Last Call

Feds Remind Wineries, Distilleries and Breweries that for Taxes, There’s no Free Ride in this Carnival World

By - September 28, 2014 | Alcoholic Beverage Law | Email Will Cheek

The Tax and Trade Bureau, the federal agency charged with overseeing alcohol, recently reminded industry members that the failure to pay liquor taxes is a serious crime.

According to the TTB, Monterey Wine Services had taxable removals of wine from its bonded wine cellar, which resulted in a wine excise tax due and owing to TTB. The owner, Brenda Jo Kibbee, failed to pay the excise tax. In the wine warehousing industry, bonded wine cellars pay wine excise tax on the removal of wine, but then typically pass this cost on to their winery customers. Even though Kibbee did not pay the excise tax due to TTB, she invoiced her customers and received payments from them for the excise taxes. Kibbee agreed that the tax loss resulting from her misconduct was at least $877,126.94.

Brings to mind “Carnival World” by Jimmy Buffett

But talk is cheap
It takes money to buy your freedom
And the tax man’s knockin’ on your door
Spend it while you can, money’s contraband
You can’t take it with you when you go.
Spend it while you can, before it’s taken from your hand,
There’s no free ride in this carnival world.

TTB Assistant Administrator for Field Operations Tom Crone said, “Tax evasion is not a victimless crime. Law abiding businesses rely on us to ensure a level playing field. We take that responsibility seriously.”

Honorable D. Lowell Jensen, United States District Court Judge, in San Jose sentenced Kibbee to a three-year term of supervised release.

Is Universal Carding Fool’s Paradise for Preventing Sales of Wine and Liquor to Minors in Tennessee?

By - September 24, 2014 | Alcoholic Beverage Law | Email Will Cheek

Tennessee’s Wine in Grocery Store law requires that liquor stores card everyone beginning July 1, 2014.  WIGS also requires food stores to card everyone for wine sales, when WIGS becomes effective for groceries and other food stores on July 1, 2016.

Known as universal carding in the liquor industry, the practice is politically popular. Liquor industry experts complain that universal carding is “a quick fix” that is “meaningless” to controlling sales to underaged consumers.

Universal carding requires that everyone show an ID for the purchase of alcohol. Regardless of age. Octogenarians must fork over an ID to purchase hooch.

Paul McCartney’s classic Beatles tune inescapably comes to mind:

When I get older, losing my hair, many years from now
Will you still be sending me a valentine, birthday greetings, bottle of wine?
If I’d been out ’til quarter to three, would you lock the door?
Will you still need me, will you still feed me when I’m sixty-four?
 

Those in the know say that universal carding takes the focus off of ensuring that folks close to the legal drinking age present valid identification. Clerks have to spend time carding people that clearly are of age, including repeat customers that clerks know.

When lines form at checkout, it is easy to understand that less time is devoted to looking at the IDs of younger purchasers. 

Adam Chafetz at TIPS, the global leader in education and training for the responsible service, sale, and consumption of alcohol, observes that:

Today’s extremist attitudes on the part of liquor boards about underage drinking have created environments where these kinds of meaningless practices abound. Add political correctness to the mix and you end up carding everyone, just to be on the safe side. 

Tennessee was the first state to adopt universal carding. In 2007, Tennessee required everyone to show ID to purchase beer at markets, grocery stores and other off-premises sales. The law made national news.

Universal carding at liquor stores, and at groceries beginning in 2016, is fertile ground for Tennessee ABC citations. If a clerk fails to card, the ABC can issue a citation. The Metro Nashville Beer Board has certainly profited from universal carding for beer and we expect the ABC to see an increase in fines from universal carding.

As one loyal reader pointed out:

This law ignores common sense and places undue burden on small businesses that already understand the consequences of selling to a minor.  This bill does nothing to improve upon that and only hassles loyal customers and good operators.

 

Tennessee Alcoholic Beverage Commission Will Rock Your Liquor License Renewal

By - September 23, 2014 | Alcoholic Beverage Law | Email Will Cheek

Anyone in the liquor business knows that the Tennessee ABC has been implementing big changes over the past couple of years.  Keith Bell, appointed as Director of the ABC on May 21, 2013, has clearly stated his intention to “clean up” the liquor laws.

Today, we learned that renewals of liquor-by-the-drink licenses must comply with new deadlines.  Failure to meet the deadlines results in termination of the liquor license and an interruption in service while applying for a new liquor license.

The ABC requires that managers sign the attached form when the ABC agent inspects for renewals.  We strongly encourage all LBD license holders to pay close attention to the new deadlines.

Brings to mind the 1977 Queen anthem “We Will Rock You”

Buddy you’re a boy make a big noise
Playin’ in the street gonna be a big man some day
You got mud on yo’ face
You big disgrace
Kickin’ your can all over the place
Singin’

We will we will rock you
 

The new TABC rule says that licenses will be voided out if the renewal is not complete within 14 days of the date the license expires.  We expect that the ABC will put you on no buy with the wholesalers and send an agent to take your license off the wall.

The ABC is clear that if you fail to meet the 2 week grace period on renewals, you will have to apply for a new license.

Failure to complete a liquor license renewal within 2 weeks of the expiration date will lead to a prolonged interruption in service. No wine or spirits for several weeks.

As we read the ABC requirements, the following must be completed before the LBD license expires:

  • Renewal application filed with the ABC
  • Renewal fee paid
  • Tax clearance from the Tennessee Department of Revenue
  • Bond clearance from the Tennessee Department of Revenue
  • All citations with the ABC resolved for all stores in Tennessee

We are trying to clarify whether a new price schedule is required for renewals.

The problem is that it is hard to determine when a renewal is complete. The ABC and Revenue do not have the resources to tell you when you have a citation, bond issues, or taxes owed that prevent you from renewing.

With the prospect of a prolonged interruption in service, restaurants, hotels, caterers and venues should pay close attention to renewals.

Tennessee 2014 WIGS Residency Requirement for Retail Package Stores Is Not Legal

By - September 19, 2014 | Alcoholic Beverage Law | Email Will Cheek

So says the Tennessee Attorney General in an opinion released this week.  The full opinion is here.

For decades, state law required that liquor stores must be owned by Tennessee residents.  The Attorney General found the original residency requirement unconstitutional on June 6, 2012.

Reminds us of Genesis’ catchy 1984 hit Illegal Alien:

It’s no fun being an illegal alien, I tell ya
It’s no fun being an illegal alien, no no no no no
It’s no fun being an illegal alien, I mean it when I tell ya that
It’s no fun being an illegal alien,
An illegal alien, O.K.

 

As a part of the messy deal struck for wine in grocery stores, which we affectionately call WIGS, the legislature reaffirmed the Tennessee residency requirement with new language designed to make the residency requirement constitutional.  Industry insiders speculate that the Tennessee retail liquor store association pushed for the revamped residency requirement to prevent out-of-state mega liquor stores, which are game changers for the market.

The residency fix in WIGS calls to mind a poignant Einstein quote: “The difference between genius and stupidity is that genius has its limits.”  We expected the Attorney General to find that the WIGS residency requirement was unconstitutional.

The take away?  If the Tennessee Alcoholic Beverage Commission follows the advice of the Attorney General, retail liquor stores can be owned by folks that are not Tennessee residents.  The Tennessee ABC is not legally bound to follow the Attorney General ruling, but we expect it to do so.

2014 Taste of Tennessee Showcases Artisan Distillers

By - September 06, 2014 | Alcoholic Beverage Law | Email Will Cheek

The inaugural Taste of Tennessee festival featured distillers’ finest, served neat for whiskey aficionados. The September 6, 2014 event was hosted by the Tennessee State Fair and benefitted the Tennessee Distillers Guild.

We grabbed shots of the participating distillers and event sponsors.  Enjoy.

4V5A3290

4V5A3291

(more…)

Obscure 2014 Liquor Law Muddies Water for Sweet Treats with Alcohol

By - September 04, 2014 | Alcoholic Beverage Law | Email Will Cheek

The 2014 Tennessee legislative session profoundly impacted the alcoholic beverage industry. Although the Wine in Grocery Stores (aka WIGS) debate was prominently featured, there were a number of big changes that passed quietly.

Buried in Section 8 of PC 1001, a law passed to resolve the controversy over infusions, is a new law that specifies that any product containing distilled alcohol  that is capable of being consumed by a human being is an alcoholic beverage.

Previously, it was unclear whether products like Liquor Filled Chocolate Covered Cherries were regulated as liquor.  Mainstream retailers sell a wide variety of treats that contain alcohol. Unlike alcohol used in sauces and other cooking recipes, a small amount of alcohol is in the finished product.

Finer restaurants often feature desserts with liquor, where alcohol is not cooked out.

The new law appears to make it clear that at restaurants and bars, food products containing alcohol are alcoholic beverages. Since most restaurants have liquor licenses, the change is not a problem, for licensing purposes.

The real issue is taxes. Liquor-by-the-drink has an additional 15% tax. If desserts with alcohol are alcoholic beverages, restaurants have to collect the 15% tax, in addition to the 9.25% sales tax.

We suspect that no one rings up desserts with small amounts of alcohol as an alcoholic beverage and pays the 15% tax.

Little Jimmy Dickens sings:

I got a hole in my pocket and my money just runs on through.
Can’t seem to save a dollar like my baby dolly wants me to.
 

We strongly encourage restaurants that serve desserts or other dishes with alcohol to enforce 21 carding for purchases, just like you do for drinks.

Although we read the law as only applying to restaurants and bars, we have heard that the ABC is investigating manufacturers of products that contain alcohol. For example, there are a number of bakeries that produce variations of the Tennessee Whiskey Tipsy Cake featuring Jack Daniels.

As we read it, the new law only applies to restaurants, bars and other LBD establishments.  The ABC appears to be enforcing the new law against food manufacturers that do not hold ABC licenses.

Stay tuned as we sail through unchartered territory.

Wine in Grocery Stores Makes Ballot in 80 Tennessee Cities for November 4, 2014 Elections

By - September 02, 2014 | Alcoholic Beverage Law | Email Will Cheek

Tens of thousands of Tennessee oenophiles are wondering why wine is not in their grocery stores. We hear the question all the time: Wassup? Tennessee legalized the sale of wine in stores like Publix, Kroger and Trader Joes. When will my favorite varietal be on store shelves?

We blogged about the hurdles for wine in groceries here.

Good news for most fans of WIGS (our pet name for wine in grocery stores). The petition drives to place WIGS on the ballot for local option election were successful in 80 Tennessee cities, including Chattanooga, Knoxville, Memphis and Nashville.

To qualify for the ballot, each municipality or county had to receive a petition with a number of valid signatures equaling at least 10 percent of the voting population in the 2010 gubernatorial election. Petitions were due on August 21.

14 cities, including Columbia, Dickson, La Vergne, Portland and Springfield failed to collect enough qualifying signatures. Petition drives in unincorporated parts of Hamilton and Shelby counties also came up short.

The next step for WIGS are local option elections on the November 4 general election ballot. Early voting runs October 15-30.

After all the dust settles from voter referenda, the waiting begins again for oenophiles. The soonest that Yellowtail will grace the shelves at Kroger is July 1, 2016, unless the Legislature changes the effective date for WIGS.

Groceries in cities or counties that fail to approve WIGS will be at a distinct disadvantage to neighboring stores in cities that vote in favor of WIGS. For example, wine-drinking shoppers near Columbia may drive to competing stores in Spring Hill to buy groceries and wine. Groceries located outside of cities in Shelby and Hamilton counties will undoubtedly suffer from not having wine on shelves.

Metro Nashville includes Davidson County, which means WIGS is up for election for the entire county.

Brings to mind the classic Loretta Lynn tune Wine, Women and Song:

Well I’m at home a workin’ and a slavin’ this way
You’re out a misbehavin’ spendin’ all of your pay on wine women and song
 

The following 80 cities and counties will hold wine-in-grocery-stores referendums on Nov. 4:

Alcoa
Arlington
Ashland City
Athens
Atoka
Bartlett
Brentwood
Bristol
Burns
Chattanooga
Church Hill
Clarksville
Cleveland
Clinton
Collegedale
Collierville
Cookeville
Coopertown
Covington
Crossville
Unincorporated Cumberland County
Dunlap
Dyersburg
East Ridge
Elizabethton
Etowah
Fairview
Farragut
Franklin
Gallatin
Gatlinburg
Germantown
Goodlettsville
Greeneville
Harriman
Hendersonville
Jackson
Johnson City
Jonesborough
Kingsport
Kingston
Unincorporated Knox County
Knoxville
Lakeland
Lakesite
Lebanon
Lenoir City
Loudon
Manchester
Martin
Maryville
McKenzie
Memphis
Millington
Monteagle
Morristown
Mt. Juliet
Mt. Pleasant
Munford
Murfreesboro
Nashville
Newport
Norris
Oak Ridge
Oakland
Paris
Pigeon Forge
Pleasant View
Red Bank
Rogersville
Savannah
Sevierville
Shelbyville
Signal Mountain
Smyrna
Spring Hill
Thompson’s Station
Tullahoma
Union City
White House

Pro wine in grocery advocate Red, White and Food posts updated information here.

I Got Some Action at the August Tennessee Alcoholic Beverage Commission Meeting

By - August 26, 2014 | Alcoholic Beverage Law | Email Will Cheek

Today’s August 26, 2014 Tennessee Alcoholic Beverage Commission meeting featured some notable firsts.  We like it when the ABC takes action in unchartered territory.

Reminds us of the classic disco tune “I Love The Nightlife” by Alicia Bridges from Adventures of Priscilla: Queen Of The Desert:

I want some action, I wanna live
Action, I got so much to give
I want to give it
I want to get some too
 
I love the nightlife, I got to boogie
On the disco ’round, yeah
I love the nightlife, I got to boogie
On the disco ’round, yeah
 

Wineries.

Bootleggers Homemade Wine LLC in Gatlinburg was approved for the first satellite winery under new 2014 legislation PC 1015.  Bootleggers will open a satellite store in nearby Pigeon Forge.

The satellite winery law allows Tennessee wineries to open up to two additional retail stores for tastings and sales of bottles and merchandise.  Satellite wineries cannot make or bottle wine.

In addition, the new winery law allows wineries to hold a restaurant or limited service restaurant LBD license.  Previously, winery owners were prohibited from owning a restaurant.

We see the new privileges as being very positive for the winery business in Tennessee.

Wholesalers.

Tennessee passed legislation that significantly expanded the location of liquor wholesalers.  The new law allows liquor wholesalers to be located in any “county in which the voters of any municipality or other jurisdiction within that county have approved retail package sales or consumption of alcoholic beverages on premises by referendum as provided in this title.”

Holston Beverages was the first wholesaler approved by the Tennessee ABC under the new law.  Holston primarily serves the tri-cities: Kingsport, Johnson City, and Bristo.  Previously, state law required Holston to be located in Knoxville.

Bone McAllester Norton Alcoholic Beverage team member Rob Pinson represented Bootleggers and Holston today at the ABC.

License Revocation.

In what we believe to be a first for the Commissioners appointed by Governor Haslam to the Tennessee Alcoholic Beverage Commission, Commissioners voted to revoke the liquor license of a retail liquor store. The manager was accused of lying to the ABC in connection with a no buy, based on a falsified letter.

The take away is never ever lie to the ABC.  Whatever you may have done, it most likely pales in comparison to the punishment you will get from trying to conceal the truth from the ABC.

Good News for Trendy Cocktails in Tennessee

By - August 22, 2014 | Alcoholic Beverage Law | Email Will Cheek

Infused alcoholic beverages became headline news last year as the Tennessee Alcoholic Beverage Commission questioned the legality of infusing for cocktails. Industry members and the TABC reached a compromise that became Tennessee law this summer.

We repeatedly hear two questions about the Tennessee infusion law:

1. The law limits infusions to a 10 day period.   When does the 10 day limit begin – when the infusion process begins or when the infusion is ready to be sold to the public?

2. How are bitters treated?

Conjures up the 1967 Cream classic Strange Brew:

Strange brew, kill what’s inside of you.
She’s a witch of trouble in electric blue,
In her own mad mind she’s in love with you
 

Reliable sources tell us that the ABC says that the 10 day period for infusions begins when the infused product is offered for sale.  This gives cocktail connoisseurs time for lengthy infusion processes, perhaps even including barrel aging.  We thought that 10 days was too short to properly infuse and sell all infused product.

Recently, bitters have emerged as a subject of discussion among the ABC and industry members.

Personally, we think bitters are non-beverage under federal law, and therefore are not alcoholic beverages subject to ABC jurisdiction.  Non-beverage products contain alcohol, but are not drinkable.  Think of peppermint extract, which is around 180 proof, or Scope.  Both have significant amounts of alcohol, but are not regulated as alcoholic beverages.

We understand that the liquor wholesalers are pressing the Tennessee ABC to require that bitters be distributed by liquor wholesalers and only sold at liquor stores.

In our humble opinion, this is plainly wrong.  Will the wholesalers’ next target be cooking wine or Calvin Kline Eternity perfume?

Brings to mind another classic rock song, this time from The Beatles:

You say you want a revolution
Well, you know
We all want to change the world
 

We hear that the ABC is moving toward a position that will allow barkeeps to continue making and using house-made bitters.  We see this as great news.  Nashville is reaping the benefits of being a trendy designation for tourists.  The freedom to serve cutting edge cocktails is an important part of pleasing trend-setting tourists.

Tennessee Liquor Stores Given Free Booze for Tastings

By - August 17, 2014 | Alcoholic Beverage Law | Email Will Cheek

The Tennessee Wine in Grocery Stores law was a game changer on many levels.  One obscure victory for retail liquor stores is the ability for distilleries and importers to donate product for tastings at retail liquor stores.

Tennessee liquor stores earned the right to conduct tastings in 2011.  We blogged about the new law here.

The Tennessee ABC cracked down on free liquor beginning on July 1, 2014.  Only nonprofits and liquor stores tastings can receive free liquor under Tennessee law.

The crackdown on free liquor was a big change for the Tennessee liquor industry.  Reminds us of a classic Beastie Boy tune about rebellion:

Yo ho ho and a pint of Brass Monkey
And when my girlie shakes her hips she sure gets funky
Skirt chasin’, free basin’, killin’ every village
We drink and rob and rhyme and pillage

 

Retail liquor stores scored a number of huge victories in the WIGS battle and we commend their lobbyist David McMahan for making the best out of WIGS. Grocers cannot conduct tastings, much less receive free product for doing so.