Tennessee ABC Slipping Into the Future with Electronic Filing

By - January 30, 2016 | Alcoholic Beverage Law | Email Will Cheek

At the Tuesday, January 26, 2016, Tennessee Alcoholic Beverage Commission meeting, an early version of the on-line electronic filing system was demonstrated.  Kudos to the ABC for making the e-leap – and huge congrats for being able to deliver early results.  We know it is a daunting task.

The TABC system appears to be based on the TTB system for manufacturers, and should look very familiar to anyone that files basic permits, dsp’s, brewery, or winery applications.

Contrary to early rumors, the on-line system is not being implemented just for WIGS.  This system is projected to be ready for beta testing in May 2016.  Groceries are chomping at the bit for wine and will be filing WIGS applications way before the on-line system will go live.

The demo included most types of licenses. The Tennessee ABC plans on having electronic filing for liquor license applications for restaurants, bars, hotels, liquor stores, wholesalers, wineries and distilleries.

The software company did not have a projected date for going live to the public.

We have pondered the meaning of Steve Miller Band’s Fly Like an Eagle for decades, with no success:

I want to fly like an eagle
Till I’m free
Fly through the revolution

Time keeps on slippin’, slippin’, slippin’
Into the future

With all the changes and new rulings forced upon the ABC by the implementation of WIGS, we personally believe that adding electronic filing could have been the proverbial straw that broke the camel’s back. Frankly, we are glad to be filing paper applications.

Legislation to Help Antsy Consumers Purchase Wine in Tennessee Grocery Stores Beginning July 1, 2016

By - January 23, 2016 | Alcoholic Beverage Law | Email Will Cheek

Hordes of Tennesseans are all atwitter about buying wine in grocery stores.  The question we keep hearing is when – when can I buy wine at Trader Joe’s, Wal-Mart or Costco?

Wine in Grocery Stores, which we affectionately call WIGS, will legalize the sale of wine at Tennessee grocery stores beginning July 1, 2016.  Under the current WIGS law, we predict it will take weeks after July 1 before wine is actually ready to sell.

Why?

The ABC cannot issue licenses until July 1.  Even if applications are complete, it will take time for the ABC to issue hundreds of wine licenses.

Wholesalers will not be able to deliver orders until licenses are issued.  Keep in mind that delivering wine to major grocery stores and big box retailers will not happen overnight.  Stocking for WIGS will be a huge financial windfall for Tennessee wholesalers because of the quantities of wine needed to fill the shelves on huge stores.

Once wine is delivered, grocers will still have to stock shelves.

“Waiting” by Green Day seems apropos:

I’ve been waiting a long time
For this moment to come
I’m destined
For anything…at all

As D Day for wine approaches, the logistics of selling wine on July 1 have lead to new legislation. Folks have realized that expecting the ABC to issue hundreds of permits, wholesalers taking and delivering huge orders to grocery stores, and stores stocking wine on shelves – all in one day – is crazy.

Here is a draft of the legislation.

We see the pending legislation as being a realistic way to make wine available for purchase by consumers at food stores beginning on July 1, 2016. Without legislative action, consumers probably will not see wine in food stores for several weeks after July 1.

Where is Wine in My Tennessee Grocery Store? Why Did My Liquor Store Start Selling Mixers, Beer and Ice? What About High Gravity Beer?

By - January 19, 2016 | Alcoholic Beverage Law | Email Will Cheek

Tennessee legalized the sale of wine in groceries and many discount retailers beginning July 1, 2016.

So what exactly are all these rules about liquor stores, groceries, wine and high gravity beer?  Tennessee liquor laws are really confusing.

Led Zeppelin’s classic Dazed and Confused pretty much sums it up:

Been dazed and confused for so long, it’s not true
Wanted a woman, never bargained for you
Take it easy baby, let them say what they will
Will your tongue wag so much when I send you the bill?

 

Here is a primer.

In Tennessee, liquor stores were limited to selling wine, spirits, lottery tickets and cashing checks.  Starting July 1, 2014, liquor stores were authorized to sell beer, ice, mixers and a variety of products.  It is part of the wine in grocery store law, which we affectionately call WIGS.

Many liquor stores have filed applications with the Tennessee Alcoholic Beverage Commission to approve consolidation of adjacent beer stores.  Under WIGS, a retail liquor store can combine with an adjoining beer store, but the combination requires prior approval from the TABC.

WIGS also authorized liquor store owners to have multiple liquor stores.  For decades, state law required that a person could only own one liquor store.  This presents huge opportunities for ambitious entrepreneurs that can leverage ownership of several liquor stores.

Meanwhile, WIGS does not kick in for grocery stores until July 1, 2016.  Under WIGS, grocery stores will be able to sell wine, but not Jack Daniels and other spirits.

For grocery stores too close to liquor stores, the grocery store may not be able to sell wine until July 1, 2017.  Unless the liquor store elects to sell beer, ice, mixers and other items.

Did we mention that WIGS is really complicated?

Tennessee has an unusual distinction between liquor and beer permits. Beer permits are issued from the city or county.  Permits for wine and spirits are issued by the state.  Each city has a different process for obtaining beer permits, with laws that have distance and other requirements.

Following passage of WIGS, the Tennessee Legislature passed a separate law that changes the definition of beer to include stronger beer.  In an unusual quirk of Tennessee law, beer stronger than 5% by weight, which translates to about 6.3% by volume, is an alcoholic beverage that cannot be sold with a beer permit.

Beginning January 1, 2017, beer up to 8% by weight, or approximately 10.1% by volume, can be sold with a regular beer permit.  This means that grocers, pharmacies and convenience stores will be able to sell high gravity beers, which currently can only be purchased at liquor stores.

Tennessee Distillery Closed by ABC

By - January 10, 2016 | Alcoholic Beverage Law | Email Will Cheek

The Tennessee ABC has refused to renew the permit of a well-known distillery.  The ABC found that the distillery was tasting and selling bottles of product made at the distillery’s other DSP in Tennessee.

State law requires that a distillery can only taste and sell product made at the facility offering tastings and bottles for sale.

Although we agree with the ABC’s construction of the law, we are disappointed that the distillery received no notice that it was violating state law.  We think fairness requires the ABC to give a distillery an opportunity to come into compliance with the law, before taking away its license.

We are particularly troubled by the ABC action because it is far from clear how much a distillery must do to product in order to claim it as being made at the facility.  For example, if a distillery receives neutral grain spirits and distills it once on site, is it made on site?  What if the distillery purchases neutral grain spirits, does not distill on site, but adds a flavor and bottles it?

There is absolutely no guidance on these points.

Gillian Welch understands the lonely life of a moonshiner:

Oh, tear my stillhouse down, let it go to rust
Don’t leave no trace of the hiding place
Where I made that evil stuff
For all my time and money, no profit did I see
That old copper kettle was the death of me

 

When Will Wine Be in Grocery Stores in Tennessee?

By - January 01, 2016 | Alcoholic Beverage Law | Email Will Cheek

If Casey Kasem had an American Top 40 chart for Tennessee liquor questions, this query would be stuck at number one:  When Will Wine Be in My Grocery Store in Tennessee?

The short answer is maybe July 1, 2016.  That is when the wine in grocery store law, which we affectionately call WIGS, allows food stores to sell wine.

But Tennessee liquor laws are never that simple.  WIGS has a lot of moving parts that could easily delay when wine is sold in groceries.

Calls to mind the Eagles classic Hotel California:

“Mirrors on the ceiling, the pink champagne on ice
And she said ‘We are all just prisoners here, of our own device'”
Here is our list of potentially complicating factors that may delay the first date you can purchase wine at Kroger, Public, Target, Costco and Walmart:

  1. Electronic applications.  The Tennessee ABC is using WIGS as an opportunity to move to electronic applications.  The Tennessee ABC is currently all paper.  Although we applaud the ABC for moving toward electronic filing, doing so for WIGS is fraught with danger.  WIGS will see an overwhelming number of applicants seeking licenses to sell wine on July 1, 2016.
  2. Local certificates of compliance.  Although WIGS has very few requirements for issuance of a WIGS certificate of compliance by cities, we expect push back from many cities.  WIGS voids many of the controls cities have for liquor stores.  In our humble experience, cities do not like to lose the power to regulate.
  3. ABC Staffing.  Organized applicants will all be pressing for wine licenses on July 1.  The ABC will be stretched thin to approve the large volume of licenses, particularly under a brand new process.
  4. Wholesaler Capacity.  We expect that many WIGS applications will be approved on the eve of July 1.  Wholesalers will be hard pressed to deliver large orders to grocers in one day.  There is talk about amending the WIGS law to allow wholesalers to deliver before July 1.
  5. Retail Liquor Store Clearance.  WIGS requires that grocery stores located within 500 feet of an existing liquor store obtain consent from the liquor store.   Before WIGS, having a grocery store near a liquor store was a good thing, and many grocers will face this issue.  Grocery stores cannot sell wine until July 1, 2017, unless the liquor store gives consent; however, if consent not given, the liquor store cannot sell items other than liquor and wine from 7/1/16 to 7/1/17.
  6. Employee Permits.  WIGS requires training for permits for grocery store employees.  At this point, there is no rule about which employees must train.  Do stockers, baggers and the guy that carry your groceries to your car have to be trained and have a permit?  Everyone at a retail liquor store must train and hold an ABC permit.  Groceries have many more employees and much higher turnover, so training and permitting all employees is a real problem.  Grocers understandably want to limit training to sales clerks.
  7. Ordering.  Most grocery store chains order at the regional level.  WIGS requires that a designated manager at each store place orders and pay for wine at delivery.  This will require major logistical changes for grocers, or ABC regs to make this process more friendly to business.

We see lots of hurdles for grocers to obtain WIGS licenses.  One thing is for sure.  It will not be easy.

Will Tennessee Food Stores Have Wine for Sale on July 1, 2016?

By - December 19, 2015 | Alcoholic Beverage Law | Email Will Cheek

As D Day for Wine in Grocery Stores approaches in Tennessee, the hurdles for selling wine on July 1, 2016 keep popping up.  There are immense licensing issues yet to be resolved.

The public has been fixated on being able to purchase wine in groceries on July 1, 2016.  Recently, a practical reality has surfaced that may lead to the first legislative battle to revise WIGS.

Stocking wine in Walmart, Kroger, Costco, Publix and other food stores will be quite lucrative for Tennessee wholesalers.  It will also be a logistical nightmare to open new accounts, take massive orders, and deliver huge quantities of wine on one day.

In our humble opinion, it will take a few weeks to fill the shelves at Tennessee groceries.

There has been a rumor that legislation will be introduced to allow groceries to start stocking before July 1.  For consumers and groceries, this makes sense.  For wholesalers, it will simplify the huge challenge of stocking stores.  For retail package stores, it will mean more days without profit from selling Yellowtail and Bare Foot.

Makes us think of Pink Floyd’s classic “Money”

Money, it’s a gas
Grab that cash with both hands and make a stash
New car, caviar, four star daydream,
Think I’ll buy me a football team

Proposed Tennessee ABC Regulations for WIGS Set For December 9 Hearing

By - December 05, 2015 | Alcoholic Beverage Law | Email Will Cheek

Important rules for WIGS have been proposed by the Tennessee ABC and are set for public hearing at 1:30 pm on December 9 at the Nashville ABC offices.  Most folks are oblivious of the proposed Regs, which we blogged about here.

Although WIGS was a very detailed law, there are lots of critical details that are not defined in WIGS.  There are also some requirements in WIGS that are almost unworkable for the industry.

For example, WIGS requires that the on-site store manager order wine for the store.  Industry practice is for wine to be ordered at the regional level.

These kind of issues may be curable in Regs, if the industry participates.

AC/DC classic “Breaking the Rules” comes to mind:

No rebellion, not today
I get my kicks in my own way
Right, ok
Just keep on breaking the rules
Come on, get ready to rule

We encourage grocery, big box retail and other food stores to pay attention to the WIGS Reg process and present comments at the meeting next week.   If you want more information, feel free to contact us at will@willcheek.com.

Metro Nashville Beer Board Set to Get New Blood

By - November 29, 2015 | Alcoholic Beverage Law | Email Will Cheek

Reliable sources say that newly-crowned Mayor Megan Barry is making some changes to the composition of the Metro Beer Board.  The following are set for approval by the Metro Council at its December 1, 2015 meeting:

Reappointment of Ms. Anne Sumpter Arney for a term expiring October 31, 2019.
Appointment of Ms. Jennifer Carpenter for a term expiring October 31, 2019.
Appointment of Ms. Telisha Arguelles Cobb for a term expiring October 31, 2019.
Appointment of Mr. Jack Davis for a term expiring October 31, 2019.
Appointment of Mr. Anton Jackson for a term expiring October 31, 2019.
Reappointment of Mr. Brian Taylor for a term expiring October 31, 2019.
Reappointment of Ms. Jessica Van Dyke for a term expiring October 31, 2019.

We hope to see some influence from Johnny Nash’s 1972 smash hit:

I can see clearly now the rain is gone

I can see obstacles in my way

It’s gonna be a bright, bright sun-shiny day

Mayoral appointments are generally adopted by the council without question.  We expect the Mayor’s slate of Beer Board appointments to be approved.

Shot Gun Marriage: Tennessee Department of Revenue Releases Guide for Terminating Your Liquor Wholesaler

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

Shot gun marriage pretty much sums it up.  For distilleries, wineries and breweries, choosing a wholesaler in Tennessee is like marrying your high school sweat heart.  She may look great when you are in high school, but as you grow older, you have to ask “Did I find the right partner for life.”

Unlike your high school sweat heart, divorce is not really an option for your Tennessee wholesaler.  Tennessee law protects wholesalers and makes terminating the relationship practically impossible.

The Tennessee Department of Revenue recently issued a guideline for terminating a wholesale contract.  Download a copy here Guide.

Wholesale termination reminds us of the J. Geils Band tune:

You love her but she loves him
And he loves somebody else you just can’t win
And so it goes till the day you die
This thing they call love it’s gonna make you cry
I’ve had the blues the reds and the pinks
One thing for sure
Love stinks yeah, yeah
(Love stinks)

In order to start the termination process, a manufacturer has to tell its wholesaler in writing that it wants to terminate the relationship and provide specific reasons why the wholesaler is inadequate. The wholesaler has 30 days to fix the problems.

This is not something any reasonable business person would do. Why tell someone you cannot divorce that you do not like them and tell them why?

We know of no manufacturer that has terminated a wholesaler contract in Tennessee. Although scuffles between manufacturers and wholesalers sometimes result in trading brands, between wholesalers, the brand termination process in Tennessee is heavily weighted in favor of the wholesaler.

How to Answer Question 15 About Infusing vs. Pre-Mixing Cocktails on the Tennessee Alcoholic Beverage Commission Renewal Application

By - November 04, 2015 | Alcoholic Beverage Law | Email Will Cheek

We are hearing from lots of folks that are confused about Tennessee ABC  infused cocktail policies.  The TABC has added a question to the liquor-by-the-drink application about infusing, which must be filled out by every license holder at renewal.

Question 15 asks: “Do you intend at any point during the next license year to produce, store, sell or offer for sale infusions as that term is defined in T.C.A. §57-4-108?”  The renewal application is here LBD Renewal.

Tennessee has special rules about infusions, which we blogged about here.  In our humble opinion, the Tennessee infusion law is not overly burdensome.  But the rules for what constitutes an infusion and the potential penalties for failing to comply create concern in the industry.

We blogged about the difference between pre-mixed cocktails and infusions and some common sense practices here.  Based on citations issued by agents, we strongly encourage that restaurants and bars follow our advice about pre-mixed cocktails.

We thank ABC Assistant Director Ginna Winfree for advocating for different treatment of pre-mixed cocktails and infusions.  Although the legal technicalities may make little sense to anyone other than lawyers, there is an important distinction.

Conjures up the classic Beastie Boys tune “Brass Monkey”

When it’s time to get ill I pour it on my face

Monkey tastes def when you pour it on ice

Come on y’all it’s time to get nice.”

We find that many licensing professionals think they serve infusions, when in fact they only serve pre-mixed cocktails.  Our advice for answering Question 15 for restaurants and bars that serve pre-mixed cocktails is to answer “no, see attached” and disclose on the attachment that the restaurant has pre-mixed cocktails.  We also advise labelling pre-mixed cocktails as we describe here.

Given TABC patterns of enforcement and significant penalties, erring on the side of disclosure is a good thing.