DC AG Announces $6.5M Settlement with Beverage Delivery Service Drizly Over Driver Tips and Taxes

A press release issued by District of Columbia Attorney General Karl A. Racine announced a settlement with Drizly, an alcohol delivery company, over allegations that it failed to give tips left by consumers to drivers and failed to pay taxes. Under the terms of last week’s settlement, the Boston-based company will pay an estimated $6.46 million in reimbursements, past-due taxes, and penalties.

According to Racine’s office, Drizly facilitates the placement and delivery of online orders for beer, wine, and spirits, which local stores fulfill and local drivers deliver, while alcoholic retail outlets pay drivers an hourly rate or flat fee. Though the attorney general’s investigation determined that Drizly did not divert driver tips to itself, it did not ensure that they ended up in drivers’ hands.

Specifically, Drizly passed customer tips to its retail partners with no meaningful requirements that the money be paid to drivers, which usually resulted in retail partners keeping the tips to offset their own operating costs or increase profits.

In terms of taxation, the attorney general accused Drizly of failing to pay millions of dollars in taxes owed to the District, including both taxes on orders as well as those on the delivery and service fees charged to District consumers.

The settlement follows one with the Federal Trade Commission (FTC) over allegations that, in the wake of a data breach exposing 2.5 million customers’ information, the beverage company did not have adequate cybersecurity protections. The FTC’s October action concluded with the company and its founder’s agreement to implement better protective measures.