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.

Vote for Wine in Tennessee Groceries Meets Attack Ads in Maryville and Alcoa

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

For Christians, wine is central to the Eucharist, a sacred rite from the Last Supper, where Jesus famously shared bread and wine with his disciples.

Wine in Grocery Stores, which we affectionately call WIGS, is shaping up to be the big issue on the ballot for fall elections.  Although the Tennessee legislature legalized WIGS, each city or county must hold an election to vote for WIGS before groceries can sell wine.  About 80 cities and counties have WIGS on the ballot this fall, as we blogged here.

Many political pundits predicted that WIGS could face opposition from conservative religious groups, particularly in small towns in more rural areas.

An anti-WIGS ad campaign in Maryville and Alcoa, reportedly funded by retail liquor stores, comes as a surprise even for the most jaded of liquor-industry insiders.  The Daily News has the scoop.

The anti-WIGS billboard ads feature fear-mongering over the sale of fortified wines in convenience stores.  The ads ignore the fact that almost every convenience store is not eligible for a WIGS license.  Mapco, Pilot and other Tennessee convenience stores do not sell enough grocery food items to qualify for wine sales under WIGS.

Conjures up Lilac Wine by Nina Simone:

Lilac wine is sweet and heady, like my love
Lilac wine, I feel unsteady, like my love

Local option liquor elections like WIGS in Tennessee have involved colorful election tactics.  Nashville’s 1967 election to legalize liquor-by-the-drink led to a seemingly unlikely  alliance between bootleggers and Baptists.  Liquor opponents bombed the mailbox of a prominent proponent of liquor.

Although we hope WIGS does not inspire violence, we expect the political battles over WIGS to heat up as the November 4 election approaches.

Jennifer Maxey Joins Bone McAllester Tennessee Liquor Team

By - October 13, 2014 | Alcoholic Beverage Law | Email Will Cheek

Jennifer Maxey has a national reputation among liquor licensing professionals. Jennifer’s skill set made her a perfect hire for Tennessee’s leading liquor licensing firm, Bone McAllester Norton.

We are so glad to have Jennifer on our team.

Jennifer’s licensing expertise is widely recognized in the alcoholic beverage industry.  Less known are her culinary skills, skydiving experience and NFL Colt’s obsession.

Jennifer is admittedly afraid of heights.  Nevertheless (a word only used by lawyers), a couple of months ago, Jennifer embraced her fear and jumped out of an airplane at 10,000 feet.

Reminds us of Steve Miller Band’s classic:

I want to fly like an eagle
To the sea
Fly like an eagle
Let my spirit carry me

 

Jennifer cooks up a mean Buffalo Chicken Slider. Watch out BW3.  Jennifer’s culinary obsession is chicken lo mein.  Her version of the classic Chinese dish is legendary.

 

FDA Requires Renewal of Brewery and Distillery Registrations by 2014 Year End

By - October 03, 2014 | Alcoholic Beverage Law | Email Will Cheek

As part of the response to 9.11, the U.S requires all food manufacturers to register with the federal Food and Drug Administration. The intent was to make it easier for the U.S. to respond to a terrorist attack through food – for example, poisoning beer at a Bud brewery.

This week’s TTB newsletter has an alert about new FDA registrations due by the end of the year.  The details about the renewal are cryptic, to say the least.  But we know that breweries and distilleries are subject to the FDA registration requirements.

For some reason, punk band Green Day’s song “Warning” comes to mind:

Is it the cop, or am I the one that’s really dangerous?
Sanitation, expiration date, question everything.
Or shut up and be a victim of authority

The unfortunate reality is that the Borg were correct when declaring that “resistance is futile.”  Our advice is to suck it up and comply.  At least there is no charge.

The Bitter End for Bitters at Tennessee Grocery Stores

By - September 30, 2014 | Alcoholic Beverage Law | Email Will Cheek

We were baffled by the Tennessee Alcoholic Beverage Commission’s recent instructions to grocers that bitters could only be sold at retail liquor stores. This week, the ABC provided an explanation that makes sense.

We still disagree with the ABC reasoning, but at least we know how far the ABC will go.

Buck Owens penned a classic hit that catches our sentiment:

The flame of love was burning high we vowed to never let it die
But now you’re growing tired of me so let’s agree to disagree
Let’s agree to disagree there’s nothing left for you and me
You won’t be happy till you’re free so let’s agree to disagrees

Those of us knowledgeable of obscure federal liquor laws understand that bitters are “non-beverage.” Scope, peppermint extract and cooking wine are non-beverage products that contain alcohol. Unlike alcoholic beverages, non-beverage products are not regulated and taxed like whiskey and vodka.

The simplest explanation of whether a product is non-beverage is “can you drink it?”

Most flavorings like peppermint and vanilla are around 190 proof. Your local grocer stocks hundreds of non-beverage products with alcohol.

Non-beverage is the federal standard for determining whether a product is taxed like wine or whiskey, or is exempt from federal taxes. Generally, states follow the TTB standards. If a product like cooking wine is non-beverage under federal law, it is not an alcoholic beverage under state law.

Recently, the Tennessee ABC instructed grocers to pull bitters from shelves. According to the Tennessee ABC, bitters can only be sold by retail liquor stores.

We disagreed with the ABC finding, in large part because of concern that hundreds of non-beverage products containing alcohol could be deemed contraband. Would the ABC declare that Scope could only be purchased at a liquor store?

We are pleased with the ABC explanation that bitters are unusual under state law.  ABC Staff Attorney Josh Stepp contacted us today to explain that the treatment of bitters as alcoholic beverages by the ABC was based on Tenn. Code Ann. § 57-3-101(17), which specifically names bitters as a product of “rectifying.”

We agreed to disagree.  But at least, the ABC will not be banning other non-beverage products from grocery stores.

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.