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(Adds Gorsuch quote and background on dispute, paragraphs 7-13)
WASHINGTON, June 26 (Reuters) - The U.S. Supreme Court on Wednesday ruled in a case concerning alcohol regulations enacted following the Prohibition era that Tennessee residency requirements for liquor retailers violate the U.S. Constitution's interstate commerce provision.
The 7-2 ruling held that Tennessee's regulations unlawfully discriminated against out-of-state businesses in violation of the Constitution's so-called Commerce Clause.
The case pitted two constitutional provisions against one another: the 21st Amendment, which repealed the 18th Amendment ban on alcohol, and the Commerce Clause, which prevents states from discriminating against out-of-state businesses.
The state law imposed a two-year in-state residency requirement for business owners applying for a license and 10-year residency requirements for license renewals.
"Because Tennessee's two-year residency requirement for retail license applicants blatantly favors the state residents and has little relationship to public health and safety, it is unconstitutional," conservative Justice Samuel Alito wrote for the court.
The 21st Amendment explicitly gave states the power to regulate alcohol sales within their borders. But Supreme Court rulings regarding the Commerce Clause prevent states from discriminating against out-of-state businesses. The court in 2005 ruled that states could not let in-state wineries ship wine to consumers but prevent out-of-state wineries from doing so.
Conservative justices Neil Gorsuch and Clarence Thomas dissented, with Gorsuch writing that the 21st Amendment allows for regulations like those in Tennessee.
"Like it or not, those who adopted the 21st Amendment took the view that reasonable people can disagree about the costs and benefits of free trade in alcohol," Gorsuch wrote.
Maryland-based Total Wine and More, a major retailer that operates 193 stores in 23 states, was one of the challengers. Total Wine's co-founder and co-owner David Trone won election in November to the U.S. House of Representatives as a Democrat from Maryland.
The case began when a state-level trade association urged Tennessee officials in 2016 to reject liquor license applications from Total Wine and a couple who recently arrived from Utah and wanted to open a liquor store.
Tennessee's alcohol regulator preemptively filed suit seeking a declaration that the state regulations were lawful, but lower courts ruled against the state.
A separate provision that effectively prevented out-of-state retailers for opening stores was struck down by a lower court and was not at issue in the Supreme Court ruling.
The Supreme Court argument in the case on Jan. 16 came on the 100th anniversary of the ratification of the Constitution's 18th Amendment, which imposed a nationwide ban on alcoholic beverages and paved the way for a Prohibition era that ran from 1920 to 1933. (Reporting by Lawrence Hurley; Editing by Will Dunham)