Free Booze for Tastings at Tennessee Restaurants and Bars?

By - January 13, 2015 | Alcoholic Beverage Law | Email Will Cheek

The Tennessee Alcoholic Beverage Commission cracked down on free booze beginning July 1, 2014. We blogged about it here.

Distilleries, wineries, importers and other manufacturers can no longer give free product to wholesalers and retailers. This was a big change for the industry.

In the 2014 legislative session, as part of the ugly compromise that legalized wine in grocery stores (which we affectionately call “WIGS”), retail liquor stores were granted the right to accept free product from distilleries and importers, as we blogged here. All free product must pass though the wholesalers.

We thought that the new free-booze for tastings rule only applied to retail package stores – not restaurants, bars and other on-premise license holders. WIGS specifically applies to food stores and retail package stores.

The TABC appears to be interpreting the new free booze rule for tastings as applying to both on and off-premises retail licensees. If so, this is a huge benefit for restaurants and bars.

The TABC  has proposed regs out for informal comment on this and other issues. We will keep readers posted on updates.

Bruno Mars’ Liquor Store Blues comes to mind:

Standing at this liquor store
Whisky coming through my pores
Feeling like I run this whole block
Lotto tickets and cheap beer
That’s why you can catch me here
Tryna scratch my way up to the top

Tennessee ABC Releases Draft of New Rules for Consumer Tastings and Distillery Marketing

By - January 07, 2015 | Alcoholic Beverage Law | Email Will Cheek

The TABC has implemented a number of restrictions on the rights of distilleries, importers and other suppliers to market at restaurants, bars and package stores.  Until recently, the new rules were not written.  Often, industry members learned about the new rules when they were cited for violations and assessed large fines.  Uncertainty is a bad thing for the industry and rumors about new ABC rules were rampant – and often wildly incorrect.

We applaud the TABC for taking a first step toward proposing written rules for tastings and other related trade practices.  Attached is what TABC Director Keith Bell called “a very rough draft of our outline.”  Distiller-Rep-Memo-Outline-ABC-Regs-Draft-01179350.docx

The Director asks for comments by January 15, and we encourage industry members to carefully analyze the proposed rules and comment to the Director via this link.

The new rules call to mind an Elvis Presley hit:

Well you got me working boss man
Working round the clock
I want to little drink of water

WIGS Has Unsung Silver Lining for Tennessee Retail Package Stores

By - December 18, 2014 | Alcoholic Beverage Law | Email Will Cheek

The recently minted Tennessee law that legalizes wine in grocery stores (which we affectionately call WIGS) gives retail package store owners new rights in exchange for having to compete against goliath grocery stores for wine sales.

Many liquor stores have been focusing on the newly vested rights to sell beer, glassware, gourmet cheese and other items under WIGS.  Scores of stores have obtained approval from the ABC to merge liquor stores with adjacent beer stores.

A lesser known provision of WIGS eliminates the long-standing prohibition preventing liquor store owners from owning restaurants and bars.  Before WIGS, the ABC aggressively investigated and enforced any accusation of ownership by a retail liquor store owner in a restaurant or bar.  It was completely taboo.

WIGS is not entirely clear, but as we read the section, a retail liquor store owner can also partially or wholly own one or more restaurants or bars. Here is the provision:

Notwithstanding any other provision in title 57 or any rule to the contrary, an individual or corporation may hold a retail license issued pursuant to § 57-3-204 and may also hold a license to sell alcoholic beverages for consumption on premises pursuant to title 57, chapter 4; provided, however, that each license must be operated as a separate and distinct business and shall not be at the same location.

 Reminds us of the shortest Beatles song, Her Majesty, from Abbey Road:

“I wanna tell her that I love her a lot,
but I gotta get a belly full of wine –
Her majesty’s a pretty nice girl;
some day I’m gonna make her mine – oh yeah.”

We see WIGS as a first step toward removing unnecessary government restrictions from the liquor industry.  We encourage liquor entrepreneurs to exploit the changes for better business and profits..

Fake Tennessee IDs Targeted by Tennessee ABC

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

An investigation by Nashville Channel 4 WSMV reporter Jeremy Finley about the proliferation of fake IDs used to purchase alcohol has grabbed the attention of the Tennessee Alcoholic Beverage Commission.  WSMV informants were able to obtain identification cards without any background check or other verification of identity and purchase alcohol using the fake IDs.

According to WSMV, the ID is complete with date of birth, address and photo, along with a hologram across the card. All of the information provided by the WSMV informant was false.  According to WSMV, the 22-year-old was able to purchase alcohol in two different locations.

WSMV asked the ABC if they consider the ID a fake ID.

“This is a fake ID. Because anybody could make that,” Tennessee ABC Assistant Director Ginna Winfree said.

Now, the businesses that sold the 22-year-old the alcohol could be in trouble with the state.

“Based on this, they’re (the businesses) definitely committing a crime,” Winfree said.

Sabrina Jacal, the owner of Servicio Internacional, the company selling the IDs, said she doesn’t have to have state approval to make the IDs.  “I’m not authorized to do anything. It’s not an authorization that needs to be given,” Jacal said.  Jacal said she’s not selling fake IDs, but instead IDs that also serve as membership cards for translation services.

Read more:

A particularly politically incorrect Ted Nugget song comes to mind:

Well, I don’t care if you’re just 13
You look too good to be true
I just know that you’re probably clean…
Jailbait you look fine, fine, fine…

Shameless Self Promotion About Tennessee WIGS

By - December 01, 2014 | Alcoholic Beverage Law | Email Will Cheek

If you are a Tennessee attorney looking for easy CLE, you may want to join us with a “Liquor Law Update: WIGS, High Gravity Beer…And Things That Make You Go Hmmmmm.”

Tomorrow December 2, 2014, and on line afterwards, Red White and Food advocate Emily Ogden and I will discuss the Wine In Grocery Store law and other major 2014 revisions to Tennessee liquor law.  Course info is here.

Here is what we will cover:

New 2014 Tennessee liquor laws dramatically changed the liquor business in Tennessee. Wine in Grocery Stores (which we affectionately call “WIGS”) not only legalized the sale of wine in Kroger, WIGS gave retail liquor stores the right to sell beer and a host of other goods beginning July 1, 2014. The WIGS compromise requires the voters of each city or county to petition to have a local referendum election to approve of WIGS in the city or county. If WIGS is approved by local option election, grocery stores cannot begin selling wine until July 1, 2016.

WIGS was a true compromise that disappointed all industry members. As a hard-negotiated compromise, WIGS is full of provisions that make little sense from a business perspective.

Related legislation modernized the definition of beer to allow higher proof beers to be sold alongside Yazoo Dos Perros and Miller Lite beginning January 1, 2017. Current Tennessee law limits the alcoholic content of beer to 5% by weight.

2014 laws also legalized wineries to open a second retail store and have a restaurant. This allows wineries like Arrington Vineyards to open a restaurant at the winery and sell Arrington wines by the glass, as well as other alcoholic beverages. The new law enables City Winery in Nashville to make wine and have a restaurant concert venue, like the company does in New York and Chicago.

Learn this and much more in this one-hour session.

Free Booze for Tennessee Retail Package Store Tastings Opens Surprise Can of Worms

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

As part of the unseemly compromise to pass legislation authorizing the sale of wine in groceries in Tennessee, state law was changed to allow manufacturers to donate product for tastings at retail liquor stores.  We blogged about the new law here.

We have been hearing from reliable sources that some manufacturers are using the tastings law as a conduit to illegally channel free booze to retailers for purchasing product.

Before the Tennessee ABC cracked down on free booze, the industry often gave free booze to a retailer that ordered a certain quantity.  For example, a retailer might get 3 free bottles if it ordered 3 cases.

The TABC cracked down on free booze effective July 1, 2014.

Free booze for tastings gives unscrupulous industry members a way to funnel free product to retailers under the guise of using the product for tastings.

Conjures up Neil Young’s bizarre “Welfare Mothers”

Down at every laundromat in town now
(Welfare mothers make better lovers)
While they’re washin’ you can hear this sound now
(Welfare mothers make better lovers)

We applaud the new law and its goal to allow manufacturers to provide complimentary booze to retailers to help market wine and spirits.  As a business-friendly state, it makes sense.

We strongly support efforts to prevent using the tasting law as a way to avoid the prohibition on free booze.

One idea is to mark free bottles with a label saying that the product is not for sale.  This gives the TABC something to look for in stores.  Another idea is to require wholesalers to break the seal of free product upon delivery to a retailer.  Customers will generally not purchase open stock.

We invite industry members to share tips for ways to short-circuit the use of free tasting product as an illegal incentive for purchases.

New Rule for Renewal of Tennessee Restaurant, Hotel or Other Liquor-By-The-Drink Licenses

By - November 21, 2014 | Alcoholic Beverage Law | Email Will Cheek

The annual liquor license renewal for Tennessee on-premise liquor license holders has been the same for as long as we can remember.  A TABC Agent inspects, tells the license holder it needs to renew and leaves a copy of the renewal paperwork.

A common complaint from corporate license holder was that the renewal application was not forwarded to corporate offices for renewal.  This sometimes caused a last-minute or late rush to renew.

We recently learned that the TABC has changed the procedure for renewals.  TABC agents still inspect before the renewal deadline.  But renewal forms are no longer provided.

TABC agents direct license holders to forms available on line.

We are advising clients to calendar renewals.  Given the recent ABC rule about voiding late renewals, which we covered here, timing for renewals is a potential trap.

Green Day’s bizarre lyrics to Homecoming comes to mind:

Jesus filling out paperwork now
At the facility on East 12th St.
He’s not listening to a word now
He’s in his own world and he’s daydreaming

With a prolonged interruption in service as the penalty for a late renewal, we strongly encourage that renewals be closely monitored and completed on time.

Wine in Grocery Election Popular at Tennessee Polls

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

Early voting results suggest that Wine in Grocery Stores, which we affectionately call WIGS, is quite popular with the electorate. Based on our unscientific and very amateur view of early election results, approval of WIGS has a commanding lead.

Although WIGS was approved by the state legislature earlier this year, the law requires the citizens of each city or county to vote in favor of allowing WIGS before local grocers can sell wine.  Called local option, it is the process that authorizes each city to allow package stores and restaurants.

We blogged about the list of cities and counties holding WIGs elections here.

Brings to remind the Eagles 1977 super hit “Hotel California:”

Mirrors on the ceiling, the pink champagne on ice
And she said ‘We are all just prisoners here, of our own device’

We see approval of WIGS as being crucial to the competitiveness of grocery stores in large and mid-sized towns.  A city that fails to adopt WIGS puts its grocers at a disadvantage to grocery stores that can sell wine.  Although wine may not be a huge part of revenue for a grocer, losing high end consumers that want to purchase wine while grocery shopping could be a big loss.

Check back in a day or so when we post full election results.

New Liquor Rules for Nonprofit Events and Fundraisers in Tennessee

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

The Tennessee Alcoholic Beverage Commission has issued new rules for nonprofit liquor licenses, known as Special Occasion Licenses.  We see the new TABC rules as game changers, particularly for bigger events.

Previously, nonprofits could pull a Special Occasion License from the ABC for an event and just receive a check.  The nonprofit was merely the beneficiary of the event.

No more.

The Tennessee ABC now requires that the nonprofit actively provide liquor service: from picking up or receiving liquor inventory to paying for servers or providing volunteers to serve alcohol.

George Thorogood’s classic tune seems relevant:

One bourbon, one scotch, one beer
Well I ain’t seen my baby since I don’t know when,
I’ve been drinking bourbon, whiskey, scotch and gin
Gonna get high man, I’m gonna get loose,
Need me a triple shot of that juice
Gonna get drunk, don’t you have no fear
I want one bourbon, one scotch and one beer
One bourbon, one scotch, one beer

Special occasion licenses are critical for many popular events.  A nonprofit with a special occasion license can receive donated alcohol.  Under another recent Tennessee ABC rule, regular permit holders cannot receive free alcohol.  Caterers, for example, cannot serve donated liquor at a nonprofit event.

The ABC has compiled a helpful pdf of relevant laws special occasion license laws and regs (01144156).

Special occasion license holders also do not have to pay sales or LBD taxes, which typically add up to 24.25%.

Special occasion licenses are regularly used to permit alcohol sales at outdoor events that do not normally qualify for liquor sales.

Keep in mind that these rules only apply to wine and spirits.  Beer is poured under completely different laws.

As we see things, perhaps the biggest impact of the new Tennessee ABC rule is that the nonprofit must pay for servers or provide volunteers to serve alcohol.  For large events, staffing bars is a huge responsibility.

So far, the Tennessee ABC seems to allow the event promoter to pay the nonprofit in advance for staffing costs.

We advise nonprofits to require promoters to name the nonprofit as an additional insured and provide proof of insurance before the event.  This is a small expense for the promoter that is priceless for the nonprofit.  If a guest served by the nonprofit at the event causes a drunk driving accident or other liquor liability, the insurance will cover the cost of legal fees for the nonprofit, which can easily cost tens of thousands of dollars, as well as any court judgment.

If the Tennessee ABC cracks down further, the rules could become unworkable for many special events.  For example, so far, the Tennessee ABC seems to allow a promoter to sell tickets and pay for event expenses like entertainment, staging, security, trash and portapotties.

Under the current rules, a promoter bears the risk that an event makes or loses money.  The nonprofit gets a check regardless of whether the event makes money.

The Tennessee ABC could require a nonprofit to be responsible for all aspects of an event, including being responsible for losses.  This would be a huge game changer.

Tennessee Loses Huge Asset at Revenue

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

Today, October 23, 2014, we learned that liquor-by-the-drink tax ace Rondal John is moving onto greener pastures.  Anyone that licenses in Tennessee knows how critical Rondal has been for liquor licensing.

As of November 17, 2014, Rondal will no longer be an employee of Taxpayer Services LBD Unit. Rondal is going to become a computer programmer for Tennessee.

We wish Rondal well and thank him for bringing sanity to the often chaotic process for tax clearance and bond approvals for restaurants, bars and other liquor license holders.  Rondal eagerly fixed seemingly impossible tax issues on a regular basis.

Rondal brings to mind Randy Newman’s 1995 hit:

You’ve got troubles, well I’ve got ‘em too
There isn’t anything I wouldn’t do for you
We stick together and we see it through
You’ve got a friend in me
You’ve got a friend in me

Look for Rondal at Smoking’ Thighs, one of his favorite food purveyors.  Best wishes Rondal.