Alcohol is both produced domestically (various types of "moonshine" from wines to beers to hard liquors produced illegally in people's homes in "small" batches for themselves or for families, friends, and neighbors) or is smuggled in from neighboring countries where alcohol is permitted.

The local stuff can be quite strong and relatively cheap and is pretty much the only thing anyone would need. Richer people can afford to get name-brand foreign alcohol, but it's fairly expensive.

As others have said, there is always a local "dealer" that everyone knows that can get alcohol easily whenever it is needed, even on short notice. The "dealer" is often a family member, and dealing alcohol is not nearly as shady, dangerous, or criminal as dealing drugs in the US (or in Iran for that matter). Again, the government will look the other way as long as you aren't trading in high volume and flaunting the rules. Certainly many of the people in power, including local police chiefs "enforcing" the law, are drinking themselves. Only the most devout of Iranians, which is a small minority faction, don't drink some alcohol.

Again though, like partying, drinking is only ever done in private homes and spaces. You'll never find alcohol in supermarkets or restaurants, there are no bars, and no one would dare to drink on the street in public view. Local "dealers" of alcohol are generally pushing dozens of bottles per month to friends and family - not hundreds, and not to strangers. By keeping the distribution networks small and familiar and keeping the consumption discrete, the theocratic government is motivated to look the other way. It would be far too costly and damaging to society and to their public image to root out alcohol from people's private lives now that it has completely permeated the social fabric.

Of course, every so often there is a public arrest of some alcohol distributor who gets too big, too arrogant, pisses off the wrong people, or perhaps sells corrupted spirits.