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Category archives for “Laws”

California’s New Online Sales Tax Law Could Impact California Wine Purchases

July 1st, 2011

Earlier this week, California legislators passed a law that requires large internet retailers to collect sales tax for orders placed from California customers. Most of the publicity surrounding the bill has been on large internet retailers like Amazon.com and Overstock.com, which have strongly opposed the law, and are now beginning the process of limiting their presence in California in order to avoid needing to charge sales tax on California purchases. However, the law is not limited to these major retailers, as it stands to affect consumers who order alcohol online as well as out-of-state alcohol retailers who do substantial business in the state.

Two primary factors will most impact whether an alcohol retailer and its consumers will be affected by the new law. First, the law is aimed at large retailers, and only applies only to businesses that have sales within California in excess of $500,000 over the previous 12 months. This likely means that orders from small wineries would remain untaxed, while large internet retailers will probably need to start charging sales tax to California consumers.

Second, the law applies only to retailers that have a “substantial nexus” in California. The precise meaning of this term has already been the source of considerable confusion, and large retailers like Amazon.com have begun breaking ties with California-based affiliates and entities that provide “click-throughs” to their site, so that they are not affected by the law. How this provision affects out-of-state alcohol retailers remains unclear. Retailers that are definitely subject to the law are those with a place of business in California, including an office, place of distribution, sales room, or warehouse. Also, retailers with representatives or salespeople in California will be subject to the law. What remains unknown is whether retailers without any such contacts will be required to collect sales tax on shipments into the state. Stay tuned.

California’s new law went into effect on July 1, 2011, and is codified at Cal. Rev. & Tax Code § 6203.

Supreme Court Denies Certiorari for Wine Country Gift Baskets.com Case

March 7th, 2011

As we mentioned last Monday, the Supreme Court was toying with the decision to grant certiorari to Wine Country Gift Baskets.com, et. al., v. John T. Steen Jr., et. al., a case that dealt with Commerce Clause and Twenty-First Amendment issues as they pertain to wine retailers inside and outside the state of Texas. The Supreme Court Justices took the case to conference three times and today finally issued their order denying certiorari. No reasoning for the certiorari denial was given, although such explanations by the Court are often not provided. This means that the Fifth Circuit decision, which upheld Texas’ law prohibiting out-of-state wine retailers from shipping wine directly to Texas consumers while allowing in-state wine retailers to ship wine directly to Texas consumers, will remain the final decision on the case. If you are interested in reading the Fifth Circuit’s opinion for the case, it can be found here.

Still No Certiorari Decision from the Supreme Court on Wine Country Gift Baskets.com Case

February 28th, 2011

The pins and needles many in the alcoholic beverage industry were on this morning remain, as the Supreme Court’s orders list issued this morningwas silent on the certiorari decision for Wine Country Gift Baskets.com, et.al., v. John T. Steen, Jr., et.al.Cases are typically distributed among the Supreme Court Justices on Fridays for their conferences, during which they discuss whether or not to grant certiorari. Orders are then typically issued the following Monday. If a case that goes to conference on a Friday is not among the order list published on the following Monday, it usually means the case is being discussed among the Justices, with a few but not a majority, arguing for the grant of certiorari. However, once a case has gone to conference more than once without a subsequent order being issued, it tends to mean that the votes for the certiorari grant are not and will not be there. This is now the second time Wine County Gift Baskets.com, et.al., v. John T. Steen, Jr., et.al. has gone to conference (first on February 18, 2011 and second on February 25, 2011) and not been included in the following Monday’s orders. Thus, it is unlikely that the case will be granted certiorari, although not impossible. If the case is denied certiorari, the Fifth Circuit’s decision will stand. For a summary of the Fifth Circuit’s decision, see our prior post here.

Have Wine, Will Travel

February 25th, 2011

It is called everything from the bombastic “corkage” to the everyperson “BYOB,” but it means the same across all fifty states and beyond: bringing ones own bottle of alcohol to a restaurant for consumption with ones meal. Not every state allows the practice, but Virginia is on the brink of joining the list of states where brown-bagging is permissible. On February 8^th, the Virginia Senate passed SB 1292 (27-Y, 13-N) and the bill passed the House on February 22^nd (78-Y, 18-N), leaving only Governor Robert McDonnell’s signature to make it official. The bill was introduced by Republican state Senator Jeffrey McWaters, who argued passage of SB 1292 would help boost Virginia’s restaurant and wine industries. SB 1292 will add Section 16 to § 4.1-201(A) of the Code of Virginia, thereby allowing licensed restaurants to permit customers to consume legally acquired wine on a restaurant premises and allowing the restaurant to charge a corkage fee if desired.

Each state that allows BYOB has its own unique set of regulations. Virginia’s neighbor to the South, North Carolina, has a “brown-bagging” permit, which allows customers in permitted establishments to bring and consume on the premises “up to eight liters of fortified wine or spirituous liquor, or eight liters of the two combined.” Restaurants, hotels and community theaters are only allowed such permits if they are located in a county where the sale of mixed beverages has not been approved. Eight liters of fortified wine, which in North Carolina is defined as 16-24% alcohol by volume, or distilled spirits, may seem like an exorbitant amount of alcohol. However, unlike Virginia’s SB 1292, North Carolina’s law is not about enjoying a glass of ones own wine with dinner, but rather about consuming a gin and tonic at ones local haunt when such establishment is not allowed by law to sell gin. Attending “liquor locker” provisions in North Carolina allow patrons to store their brown-bagged alcohol in individual lockers at licensed facilities, so that they can drain their provisions over time. Traditional bottle opening fees do not apply in such situations, rather the restaurant makes money selling the mixer used by the patron, commonly referred to as a “set-up.”

The North Carolina arrangement would be defined as an illegal “bottle club” in California. California only allows people to bring their own alcohol to a licensed premises, and one can only bring alcohol that could have been sold by the licensee at the establishment. So if a restaurant only sells beer and wine, one cannot bring in vodka. Also, in California any unfinished portion of the BYOB must be left at the restaurant, so if you bring a bottle of expensive wine to a restaurant, bring enough friends to drink it all!

As we head into the weekend, we’ll leave you to ponder these burning questions: Is it counterintuitive for California to forbid people from bringing wine to restaurants that do not serve it, but permit patrons to bring wine to restaurants with the exact same bottle available for sale on their wine list? Also, who pays more in BYOB alcohol costs—North Carolina patrons bringing in eight liters of distilled spirits or New York patrons (blind item) dining at a well known restaurant with a $90 corkage fee?

Extended Comment Period on TTB Notice 109: Use of Winemaking Terms

January 14th, 2011

The deadline has been extended for comments on the Alcohol Tax and Trade Bureau’s (“TTB”) proposed amendment to regulations regarding common winemaking terms used on wine labels and advertisements. Written comments are now due by March 4, 2011. The TTB set out their proposed new regulations in Notice 109, “Use of Various Winemaking Terms on Wine Labels and in Advertisements”, published November 3, 2010 in the Federal Register. The comment period was extended at the request of Napa Valley Vintners (“NVV”). NVV has formed a subcommittee to research and survey members on the proposed new regulations.

There are four main proposals set forth by the TTB in Notice 109. First, the TTB proposes requiring the use of the terms “estate grown,” “estate,” and “estates” to meet the higher threshold definition it currently ascribes to “estate bottled.” Second, the TTB proposes codifying its policy of only allowing the terms “proprietor grown” and “vintner grown” if 100% of the grapes used in a wine are grown on vineyards owned or controlled by the bottling winery. Third, the TTB proposes to codify its current position that “single vineyard” may only be used when 100% of the grapes used in the wine come from one vineyard. Further, it would extend that reasoning to the terms “single orchard,” “single farm,” and “single ranch.” Fourth, the TTB is considering codifying definitions for the following terms: “Proprietors Blend,” “Old Vine,” “Barrel Fermented,” “Old Clone,” “Reserve,” “Select Harvest,” “Bottle Aged,” and “Barrel Select.” The TTB made the proposals in an effort to ensure that consumers are not misled by wine labels and advertising. Should these changes occur the TTB could revoke its approval of previously approved labels.

The Federal Alcohol Administration Act (“FAA Act”) sets forth the regulations for alcohol labeling and advertisements, including wine. The TTB is responsible for the administration of the FAA Act and the promulgation of regulations thereunder. The specific wine labeling and advertising regulations can be found in Title 27 of the Code of Federal Regulations.

Small Craft Brewers Get Bigger as the Brewers Association Changes Their Bylaws

January 12th, 2011

As the formidable Harry Schuhmacher, editor and publisher of BeerNet, reported last week, the Brewers Association Board recently approved a change to the definition of “small” in their bylaws as it applies to craft brewers.

The Brewers Association was formed in 2005, after a merger of two longstanding organizations, The Association of Brewers and Brewers’ Association of America. Its mission is to, “promote and protect small and independent American brewers, their craft beers and the community of brewing enthusiasts.” Currently, their membership includes over 1,000 U.S. brewers. The definition of “small” was changed in their bylaws from those brewing a maximum of 2 million barrels to those brewing a maximum of 6 million barrels. The definition is relevant for both classes of the Brewers Association’s membership, Professional Packaging Brewers and Associates. The change allows brewers that were nearing the 2 million barrel mark to remain a part of the Brewers Association. Boston Beer Co., makers of Samuel Adams and a public company with a current market cap of $1.21 billion, was poised to pass the 2 million barrel mark, but the recent change allows them to remain a member.

Regarding the change, Nick Matt, chairman of the Board of Directors, stated, “A lot has changed since 1976. The largest brewer in the U.S. has grown from 45 million barrels to 300 million barrels of global beer production. The craft brewer definition and bylaws now more accurately reflect and align with our governmental affairs efforts.”

In 2010, the Brewers Association supported H.R. 4278/S. 3339, which aims to expand a reduced excise tax for certain small brewers. The excise tax for small brewers was established in 1976 and currently applies to those producing 2 million barrels per year or less. The proposed bills would both increase the production allowances for “small brewers” to 6 million barrels per year, and decrease the excise tax for such brewers. In the House, the bill was last referred to the House Committee on Ways and Means, while in the Senate, an identical bill remains in the Committee on Finance.