 2,000 people, 2 licenses for the next 2,000, and 1 additional license for every additional 2,000 inhabitants.
The state of Montana liquor distribution is a three tiered system. First distillers sell their product to the state liquor warehouse in Helena. A tax is collected and a markup added to the unit price and then sold based on demand to state liquors stores across Montana. State liquor stores are then allowed to sell liquor to bars and restaurants with full beverage licenses.