Tennessee Attorney General Tosses Residency Requirements

By - June 13, 2012 | Alcoholic Beverage Law | Email Will Cheek

On June 6, 2012, the Tennessee Attorney General declared that the Tennessee residency requirements for alcoholic beverage wholesalers and retailers violates the Commerce Clause of the U.S. Constitution.  State law requires that the owners of wholesalers and retail package stores meet Tennessee residency requirements.  
For example, all owners of package stores must be Tennessee residents for two years before applying, with a few exceptions. A full copy of the Opinion is here.
For many cities in Tennessee, the Opinion may not have an immediate impact on licensing for retail package stores.  Nashville, for example, has a local residency requirement of 2 years.  The Attorney General Opinion does not directly address local residency requirements, which most likely would have failed if analyzed by the Attorney General.
The Tennessee Alcoholic Beverage Commission has deferred to advice provided by the Attorney General on numerous occasions.  Whether or not the Commission follows this opinion will most likely be decided by the full Commission.  The Commission is not legally bound by the Opinion.
The fall of the residency requirement could be a game changer for wholesalers.
If the ABC adopts the Opinion, out-of-state wholesalers will be able to enter the market. Although a handful of existing wholesalers have been acquired by out-of-state wholesalers, these acquisitions do not increase the total number of wholesalers.  New wholesalers mean more competition, although brand franchise laws will hamper market penetration for new wholesalers.
For retail package stores, the decision did not address the one store per person limitation.  With the one store limitation remaining in effect, the fall of residency requirements is not as likely to dramatically affect the market for retail package stores.
For example, although an out-of-state grocery chain may be able to obtain one retail license, the chain could not obtain licenses for any other stores.  Plus, the liquor store would have to be completely separate from the grocery store.
Tom Humphreys from the Knoxville News Sentinel has more analysis at this link.

Liquor Tax Woes Make Progress in Metro Nashville Davidson County Tennessee

By - June 09, 2012 | Alcoholic Beverage Law | Email Will Cheek

The Metro Nashville’s city council is considering legislation to move the collection of liquor privilege taxes from the City Clerk to the Treasurer. We see this as progress.

The City Clerk’s mishandling of liquor privilege taxes has fueled considerable chatter among restaurant owners and licensing professionals. Earlier this spring, hundreds of invoices were mailed demanding payment for three year’s worth of taxes, at a rate higher than authorized by state law.

We blogged about the letters here.

Once the legislation becomes law, we expect the Treasurer to consult with Metro Legal and work through the issues with the liquor privilege tax. We have spoken to the Treasurer and offered our assistance.

Until resolved, we recommend that folks continue holding onto invoices. Some tax is undoubtedly due, but we suspect the amount will be less than originally demanded.

Stay tuned for more news.

Why Do I Need A Lawyer at the Beer Board?

By - June 07, 2012 | Alcoholic Beverage Law | Email Will Cheek

Smart business owners often navigate the labyrinth of liquor laws without legal counsel. Why should folks spend for legal counsel?

A recent case before the Nashville Beer Board involving a grocery that was accused of selling to a minor answers the query.

At a hearing on a sale to a minor, a local grocery store plead guilty with explanation. Pleading guilty with explanation is the way a permit holder admits it messed up and sold to a minor, but wants to tell the board how they try to prevent sales to minors.

The guilty with explanation defense does not reduce penalties, but allows the permittee to vent a bit and hopefully pave the way for a better defense for a subsequent sale to minor.

The grocery plead guilty with explanation. But after witnesses testified, a beer board member moved to dismiss the charge because the minor used a fake ID to purchase the beer. If the motion was adopted, the charge would have been dismissed.  The grocery would have been found not guilty.

Because the grocery had already plead guilty with explanation, the board could not dismiss the charge. The grocery legally had admitted that it was guilty.  

Instead of dismissing the charge, the beer board imposed probation. Although the penalty did not affect beer sales, it goes down on the permanent record of the grocery.

The grocery could have easily avoided a citation if it was represented by qualified legal counsel.

Tennessee Business Owners Beware of the Taxman’s Sucker Punch

By - June 05, 2012 | Alcoholic Beverage Law | Email Will Cheek

Tennessee business owners know government imposes an almost infinite number of potential traps for the unwary. Recent news about the padlocking of a century-old restaurant in Murfreesboro reminds us of an important lesson about taxes.

Employees, food and beverage wholesalers, the landlord, utilities and other critical vendors demand payment. Uncle Sam and the Volunteer State are not quite as aggressive, at least not as quickly.

But ignoring the taxman is playing with fire.

City Cafe on the courthouse square in Murfreesboro has seen more than 100 years of diners, defying defeat by more modern chains. Last month, the historic business was padlocked by Tennessee Department of Revenue officials .

According to The Tennessean, “Tennessee Department of Revenue agents showed customers to the door around 9 a.m. May 23 before seizing the cash register and changing the locks, in addition to putting a note on the door stating it had been closed by order of the Tax Enforcement Division for uncollected taxes.”

This Monday June 3, 2012, City Cafe reopened. We are not privy to the specific tax woes of City Cafe, but the sudden closure of the historic diner serves as a reminder that the taxman cannot be ignored.