Monthly Archives: September 2014
We were baffled by the Tennessee Alcoholic Beverage Commission’s recent instructions to grocers that bitters could only be sold at retail liquor stores. This week, the ABC provided an explanation that makes sense.
We still disagree with the ABC reasoning, but at least we know how far the ABC will go.
Buck Owens penned a classic hit that catches our sentiment:
The flame of love was burning high we vowed to never let it die
But now you’re growing tired of me so let’s agree to disagree
Let’s agree to disagree there’s nothing left for you and me
You won’t be happy till you’re free so let’s agree to disagrees
Those of us knowledgeable of obscure federal liquor laws understand that bitters are “non-beverage.” Scope, peppermint extract and cooking wine are non-beverage products that contain alcohol. Unlike alcoholic beverages, non-beverage products are not regulated and taxed like whiskey and vodka.
The simplest explanation of whether a product is non-beverage is “can you drink it?”
Most flavorings like peppermint and vanilla are around 190 proof. Your local grocer stocks hundreds of non-beverage products with alcohol.
Non-beverage is the federal standard for determining whether a product is taxed like wine or whiskey, or is exempt from federal taxes. Generally, states follow the TTB standards. If a product like cooking wine is non-beverage under federal law, it is not an alcoholic beverage under state law.
Recently, the Tennessee ABC instructed grocers to pull bitters from shelves. According to the Tennessee ABC, bitters can only be sold by retail liquor stores.
We disagreed with the ABC finding, in large part because of concern that hundreds of non-beverage products containing alcohol could be deemed contraband. Would the ABC declare that Scope could only be purchased at a liquor store?
We are pleased with the ABC explanation that bitters are unusual under state law. ABC Staff Attorney Josh Stepp contacted us today to explain that the treatment of bitters as alcoholic beverages by the ABC was based on Tenn. Code Ann. § 57-3-101(17), which specifically names bitters as a product of “rectifying.”
We agreed to disagree. But at least, the ABC will not be banning other non-beverage products from grocery stores.
The Tax and Trade Bureau, the federal agency charged with overseeing alcohol, recently reminded industry members that the failure to pay liquor taxes is a serious crime.
According to the TTB, Monterey Wine Services had taxable removals of wine from its bonded wine cellar, which resulted in a wine excise tax due and owing to TTB. The owner, Brenda Jo Kibbee, failed to pay the excise tax. In the wine warehousing industry, bonded wine cellars pay wine excise tax on the removal of wine, but then typically pass this cost on to their winery customers. Even though Kibbee did not pay the excise tax due to TTB, she invoiced her customers and received payments from them for the excise taxes. Kibbee agreed that the tax loss resulting from her misconduct was at least $877,126.94.
Brings to mind “Carnival World” by Jimmy Buffett
But talk is cheap
It takes money to buy your freedom
And the tax man’s knockin’ on your door
Spend it while you can, money’s contraband
You can’t take it with you when you go.
Spend it while you can, before it’s taken from your hand,
There’s no free ride in this carnival world.
TTB Assistant Administrator for Field Operations Tom Crone said, “Tax evasion is not a victimless crime. Law abiding businesses rely on us to ensure a level playing field. We take that responsibility seriously.”
Honorable D. Lowell Jensen, United States District Court Judge, in San Jose sentenced Kibbee to a three-year term of supervised release.
Tennessee’s Wine in Grocery Store law requires that liquor stores card everyone beginning July 1, 2014. WIGS also requires food stores to card everyone for wine sales, when WIGS becomes effective for groceries and other food stores on July 1, 2016.
Known as universal carding in the liquor industry, the practice is politically popular. Liquor industry experts complain that universal carding is “a quick fix” that is “meaningless” to controlling sales to underaged consumers.
Universal carding requires that everyone show an ID for the purchase of alcohol. Regardless of age. Octogenarians must fork over an ID to purchase hooch.
Paul McCartney’s classic Beatles tune inescapably comes to mind:When I get older, losing my hair, many years from now
Will you still be sending me a valentine, birthday greetings, bottle of wine?
If I’d been out ’till quarter to three, would you lock the door?
Will you still need me, will you still feed me when I’m sixty-four?
Those in the know say that universal carding takes the focus off of ensuring that folks close to the legal drinking age present valid identification. Clerks have to spend time carding people that clearly are of age, including repeat customers that clerks know.
When lines form at checkout, it is easy to understand that less time is devoted to looking at the IDs of younger purchasers.
Adam Chafetz at TIPS, the global leader in education and training for the responsible service, sale, and consumption of alcohol, observes that:
Today’s extremist attitudes on the part of liquor boards about underage drinking have created environments where these kinds of meaningless practices abound. Add political correctness to the mix and you end up carding everyone, just to be on the safe side.
Tennessee was the first state to adopt universal carding. In 2007, Tennessee required everyone to show ID to purchase beer at markets, grocery stores and other off-premises sales. The law made national news.
Universal carding at liquor stores, and at groceries beginning in 2016, is fertile ground for Tennessee ABC citations. If a clerk fails to card, the ABC can issue a citation. The Metro Nashville Beer Board has certainly profited from universal carding for beer and we expect the ABC to see an increase in fines from universal carding.
As one loyal reader pointed out:
This law ignores common sense and places undue burden on small businesses that already understand the consequences of selling to a minor. This bill does nothing to improve upon that and only hassles loyal customers and good operators.
Anyone in the liquor business knows that the Tennessee ABC has been implementing big changes over the past couple of years. Keith Bell, appointed as Director of the ABC on May 21, 2013, has clearly stated his intention to “clean up” the liquor laws.
Today, we learned that renewals of liquor-by-the-drink licenses must comply with new deadlines. Failure to meet the deadlines results in termination of the liquor license and an interruption in service while applying for a new liquor license.
The ABC requires that managers sign the attached form when the ABC agent inspects for renewals. We strongly encourage all LBD license holders to pay close attention to the new deadlines.
Brings to mind the 1977 Queen anthem “We Will Rock You”Buddy you’re a boy make a big noise
Playin’ in the street gonna be a big man some day
You got mud on yo’ face
You big disgrace
Kickin’ your can all over the place
We will we will rock you
The new TABC rule says that licenses will be voided out if the renewal is not complete within 14 days of the date the license expires. We expect that the ABC will put you on no buy with the wholesalers and send an agent to take your license off the wall.
The ABC is clear that if you fail to meet the 2 week grace period on renewals, you will have to apply for a new license.
Failure to complete a liquor license renewal within 2 weeks of the expiration date will lead to a prolonged interruption in service. No wine or spirits for several weeks.
As we read the ABC requirements, the following must be completed before the LBD license expires:
- Renewal application filed with the ABC
- Renewal fee paid
- Tax clearance from the Tennessee Department of Revenue
- Bond clearance from the Tennessee Department of Revenue
- All citations with the ABC resolved for all stores in Tennessee
We are trying to clarify whether a new price schedule is required for renewals.
The problem is that it is hard to determine when a renewal is complete. The ABC and Revenue do not have the resources to tell you when you have a citation, bond issues, or taxes owed that prevent you from renewing.
With the prospect of a prolonged interruption in service, restaurants, hotels, caterers and venues should pay close attention to renewals.
So says the Tennessee Attorney General in an opinion released this week. The full opinion is here.
For decades, state law required that liquor stores must be owned by Tennessee residents. The Attorney General found the original residency requirement unconstitutional on June 6, 2012.
Reminds us of Genesis’ catchy 1984 hit Illegal Alien:It’s no fun being an illegal alien, I tell ya
It’s no fun being an illegal alien, no no no no no
It’s no fun being an illegal alien, I mean it when I tell ya that
It’s no fun being an illegal alien,
An illegal alien, O.K.
As a part of the messy deal struck for wine in grocery stores, which we affectionately call WIGS, the legislature reaffirmed the Tennessee residency requirement with new language designed to make the residency requirement constitutional. Industry insiders speculate that the Tennessee retail liquor store association pushed for the revamped residency requirement to prevent out-of-state mega liquor stores, which are game changers for the market.
The residency fix in WIGS calls to mind a poignant Einstein quote: “The difference between genius and stupidity is that genius has its limits.” We expected the Attorney General to find that the WIGS residency requirement was unconstitutional.
The take away? If the Tennessee Alcoholic Beverage Commission follows the advice of the Attorney General, retail liquor stores can be owned by folks that are not Tennessee residents. The Tennessee ABC is not legally bound to follow the Attorney General ruling, but we expect it to do so.
The inaugural Taste of Tennessee festival featured distillers’ finest, served neat for whiskey aficionados. The September 6, 2014 event was hosted by the Tennessee State Fair and benefitted the Tennessee Distillers Guild.
We grabbed shots of the participating distillers and event sponsors. Enjoy.
The 2014 Tennessee legislative session profoundly impacted the alcoholic beverage industry. Although the Wine in Grocery Stores (aka WIGS) debate was prominently featured, there were a number of big changes that passed quietly.
Buried in Section 8 of PC 1001, a law passed to resolve the controversy over infusions, is a new law that specifies that any product containing distilled alcohol that is capable of being consumed by a human being is an alcoholic beverage.
Previously, it was unclear whether products like Liquor Filled Chocolate Covered Cherries were regulated as liquor. Mainstream retailers sell a wide variety of treats that contain alcohol. Unlike alcohol used in sauces and other cooking recipes, a small amount of alcohol is in the finished product.
Finer restaurants often feature desserts with liquor, where alcohol is not cooked out.
The new law appears to make it clear that at restaurants and bars, food products containing alcohol are alcoholic beverages. Since most restaurants have liquor licenses, the change is not a problem, for licensing purposes.
The real issue is taxes. Liquor-by-the-drink has an additional 15% tax. If desserts with alcohol are alcoholic beverages, restaurants have to collect the 15% tax, in addition to the 9.25% sales tax.
We suspect that no one rings up desserts with small amounts of alcohol as an alcoholic beverage and pays the 15% tax.
Little Jimmy Dickens sings:I got a hole in my pocket and my money just runs on through. Can’t seem to save a dollar like my baby dolly wants me to.
We strongly encourage restaurants that serve desserts or other dishes with alcohol to enforce 21 carding for purchases, just like you do for drinks.
Although we read the law as only applying to restaurants and bars, we have heard that the ABC is investigating manufacturers of products that contain alcohol. For example, there are a number of bakeries that produce variations of the Tennessee Whiskey Tipsy Cake featuring Jack Daniels.
As we read it, the new law only applies to restaurants, bars and other LBD establishments. The ABC appears to be enforcing the new law against food manufacturers that do not hold ABC licenses.
Stay tuned as we sail through unchartered territory.
Tens of thousands of Tennessee oenophiles are wondering why wine is not in their grocery stores. We hear the question all the time: Wassup? Tennessee legalized the sale of wine in stores like Publix, Kroger and Trader Joes. When will my favorite varietal be on store shelves?
We have blogged about the hurdles for wine in groceries before.
Good news for most fans of WIGS (our pet name for wine in grocery stores). The petition drives to place WIGS on the ballot for local option election were successful in 80 Tennessee cities, including Chattanooga, Knoxville, Memphis and Nashville.
To qualify for the ballot, each municipality or county had to receive a petition with a number of valid signatures equaling at least 10 percent of the voting population in the 2010 gubernatorial election. Petitions were due on August 21.
14 cities, including Columbia, Dickson, La Vergne, Portland and Springfield failed to collect enough qualifying signatures. Petition drives in unincorporated parts of Hamilton and Shelby counties also came up short.
The next step for WIGS are local option elections on the November 4 general election ballot. Early voting runs October 15-30.
After all the dust settles from voter referenda, the waiting begins again for oenophiles. The soonest that Yellowtail will grace the shelves at Kroger is July 1, 2016, unless the Legislature changes the effective date for WIGS.
Groceries in cities or counties that fail to approve WIGS will be at a distinct disadvantage to neighboring stores in cities that vote in favor of WIGS. For example, wine-drinking shoppers near Columbia may drive to competing stores in Spring Hill to buy groceries and wine. Groceries located outside of cities in Shelby and Hamilton counties will undoubtedly suffer from not having wine on shelves.
Metro Nashville includes Davidson County, which means WIGS is up for election for the entire county.
Brings to mind the classic Loretta Lynn tune Wine, Women and Song:Well I’m at home a workin’ and a slavin’ this way
You’re out a misbehavin’ spendin’ all of your pay on wine women and song
The following 80 cities and counties will hold wine-in-grocery-stores referendums on Nov. 4:Alcoa Arlington Ashland City Athens Atoka Bartlett Brentwood Bristol Burns Chattanooga Church Hill Clarksville Cleveland Clinton Collegedale Collierville Cookeville Coopertown Covington Crossville Unincorporated Cumberland County Dunlap Dyersburg East Ridge Elizabethton Etowah Fairview Farragut Franklin Gallatin Gatlinburg Germantown Goodlettsville Greeneville Harriman Hendersonville Jackson Johnson City Jonesborough Kingsport Kingston Unincorporated Knox County Knoxville Lakeland Lakesite Lebanon Lenoir City Loudon Manchester Martin Maryville McKenzie Memphis Millington Monteagle Morristown Mt. Juliet Mt. Pleasant Munford Murfreesboro Nashville Newport Norris Oak Ridge Oakland Paris Pigeon Forge Pleasant View Red Bank Rogersville Savannah Sevierville Shelbyville Signal Mountain Smyrna Spring Hill Thompson’s Station Tullahoma Union City White House
Pro wine in grocery advocate Red, White and Food posts updated information here.