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Imbiblog is published for general informational purposes only and is not intended as legal advice.

Category archives for “liquor law”

Supplier-Funded Instant Rebates No Longer Permitted on Beer in California

August 7th, 2014

On July 18th, California Governor Jerry Brown signed into law Section 25600.3 of the Business and Professions Code, which expressly prohibits beer manufacturers, importers, and wholesalers from offering, funding, sponsoring, or furnishing any type of coupon whereby a consumer gets an instant discount on beer, cider or perry, at the time of purchase. Prohibited coupons include instantly redeemable coupons (IRCs) of all kinds, whether paper, digital or electronic. The bill also prohibits retail licensees from accepting or possessing any such coupon funded by a beer wholesaler or manufacturer, although it does not prevent a retailer from offering its own coupons as set out below.

Per the bill sponsor, beer IRCs have been targets for fraud and have created liability issues for beer suppliers, as well as creating an imbalance in the beer marketplace among major breweries and the burgeoning craft beer market. The bill received major support from MillerCoors and Anheuser-Busch.

Not affected by the law are mail-in rebates, retailer-sponsored coupons, instant coupons for distilled spirits and wine (provided the coupons do not also discount beer), and instant rebates offered by beer manufacturers at the production facility or other premises owned or operated by the manufacturer. This last exception keeps the door open for small brewers licensed with a Type 23 license to offer instant rebates at brew-pubs owned and operated by the brewery.

Suppliers and retailers should be careful with all beer, cider and perry coupons as they may be affected by the new prohibition. We have put together a chart below to show what coupons are caught by the law. You should check each license that is held by the sponsor to see if the law prevents the coupon.

California IRCs  by Alcohol and ABC License Type

            

 

 

Beer Manufacturer (CA or out-of-state)

Beer and Wine Wholesaler

Beer and Wine Importer

Winegrower (if wholly owned by a Beer Manufacturer)

Winegrower (not owned by Beer Manufacturer)

Retailer

Malt beverages (incl. beer)

No

No

No

No

N/A

Yes

Cider

No

No

No

No

Yes

Yes

Perry

No

No

No

No

Yes

Yes

Wine/spirits

N/A

Yes

Yes

Yes

Yes

Yes

Rebate regulations vary from state to state. For more information on coupon laws for wine, beer, and distilled spirits, contact an attorney at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·

How About a Bacon Flavored Beer?

July 9th, 2014

“Ready-to-drink” alcoholic beverage categories are continuing to boom. Variously known as flavored malt beverages (FMBs), alcopops, progressive adult beverages (PABs) and ready-to-drink cocktails (RTDs), all sorts of flavors are being added to all sorts of products to create new taste sensations. Despite RTDs generally suffering some decline after Four Loko triggered state bans on adding caffeine to alcoholic beverages (covered herehereherehere, and here), the category has well and truly picked up again in recent times.

If you are looking to produce a flavored product, we have put some tips together to keep in mind.

Formulation Issues

One of the key things under federal law to be aware of with FMBs is that most of the alcohol must come from the malt beverage base. If the product is below 6% alcohol, at least half of the alcohol must come from the production of the beverage itself and cannot come from nonbeverage items like flavorings (which often contain high alcohol levels). Above 6%, no more than 1.5% of the alcohol can be from nonbeverage ingredients.

For wine-based products, an important factor to keep in mind is to make sure that your formula leaves you with a product that you can sell in grocery stores in states that do not allow them to sell wine. In New York, for example, a wine product that can be sold in grocery stores must meet a strict definition which includes that it must be below 6% alcohol, and it must contain juice and carbon dioxide. If you can meet the definition, you fall outside price posting requirements in the state, but you still have to register the brand there. Similarly, in a state like New York, you should be aware that a distilled spirits based RTD, even if below 6% or 7% alcohol, can’t be sold at grocery, convenience and pharmacy type stores where most low alcohol products are sold.

Labeling Issues

It is important to know about the various regulatory agencies that monitor the labeling of alcoholic beverages. FMBs and wine coolers, depending on their alcohol content, could fall under the regulation of the Food and Drug Administration (FDA), the Alcohol and Tobacco Tax and Trade Bureau (TTB), or both. For example, labeling requirements for wines containing 7% or more alcohol are controlled by the TTB, but wine coolers under 7% alcohol are regulated by the FDA, because such products do not fall under the federal definition of wine. In addition, labeling requirements for beers not made from malted barley and hops are regulated by the FDA (such as sorghum beer), while malt based products and distilled spirit based products are subject principally to TTB requirements.

If your product falls under TTB’s labeling jurisdiction, you will need to get a Certificate of Label Approval (COLA) and you will likely need to get formula approval (see, for example, our previous blog on easing up of beer formula requirements here). If your product label is FDA regulated, you will have to include a nutrition facts statement and other information that would not be required under the TTB labeling regulations. Bear in mind that even products under FDA jurisdiction for labeling still may need TTB formula approval.  You need to be careful about using any type of name which makes customers think that the product might be a spirit drink if it isn’t (including cocktail names like margarita or daiquiri).

Recycling

In addition to formulation and labeling issues, recycling laws surrounding FMBs and similar products can be tricky. Ten states, including California (with its CalRecycle program), Connecticut, Hawaii, Iowa, Maine, Massachusetts, Michigan, New York, Oregon, and Vermont, have container recycling laws that apply to a variety of alcoholic beverages.  The specific products that are subject to the laws vary from state to state, as do the container marking requirements. Wine- and spirits-based products may be subject to recycling laws, even in states where wine and distilled spirits are exempted.

Conclusion

Before producing a flavored malt beverage or other ready to drink beverage, be sure to familiarize yourself with the special rules that apply to these products. For questions about any of these products, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

More New York Industry Guidance on Limited Availability, Brand Registration and more

June 3rd, 2014

Following our blog post on May 6 (http://strikeandtechel.com/2014/05/06/nysla-expands-suppliers-ability-to-entertain-consumers/), regarding the new advisory from New York covering supplier events, here are some more advisories recently published by New York. The advisories summarized here cover limited availability items and closeout sales, new brand registration rules, growler information for beer and cider, and the use of third party agents for consumer tastings.

Limited Availability Items – #2014-5

New York is one of a number of states around the country which continues to require its wholesalers to post prices for wine and spirits around five weeks in advance of sale. The retail posted pricing (from in-state manufacturers and wholesalers to retailers) is available to any retailer who wants to buy the products at the posted price. In the case of products with limited availability, or in the case of closeout sales with limited inventory, the SLA published an advisory in 2013 and now replaces it with this one.

A limited availability item is one where the New York manufacturer or wholesaler believes that demand will exceed supply. As an exception to the general, and strongly enforced, rule against channel pricing, limited availability items can be allocated differently between on- and off-premises retail buyers. A closeout sale occurs when the manufacturer or wholesaler intends to sell its entire remaining inventory of an older or seasonal item at a price at least 10% lower than the last posted price.

In the case of limited availability items, the SLA is switching over the whole current price posting system to create a new category for these types of items. The new system will allow a manufacturer or wholesaler to indicate how it will allocate limited availability items. The system will also allow a manufacturer or wholesaler to move items to limited availability after prices have been posted if there is an exceptional event like a high score from a trade or consumer publication or a celebrity endorsement. In the advisory, the SLA gives a number of examples of allocation methods which are permitted.

Brand Label Registration – #2014-7

In addition to federal certificate of label approval (COLA) requirements from the Alcohol and Tobacco Tax and Trade Bureau (TTB), New York requires brand labels to be registered with the state for almost all alcoholic beverages. Wines over 7% alcohol which have a COLA do not generally need to be registered. Many of the changes in the new advisory parallel recent TTB changes allowing a number of label alterations without requiring a new COLA.

Brand labels must contain the brand or trade name, the class and type of alcoholic beverage, the net contents and other labeling information required for a COLA. If there is any change to the brand name, the flavor description, age or geographic appellation, or if qualifiers like “kosher” or “organic” are added to a label, a new registration must be obtained. If the alcoholic content of a brand registered product changes more than 1.5%, or 0.5% in the case of a cider or a “wine product,” a new registration must be obtained. Unlike wine, “wine products” can be sold in grocery stores if they meet the state-specific definition, which requires things like carbonation and added flavoring materials.  Registrations are filed by the brand owner, if they are a New York licensee, or otherwise by the New York wholesaler appointed by the brand owner to post prices for and sell the product.

Brand label registrations are valid for a set calendar year depending on the type of alcoholic beverage. Current registrations will remain in effect until they expire and will then be transitioned to the new schedule. There will be additional use-up periods allowed for non-compliant products.

Private labels owned by retailers who sell them exclusively are exempt from price posting requirements. The labels do not have to contain the retailer’s name, but the brand name must belong to the retailer or the retailer must have the legal right to use the name. A retailer can license the brand name from another entity but cannot license a brand name belonging to a manufacturer or wholesaler. The use of terms like “exclusively bottled for” or “exclusive to” cannot be used to try and create a private brand label for a retailer.

Growlers – #2014-11

The advisory covers the sale of beer and cider in growlers by off premise retailers authorized to sell those beverages and confirms that liquor and wine cannot be sold in growlers in New York. In the case of beer and cider, either the consumer can provide the container or the retailer can. Due to local open container laws, retailers serving growlers should provide sealed containers where applicable.

Authorized Agents for Tastings and Bottle Sales – #2014-13

Certain New York licensees, and certain out-of-state suppliers with supplier marketing permits, are allowed to provide tastings in accordance with an advisory published in July 2013. This new advisory confirms that the licensee or supplier can use another manufacturer or wholesaler licensee as its agent for such a tasting. The only exception is that a beer wholesaler is not allowed to act as an agent for a brewer.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

TTB Reconsiders Use of “Estate Bottled” Following a Winery Sale

May 21st, 2014

To be labeled as “estate bottled,” a wine must be, among other things, made from grapes grown in an American Viticultural Area, on land that is owned or “controlled by” the winery, and the winery must crush, finish, age and bottle the wine in a continuous process.

Previous guidance from the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) suggested that a wine would not be entitled to use the “estate bottled” designation if a change of ownership of the winery occurred at any point during the winemaking process, because the new owner technically would not have “controlled” all phases of the process. To address this issue, sellers and buyers of wineries that produce “estate bottled” wines would sometimes enter into an Alternating Proprietorship Agreement (“AP”) whereby the seller would maintain its bonded winery operations until all wine in process at the winery as of the closing date had been bottled and labeled. This approach was difficult for both sellers and buyers, given that the AP could be in effect for a lengthy period of time depending on which stage of production the “estate bottled” wine was in.

In a recent private letter ruling, the TTB advised that it has reconsidered its position and that the proprietor of a winery can  use an “estate bottled” designation for wine that was grown and fermented by a predecessor proprietor and bottled by a new proprietor (provided the wine also met the other requirements under 27 C.F.R. § 4.26). The ruling provides that the ownership of a winery may change while the wine is in process as long as the bottling winery does not change. The TTB further explains that the definition of “controlled by” refers to the land on which the grapes are grown and the winery operates, as opposed to the owner of such land. With a change in winery ownership, the “estate” land is not altered, and thus the new owner can maintain the “estate bottled” designation.

This guidance from the TTB should come as a welcome relief to potential purchasers and sellers of wineries that produce “estate bottled” wines.

For questions about the acquisition or sale of a winery, please contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

NYSLA Expands Suppliers’ Ability to Entertain Consumers

May 6th, 2014

Suppliers’ ability to run events for consumers in the New York market has been up in the air for a number of years now, and especially since the industry consent orders in 2006. Now, the New York State Liquor Authority (SLA) has given helpful and detailed guidance on how these events can be run.

Supplier Purchases of Alcohol from On-Premise Retailers – #2014-8

This new SLA Advisory covers the ways in which suppliers and wholesalers may purchase alcoholic beverages from on premise retailers for consumers. Under the consent orders issued in 2006, there were three ways in which this could be done: (1) on an incidental basis; (2) for employees or private guests at an invitation-only event; or (3) at a bar spend promotional event open to the general public. The new advisory clarifies the scope of those activities and also expands on them.

Purchases for Consumers on an Individual or Incidental Basis

This is unchanged from SLA’s prior position. It is not intended to be an option for promotional events. It permits a supplier rep to buy themselves a drink and to buy a drink for individual patrons of a retailer.

Business Meetings and Private Events

- Business meetings or business entertainment

This means a gathering of a supplier employees, and/or representatives for entities that do business with a supplier (including other suppliers, distributors and retailers). There must be a legitimate business purpose for the meeting, like discussing product sales, new product introductions etc. It does not include holiday parties or other special occasion events. There are no spending restrictions, or limits on the number of meetings at any particular on premise location. The event must be in a reserved area (can be as little as one table), and at least one supplier employee must be present. Retail licensees and their employees can be invited and an invite can be sent to all employees of a particular retailer.  Media reps can be present.

- Private invitation only events closed to the general public

This is an event not conducted for a business purpose or for promotional purposes. It must be a gathering of invitees who have an identifiable affiliation with a supplier (e.g., a party for employees, vendors or business associates), or a common affiliation or relationship with each other (e.g. journalists, sports teams or non-profit organizations). The language of the advisory makes it clear the group cannot just be a large gathering of a group of consumers or potential consumers without meaningful commonality other than an attempt to market or target a demographic. Invitations must be sent by a supplier to invitees by individual name, each such invitee may bring only one guest. Invites can be by phone, e-mail, letter, in person, etc. Invites cannot be in any type of media advertisement or generic communication to anyone wishing to attend and cannot be sent to a “mailing list” of consumers obtained or created by a supplier. The event must be in a reserved area (can be as little as one table) and at least one supplier employee must be present. Despite the stated non-business and non-promotional purpose of the events, retail licensees and their employees can be invited, as can the media.  A supplier cannot send a general invite to all employees of a retailer or a retail chain.

Promotional Events Open to the General Public – No Invitation Required

Prior to the advisory, a bar spend was limited to $500 (plus 20% tip) and no more than six events per retailer, per year. Now, the limit is $700 (plus 20% tip), and no more than ten events per retailer, per year. A supplier cannot purchase food, non-alcoholic beverages, or anything else from the retailer for such an event. These events can now be advertised, identifying the time, date and location. Invites may also be sent to members of the general public, but the event cannot be restricted to people that received such invitations. There is no longer a need to submit statements after these events; a supplier must maintain a record of each event for two years that includes date, time, location and duration, brands that were purchased, and names of supplier reps or agents who conducted the event.

Promotional Events Open to the General Public – Invitation Required (“Brand Experience Events”)

This is a new category of events which will be extremely helpful for supplier marketing and promotions in New York. The advisory refers to these as “brand experience” events that are “much larger” than bar spend events. At a brand experience event, a supplier can spend up to $10,000 (plus 20% tip), and may purchase alcoholic beverages, non-alcoholic beverages and food. A supplier can also apply to the SLA for advance permission to spend more than $10,000 for an event. A supplier can have up to six such events per retailer per year (whether the event is at a retail premises or whether a retailer caters the event, as catering permits in New York are only held by on premise licensees). Attendees at these events must be invited and an event can be restricted to invitees only. A supplier can invite people individually (by phone, letter, e-mail, in person, etc.), or can also place media advertisements including invitations, generic communications inviting anyone who wishes to attend to register, and “mailing lists” of consumers. A supplier can advertise brand experience events, including date, time and location. Each person registered as an invitee may bring one guest. A supplier must maintain a record of each event for two years that includes date, time, location and duration, brands that were purchased, and names of supplier reps or agents who conducted the event.

Events Where the Supplier or Wholesaler Provides the Alcoholic Beverages

In a very helpful clarification, the new advisory notes that it is only intended to cover occasions where a supplier is purchasing alcoholic beverages from a retailer. It goes on to discuss the fact that a supplier may provide alcoholic beverages for an event without being bound to any of the above exceptions.  Specifically:

- Not-for-profit organizations

A supplier may donate product to a not-for-profit organization for an event which the not-for-profit organization is conducting, either at licensed premises or at an unlicensed location with a permit from the SLA. A supplier can also receive promotional benefits in exchange for the donation to the organization. The only real restriction is that a supplier cannot choose the retailer for the event. The new advisory does not use the same restrictive “bona fide charitable organization” language used in the tasting advisory published in July, 2013. It appears that non-charitable not-for-profit organizations qualify for these events.

- Private/Brand Experience events at unlicensed locations

The new advisory allows a supplier to conduct a private invitation-only event or a brand experience event at an unlicensed location and to provide the alcoholic beverages for that event without having to fit into one of the four event types above. Note that any unused alcoholic beverages must be removed by a supplier after any event under this section.

An appropriate permit must be in place for these events. This means that a supplier should use a retail licensee caterer for such events at this stage. We anticipate a new supplier event permit will available in the future.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

Nevada Signals Intention to More Actively Monitor Trade Practices

March 5th, 2014

Almost three years ago now, as reported on Imbiblog here, the TTB accepted its largest set of offers in compromise ever, for trade practices violations. Some of the biggest names in the business agreed to pay hundreds of thousands of dollars to the TTB even though they denied violating any laws or regulations. The allegations of trade practice violations came from participation by the companies in the 2008-2009 Harrah’s Nationwide Beverage Program. Unlike notable earlier trade practice investigations by the TTB, where there was state participation and a parallel investigation, there were no allegations made against retailers involved in the program, and no fines or penalties assessed against retailers (see for example the 2004-2009 joint investigation by Illinois and TTB into payments made by suppliers and wholesalers to Sam’s Wine & Spirits, Inc., then the largest wine retailer in the country, and its captive third party marketing organization Skyline Marketing, Inc.). The 2011 settlement by TTB was acknowledged to result from a retailer-initiated promotional program. Given that the TTB has extremely limited jurisdiction over alcohol retailers, however, the agency was unable to enforce any allegations against Harrah’s for the promotion. Had the State of Nevada participated in the investigation, it is more likely that charges could have been brought.

Now, the Office of the Attorney-General in Nevada has come out with an open letter to retailers, wholesalers and suppliers of liquor in Nevada in what appears to signal an intention to focus more attention on trade practice issues in the State. The advice contained in the letter is phrased as a “reminder” to the industry of prohibited and restricted activities. It covers the following issues:

-          No loans from wholesalers to retailers of money or other thing of value, no investments by a wholesaler in a retailer, no complimentary furnishing of premises or equipment, and no joint operation of a retail business;

-          Adherence to strict payment terms, with no preference accorded by wholesalers to certain retailers, and with a cessation of sales and monthly service charges in case of delinquency;

-          No substitution of brands without consent, and no delivery of unwanted or unnecessary inventory;

-          No required boycotts of other suppliers;

-          No price fixing down the supply chain by suppliers imposing resale prices on wholesalers, and no profit splitting with the supplier getting a specified portion of the wholesaler’s profit margin;

-          No excessive marketing contributions being required by suppliers of their wholesalers, for promotions outside the wholesaler’s market or beyond the terms agreed by the parties;

-          Strict adherence to the quoted price from suppliers to wholesalers;

-          No discrimination by suppliers among wholesalers (note that Nevada has a franchise law meaning that this refers to discrimination between wholesalers in different parts of the state as only one wholesaler can be appointed in any given market); and,

-          No deceptive trade practices.

The letter refers to concerns with illegal terms or incentives by industry members looking for a competitive edge in the market. It notes that the Attorney General has jurisdiction over these issues and is required by law to take appropriate legal action to enforce the provisions of law setting forth the restrictions above. The Attorney General’s office recognizes in the letter its duty to investigate and prosecute deceptive trade practices in Nevada. Should the type of circumstances in the TTB’s investigation in 2011 arise again, it will be very interesting to see what action is taken by the state in light of this clear signal that it is unlikely to sit by if unlawful trade practices occur in Nevada.

If you have any questions about trade practice issues, in Nevada or elsewhere, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

TTB Updates its Position on Gluten-Free Label Claims

February 11th, 2014

On Tuesday, the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) issued an Announcement regarding its treatment of “gluten-free” claims on alcoholic beverage labels. As we previously blogged here, TTB has been looking into the issue of gluten-free labeling since at least 2012, and TTB Ruling 2012-2 implemented a policy of allowing the term “gluten-free” only on the labels of products that are produced without any ingredients that contain gluten. For products made from gluten-containing materials, the 2012 Ruling implemented several requirements, including: a) a statement that the product is “Processed or Treated or Crafted to remove gluten;” b) a qualifying statement to inform consumers that (i) the product was made from a grain that contains gluten, (ii) there is currently no valid test to verify the gluten content of fermented products, and (iii) the finished product may contain gluten; and, c) a detailed description of the method used to remove gluten from the product.

TTB explains in its most recent announcement that it has finished its review of the FDA’s rule on gluten-free labeling, and has updated its requirements accordingly. TTB will continue to allow the term “gluten-free” only on the labels of products that are produced without any ingredients that contain gluten. However, for products made from gluten-containing materials, TTB has lessened the labeling requirements, and now provides that such products may be labeled with a statement that the product was “processed, “treated” or “crafted” to remove gluten, if that claim “is made together with a qualifying statement that warns the consumer that the gluten content of the product cannot be determined and that the product may contain gluten.” Labels no longer require a detailed description of the method used to remove gluten from the product.

If you have any questions about alcoholic beverage labeling, contact one of the attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·

Dan Kramer Featured in The San Francisco Examiner!

February 3rd, 2014

Strike & Techel’s own Dan Kramer was featured in an article in Sunday’s San Francisco Examiner. Dan was interviewed for the article “Want to be in the booze business in SF? Better know the law” in which he discusses his experience in the alcoholic beverage industry, including the complications and expenses of obtaining a retail license in San Francisco, California promotional issues, as well as distribution and direct shipping. As Dan pointed out, alcoholic beverage legal issues can not only be complicated, but they are often not on people’s radar as they venture into the industry. If you’re just getting started in the industry or have any questions about retail licensing, distribution, direct shipping, or just about anything else in the industry, call Dan or one of the other attorneys at Strike & Techel.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved

Getting Started in the Business: Licensing

December 12th, 2013

This blog entry is part of a continuing series discussing important steps to get started in the alcoholic beverage industry. Once you have pinpointed a location for your business (discussed in a previous post, here), you will need to obtain a license, or a combination of licenses, before you commence operations.  To determine what type(s) of license(s) you need, here are some answers to questions you may be asking:

*   Do the Tied-House Laws Permit Me to Hold the Licenses I Want?  Federally and across all states, “tied house” laws generally prohibit the same person or entity from having an ownership interest in alcohol beverage businesses in more than one of the 3 tiers -manufacturing/importing, distribution and retail.  (To learn more about tied house laws, review this post.)  However, that restriction is far from absolute.  Many statutory exceptions have been carved out of the 3-tier system to permit cross-tier licensing and the resulting patchwork of exceptions can be difficult to comprehend.  For example, in California, wineries can also own restaurants (subject to restrictions) and certain off-sale retail stores.  Small breweries (less than 60,000 barrels/year) can own on-sale retailers but large breweries cannot.  Beer and wine wholesalers cannot also be retailers, unless they sell only wine through the retail store.  Other states have their own set of hard-to-explain exceptions.

*   What Does My License Permit Me to Do?  The general rule is that manufacturers sell to wholesalers; wholesalers sell to retailers; and retailers sell to consumers.  But this, too, is riddled with exceptions.  California wineries and breweries can sell their products directly to retailers and consumers without using a distributor, but distilled spirits manufacturers can sell only to distributors and cannot themselves hold a distributor license.  Rectifiers, on the other hand, can act as their own distributor and sell their products – and spirits products made by anyone else – directly to retailers.  Moreover, you may need more than one license to operate your business.  For example, if you are going to be operating a distillery, you will need a Type 4 (Distilled Spirits Manufacturer’s license), and a Type 6 (Still) license.  If you are importing distilled spirits from outside of California and distributing them to retailers you’ll need a Type 12 (Distilled Spirits Importer), and a Type 18 (Distilled Spirits Wholesaler).  California issues dozens of different licenses so it is important to know exactly what you want to do, which licenses are needed to accomplish it, and whether you are eligible to hold them.

*   What are the Processing Times to Obtain a License?  In California, it takes about 90-120 days to process an application for a new license, and slightly less time to transfer an existing license at a premises that is already licensed. It will take longer to process an application that is incomplete, contested by neighboring residents or the local authorities, or filed incorrectly.  Also keep in mind that the ABC cannot issue a license until it has received confirmation from the City/County that all required use permits have been obtained.  Each applicant will be assigned a local ABC investigator to handle the application until the process is completed.  Currently, U.S. Alcohol Tobacco Tax Trade Bureau (“TTB”) licenses are processing in about 90 days, similar to California licenses.

*   May I Obtain a Temporary Permit?  Provided that you are transferring an existing license at an already licensed premises, the California ABC may grant a temporary permit so you may operate your business while the license transfer application is being processed. A temporary permit is not available in connection with applications for new licenses or applications to transfer existing licenses to a premises that has not been previously licensed.

*    What Are the Costs Involved?  Depending on what type(s) of license(s) applied for, the cost can vary considerably.  A schedule of license costs is available here.  Some retail licenses are limited in numbers and must be purchased on the open market.  Prices for these licenses vary greatly by type and location.  For instance, a Type-47 (On-sale general eating place) may sell for $200,000 in San Francisco, whereas the same type of license in Fresno County currently only costs $12,000.

In conjunction with your ABC application, you may also need to obtain other federal, state or local licenses/permits.   In California this may include, for example:  federal licenses through the TTB; a certification from the Secretary of State that you are qualified to do business in the state; and a sales tax permit from the State Board of Equalization.

Contact one of the attorneys at Strike & Techel if you have questions about applying for a license to get started in the alcohol beverage business.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·

Getting Started in the Business: Location

December 2nd, 2013

This blog entry is part of a continuing series discussing important steps to get started in the alcoholic beverage industry. If you intend to obtain an alcoholic beverage license for your business, you’ll need to have a location for the business before you apply.  In selecting a location, you should consider the following factors.

 

State:  Each state has different licenses available, charges different fees for its licenses, and applies different rules to its licensees.  Further, some states move faster than others in issuing licenses.  Once you’ve settled on a business model, you should choose a state that is favorable to your model and where you can get licensed on a schedule that works for your launch plans.

 

Zoning and Lease:  Check with the local planning department to make sure the location that you are considering is properly zoned for the proposed activity.  If it is not properly zoned, the process to obtain an exception can be long, expensive and unpredictable, so proceed with caution.  If you must enter a lease before applying for an alcoholic beverage license, be sure to include a provision that allows you to vacate the lease if you are unable to obtain the desired alcoholic beverage license at the location.

 

Limited Availability: In some localities and for some license types, the number of available licenses is limited.  If you cannot obtain a new license from the alcohol regulatory agency and have to buy one on the open market, prices may vary widely depending on supply and demand. This is particularly common in densely populated areas.  Be aware that a slight change in location can have a large impact on the availability and cost of the license you need.

 

Consideration Points: Though each state is different, most states do not want alcohol businesses to be close (within 500 ft.) to churches or schools.  If there are residential neighbors near your proposed location, they will also be given an opportunity to oppose your license application.  Try to determine if your business will be welcomed by the local police department and residents.  If local law enforcement does not support your project, you may face an uphill licensing battle.  Moreover, sometimes an active anti-alcohol neighborhood group can delay or even derail a licensing project. Typically, a large poster-sized notice announcing your application will be posted while the license is pending, so if you elect to license your home, be prepared for curious neighbors.

 

The most important consideration in choosing a location for your business is deciding where you want/need to be located.  For example, where do you want to spend your time? Where do you want to make most of your sales?  Do you need to have access to a warehouse or will an office suffice?  What sort of staffing will you need to operate the business and is it available within the local labor pool?  Are economies of scale possible by sharing warehousing or production facilities? 

 

Contact one of the attorneys at Strike & Techel if you have questions about things to consider when choosing a location to get started in the alcohol beverage business.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2013 · All Rights Reserved ·