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We’ve been getting lots of inquiries about the privileges and limitations of the new limited off-sale license offered by the ABC.  Though we’ve already commented on the basics of the permit here, we’re following up with answers to the clarification questions we’ve been getting:

Where can I find the privileges for the new off-sale wine license?

Read the ABC Advisory and the enabling statute CAL. BUS. & PROF. CODE §23393.5.

Can I sell tequila and beer with the Type 85?

No, the privilege is limited to wine.

Can I get the Type 85 license if I have an upper-tier California license?

No.  The Type 85 is a retail-tier license, and there are no special exceptions permitting it to be held with an upper-tier license.  On the flip side, you can get it if you are an employee of an on-sale retailer.  This is a key distinction between the Type 85 and the Type 17/20 combination that remains popular in California.

Can I deliver product stored out-of-state directly to consumers in California with the Type 85?

No.  You must have possession and title to the wine in California. It must be delivered to the consumer from your licensed premises in California or the premises of a licensed public warehouse (Type 14 License).

Can I deliver wine to consumers outside of California with the Type 85?

Yes, but only to about 13 states.  2/3 of those states require additional licensing. You can’t reach New York, Texas, Illinois or Florida.

Do I have to have a location to obtain the Type 85?

Yes.  You have to choose an address where the license will be active and your records will be kept.  It may not be open to the public. You will have to post notice at the premises and mail notice to nearby neighbors.

Who can I buy wine from with the Type 85?

Licensed California wholesalers and wineries.  Not retailers.

How do I apply for the Type 85?

If you are interested in obtaining the license, you need to fill out the forms for an original retail license (e.g.  ABC 211-SIG, 217, 208-A/B, 253, 257, 255, 247, 251, 140, entity forms).  You can obtain them from the ABC website, or can hire an attorney or licensing specialist to complete them and assist you with the process.  The filing fee is $342 ($100 application fee plus $242 annual fee).

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·

In 2005, when Granholm v. Heald was decided by the Supreme Court, the doors to direct shipping wine to consumers opened wider than ever before. But the principles behind Granholm may open more than just the direct shipping avenue. Recently, a California winery stepped down this expanded path by opening a tasting room in Pennsylvania. Several states allow licensed wineries to operate satellite tasting rooms within the state. In Pennsylvania, limited wineries may operate, separately or in conjunction with other limited wineries, up to five additional tasting and off-premises sales locations within the state. No production or bottling is required at those five separate facilities. 47 Pa. Cons. Stat. § 5-505.2(a)(3). Virginia has a similar provision allowing licensed farm wineries to sell wine for on- and off-premises consumption at up to five additional retail locations. Va. Code Ann. § 4.1-207(5).

In order to become a licensed limited winery in Pennsylvania a winery must be producing wine from agricultural products grown in Pennsylvania. While this requirement seems to preclude an out-of-state winery from opening a tasting room in Pennsylvania, the Granholm court addressed this issue when it examined New York’s former requirement that only farm wineries, which can only produce wine from agricultural products grown in New York, were allowed the most direct avenue to ship wine to New York consumers. Granholm v. Heald, 544 U.S. 460, 476 (2005). In its decision the Court stated, “States may not enact laws that burden out-of-state producers or shippers simply to give a competitive advantage to in-state business.” Id. at 472. Thus, predicating the ability to open a tasting facility where direct sales are allowed on the production of wine solely from in-state grown agricultural products violates the principles of Granholm. In 2010 this exact issue came to heard in New Jersey when a law that allowed in-state wineries to sell directly to consumers from up to six salesrooms apart from the winery premises, while prohibiting out-of-state wineries from similar direct sales activities, was found to violate the dormant Commerce Clause. Freeman v. Corzine, 629 F. 3d 146, 159 (2010). While opening up facilities in other states is a large investment of time and capital that likely would not suit many wineries, it may be a viable strategy for some. Given the rapid changes over the last few years in new paths to consumers, keeping an open mind about ways to grow sales is always a good idea.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·

California Business and Professions Code Section 23393.5 went into effect on January 1, 2012, authorizing the state’s new limited off-sale wine license.   The new “Type 85” license, which we first discussed here, will allow licensees to make direct sales of wine to consumers over the internet and via direct mail and telephone, without requiring the licensee to maintain a brick and mortar retail location or to hold a beer and wine wholesaler license.  Up until now, businesses looking to focus on internet wine sales have been required to obtain both an off-sale beer and wine retail license and a beer and wine wholesaler license, commonly referred to as a 17/20 license combination.  With a 17/20 combination, licensees are able to sell wine via the internet, but also must meet the requirements of a wholesaler licensee, including selling wine to other retailers.

The California ABC recently posted an Industry Advisory on the new off-sale wine license.  The advisory makes clear that Type 85 license holders may not maintain a brick and mortar store that is open to the public, and all sales must be made via direct mail, telephone or the internet.  Additionally, the ABC confirmed that the new license alleviates the need for a beer and wine wholesaler license for retailers focused on selling wine via the internet, but the ABC will continue to process applications for 17/20 license combinations.  If you would like more information about the license, please feel free to contact any of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·

The Fourth Circuit of the United States Court of Appeals recently decided that North Carolina’s former Wine Distribution Act did not require that a wholesaler used by an importer of foreign wine must be used by a new importer of that wine. Country Vintner of N.C., LLC v. E & J Gallo Winery, Inc., No. 10-2289 (4th Cir., January 6, 2012). Wine from Bodegas Esmeralda, an Argentinean winery, was being imported into the United States by Billington Imports, which in turn used Country Vintner of North Carolina as its exclusive North Carolina wholesaler for the wine. Bodegas Esmeralda then switched its importer to E & J Gallo. After the switch Gallo began using its own wholesaler network, as opposed to Country Vintner. The Fourth Circuit upheld the district court’s conclusion that there had never been a commercial relationship between Gallo and Country Vintner and therefore, Country Vintner had no protections from North Carolina’s Wine Distribution Act. The protections Country Vintner had under the act with Billington Imports were no longer relevant due to the fact that Billington ceased to import the wine.

In 2010, North Carolina amended its Wine Distribution Act to provide a continuation of wholesaler rights upon a succession to importer rights; however, that amendment only applies prospectively. N.C. Gen. Stat. § 18B-1213. Thus, in importer-wholesaler relationships entered into after the 2010 amendment in North Carolina, the holding of this case will not apply. For relationships entered into prior to the change, however, the case provides instructive insight into wholesaler continuation rights in a change of importer situation.

If you’d like to discuss specific distribution issues, please feel free to contact any of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·

Late Monday night, on the last day of New Jersey’s legislative session, the state Assembly voted 51-18-4 in favor of Bill A-4336, New Jersey’s wine direct shipping bill.  The companion bill, S-3172, passed the New Jersey Senate last month, and now only the governor’s approval stands in the way of New Jersey becoming the 39^th state to allow some form of direct shipping.  Under the bill, New Jersey Farm Wineries, New Jersey Plenary Wineries that produce 250,000 gallons or less of wine a year, and out-of-state wineries that produce 250,000 gallons of wine or less each year and that obtain an out-of-state shipping license will be able to ship up to 12 cases of wine per year to any New Jersey consumer.  If the bill is signed by New Jersey Governor Christie as expected, the law will go into effect in May, 2012.  To see our earlier posts on this topic, check here and here.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·

The San Francisco ABC office will be moving to Oakland this month to allow for remodeling efforts at the San Francisco office.  The current San Francisco office, located at 71 Stevenson St. will be closed beginning at 5 p.m. on Friday, January 20, 2012.  They will re-open at their temporary Oakland location on Monday, January 23, 2012.  The temporary office contact information is:

Department of Alcoholic Beverage Control

1515 Clay Street, Suite 2208

Oakland, CA 94612

(510) 622-4970

Be sure to update your records and plan accordingly if you need to contact the San Francisco ABC office.  It is anticipated that the office will move back into San Francisco in March 2012, but construction delays may extend the moving date.  We will keep you posted as new information arises.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·

On January 1, 2012, California Business and Professions Code Section 23394.7 goes into effect, which aims to regulate alcohol sales at self-checkout terminals.  The controversial law provides that “no privileges under an off-sale license shall be exercised by the licensee at any customer-operated checkout stand located on the licensee’s physical premises.”  The law has been opposed since its inception by grocery stores with self-checkout and has been supported by retail clerks labor unions, among other entities.

The California Alcoholic Beverage Control issued an Industry Advisory to explain the new law last week, and the California Grocers Association (“CGA”) just filed a petition contesting the terms of the Advisory.  For example, the Industry Advisory provides in part, “it is clear that ‘customer-operated checkout stand’ means a checkout stand or station that is designated for operation by the customer.”  In its petition in the California Third District Court of Appeal, the CGA argues that the ABC overstepped its regulatory authority by defining one of the law’s key provisions in the Advisory, rather than going through the formal rule-making process required by the California Administrative Procedure Act.  The CGA also argues that the definition put forth by the ABC is inconsistent with the statute.  The CGA has asked that the Advisory be set aside, or that its effect at least be delayed until the issue has been resolved.  Check back for updates!

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2011 · All Rights Reserved ·

Updating our post of late last week, the New Jersey Senate last Thursday voted 23 to 13 in favor of Bill S-3172, permitting wineries to ship directly to New Jersey consumers.  Now that it has passed the Senate, the New Jersey Assembly has to vote on the bill by January 9, 2012, the last day of the legislative session.  Under the bill, New Jersey Farm Wineries, New Jersey Plenary Wineries that produce 250,000 gallons or less of wine a year, and out-of-state wineries that produce 250,000 gallons of wine or less each year and that obtain an out-of-state shipping license would be able to ship up to 12 cases of wine per year to any New Jersey consumer.  If passed, New Jersey would become the 39^th state to allow direct shipping.  Check back in early 2012 for an update!

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2011 · All Rights Reserved ·

The New Jersey Senate will vote on a direct shipping bill this Thursday, December 15, 2011, called S-3172 in its current form.  If passed into law, New Jersey Farm Wineries, New Jersey Plenary Wineries that produce 250,000 gallons or less of wine a year, and out-of-state wineries that produce 250,000 gallons of wine or less each year and that obtain an out-of-state shipping license would be able to ship up to 12 cases of wine per year to any New Jersey consumer.   With passage of the bill, New Jersey would join the 38 states that currently allow direct wine shipping to consumers in some form, including Maryland and New Mexico as of earlier this year.  However, the “capacity cap” for out-of-state wineries of 250,000 gallons per year remains a point of contention, as that limit would preclude the majority of California wineries from shipping to New Jersey consumers.  Stay tuned to find out how the New Jersey Senate votes!

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2011 · All Rights Reserved ·

The California ABC released an Advisory earlier this month that outlines a compliant path for California alcoholic beverage licensees to engage unlicensed service providers. In our practice, this issue comes up often in reference to websites that look like wine shops, but hold no alcoholic beverage licenses of their own. The Advisory is available here.

We were active on the working group that made suggestions on this issue to the ABC, and were pleased that the ABC was willing to listen to industry feedback before deciding on a course of action. We’ve been getting lots of questions on the provision regarding control of funds, which (is long!) and states:

“The control of funds from a transaction involving the sale of alcoholic beverages constitutes a significant degree of control over a licensed business. As such, while a Third Party provider may act as an agent for the collection of funds (such as receiving credit card information and securing payment authorization), the full amount collected must be handled in a manner that gives the licensee control over the ultimate distribution of funds. This means that the Third Party Provider cannot independently collect the funds, retain its fee, and pass the balance on to the licensee. The Third Party Provider should pass all funds collected from the consumer to the licensee conducting the sale, and that licensee should thereafter pay the Third Party Provider for services rendered. Alternatively, the parties may utilize an escrow account, or similar instrument, that disburses the funds upon the instructions of the licensee. So, for example, a Third Party Provider may accept consumer credit card information, debit the card, deposit the funds in an account under the licensee’s ultimate control, and, upon the licensee’s acceptance of the order and direction to the account holder, receive a fee from the account. Given the nature of Internet transactions, the Department recognizes that such collection, acceptance, and disbursement of funds will often times be accomplished solely through computer-generated means.”

We’re looking forward to seeing how the industry adapts to this provision, which seems to require that all funds for an alcoholic beverage sale settle to the account of a licensee before they are disbursed. Will new “alcohol escrow” businesses pop-up to service the need? Will each unlicensed website create its own special accounting to comply? Will fee collection be adversely affected for the unlicensed websites, such that the business model becomes less viable? We’re watching this issue unfold with great anticipation.