INITIATIVE 1183

To the People

Chapter 2, Laws of 2012

LIQUOR SALES--PRIVATIZATION

EFFECTIVE DATE: 12/08/11

Approved by the

People of the State of Washington

in the General Election on

November 8, 2011

ORIGINALLY FILED

May 26, 2011

Secretary of State

 1AN ACT Relating to liquor; amending RCW 66.24.360, 82.08.150,

 266.08.050, 66.08.060, 66.20.010, 66.20.160, 66.24.310, 66.24.380,

 366.28.030, 66.24.540, 66.24.590, 66.28.060, 66.28.070, 66.28.170,

 466.28.180, 66.28.190, 66.28.280, 66.04.010, 43.19.19054, 66.08.020,

 566.08.026, 66.08.030, 66.24.145, 66.24.160, 66.32.010, 66.44.120,

 666.44.150, 66.44.340, 19.126.010, and 19.126.040; reenacting and

 7amending RCW 66.28.040 and 19.126.020; adding new sections to chapter

 866.24 RCW; adding new sections to chapter 66.28 RCW; creating new

 9sections; repealing RCW 66.08.070, 66.08.075, 66.08.160, 66.08.165,

1066.08.166, 66.08.167, 66.08.220, 66.08.235, 66.16.010, 66.16.040,

1166.16.041, 66.16.050, 66.16.060, 66.16.070, 66.16.100, 66.16.110,

1266.16.120, and 66.28.045; contingently repealing ESSB 5942, 2011 1st

13sp.s. c ... ss 1 through 10; and providing an effective date.

14BE IT ENACTED BY THE PEOPLE OF THE STATE OF WASHINGTON:

15PART I

16LICENSED SALE OF SPIRITS

17NEW SECTION. Sec. 101. (1) The people of the state of Washington,

18in enacting this initiative measure, find that the state government

 1monopoly on liquor distribution and liquor stores in Washington and the

 2state government regulations that arbitrarily restrict the wholesale

 3distribution and pricing of wine are outdated, inefficient, and costly

 4to local taxpayers, consumers, distributors, and retailers. Therefore,

 5the people wish to privatize and modernize both wholesale distribution

 6and retail sales of liquor and remove outdated restrictions on the

 7wholesale distribution of wine by enacting this initiative.

 8(2) This initiative will:

 9(a) Privatize and modernize wholesale distribution and retail sales

10of liquor in Washington state in a manner that will reduce state

11government costs and provide increased funding for state and local

12government services, while continuing to strictly regulate the

13distribution and sale of liquor;

14(b) Get the state government out of the commercial business of

15distributing, selling, and promoting the sale of liquor, allowing the

16state to focus on the more appropriate government role of enforcing

17liquor laws and protecting public health and safety concerning all

18alcoholic beverages;

19(c) Authorize the state to auction off its existing state liquor

20distribution and state liquor store facilities and equipment;

21(d) Allow a private distributor of alcohol to get a license to

22distribute liquor if that distributor meets the requirements set by the

23Washington state liquor control board and is approved for a license by

24the board and create provisions to promote investments by private

25distributors;

26(e) Require private distributors who get licenses to distribute

27liquor to pay ten percent of their gross spirits revenues to the state

28during the first two years and five percent of their gross spirits

29revenues to the state after the first two years;

30(f) Allow for a limited number of retail stores to sell liquor if

31they meet public safety requirements set by this initiative and the

32liquor control board;

33(g) Require that a retail store must have ten thousand square feet

34or more of fully enclosed retail space within a single structure in

35order to get a license to sell liquor, with limited exceptions;

36(h) Require a retail store to demonstrate to state regulators that

37it can effectively prevent sales of alcohol to minors in order to get

38a license to sell liquor;

 1(i) Ensure that local communities have input before a liquor

 2license can be issued to a local retailer or distributor and maintain

 3all local zoning requirements and authority related to the location of

 4liquor stores;

 5(j) Require private retailers who get licenses to sell liquor to

 6pay seventeen percent of their gross spirits revenues to the state;

 7(k) Maintain the current distribution of liquor revenues to local

 8governments and dedicate a portion of the new revenues raised from

 9liquor license fees to increase funding for local public safety

10programs, including police, fire, and emergency services in communities

11throughout the state;

12(l) Make the standard fines and license suspension penalties for

13selling liquor to minors twice as strong as the existing fines and

14penalties for selling beer or wine to minors;

15(m) Make requirements for training and supervision of employees

16selling spirits at retail more stringent than what is now required for

17sales of beer and wine;

18(n) Update the current law on wine distribution to allow wine

19distributors and wineries to give volume discounts on the wholesale

20price of wine to retail stores and restaurants; and

21(o) Allow retailers and restaurants to distribute wine to their own

22stores from a central warehouse.

23NEW SECTION. Sec. 102. A new section is added to chapter 66.24

24RCW to read as follows:

25(1) The holder of a spirits distributor license or spirits retail

26license issued under this title may commence sale of spirits upon

27issuance thereof, but in no event earlier than March 1, 2012, for

28distributors, or June 1, 2012, for retailers. The board must complete

29application processing by those dates of all complete applications for

30spirits licenses on file with the board on or before sixty days from

31the effective date of this section.

32(2) The board must effect orderly closure of all state liquor

33stores no later than June 1, 2012, and must thereafter refrain from

34purchase, sale, or distribution of liquor, except for asset sales

35authorized by this act.

36(3) The board must devote sufficient resources to planning and

37preparation for sale of all assets of state liquor stores and

 1distribution centers, and all other assets of the state over which the

 2board has power of disposition, including without limitation goodwill

 3and location value associated with state liquor stores, with the

 4objective of depleting all inventory of liquor by May 31, 2012, and

 5closing all other asset sales no later than June 1, 2013. The board,

 6in furtherance of this subsection, may sell liquor to spirits

 7licensees.

 8(4)(a) Disposition of any state liquor store or distribution center

 9assets remaining after June 1, 2013, must be managed by the department

10of revenue.

11(b) The board must obtain the maximum reasonable value for all

12asset sales made under this section.

13(c) The board must sell by auction open to the public the right at

14each state-owned store location of a spirits retail licensee to operate

15a liquor store upon the premises. Such right must be freely alienable

16and subject to all state and local zoning and land use requirements

17applicable to the property. Acquisition of the operating rights must

18be a precondition to, but does not establish eligibility for, a spirits

19retail license at the location of a state store and does not confer any

20privilege conferred by a spirits retail license. Holding the rights

21does not require the holder of the right to operate a liquor-licensed

22business or apply for a liquor license.

23(5) All sales proceeds under this section, net of direct sales

24expenses and other transition costs authorized by this section, must be

25deposited into the liquor revolving fund.

26(6)(a) The board must complete the orderly transition from the

27current state-controlled system to the private licensee system of

28spirits retailing and distribution as required under this chapter by

29June 1, 2012.

30(b) The transition must include, without limitation, a provision

31for applying operating and asset sale revenues of the board to just and

32reasonable measures to avert harm to interests of tribes, military

33buyers, and nonemployee liquor store operators under then existing

34contracts for supply by the board of distilled spirits, taking into

35account present value of issuance of a spirits retail license to the

36holder of such interest. The provision may extend beyond the time for

37completion of transition to a spirits licensee system.

 1(c) Purchases by the federal government from any licensee of the

 2board of spirits for resale through commissaries at military

 3installations are exempt from sales tax based on selling price levied

 4by RCW 82.08.150.

 5NEW SECTION. Sec. 103. A new section is added to chapter 66.24

 6RCW to read as follows:

 7(1) There is a spirits retail license to: Sell spirits in original

 8containers to consumers for consumption off the licensed premises and

 9to permit holders; sell spirits in original containers to retailers

10licensed to sell spirits for consumption on the premises, for resale at

11their licensed premises according to the terms of their licenses,

12although no single sale may exceed twenty-four liters, unless the sale

13is by a licensee that was a contract liquor store manager of a contract

14liquor store at the location of its spirits retail licensed premises

15from which it makes such sales; and export spirits.

16(2) For the purposes of this title, a spirits retail license is a

17retail license, and a sale by a spirits retailer is a retail sale only

18if not for resale. Nothing in this title authorizes sales by on-sale

19licensees to other retail licensees. The board must establish by rule

20an obligation of on-sale spirits retailers to:

21(a) Maintain a schedule by stock-keeping unit of all their

22purchases of spirits from spirits retail licensees, indicating the

23identity of the seller and the quantities purchased; and

24(b) Provide, not more frequently than quarterly, a report for each

25scheduled item containing the identity of the purchasing on-premise

26licensee and the quantities of that scheduled item purchased since any

27preceding report to:

28(i) A distributor authorized by the distiller to distribute a

29scheduled item in the on-sale licensee's geographic area; or

30(ii) A distiller acting as distributor of the scheduled item in the

31area.

32(3)(a) Except as otherwise provided in subsection (c) of this

33section, the board may issue spirits retail licenses only for premises

34comprising at least ten thousand square feet of fully enclosed retail

35space within a single structure, including storerooms and other

36interior auxiliary areas but excluding covered or fenced exterior

37areas, whether or not attached to the structure, and only to applicants

 1that the board determines will maintain systems for inventory

 2management, employee training, employee supervision, and physical

 3security of the product substantially as effective as those of stores

 4currently operated by the board with respect to preventing sales to or

 5pilferage by underage or inebriated persons.

 6(b) License issuances and renewals are subject to RCW 66.24.010 and

 7the regulations promulgated thereunder, including without limitation

 8rights of cities, towns, county legislative authorities, the public,

 9churches, schools, and public institutions to object to or prevent

10issuance of local liquor licenses. However, existing grocery premises

11licensed to sell beer and/or wine are deemed to be premises "now

12licensed" under RCW 66.24.010(9)(a) for the purpose of processing

13applications for spirits retail licenses.

14(c) The board may not deny a spirits retail license to an otherwise

15qualified contract liquor store at its contract location or to the

16holder of former state liquor store operating rights sold at auction

17under section 102 of this act on the grounds of location, nature, or

18size of the premises to be licensed. The board shall not deny a

19spirits retail license to applicants that are not contract liquor

20stores or operating rights holders on the grounds of the size of the

21premises to be licensed, if such applicant is otherwise qualified and

22the board determines that:

23(i) There is no retail spirits license holder in the trade area

24that the applicant proposes to serve;

25(ii) The applicant meets, or upon licensure will meet, the

26operational requirements established by the board by rule; and

27(iii) The licensee has not committed more than one public safety

28violation within the three years preceding application.

29(d) A retailer authorized to sell spirits for consumption on or off

30the licensed premises may accept delivery of spirits at its licensed

31premises or at one or more warehouse facilities registered with the

32board, which facilities may also warehouse and distribute nonliquor

33items, and from which the retailer may deliver to its own licensed

34premises and, pursuant to sales permitted under subsection (1) of this

35section:

36(i) To other retailer premises licensed to sell spirits for

37consumption on the licensed premises;

38(ii) To other registered facilities; or

 1(iii) To lawful purchasers outside the state. The facilities may

 2be registered and utilized by associations, cooperatives, or comparable

 3groups of retailers, including at least one retailer licensed to sell

 4spirits.

 5(4) Each spirits retail licensee must pay to the board, for deposit

 6into the liquor revolving fund, a license issuance fee equivalent to

 7seventeen percent of all spirits sales revenues under the license,

 8exclusive of taxes collected by the licensee and of sales of items on

 9which a license fee payable under this section has otherwise been

10incurred. The board must establish rules setting forth the timing of

11such payments and reporting of sales dollar volume by the licensee,

12with payments required quarterly in arrears. The first payment is due

13October 1, 2012.

14(5) In addition to the payment required under subsection (4) of

15this section, each licensee must pay an annual license renewal fee of

16one hundred sixty-six dollars. The board must periodically review and

17adjust the renewal fee as may be required to maintain it as comparable

18to annual license renewal fees for licenses to sell beer and wine not

19for consumption on the licensed premises. If required by law at the

20time, any increase of the annual renewal fee becomes effective only

21upon ratification by the legislature.

22(6) As a condition to receiving and renewing a retail spirits

23license the licensee must provide training as prescribed by the board

24by rule for individuals who sell spirits or who manage others who sell

25spirits regarding compliance with laws and regulations regarding sale

26of spirits, including without limitation the prohibitions against sale

27of spirits to individuals who are underage or visibly intoxicated. The

28training must be provided before the individual first engages in the

29sale of spirits and must be renewed at least every five years. The

30licensee must maintain records documenting the nature and frequency of

31the training provided. An employee training program is presumptively

32sufficient if it incorporates a "responsible vendor program"

33promulgated by the board.

34(7) The maximum penalties prescribed by the board in WAC 314-29-020

35through 314-29-040 relating to fines and suspensions are doubled for

36violations relating to the sale of spirits by retail spirits licensees.

37(8)(a) The board must promulgate regulations concerning the

38adoption and administration of a compliance training program for

 1spirits retail licensees, to be known as a "responsible vendor

 2program," to reduce underage drinking, encourage licensees to adopt

 3specific best practices to prevent sales to minors, and provide

 4licensees with an incentive to give their employees on-going training

 5in responsible alcohol sales and service.

 6(b) Licensees who join the responsible vendor program under this

 7section and maintain all of the program's requirements are not subject

 8to the doubling of penalties provided in this section for a single

 9violation in any period of twelve calendar months.

10(c) The responsible vendor program must be free, voluntary, and

11self-monitoring.

12(d) To participate in the responsible vendor program, licensees

13must submit an application form to the board. If the application

14establishes that the licensee meets the qualifications to join the

15program, the board must send the licensee a membership certificate.

16(e) A licensee participating in the responsible vendor program must

17at a minimum:

18(i) Provide on-going training to employees;

19(ii) Accept only certain forms of identification for alcohol sales;

20(iii) Adopt policies on alcohol sales and checking identification;

21(iv) Post specific signs in the business; and

22(v) Keep records verifying compliance with the program's

23requirements.

24Sec. 104. RCW 66.24.360 and 2011 c 119 s 203 are each amended to

25read as follows:

26(1) There ((shall be)) is a ((beer and/or wine retailer's license

27to be designated as a)) grocery store license to sell wine and/or beer,

28including without limitation strong beer((, and/or wine)) at retail in

29((bottles, cans, and)) original containers, not to be consumed upon the

30premises where sold((, at any store other than the state liquor

31stores)).

32(((1))) (2) There is a wine retailer reseller endorsement of a

33grocery store license, to sell wine at retail in original containers to

34retailers licensed to sell wine for consumption on the premises, for

35resale at their licensed premises according to the terms of the

36license. However, no single sale may exceed twenty-four liters, unless

37the sale is made by a licensee that was a contract liquor store manager

 1of a contract-operated liquor store at the location from which such

 2sales are made. For the purposes of this title, a grocery store

 3license is a retail license, and a sale by a grocery store licensee

 4with a reseller endorsement is a retail sale only if not for resale.

 5(3) Licensees obtaining a written endorsement from the board may

 6also sell malt liquor in kegs or other containers capable of holding

 7less than five and one-half gallons of liquid.

 8(((2))) (4) The annual fee for the grocery store license is one

 9hundred fifty dollars for each store.

10(((3))) (5) The annual fee for the wine retailer reseller

11endorsement is one hundred sixty-six dollars for each store.

12(6) The board ((shall)) must issue a restricted grocery store

13license authorizing the licensee to sell beer and only table wine, if

14the board finds upon issuance or renewal of the license that the sale

15of strong beer or fortified wine would be against the public interest.

16In determining the public interest, the board ((shall)) must consider

17at least the following factors:

18(a) The likelihood that the applicant will sell strong beer or

19fortified wine to persons who are intoxicated;

20(b) Law enforcement problems in the vicinity of the applicant's

21establishment that may arise from persons purchasing strong beer or

22fortified wine at the establishment; and

23(c) Whether the sale of strong beer or fortified wine would be

24detrimental to or inconsistent with a government-operated or funded

25alcohol treatment or detoxification program in the area.

26If the board receives no evidence or objection that the sale of

27strong beer or fortified wine would be against the public interest, it

28((shall)) must issue or renew the license without restriction, as

29applicable. The burden of establishing that the sale of strong beer or

30fortified wine by the licensee would be against the public interest is

31on those persons objecting.

32(((4))) (7) Licensees holding a grocery store license must maintain

33a minimum three thousand dollar inventory of food products for human

34consumption, not including pop, beer, strong beer, or wine.

35(((5))) (8) A grocery store licensee with a wine retailer reseller

36endorsement may accept delivery of wine at its licensed premises or at

37one or more warehouse facilities registered with the board, which

38facilities may also warehouse and distribute nonliquor items, and from

 1which it may deliver to its own licensed premises and, pursuant to

 2sales permitted by this title, to other licensed premises, to other

 3registered facilities, or to lawful purchasers outside the state.

 4Facilities may be registered and utilized by associations,

 5cooperatives, or comparable groups of grocery store licensees.

 6(9) Upon approval by the board, the grocery store licensee may also

 7receive an endorsement to permit the international export of beer,

 8strong beer, and wine.

 9(a) Any beer, strong beer, or wine sold under this endorsement must

10have been purchased from a licensed beer or wine distributor licensed

11to do business within the state of Washington.

12(b) Any beer, strong beer, and wine sold under this endorsement

13must be intended for consumption outside the state of Washington and

14the United States and appropriate records must be maintained by the

15licensee.

16(c) Any beer, strong beer, or wine sold under this ((license))

17endorsement must be sold at a price no less than the acquisition price

18paid by the holder of the license.

19(d) The annual cost of this endorsement is five hundred dollars and

20is in addition to the license fees paid by the licensee for a grocery

21store license.

22(((6))) (10) A grocery store licensee holding a snack bar license

23under RCW 66.24.350 may receive an endorsement to allow the sale of

24confections containing more than one percent but not more than ten

25percent alcohol by weight to persons twenty-one years of age or older.

26NEW SECTION. Sec. 105. A new section is added to chapter 66.24

27RCW to read as follows:

28(1) There is a license for spirits distributors to (a) sell spirits

29purchased from manufacturers, distillers, or suppliers including,

30without limitation, licensed Washington distilleries, licensed spirits

31importers, other Washington spirits distributors, or suppliers of

32foreign spirits located outside of the United States, to spirits

33retailers including, without limitation, spirits retail licensees,

34special occasion license holders, interstate common carrier license

35holders, restaurant spirits retailer license holders, spirits, beer,

36and wine private club license holders, hotel license holders, sports

 1entertainment facility license holders, and spirits, beer, and wine

 2nightclub license holders, and to other spirits distributors; and (b)

 3export the same from the state.

 4(2) By January 1, 2012, the board must issue spirits distributor

 5licenses to all applicants who, upon the effective date of this

 6section, have the right to purchase spirits from a spirits

 7manufacturer, spirits distiller, or other spirits supplier for resale

 8in the state, or are agents of such supplier authorized to sell to

 9licensees in the state, unless the board determines that issuance of a

10license to such applicant is not in the public interest.

11(3)(a) As limited by (b) of this subsection and subject to (c) of

12this subsection, each spirits distributor licensee must pay to the

13board for deposit into the liquor revolving fund, a license issuance

14fee calculated as follows:

15(i) In each of the first two years of licensure, ten percent of the

16total revenue from all the licensee's sales of spirits made during the

17year for which the fee is due, respectively; and

18(ii) In the third year of licensure and each year thereafter, five

19percent of the total revenue from all the licensee's sales of spirits

20made during the year for which the fee is due, respectively.

21(b) The fee required under this subsection (3) is calculated only

22on sales of items which the licensee was the first spirits distributor

23in the state to have received:

24(i) In the case of spirits manufactured in the state, from the

25distiller; or

26(ii) In the case of spirits manufactured outside the state, from an

27authorized out-of-state supplier.

28(c) By March 31, 2013, all persons holding spirits distributor

29licenses on or before March 31, 2013, must have paid collectively one

30hundred fifty million dollars or more in spirits distributor license

31fees. If the collective payment through March 31, 2013, totals less

32than one hundred fifty million dollars, the board must, according to

33rules adopted by the board for the purpose, collect by May 31, 2013, as

34additional spirits distributor license fees the difference between one

35hundred fifty million dollars and the actual receipts, allocated among

36persons holding spirits distributor licenses at any time on or before

37March 31, 2013, ratably according to their spirits sales made during

38calendar year 2012. Any amount by which such payments exceed one

 1hundred fifty million dollars by March 31, 2013, must be credited to

 2future license issuance fee obligations of spirits distributor

 3licensees according to rules adopted by the board.

 4(d) A retail licensee selling for resale must pay a distributor

 5license fee under the terms and conditions in this section on resales

 6of spirits the licensee has purchased on which no other distributor

 7license fee has been paid. The board must establish rules setting

 8forth the frequency and timing of such payments and reporting of sales

 9dollar volume by the licensee, with payments due quarterly in arrears.

10(e) No spirits inventory may be subject to calculation of more than

11a single spirits distributor license issuance fee.

12(4) In addition to the payment set forth in subsection (3) of this

13section, each spirits distributor licensee renewing its annual license

14must pay an annual license renewal fee of one thousand three hundred

15twenty dollars for each licensed location.

16(5) There is no minimum facility size or capacity for spirits

17distributor licenses, and no limit on the number of such licenses

18issued to qualified applicants. License applicants must provide

19physical security of the product that is substantially as effective as

20the physical security of the distribution facilities currently operated

21by the board with respect to preventing pilferage. License issuances

22and renewals are subject to RCW 66.24.010 and the regulations

23promulgated thereunder, including without limitation rights of cities,

24towns, county legislative authorities, the public, churches, schools,

25and public institutions to object to or prevent issuance of local

26liquor licenses. However, existing distributor premises licensed to

27sell beer and/or wine are deemed to be premises "now licensed" under

28RCW 66.24.010(9)(a) for the purpose of processing applications for

29spirits distributor licenses.

30Sec. 106. RCW 82.08.150 and 2009 c 479 s 65 are each amended to

31read as follows:

32(1) There is levied and ((shall be)) collected a tax upon each

33retail sale of spirits in the original package at the rate of fifteen

34percent of the selling price((. The tax imposed in this subsection

35shall apply to all such sales including sales by the Washington state

36liquor stores and agencies, but excluding sales to spirits, beer, and

37wine restaurant licensees)).

 1(2) There is levied and ((shall be)) collected a tax upon each sale

 2of spirits in the original package at the rate of ten percent of the

 3selling price on sales by ((Washington state liquor stores and agencies

 4to spirits, beer, and wine restaurant licensees)) a spirits distributor

 5licensee or other licensee acting as a spirits distributor pursuant to

 6Title 66 RCW to restaurant spirits retailers.

 7(3) There is levied and ((shall be)) collected an additional tax

 8upon each ((retail)) sale of spirits in the original package by a

 9spirits distributor licensee or other licensee acting as a spirits

10distributor pursuant to Title 66 RCW to a restaurant spirits retailer

11and upon each retail sale of spirits in the original package by a

12licensee of the board at the rate of one dollar and seventy-two cents

13per liter. ((The additional tax imposed in this subsection shall apply

14to all such sales including sales by Washington state liquor stores and

15agencies, and including sales to spirits, beer, and wine restaurant

16licensees.))

17(4) An additional tax is imposed equal to fourteen percent

18multiplied by the taxes payable under subsections (1), (2), and (3) of

19this section.

20(5) An additional tax is imposed upon each ((retail)) sale of

21spirits in the original package by a spirits distributor licensee or

22other licensee acting as a spirits distributor pursuant to Title 66 RCW

23to a restaurant spirits retailer and upon each retail sale of spirits

24in the original package by a licensee of the board at the rate of seven

25cents per liter. ((The additional tax imposed in this subsection shall

26apply to all such sales including sales by Washington state liquor

27stores and agencies, and including sales to spirits, beer, and wine

28restaurant licensees.)) All revenues collected during any month from

29this additional tax ((shall)) must be deposited in the state general

30fund by the twenty-fifth day of the following month.

31(6)(a) An additional tax is imposed upon retail sale of spirits in

32the original package at the rate of ((one and seven-tenths percent of

33the selling price through June 30, 1995, two and six-tenths percent of

34the selling price for the period July 1, 1995, through June 30, 1997,

35and)) three and four-tenths percent of the selling price ((thereafter.

36This additional tax applies to all such sales including sales by

37Washington state liquor stores and agencies, but excluding sales to

38spirits, beer, and wine restaurant licensees)).

 1(b) An additional tax is imposed upon retail sale of spirits in the

 2original package to a restaurant spirits retailer at the rate of ((one

 3and one-tenth percent of the selling price through June 30, 1995, one

 4and seven-tenths percent of the selling price for the period July 1,

 51995, through June 30, 1997, and)) two and three-tenths percent of the

 6selling price ((thereafter. This additional tax applies to all such

 7sales to spirits, beer, and wine restaurant licensees)).

 8(c) An additional tax is imposed upon each ((retail)) sale of

 9spirits in the original package by a spirits distributor licensee or

10other licensee acting as a spirits distributor pursuant to Title 66 RCW

11to a restaurant spirits retailer and upon each retail sale of spirits

12in the original package by a licensee of the board at the rate of

13((twenty cents per liter through June 30, 1995, thirty cents per liter

14for the period July 1, 1995, through June 30, 1997, and)) forty-one

15cents per liter ((thereafter. This additional tax applies to all such

16sales including sales by Washington state liquor stores and agencies,

17and including sales to spirits, beer, and wine restaurant licensees)).

18(d) All revenues collected during any month from additional taxes

19under this subsection ((shall)) must be deposited in the state general

20fund by the twenty-fifth day of the following month.

21(7)(a) An additional tax is imposed upon each retail sale of

22spirits in the original package at the rate of one dollar and thirty-

23three cents per liter. ((This additional tax applies to all such sales

24including sales by Washington state liquor stores and agencies, but

25excluding sales to spirits, beer, and wine restaurant licensees.))

26(b) All revenues collected during any month from additional taxes

27under this subsection ((shall)) must be deposited by the twenty-fifth

28day of the following month into the general fund.

29(8) The tax imposed in RCW 82.08.020 ((shall)) does not apply to

30sales of spirits in the original package.

31(9) The taxes imposed in this section ((shall)) must be paid by the

32buyer to the seller, and each seller ((shall)) must collect from the

33buyer the full amount of the tax payable in respect to each taxable

34sale under this section. The taxes required by this section to be

35collected by the seller ((shall)) must be stated separately from the

36selling price, and for purposes of determining the tax due from the

37buyer to the seller, it ((shall be)) is conclusively presumed that the

38selling price quoted in any price list does not include the taxes

 1imposed by this section. Sellers must report and return all taxes

 2imposed in this section in accordance with rules adopted by the

 3department.

 4(10) As used in this section, the terms, "spirits" and "package"

 5((shall)) have the same meaning ((ascribed to them)) as provided in

 6chapter 66.04 RCW.

 7Sec. 107. RCW 66.08.050 and 2011 c 186 s 2 are each amended to

 8read as follows:

 9The board, subject to the provisions of this title and the rules,

10((shall)) must:

11(1) ((Determine the localities within which state liquor stores

12shall be established throughout the state, and the number and situation

13of the stores within each locality;

14(2) Appoint in cities and towns and other communities, in which no

15state liquor store is located, contract liquor stores. In addition,

16the board may appoint, in its discretion, a manufacturer that also

17manufactures liquor products other than wine under a license under this

18title, as a contract liquor store for the purpose of sale of liquor

19products of its own manufacture on the licensed premises only. Such

20contract liquor stores shall be authorized to sell liquor under the

21guidelines provided by law, rule, or contract, and such contract liquor

22stores shall be subject to such additional rules and regulations

23consistent with this title as the board may require. Sampling on

24contract store premises is permitted under this act;

25(3) Establish all necessary warehouses for the storing and

26bottling, diluting and rectifying of stocks of liquors for the purposes

27of this title;

28(4) Provide for the leasing for periods not to exceed ten years of

29all premises required for the conduct of the business; and for

30remodeling the same, and the procuring of their furnishings, fixtures,

31and supplies; and for obtaining options of renewal of such leases by

32the lessee. The terms of such leases in all other respects shall be

33subject to the direction of the board;

34(5))) Determine the nature, form and capacity of all packages to be

35used for containing liquor kept for sale under this title;

36(((6))) (2) Execute or cause to be executed, all contracts, papers,

 1and documents in the name of the board, under such regulations as the

 2board may fix;

 3(((7))) (3) Pay all customs, duties, excises, charges and

 4obligations whatsoever relating to the business of the board;

 5(((8))) (4) Require bonds from all employees in the discretion of

 6the board, and to determine the amount of fidelity bond of each such

 7employee;

 8(((9))) (5) Perform services for the state lottery commission to

 9such extent, and for such compensation, as may be mutually agreed upon

10between the board and the commission;

11(((10))) (6) Accept and deposit into the general fund-local account

12and disburse, subject to appropriation, federal grants or other funds

13or donations from any source for the purpose of improving public

14awareness of the health risks associated with alcohol consumption by

15youth and the abuse of alcohol by adults in Washington state. The

16board's alcohol awareness program ((shall)) must cooperate with federal

17and state agencies, interested organizations, and individuals to effect

18an active public beverage alcohol awareness program;

19(((11))) (7) Perform all other matters and things, whether similar

20to the foregoing or not, to carry out the provisions of this title, and

21((shall have)) has full power to do each and every act necessary to the

22conduct of its ((business, including all buying, selling, preparation

23and approval of forms, and every other function of the business

24whatsoever, subject only to audit by the state auditor: PROVIDED, That

25the board shall have)) regulatory functions, including all supplies

26procurement, preparation and approval of forms, and every other

27undertaking necessary to perform its regulatory functions whatsoever,

28subject only to audit by the state auditor. However, the board has no

29authority to regulate the content of spoken language on licensed

30premises where wine and other liquors are served and where there is not

31a clear and present danger of disorderly conduct being provoked by such

32language or to restrict advertising of lawful prices.

33Sec. 108. RCW 66.08.060 and 2005 c 231 s 3 are each amended to

34read as follows:

35(((1) The board shall not advertise liquor in any form or through

36any medium whatsoever.

 1(2) In-store liquor merchandising is not advertising for the

 2purposes of this section.

 3(3))) The board ((shall have)) has power to adopt any and all

 4reasonable rules as to the kind, character, and location of advertising

 5of liquor.

 6Sec. 109. RCW 66.20.010 and 2011 c 119 s 213 are each amended to

 7read as follows:

 8Upon application in the prescribed form being made to any employee

 9authorized by the board to issue permits, accompanied by payment of the

10prescribed fee, and upon the employee being satisfied that the

11applicant should be granted a permit under this title, the employee

12((shall)) must issue to the applicant under such regulations and at

13such fee as may be prescribed by the board a permit of the class

14applied for, as follows:

15(1) Where the application is for a special permit by a physician or

16dentist, or by any person in charge of an institution regularly

17conducted as a hospital or sanitorium for the care of persons in ill

18health, or as a home devoted exclusively to the care of aged people, a

19special liquor purchase permit, except that the governor may waive the

20requirement for a special liquor purchase permit under this subsection

21pursuant to an order issued under RCW 43.06.220(2);

22(2) Where the application is for a special permit by a person

23engaged within the state in mechanical or manufacturing business or in

24scientific pursuits requiring alcohol for use therein, or by any

25private individual, a special permit to purchase alcohol for the

26purpose named in the permit, except that the governor may waive the

27requirement for a special liquor purchase permit under this subsection

28pursuant to an order issued under RCW 43.06.220(2);

29(3) Where the application is for a special permit to consume liquor

30at a banquet, at a specified date and place, a special permit to

31purchase liquor for consumption at such banquet, to such applicants as

32may be fixed by the board;

33(4) Where the application is for a special permit to consume liquor

34on the premises of a business not licensed under this title, a special

35permit to purchase liquor for consumption thereon for such periods of

36time and to such applicants as may be fixed by the board;

 1(5) Where the application is for a special permit by a manufacturer

 2to import or purchase within the state alcohol, malt, and other

 3materials containing alcohol to be used in the manufacture of liquor,

 4or other products, a special permit;

 5(6) Where the application is for a special permit by a person

 6operating a drug store to purchase liquor at retail prices only, to be

 7thereafter sold by such person on the prescription of a physician, a

 8special liquor purchase permit, except that the governor may waive the

 9requirement for a special liquor purchase permit under this subsection

10pursuant to an order issued under RCW 43.06.220(2);

11(7) Where the application is for a special permit by an authorized

12representative of a military installation operated by or for any of the

13armed forces within the geographical boundaries of the state of

14Washington, a special permit to purchase liquor for use on such

15military installation ((at prices to be fixed by the board));

16(8) Where the application is for a special permit by a vendor that

17manufactures or sells a product which cannot be effectively presented

18to potential buyers without serving it with liquor or by a

19manufacturer, importer, or distributor, or representative thereof, to

20serve liquor without charge to delegates and guests at a convention of

21a trade association composed of licensees of the board, when the said

22liquor is served in a hospitality room or from a booth in a board-

23approved suppliers' display room at the convention, and when the liquor

24so served is for consumption in the said hospitality room or display

25room during the convention, anything in this title ((66 RCW)) to the

26contrary notwithstanding. Any such spirituous liquor ((shall)) must be

27purchased from ((the board or a spirits, beer, and wine restaurant

28licensee)) a spirits retailer or distributor, and any such ((beer and

29wine shall be)) liquor is subject to the taxes imposed by RCW 66.24.290

30and 66.24.210;

31(9) Where the application is for a special permit by a

32manufacturer, importer, or distributor, or representative thereof, to

33donate liquor for a reception, breakfast, luncheon, or dinner for

34delegates and guests at a convention of a trade association composed of

35licensees of the board, when the liquor so donated is for consumption

36at the said reception, breakfast, luncheon, or dinner during the

37convention, anything in this title ((66 RCW)) to the contrary

38notwithstanding. Any such spirituous liquor ((shall)) must be

 1purchased from ((the board or a spirits, beer, and wine restaurant

 2licensee)) a spirits retailer or distributor, and any such ((beer and

 3wine shall be)) liquor is subject to the taxes imposed by RCW 66.24.290

 4and 66.24.210;

 5(10) Where the application is for a special permit by a

 6manufacturer, importer, or distributor, or representative thereof, to

 7donate and/or serve liquor without charge to delegates and guests at an

 8international trade fair, show, or exposition held under the auspices

 9of a federal, state, or local governmental entity or organized and

10promoted by a nonprofit organization, anything in this title ((66 RCW))

11to the contrary notwithstanding. Any such spirituous liquor ((shall))

12must be purchased from ((the board)) a liquor spirits retailer or

13distributor, and any such ((beer or wine shall be)) liquor is subject

14to the taxes imposed by RCW 66.24.290 and 66.24.210;

15(11) Where the application is for an annual special permit by a

16person operating a bed and breakfast lodging facility to donate or

17serve wine or beer without charge to overnight guests of the facility

18if the wine or beer is for consumption on the premises of the facility.

19"Bed and breakfast lodging facility," as used in this subsection, means

20a facility offering from one to eight lodging units and breakfast to

21travelers and guests.

22Sec. 110. RCW 66.20.160 and 2005 c 151 s 8 are each amended to

23read as follows:

24((Words and phrases)) As used in RCW 66.20.160 ((to)) through

2566.20.210, inclusive, ((shall have the following meaning:

26"Card of identification" means any one of those cards described in

27RCW 66.16.040.))

28"licensee" means the holder of a retail liquor license issued by

29the board, and includes any employee or agent of the licensee.

30(("Store employee" means a person employed in a state liquor store

31to sell liquor.))

32Sec. 111. RCW 66.24.310 and 2011 c 119 s 301 are each amended to

33read as follows:

34(1)(a) Except as provided in (b) of this subsection, no person

35((shall)) may canvass for, solicit, receive, or take orders for the

36purchase or sale of liquor, nor contact any licensees of the board in

 1goodwill activities, unless ((such person shall be the accredited

 2representative of a person, firm, or corporation holding a certificate

 3of approval issued pursuant to RCW 66.24.270 or 66.24.206, a beer

 4distributor's license, a microbrewer's license, a domestic brewer's

 5license, a beer importer's license, a domestic winery license, a wine

 6importer's license, or a wine distributor's license within the state of

 7Washington, or the accredited representative of a distiller,

 8manufacturer, importer, or distributor of spirituous liquor, or foreign

 9produced beer or wine, and shall have)) the person is the

10representative of a licensee or certificate holder authorized by this

11title to sell liquor for resale in the state and has applied for and

12received a representative's license.

13(b) (a) of this subsection ((shall)) does not apply to: (i)

14Drivers who deliver spirits, beer, or wine; or (ii) domestic wineries

15or their employees.

16(2) Every representative's license issued under this title ((shall

17be)) is subject to all conditions and restrictions imposed by this

18title or by the rules and regulations of the board; the board, for the

19purpose of maintaining an orderly market, may limit the number of

20representative's licenses issued for representation of specific classes

21of eligible employers.

22(3) Every application for a representative's license must be

23approved by a holder of a certificate of approval ((issued pursuant to

24RCW 66.24.270 or 66.24.206)), a licensed beer distributor, a licensed

25domestic brewer, a licensed beer importer, a licensed microbrewer, a

26licensed domestic winery, a licensed wine importer, a licensed wine

27distributor, or by a distiller, manufacturer, importer, or distributor

28of ((spirituous liquor)) spirits, or of foreign-produced beer or wine,

29as required by the rules and regulations of the board ((shall

30require)).

31(4) The fee for a representative's license ((shall be)) is twenty-

32five dollars per year.

33(((5) An accredited representative of a distiller, manufacturer,

34importer, or distributor of spirituous liquor may, after he or she has

35applied for and received a representative's license, contact retail

36licensees of the board only in goodwill activities pertaining to

37spirituous liquor products.))

 1Sec. 112. RCW 66.24.380 and 2005 c 151 s 10 are each amended to

 2read as follows:

 3There ((shall be)) is a retailer's license to be designated as a

 4special occasion license to be issued to a not-for-profit society or

 5organization to sell spirits, beer, and wine by the individual serving

 6for on-premises consumption at a specified event, such as at picnics or

 7other special occasions, at a specified date and place; fee sixty

 8dollars per day.

 9(1) The not-for-profit society or organization is limited to sales

10of no more than twelve calendar days per year. For the purposes of

11this subsection, special occasion licensees that are "agricultural area

12fairs" or "agricultural county, district, and area fairs," as defined

13by RCW 15.76.120, that receive a special occasion license may, once per

14calendar year, count as one event fairs that last multiple days, so

15long as alcohol sales are at set dates, times, and locations, and the

16board receives prior notification of the dates, times, and locations.

17The special occasion license applicant will pay the sixty dollars per

18day for this event.

19(2) The licensee may sell spirits, beer, and/or wine in original,

20unopened containers for off-premises consumption if permission is

21obtained from the board prior to the event.

22(3) Sale, service, and consumption of spirits, beer, and wine is to

23be confined to specified premises or designated areas only.

24(4) ((Spirituous)) Liquor sold under this special occasion license

25must be purchased ((at a state liquor store or contract liquor store

26without discount at retail prices, including all taxes)) from a

27licensee of the board.

28(5) Any violation of this section is a class 1 civil infraction

29having a maximum penalty of two hundred fifty dollars as provided for

30in chapter 7.80 RCW.

31Sec. 113. RCW 66.28.030 and 2004 c 160 s 10 are each amended to

32read as follows:

33Every domestic distillery, brewery, and microbrewery, domestic

34winery, certificate of approval holder, licensed liquor importer,

35licensed wine importer, and licensed beer importer ((shall be)) is

36responsible for the conduct of any licensed spirits, beer, or wine

37distributor in selling, or contracting to sell, to retail licensees,

 1spirits, beer, or wine manufactured by such domestic distillery,

 2brewery, microbrewery, domestic winery, manufacturer holding a

 3certificate of approval, sold by an authorized representative holding

 4a certificate of approval, or imported by such liquor, beer, or wine

 5importer. Where the board finds that any licensed spirits, beer, or

 6wine distributor has violated any of the provisions of this title or of

 7the regulations of the board in selling or contracting to sell spirits,

 8beer, or wine to retail licensees, the board may, in addition to any

 9punishment inflicted or imposed upon such distributor, prohibit the

10sale of the brand or brands of spirits, beer, or wine involved in such

11violation to any or all retail licensees within the trade territory

12usually served by such distributor for such period of time as the board

13may fix, irrespective of whether the distiller manufacturing such

14spirits or the liquor importer importing such spirits, brewer

15manufacturing such beer or the beer importer importing such beer, or

16the domestic winery manufacturing such wine or the wine importer

17importing such wine or the certificate of approval holder manufacturing

18such spirits, beer, or wine or acting as authorized representative

19actually participated in such violation.

20Sec. 114. RCW 66.24.540 and 1999 c 129 s 1 are each amended to

21read as follows:

22(1) There ((shall be)) is a retailer's license to be designated as

23a motel license. The motel license may be issued to a motel regardless

24of whether it holds any other class of license under this title. No

25license may be issued to a motel offering rooms to its guests on an

26hourly basis. The license authorizes the licensee to:

27(((1))) (a) Sell, at retail, in locked honor bars, spirits in

28individual bottles not to exceed fifty milliliters, beer in individual

29cans or bottles not to exceed twelve ounces, and wine in individual

30bottles not to exceed one hundred eighty-seven milliliters, to

31registered guests of the motel for consumption in guest rooms.

32(((a))) (i) Each honor bar must also contain snack foods. No more

33than one-half of the guest rooms may have honor bars.

34(((b))) (ii) All spirits to be sold under the license must be

35purchased from a spirits retailer or a spirits distributor licensee of

36the board.

 1(((c))) (iii) The licensee ((shall)) must require proof of age from

 2the guest renting a guest room and requesting the use of an honor bar.

 3The guest ((shall)) must also execute an affidavit verifying that no

 4one under twenty-one years of age ((shall have)) has access to the

 5spirits, beer, and wine in the honor bar.

 6(((2))) (b) Provide without additional charge, to overnight guests

 7of the motel, spirits, beer, and wine by the individual serving for on-

 8premises consumption at a specified regular date, time, and place as

 9may be fixed by the board. Self-service by attendees is prohibited.

10All spirits, beer, and wine service must be done by an alcohol server

11as defined in RCW 66.20.300 and comply with RCW 66.20.310.

12(2) The annual fee for a motel license is five hundred dollars.

13(3) For the purposes of this section, "motel" ((as used in this

14section)) means a transient accommodation licensed under chapter 70.62

15RCW.

16((As used in this section, "spirits," "beer," and "wine" have the

17meanings defined in RCW 66.04.010.))

18Sec. 115. RCW 66.24.590 and 2011 c 119 s 403 are each amended to

19read as follows:

20(1) There ((shall be)) is a retailer's license to be designated as

21a hotel license. No license may be issued to a hotel offering rooms to

22its guests on an hourly basis. Food service provided for room service,

23banquets or conferences, or restaurant operation under this license

24((shall)) must meet the requirements of rules adopted by the board.

25(2) The hotel license authorizes the licensee to:

26(a) Sell spirituous liquor, beer, and wine, by the individual

27glass, at retail, for consumption on the premises, including mixed

28drinks and cocktails compounded and mixed on the premises;

29(b) Sell, at retail, from locked honor bars, in individual units,

30spirits not to exceed fifty milliliters, beer in individual units not

31to exceed twelve ounces, and wine in individual bottles not to exceed

32three hundred eighty-five milliliters, to registered guests of the

33hotel for consumption in guest rooms. The licensee ((shall)) must

34require proof of age from the guest renting a guest room and requesting

35the use of an honor bar. The guest ((shall)) must also execute an

36affidavit verifying that no one under twenty-one years of age ((shall))

37will have access to the spirits, beer, and wine in the honor bar;

 1(c) Provide without additional charge, to overnight guests,

 2spirits, beer, and wine by the individual serving for on-premises

 3consumption at a specified regular date, time, and place as may be

 4fixed by the board. Self-service by attendees is prohibited;

 5(d) Sell beer, including strong beer, wine, or spirits, in the

 6manufacturer's sealed container or by the individual drink to guests

 7through room service, or through service to occupants of private

 8residential units which are part of the buildings or complex of

 9buildings that include the hotel;

10(e) Sell beer, including strong beer, spirits, or wine, in the

11manufacturer's sealed container at retail sales locations within the

12hotel premises;

13(f) Sell beer to a purchaser in a sanitary container brought to the

14premises by the purchaser or furnished by the licensee and filled at

15the tap in the restaurant area by the licensee at the time of sale;

16(g) Sell for on or off-premises consumption, including through room

17service and service to occupants of private residential units managed

18by the hotel, wine carrying a label exclusive to the hotel license

19holder;

20(h) Place in guest rooms at check-in, a complimentary bottle of

21((beer, including strong beer, or wine)) liquor in a manufacturer-

22sealed container, and make a reference to this service in promotional

23material.

24(3) If all or any facilities for alcoholic beverage service and the

25preparation, cooking, and serving of food are operated under contract

26or joint venture agreement, the operator may hold a license separate

27from the license held by the operator of the hotel. Food and beverage

28inventory used in separate licensed operations at the hotel may not be

29shared and ((shall)) must be separately owned and stored by the

30separate licensees.

31(4) All spirits to be sold under this license must be purchased

32from a spirits retailer or spirits distributor licensee of the board.

33(5) All on-premise alcoholic beverage service must be done by an

34alcohol server as defined in RCW 66.20.300 and must comply with RCW

3566.20.310.

36(6)(a) The hotel license allows the licensee to remove from the

37liquor stocks at the licensed premises, liquor for sale and service at

38event locations at a specified date and place not currently licensed by

 1the board. If the event is open to the public, it must be sponsored by

 2a society or organization as defined by RCW 66.24.375. If attendance

 3at the event is limited to members or invited guests of the sponsoring

 4individual, society, or organization, the requirement that the sponsor

 5must be a society or organization as defined by RCW 66.24.375 is

 6waived.

 7(b) The holder of this license ((shall)) must, if requested by the

 8board, notify the board or its designee of the date, time, place, and

 9location of any event. Upon request, the licensee ((shall)) must

10provide to the board all necessary or requested information concerning

11the society or organization that will be holding the function at which

12the endorsed license will be utilized.

13(c) Licensees may cater events on a domestic winery, brewery, or

14distillery premises.

15(7) The holder of this license or its manager may furnish spirits,

16beer, or wine to the licensee's employees who are twenty-one years of

17age or older free of charge as may be required for use in connection

18with instruction on spirits, beer, and wine. The instruction may

19include the history, nature, values, and characteristics of spirits,

20beer, or wine, the use of wine lists, and the methods of presenting,

21serving, storing, and handling spirits, beer, or wine. The licensee

22must use the ((beer or wine)) liquor it obtains under its license for

23the sampling as part of the instruction. The instruction must be given

24on the premises of the licensee.

25(8) Minors may be allowed in all areas of the hotel where

26((alcohol)) liquor may be consumed; however, the consumption must be

27incidental to the primary use of the area. These areas include, but

28are not limited to, tennis courts, hotel lobbies, and swimming pool

29areas. If an area is not a mixed use area, and is primarily used for

30alcohol service, the area must be designated and restricted to access

31by ((minors)) persons of lawful age to purchase liquor.

32(9) The annual fee for this license is two thousand dollars.

33(10) As used in this section, "hotel," "spirits," "beer," and

34"wine" have the meanings defined in RCW 66.24.410 and 66.04.010.

35Sec. 116. RCW 66.28.040 and 2011 c 186 s 4, 2011 c 119 s 207, and

362011 c 62 s 4 are each reenacted and amended to read as follows:

37Except as permitted by the board under RCW 66.20.010, no domestic

 1brewery, microbrewery, distributor, distiller, domestic winery,

 2importer, rectifier, certificate of approval holder, or other

 3manufacturer of liquor ((shall)) may, within the state of Washington,

 4give to any person any liquor; but nothing in this section nor in RCW

 566.28.305 prevents a domestic brewery, microbrewery, distributor,

 6domestic winery, distiller, certificate of approval holder, or importer

 7from furnishing samples of beer, wine, or spirituous liquor to

 8authorized licensees for the purpose of negotiating a sale, in

 9accordance with regulations adopted by the liquor control board,

10provided that the samples are subject to taxes imposed by RCW 66.24.290

11and 66.24.210((, and in the case of spirituous liquor, any product used

12for samples must be purchased at retail from the board; nothing in this

13section shall prevent the furnishing of samples of liquor to the board

14for the purpose of negotiating the sale of liquor to the state liquor

15control board)); nothing in this section ((shall)) prevents a domestic

16brewery, microbrewery, domestic winery, distillery, certificate of

17approval holder, or distributor from furnishing beer, wine, or

18spirituous liquor for instructional purposes under RCW 66.28.150;

19nothing in this section ((shall)) prevents a domestic winery,

20certificate of approval holder, or distributor from furnishing wine

21without charge, subject to the taxes imposed by RCW 66.24.210, to a

22not-for-profit group organized and operated solely for the purpose of

23enology or the study of viticulture which has been in existence for at

24least six months and that uses wine so furnished solely for such

25educational purposes or a domestic winery, or an out-of-state

26certificate of approval holder, from furnishing wine without charge or

27a domestic brewery, or an out-of-state certificate of approval holder,

28from furnishing beer without charge, subject to the taxes imposed by

29RCW 66.24.210 or 66.24.290, or a domestic distiller licensed under RCW

3066.24.140 or an accredited representative of a distiller, manufacturer,

31importer, or distributor of spirituous liquor licensed under RCW

3266.24.310, from furnishing spirits without charge, to a nonprofit

33charitable corporation or association exempt from taxation under

34((section)) 26 U.S.C. Sec. 501(c)(3) or (6) of the internal revenue

35code of 1986 (((26 U.S.C. Sec. 501(c)(3) or (6)))) for use consistent

36with the purpose or purposes entitling it to such exemption; nothing in

37this section ((shall)) prevents a domestic brewery or microbrewery from

38serving beer without charge, on the brewery premises; nothing in this

 1section ((shall)) prevents donations of wine for the purposes of RCW

 266.12.180; nothing in this section ((shall)) prevents a domestic winery

 3from serving wine without charge, on the winery premises; nothing in

 4this section ((shall)) prevents a craft distillery from serving spirits

 5without charge, on the distillery premises subject to RCW 66.24.145;

 6nothing in this section prohibits spirits sampling under chapter 186,

 7Laws of 2011; and nothing in this section ((shall)) prevents a winery

 8or microbrewery from serving samples at a farmers market under section

 91, chapter 62, Laws of 2011.

10Sec. 117. RCW 66.28.060 and 2008 c 94 s 7 are each amended to read

11as follows:

12Every distillery licensed under this title ((shall)) must make

13monthly reports to the board pursuant to the regulations. ((No such

14distillery shall make any sale of spirits within the state of

15Washington except to the board and as provided in RCW 66.24.145.))

16Sec. 118. RCW 66.28.070 and 2006 c 302 s 8 are each amended to

17read as follows:

18(1) Except as provided in subsection (2) of this section, it

19((shall be)) is unlawful for any retail spirits, beer, or wine licensee

20to purchase spirits, beer, or wine, except from a duly licensed

21distributor, domestic winery, domestic brewer, or certificate of

22approval holder with a direct shipment endorsement((, or the board)).

23(2)(a) A spirits, beer, or wine retailer ((licensee)) may purchase

24spirits, beer, or wine:

25(i) From a government agency ((which)) that has lawfully seized

26((beer or wine from)) liquor possessed by a licensed ((beer))

27distributor or ((wine)) retailer((, or));

28(ii) From a board-authorized ((retailer)) manufacturer or

29certificate holder authorized by this title to act as a distributor of

30liquor((, or));

31(iii) From a licensed retailer which has discontinued business if

32the distributor has refused to accept spirits, beer, or wine from that

33retailer for return and refund((. Beer and wine));

34(iv) From a retailer whose license or license endorsement permits

35resale to a retailer of wine and/or spirits for consumption on the

 1premises, if the purchasing retailer is authorized to sell such wine

 2and/or spirits.

 3(b) Goods purchased under this subsection ((shall)) (2) must meet

 4the quality standards set by ((its)) the manufacturer of the goods.

 5(3) Special occasion licensees holding a special occasion license

 6may only purchase spirits, beer, or wine from a spirits, beer, or wine

 7retailer duly licensed to sell spirits, beer, or wine for off-premises

 8consumption, ((the board,)) or from a duly licensed spirits, beer, or

 9wine distributor.

10Sec. 119. RCW 66.28.170 and 2004 c 160 s 17 are each amended to

11read as follows:

12It is unlawful for a manufacturer of spirits, wine, or malt

13beverages holding a certificate of approval ((issued under RCW

1466.24.270 or 66.24.206)) or the manufacturer's authorized

15representative, a distillery, brewery, or a domestic winery to

16discriminate in price in selling to any purchaser for resale in the

17state of Washington. Price differentials for sales of spirits or wine

18based upon competitive conditions, costs of servicing a purchaser's

19account, efficiencies in handling goods, or other bona fide business

20factors, to the extent the differentials are not unlawful under trade

21regulation laws applicable to goods of all kinds, do not violate this

22section.

23NEW SECTION. Sec. 120. A new section is added to chapter 66.28

24RCW to read as follows:

25(1) No price for spirits sold in the state by a distributor or

26other licensee acting as a distributor pursuant to this title may be

27below acquisition cost unless the item sold below acquisition cost has

28been stocked by the seller for a period of at least six months. The

29seller may not restock the item for a period of one year following the

30first effective date of such below cost price.

31(2) Spirits sold to retailers for resale for consumption on or off

32the licensed premises may be delivered to the retailer's licensed

33premises, to a location specified by the retailer and approved for

34deliveries by the board, or to a carrier engaged by either party to the

35transaction.

 1(3) In selling spirits to another retailer, to the extent

 2consistent with the purposes of this act, a spirits retail licensee

 3must comply with all provisions of and regulations under this title

 4applicable to wholesale distributors selling spirits to retailers.

 5(4) A distiller holding a license or certificate of compliance as

 6a distiller under this title may act as distributor in the state of

 7spirits of its own production or of foreign-produced spirits it is

 8entitled to import. The distiller must, to the extent consistent with

 9the purposes of this act, comply with all provisions of and regulations

10under this title applicable to wholesale distributors selling spirits

11to retailers.

12(5) With respect to any alleged violation of this title by sale of

13spirits at a discounted price, all defenses under applicable trade

14regulation laws are available, including without limitation good faith

15meeting of a competitor's lawful price and absence of harm to

16competition.

17(6) Notwithstanding any other provision of law, no licensee may

18import, purchase, distribute, or accept delivery of any wine that is

19produced outside of the United States or any distilled spirits without

20the written consent of the brand owner or its authorized agent.

21Sec. 121. RCW 66.28.180 and 2009 c 506 s 10 are each amended to

22read as follows:

23(1) Beer and/or wine distributors.

24(a) Every beer ((or wine)) distributor ((shall)) must maintain at

25its liquor-licensed location a price list showing the wholesale prices

26at which any and all brands of beer ((and wine)) sold by ((such beer

27and/or wine)) the distributor ((shall be)) are sold to retailers within

28the state.

29(b) Each price list ((shall)) must set forth:

30(i) All brands, types, packages, and containers of beer ((or wine))

31offered for sale by ((such beer and/or wine)) the distributor; and

32(ii) The wholesale prices thereof to retail licensees, including

33allowances, if any, for returned empty containers.

34(c) No beer ((and/or wine)) distributor may sell or offer to sell

35any package or container of beer ((or wine)) to any retail licensee at

36a price differing from the price for such package or container as shown

37in the price list, according to rules adopted by the board.

 1(d) Quantity discounts of sales prices of beer are prohibited. No

 2distributor's sale price of beer may be below the distributor's

 3acquisition cost.

 4(e) Distributor prices below acquisition cost on a "close-out" item

 5((shall be)) are allowed if the item to be discontinued has been listed

 6for a period of at least six months, and upon the further condition

 7that the distributor who offers such a close-out price ((shall)) may

 8not restock the item for a period of one year following the first

 9effective date of such close-out price.

10(f) Any beer ((and/or wine)) distributor ((or employee authorized

11by the distributor-employer)) may sell beer ((and/or wine)) at the

12distributor's listed prices to any annual or special occasion retail

13licensee upon presentation to the distributor ((or employee)) at the

14time of purchase or delivery of an original or facsimile license or a

15special permit issued by the board to such licensee.

16(g) Every annual or special occasion retail licensee, upon

17purchasing any beer ((and/or wine)) from a distributor, ((shall)) must

18immediately cause such beer ((or wine)) to be delivered to the licensed

19premises, and the licensee ((shall)) may not thereafter permit such

20beer to be disposed of in any manner except as authorized by the

21license.

22(h) Beer ((and wine)) sold as provided in this section ((shall))

23must be delivered by the distributor or an authorized employee either

24to the retailer's licensed premises or directly to the retailer at the

25distributor's licensed premises. When a ((domestic winery,)) brewery,

26microbrewery, or certificate of approval holder with a direct shipping

27endorsement is acting as a distributor of beer of its own production,

28a licensed retailer may contract with a common carrier to obtain the

29((product)) beer directly from the ((domestic winery,)) brewery,

30microbrewery, or certificate of approval holder with a direct shipping

31endorsement. A distributor's prices to retail licensees ((shall)) for

32beer must be the same at both such places of delivery. Wine sold to

33retailers must be delivered to the retailer's licensed premises, to a

34location specified by the retailer and approved for deliveries by the

35board, or to a carrier engaged by either party to the transaction.

36(2) Beer ((and wine)) suppliers' contracts and memoranda.

37(a) Every domestic brewery, microbrewery, ((domestic winery,))

38certificate of approval holder, and beer and/or wine importer offering

 1beer ((and/or wine)) for sale to distributors within the state and any

 2beer ((and/or wine)) distributor who sells to other beer ((and/or

 3wine)) distributors ((shall)) must maintain at its liquor-licensed

 4location a beer price list and a copy of every written contract and a

 5memorandum of every oral agreement which such brewery ((or winery)) may

 6have with any beer ((or wine)) distributor for the supply of beer,

 7which contracts or memoranda ((shall)) must contain:

 8(i) All advertising, sales and trade allowances, and incentive

 9programs; and

10(ii) All commissions, bonuses or gifts, and any and all other

11discounts or allowances.

12(b) Whenever changed or modified, such revised contracts or

13memoranda ((shall)) must also be maintained at its liquor licensed

14location.

15(c) Each price list ((shall)) must set forth all brands, types,

16packages, and containers of beer ((or wine)) offered for sale by such

17((licensed brewery or winery)) supplier.

18(d) Prices of a domestic brewery, microbrewery, ((domestic

19winery,)) or certificate of approval holder ((shall)) for beer must be

20uniform prices to all distributors or retailers on a statewide basis

21less bona fide allowances for freight differentials. Quantity

22discounts of suppliers' prices for beer are prohibited. No price

23((shall)) may be below the supplier's acquisition((/)) or production

24cost.

25(e) A domestic brewery, microbrewery, ((domestic winery,))

26certificate of approval holder, ((beer or wine)) importer, or ((beer or

27wine)) distributor acting as a supplier to another distributor must

28file ((a distributor appointment)) with the board a list of all

29distributor licensees of the board to which it sells or offers to sell

30beer.

31(f) No domestic brewery, microbrewery, ((domestic winery,)) or

32certificate of approval holder may sell or offer to sell any package or

33container of beer ((or wine)) to any distributor at a price differing

34from the price list for such package or container as shown in the price

35list of the domestic brewery, microbrewery, ((domestic winery,)) or

36certificate of approval holder and then in effect, according to rules

37adopted by the board.

 1(3) In selling wine to another retailer, to the extent consistent

 2with the purposes of this act, a grocery store licensee with a reseller

 3endorsement must comply with all provisions of and regulations under

 4this title applicable to wholesale distributors selling wine to

 5retailers.

 6(4) With respect to any alleged violation of this title by sale of

 7wine at a discounted price, all defenses under applicable trade

 8regulation laws are available including, without limitation, good faith

 9meeting of a competitor's lawful price and absence of harm to

10competition.

11Sec. 122. RCW 66.28.190 and 2003 c 168 s 305 are each amended to

12read as follows:

13((RCW 66.28.010)) (1) Any other provision of this title

14notwithstanding, persons licensed under ((RCW 66.24.200 as wine

15distributors and persons licensed under RCW 66.24.250 as beer

16distributors)) this title to sell liquor for resale may sell at

17wholesale nonliquor food and food ingredients on thirty-day credit

18terms to persons licensed as retailers under this title, but complete

19and separate accounting records ((shall)) must be maintained on all

20sales of nonliquor food and food ingredients to ensure that such

21persons are in compliance with ((RCW 66.28.010)) this title.

22(2) For the purpose of this section, "nonliquor food and food

23ingredients" includes, without limitation, all food and food

24ingredients for human consumption as defined in RCW 82.08.0293 as it

25((exists)) existed on July 1, 2004.

26NEW SECTION. Sec. 123. A new section is added to chapter 66.28

27RCW to read as follows:

28A retailer authorized to sell wine may accept delivery of wine at

29its licensed premises or at one or more warehouse facilities registered

30with the board, which facilities may also warehouse and distribute

31nonliquor items, and from which it may deliver to its own licensed

32premises and, pursuant to sales permitted by this title, to other

33licensed retailers, to other registered facilities, or to lawful

34purchasers outside the state; such facilities may be registered and

35utilized by associations, cooperatives, or comparable groups of

36retailers including at least one retailer licensed to sell wine. A

 1restaurant retailer authorized to sell spirits may accept delivery of

 2spirits at its licensed premises or at one or more warehouse facilities

 3registered with the board, which facilities may also warehouse and

 4distribute nonliquor items, from which it may deliver to its own

 5licensed premises and, pursuant to sales permitted by this title, to

 6other licensed retailers, to other registered facilities, or to lawful

 7purchasers outside the state; such facilities may be registered and

 8utilized by associations, cooperatives, or comparable groups of

 9retailers including at least one restaurant retailer licensed to sell

10spirits. Nothing in this section authorizes sales of spirits or wine

11by a retailer holding only an on-sale privilege to another retailer.

12Sec. 124. RCW 66.28.280 and 2009 c 506 s 1 are each amended to

13read as follows:

14((The legislature recognizes that Washington's current three-tier

15system, where the functions of manufacturing, distributing, and

16retailing are distinct and the financial relationships and business

17transactions between entities in these tiers are regulated, is a

18valuable system for the distribution of beer and wine.)) The

19legislature ((further)) recognizes that the historical total

20prohibition on ownership of an interest in one tier by a person with an

21ownership interest in another tier, as well as the historical

22restriction on financial incentives and business relationships between

23tiers, is unduly restrictive. The legislature finds the

24((modifications contained in chapter 506, Laws of 2009 are appropriate,

25because the modifications)) provisions of RCW 66.28.285 through

2666.28.320 appropriate for all varieties of liquor, because they do not

27impermissibly interfere with ((the goals of orderly marketing of

28alcohol in the state, encouraging moderation in consumption of alcohol

29by the citizens of the state,)) protecting the public interest and

30advancing public safety by preventing the use and consumption of

31alcohol by minors and other abusive consumption, and promoting the

32efficient collection of taxes by the state.

33NEW SECTION. Sec. 125. A new section is added to chapter 66.04

34RCW to read as follows:

35In this title, unless the context otherwise requires:

 1(1) "Retailer" except as expressly defined by RCW 66.28.285(5) with

 2respect to its use in RCW 6.28280 through 66.28.315, means the holder

 3of a license or permit issued by the board authorizing sale of liquor

 4to consumers for consumption on and/or off the premises. With respect

 5to retailer licenses, "on-sale" refers to the license privilege of

 6selling for consumption upon the licensed premises.

 7(2) "Spirits distributor" means a person, other than a person who

 8holds only a retail license, who buys spirits from a domestic

 9distiller, manufacturer, supplier, spirits distributor, or spirits

10importer, or who acquires foreign-produced spirits from a source

11outside of the United States, for the purpose of reselling the same not

12in violation of this title, or who represents such distiller as agent.

13(3) "Spirits importer" means a person who buys distilled spirits

14from a distiller outside the state of Washington and imports such

15spirits into the state for sale or export.

16PART II

17LIQUOR CONTROL BOARD--DISCONTINUING RETAIL SALES--TECHNICAL CHANGES

18Sec. 201. RCW 43.19.19054 and 1975-'76 2nd ex.s. c 21 s 7 are each

19amended to read as follows:

20The provisions of RCW 43.19.1905 ((shall)) do not apply to

21materials, supplies, and equipment purchased for resale to other than

22public agencies by state agencies, including educational institutions.

23((In addition, RCW 43.19.1905 shall not apply to liquor purchased by

24the state for resale under the provisions of Title 66 RCW.))

25Sec. 202. RCW 66.08.020 and 1933 ex.s. c 62 s 5 are each amended

26to read as follows:

27The administration of this title((, including the general control,

28management and supervision of all liquor stores, shall be)) is vested

29in the liquor control board, constituted under this title.

30Sec. 203. RCW 66.08.026 and 2008 c 67 s 1 are each amended to read

31as follows:

32Administrative expenses of the board ((shall)) must be appropriated

33and paid from the liquor revolving fund. These administrative expenses

34((shall)) include, but not be limited to: The salaries and expenses of

 1the board and its employees, ((the cost of opening additional state

 2liquor stores and warehouses,)) legal services, pilot projects, annual

 3or other audits, and other general costs of conducting the business of

 4the board. The administrative expenses ((shall)) do not include

 5((costs of liquor and lottery tickets purchased, the cost of

 6transportation and delivery to the point of distribution, the cost of

 7operating, maintaining, relocating, and leasing state liquor stores and

 8warehouses, other costs pertaining to the acquisition and receipt of

 9liquor and lottery tickets, agency commissions for contract liquor

10stores, transaction fees associated with credit or debit card purchases

11for liquor in state liquor stores and in contract liquor stores

12pursuant to RCW 66.16.040 and 66.16.041, sales tax, and)) those amounts

13distributed pursuant to RCW 66.08.180, 66.08.190, 66.08.200, or

1466.08.210 ((and 66.08.220)). Agency commissions for contract liquor

15stores ((shall)) must be established by the liquor control board after

16consultation with and approval by the director of the office of

17financial management. All expenditures and payment of obligations

18authorized by this section are subject to the allotment requirements of

19chapter 43.88 RCW.

20Sec. 204. RCW 66.08.030 and 2002 c 119 s 2 are each amended to

21read as follows:

22(((1) For the purpose of carrying into effect the provisions of

23this title according to their true intent or of supplying any

24deficiency therein, the board may make such regulations not

25inconsistent with the spirit of this title as are deemed necessary or

26advisable. All regulations so made shall be a public record and shall

27be filed in the office of the code reviser, and thereupon shall have

28the same force and effect as if incorporated in this title. Such

29regulations, together with a copy of this title, shall be published in

30pamphlets and shall be distributed as directed by the board.

31(2) Without thereby limiting the generality of the provisions

32contained in subsection (1), it is declared that)) The power of the

33board to make regulations ((in the manner set out in that subsection

34shall)) under chapter 34.05 RCW extends to

35(((a) regulating the equipment and management of stores and

36warehouses in which state liquor is sold or kept, and prescribing the

 1books and records to be kept therein and the reports to be made thereon

 2to the board;

 3(b))):

 4(1) Prescribing the duties of the employees of the board, and

 5regulating their conduct in the discharge of their duties;

 6(((c) governing the purchase of liquor by the state and the

 7furnishing of liquor to stores established under this title;

 8(d) determining the classes, varieties, and brands of liquor to be

 9kept for sale at any store;

10(e) prescribing, subject to RCW 66.16.080, the hours during which

11the state liquor stores shall be kept open for the sale of liquor;

12(f) providing for the issuing and distributing of price lists

13showing the price to be paid by purchasers for each variety of liquor

14kept for sale under this title;

15(g))) (2) Prescribing an official seal and official labels and

16stamps and determining the manner in which they ((shall)) must be

17attached to every package of liquor sold or sealed under this title,

18including the prescribing of different official seals or different

19official labels for different classes of liquor;

20(((h) providing for the payment by the board in whole or in part of

21the carrying charges on liquor shipped by freight or express;

22(i))) (3) Prescribing forms to be used for purposes of this title

23or the regulations, and the terms and conditions to be contained in

24permits and licenses issued under this title, and the qualifications

25for receiving a permit or license issued under this title, including a

26criminal history record information check. The board may submit the

27criminal history record information check to the Washington state

28patrol and to the identification division of the federal bureau of

29investigation in order that these agencies may search their records for

30prior arrests and convictions of the individual or individuals who

31filled out the forms. The board ((shall)) must require fingerprinting

32of any applicant whose criminal history record information check is

33submitted to the federal bureau of investigation;

34(((j))) (4) Prescribing the fees payable in respect of permits and

35licenses issued under this title for which no fees are prescribed in

36this title, and prescribing the fees for anything done or permitted to

37be done under the regulations;

 1(((k))) (5) Prescribing the kinds and quantities of liquor which

 2may be kept on hand by the holder of a special permit for the purposes

 3named in the permit, regulating the manner in which the same ((shall

 4be)) is kept and disposed of, and providing for the inspection of the

 5same at any time at the instance of the board;

 6(((l))) (6) Regulating the sale of liquor kept by the holders of

 7licenses which entitle the holder to purchase and keep liquor for sale;

 8(((m))) (7) Prescribing the records of purchases or sales of

 9liquor kept by the holders of licenses, and the reports to be made

10thereon to the board, and providing for inspection of the records so

11kept;

12(((n))) (8) Prescribing the kinds and quantities of liquor for

13which a prescription may be given, and the number of prescriptions

14which may be given to the same patient within a stated period;

15(((o))) (9) Prescribing the manner of giving and serving notices

16required by this title or the regulations, where not otherwise provided

17for in this title;

18(((p))) (10) Regulating premises in which liquor is kept for export

19from the state, or from which liquor is exported, prescribing the books

20and records to be kept therein and the reports to be made thereon to

21the board, and providing for the inspection of the premises and the

22books, records and the liquor so kept;

23(((q))) (11) Prescribing the conditions and qualifications

24requisite for the obtaining of club licenses and the books and records

25to be kept and the returns to be made by clubs, prescribing the manner

26of licensing clubs in any municipality or other locality, and providing

27for the inspection of clubs;

28(((r))) (12) Prescribing the conditions, accommodations, and

29qualifications requisite for the obtaining of licenses to sell beer

30((and)), wines, and spirits, and regulating the sale of beer ((and)),

31wines, and spirits thereunder;

32(((s))) (13) Specifying and regulating the time and periods when,

33and the manner, methods and means by which manufacturers ((shall)) must

34deliver liquor within the state; and the time and periods when, and the

35manner, methods and means by which liquor may lawfully be conveyed or

36carried within the state;

37(((t))) (14) Providing for the making of returns by brewers of

38their sales of beer shipped within the state, or from the state,

 1showing the gross amount of such sales and providing for the inspection

 2of brewers' books and records, and for the checking of the accuracy of

 3any such returns;

 4(((u))) (15) Providing for the making of returns by the wholesalers

 5of beer whose breweries are located beyond the boundaries of the state;

 6(((v))) (16) Providing for the making of returns by any other

 7liquor manufacturers, showing the gross amount of liquor produced or

 8purchased, the amount sold within and exported from the state, and to

 9whom so sold or exported, and providing for the inspection of the

10premises of any such liquor manufacturers, their books and records, and

11for the checking of any such return;

12(((w))) (17) Providing for the giving of fidelity bonds by any or

13all of the employees of the board((: PROVIDED, That)). However, the

14premiums therefor ((shall)) must be paid by the board;

15(((x))) (18) Providing for the shipment ((by mail or common

16carrier)) of liquor to any person holding a permit and residing in any

17unit which has, by election pursuant to this title, prohibited the sale

18of liquor therein;

19(((y))) (19) Prescribing methods of manufacture, conditions of

20sanitation, standards of ingredients, quality and identity of alcoholic

21beverages manufactured, sold, bottled, or handled by licensees and the

22board; and conducting from time to time, in the interest of the public

23health and general welfare, scientific studies and research relating to

24alcoholic beverages and the use and effect thereof;

25(((z))) (20) Seizing, confiscating and destroying all alcoholic

26beverages manufactured, sold or offered for sale within this state

27which do not conform in all respects to the standards prescribed by

28this title or the regulations of the board((: PROVIDED,)). However,

29nothing herein contained ((shall)) may be construed as authorizing the

30liquor board to prescribe, alter, limit or in any way change the

31present law as to the quantity or percentage of alcohol used in the

32manufacturing of wine or other alcoholic beverages.

33Sec. 205. RCW 66.24.145 and 2010 c 290 s 2 are each amended to

34read as follows:

35(1) Any craft distillery may sell spirits of its own production for

36consumption off the premises, up to two liters per person per day.

37((Spirits sold under this subsection must be purchased from the board

 1and sold at the retail price established by the board.)) A craft

 2distillery selling spirits under this subsection must comply with the

 3applicable laws and rules relating to retailers.

 4(2) Any craft distillery may contract distill spirits for, and sell

 5contract distilled spirits to, holders of distillers' or manufacturers'

 6licenses, including licenses issued under RCW 66.24.520, or for export.

 7(3) Any craft distillery licensed under this section may provide,

 8free of charge, one-half ounce or less samples of spirits of its own

 9production to persons on the premises of the distillery. The maximum

10total per person per day is two ounces. Every person who participates

11in any manner in the service of samples must obtain a class 12 alcohol

12server permit. ((Spirits used for samples must be purchased from the

13board.))

14(4) The board ((shall)) must adopt rules to implement the alcohol

15server permit requirement and may adopt additional rules to implement

16this section.

17(5) Distilling is an agricultural practice.

18NEW SECTION. Sec. 206. A new section is added to chapter 66.24

19RCW to read as follows:

20Any distiller licensed under this title may act as a retailer

21and/or distributor to retailers selling for consumption on or off the

22licensed premises of spirits of its own production, and any

23manufacturer, importer, or bottler of spirits holding a certificate of

24approval may act as a distributor of spirits it is entitled to import

25into the state under such certificate. The board must by rule provide

26for issuance of certificates of approval to spirits suppliers. An

27industry member operating as a distributor and/or retailer under this

28section must comply with the applicable laws and rules relating to

29distributors and/or retailers, except that an industry member operating

30as a distributor under this section may maintain a warehouse off the

31distillery premises for the distribution of spirits of its own

32production to spirits retailers within the state, if the warehouse is

33within the United States and has been approved by the board.

34Sec. 207. RCW 66.24.160 and 1981 1st ex.s. c 5 s 30 are each

35amended to read as follows:

36A ((liquor)) spirits importer's license may be issued to any

 1qualified person, firm or corporation, entitling the holder thereof to

 2import into the state any liquor other than beer or wine; to store the

 3same within the state, and to sell and export the same from the state;

 4fee six hundred dollars per annum. Such ((liquor)) spirits importer's

 5license ((shall be)) is subject to all conditions and restrictions

 6imposed by this title or by the rules and regulations of the board, and

 7((shall be)) is issued only upon such terms and conditions as may be

 8imposed by the board. ((No liquor importer's license shall be required

 9in sales to the Washington state liquor control board.))

10Sec. 208. RCW 66.32.010 and 1955 c 39 s 3 are each amended to read

11as follows:

12((Except as permitted by)) The board may, ((no liquor shall be kept

13or had by any person within this state unless the package in which the

14liquor was contained had, while containing that liquor, been)) to the

15extent required to control unlawful diversion of liquor from authorized

16channels of distribution, require that packages of liquor transported

17within the state be sealed with ((the)) such official seal as may be

18adopted by the board, except in the case of:

19(1) ((Liquor imported by the board; or

20(2))) Liquor manufactured in the state ((for sale to the board or

21for export)); or

22(((3) Beer,)) (2) Liquor purchased within the state or for shipment

23to a consumer within the state in accordance with the provisions of

24law; or

25(((4))) (3) Wine or beer exempted in RCW 66.12.010.

26Sec. 209. RCW 66.44.120 and 2011 c 96 s 46 are each amended to

27read as follows:

28(1) No person other than an employee of the board ((shall)) may

29keep or have in his or her possession any official seal ((prescribed))

30adopted by the board under this title, unless the same is attached to

31a package ((which has been purchased from a liquor store or contract

32liquor store)) in accordance with the law; nor ((shall)) may any person

33keep or have in his or her possession any design in imitation of any

34official seal prescribed under this title, or calculated to deceive by

35its resemblance thereto, or any paper upon which any design in

 1imitation thereof, or calculated to deceive as aforesaid, is stamped,

 2engraved, lithographed, printed, or otherwise marked.

 3(2)(a) Except as provided in (b) of this subsection, every person

 4who willfully violates this section is guilty of a gross misdemeanor

 5and ((shall be)) is liable on conviction thereof for a first offense to

 6imprisonment in the county jail for a period of not less than three

 7months nor more than six months, without the option of the payment of

 8a fine, and for a second offense, to imprisonment in the county jail

 9for not less than six months nor more than three hundred sixty-four

10days, without the option of the payment of a fine.

11(b) A third or subsequent offense is a class C felony, punishable

12by imprisonment in a state correctional facility for not less than one

13year nor more than two years.

14Sec. 210. RCW 66.44.150 and 1955 c 289 s 5 are each amended to

15read as follows:

16If any person in this state buys alcoholic beverages from any

17person other than ((the board, a state liquor store, or some)) a person

18authorized by the board to sell ((them, he shall be)) alcoholic

19beverages, he or she is guilty of a misdemeanor.

20Sec. 211. RCW 66.44.340 and 1999 c 281 s 11 are each amended to

21read as follows:

22(1) Employers holding grocery store or beer and/or wine specialty

23shop licenses exclusively are permitted to allow their employees,

24between the ages of eighteen and twenty-one years, to sell, stock, and

25handle ((beer or wine)) liquor in, on or about any establishment

26holding a ((grocery store or beer and/or wine specialty shop)) license

27((exclusively: PROVIDED, That)) to sell such liquor, if:

28(a) There is an adult twenty-one years of age or older on duty

29supervising the sale of liquor at the licensed premises((: PROVIDED,

30That)); and

31(b) In the case of spirits, there are at least two adults twenty-

32one years of age or older on duty supervising the sale of spirits at

33the licensed premises.

34(2) Employees under twenty-one years of age may make deliveries of

35beer and/or wine purchased from licensees holding grocery store or beer

 1and/or wine specialty shop licenses exclusively, when delivery is made

 2to cars of customers adjacent to such licensed premises but only,

 3however, when the underage employee is accompanied by the purchaser.

 4Sec. 212. RCW 19.126.010 and 2003 c 59 s 1 are each amended to

 5read as follows:

 6(1) The legislature recognizes that both suppliers and wholesale

 7distributors of malt beverages and spirits are interested in the goal

 8of best serving the public interest through the fair, efficient, and

 9competitive distribution of such beverages. The legislature encourages

10them to achieve this goal by:

11(a) Assuring the wholesale distributor's freedom to manage the

12business enterprise, including the wholesale distributor's right to

13independently establish its selling prices; and

14(b) Assuring the supplier and the public of service from wholesale

15distributors who will devote their best competitive efforts and

16resources to sales and distribution of the supplier's products which

17the wholesale distributor has been granted the right to sell and

18distribute.

19(2) This chapter governs the relationship between suppliers of malt

20beverages and spirits and their wholesale distributors to the full

21extent consistent with the Constitution and laws of this state and of

22the United States.

23Sec. 213. RCW 19.126.020 and 2009 c 155 s 1 are each reenacted and

24amended to read as follows:

25The definitions in this section apply throughout this chapter

26unless the context clearly requires otherwise.

27(1) "Agreement of distributorship" means any contract, agreement,

28commercial relationship, license, association, or any other

29arrangement, for a definite or indefinite period, between a supplier

30and distributor.

31(2) "Authorized representative" has the same meaning as "authorized

32representative" as defined in RCW 66.04.010.

33(3) "Brand" means any word, name, group of letters, symbol, or

34combination thereof, including the name of the distiller or brewer if

35the distiller's or brewer's name is also a significant part of the

36product name, adopted and used by a supplier to identify ((a)) specific

 1spirits or a specific malt beverage product and to distinguish that

 2product from other spirits or malt beverages produced by that supplier

 3or other suppliers.

 4(4) "Distributor" means any person, including but not limited to a

 5component of a supplier's distribution system constituted as an

 6independent business, importing or causing to be imported into this

 7state, or purchasing or causing to be purchased within this state, any

 8spirits or malt beverages for sale or resale to retailers licensed

 9under the laws of this state, regardless of whether the business of

10such person is conducted under the terms of any agreement with a

11distiller or malt beverage manufacturer.

12(5) "Importer" means any distributor importing spirits or beer into

13this state for sale to retailer accounts or for sale to other

14distributors designated as "subjobbers" for resale.

15(6) "Malt beverage manufacturer" means every brewer, fermenter,

16processor, bottler, or packager of malt beverages located within or

17outside this state, or any other person, whether located within or

18outside this state, who enters into an agreement of distributorship for

19the resale of malt beverages in this state with any wholesale

20distributor doing business in the state of Washington.

21(7) "Person" means any natural person, corporation, partnership,

22trust, agency, or other entity, as well as any individual officers,

23directors, or other persons in active control of the activities of such

24entity.

25(8) "Spirits manufacturer" means every distiller, processor,

26bottler, or packager of spirits located within or outside this state,

27or any other person, whether located within or outside this state, who

28enters into an agreement of distributorship for the resale of spirits

29in this state with any wholesale distributor doing business in the

30state of Washington.

31(9) "Successor distributor" means any distributor who enters into

32an agreement, whether oral or written, to distribute a brand of spirits

33or malt beverages after the supplier with whom such agreement is made

34or the person from whom that supplier acquired the right to manufacture

35or distribute the brand has terminated, canceled, or failed to renew an

36agreement of distributorship, whether oral or written, with another

37distributor to distribute that same brand of spirits or malt beverages.

 1(((9))) (10) "Supplier" means any spirits or malt beverage

 2manufacturer or importer who enters into or is a party to any agreement

 3of distributorship with a wholesale distributor. "Supplier" does not

 4include: (a) Any ((domestic)) distiller licensed under RCW 66.24.140

 5or 66.24.145 and producing less than sixty thousand proof gallons of

 6spirits annually or any brewery or microbrewery licensed under RCW

 766.24.240 and producing less than two hundred thousand barrels of malt

 8liquor annually; (b) any brewer or manufacturer of malt liquor

 9producing less than two hundred thousand barrels of malt liquor

10annually and holding a certificate of approval issued under RCW

1166.24.270; or (c) any authorized representative of distillers or malt

12liquor manufacturers who holds an appointment from one or more

13distillers or malt liquor manufacturers which, in the aggregate,

14produce less than two hundred thousand barrels of malt liquor or sixty

15thousand proof gallons of spirits.

16(((10))) (11) "Terminated distribution rights" means distribution

17rights with respect to a brand of malt beverages which are lost by a

18terminated distributor as a result of termination, cancellation, or

19nonrenewal of an agreement of distributorship for that brand.

20(((11))) (12) "Terminated distributor" means a distributor whose

21agreement of distributorship with respect to a brand of spirits or malt

22beverages, whether oral or written, has been terminated, canceled, or

23not renewed.

24Sec. 214. RCW 19.126.040 and 2009 c 155 s 3 are each amended to

25read as follows:

26Wholesale distributors are entitled to the following protections

27which are deemed to be incorporated into every agreement of

28distributorship:

29(1) Agreements between wholesale distributors and suppliers

30((shall)) must be in writing;

31(2) A supplier ((shall)) must give the wholesale distributor at

32least sixty days prior written notice of the supplier's intent to

33cancel or otherwise terminate the agreement, unless such termination is

34based on a reason set forth in RCW 19.126.030(5) or results from a

35supplier acquiring the right to manufacture or distribute a particular

36brand and electing to have that brand handled by a different

37distributor. The notice ((shall)) must state all the reasons for the

 1intended termination or cancellation. Upon receipt of notice, the

 2wholesale distributor ((shall have)) has sixty days in which to rectify

 3any claimed deficiency. If the deficiency is rectified within this

 4sixty-day period, the proposed termination or cancellation is null and

 5void and without legal effect;

 6(3) The wholesale distributor may sell or transfer its business, or

 7any portion thereof, including the agreement, to successors in interest

 8upon prior approval of the transfer by the supplier. No supplier may

 9unreasonably withhold or delay its approval of any transfer, including

10wholesaler's rights and obligations under the terms of the agreement,

11if the person or persons to be substituted meet reasonable standards

12imposed by the supplier;

13(4) If an agreement of distributorship is terminated, canceled, or

14not renewed for any reason other than for cause, failure to live up to

15the terms and conditions of the agreement, or a reason set forth in RCW

1619.126.030(5), the wholesale distributor is entitled to compensation

17from the successor distributor for the laid-in cost of inventory and

18for the fair market value of the terminated distribution rights. For

19purposes of this section, termination, cancellation, or nonrenewal of

20a distributor's right to distribute a particular brand constitutes

21termination, cancellation, or nonrenewal of an agreement of

22distributorship whether or not the distributor retains the right to

23continue distribution of other brands for the supplier. In the case of

24terminated distribution rights resulting from a supplier acquiring the

25right to manufacture or distribute a particular brand and electing to

26have that brand handled by a different distributor, the affected

27distribution rights will not transfer until such time as the

28compensation to be paid to the terminated distributor has been finally

29determined by agreement or arbitration;

30(5) When a terminated distributor is entitled to compensation under

31subsection (4) of this section, a successor distributor must compensate

32the terminated distributor for the fair market value of the terminated

33distributor's rights to distribute the brand, less any amount paid to

34the terminated distributor by a supplier or other person with respect

35to the terminated distribution rights for the brand. If the terminated

36distributor's distribution rights to a brand of spirits or malt

37beverages are divided among two or more successor distributors, each

38successor distributor must compensate the terminated distributor for

 1the fair market value of the distribution rights assumed by that

 2successor distributor, less any amount paid to the terminated

 3distributor by a supplier or other person with respect to the

 4terminated distribution rights assumed by the successor distributor.

 5A terminated distributor may not receive total compensation under this

 6subsection that exceeds the fair market value of the terminated

 7distributor's distribution rights with respect to the affected brand.

 8Nothing in this section ((shall)) may be construed to require any

 9supplier or other third person to make any payment to a terminated

10distributor;

11(6) For purposes of this section, the "fair market value" of

12distribution rights as to a particular brand means the amount that a

13willing buyer would pay and a willing seller would accept for such

14distribution rights when neither is acting under compulsion and both

15have knowledge of all facts material to the transaction. "Fair market

16value" is determined as of the date on which the distribution rights

17are to be transferred in accordance with subsection (4) of this

18section;

19(7) In the event the terminated distributor and the successor

20distributor do not agree on the fair market value of the affected

21distribution rights within thirty days after the terminated distributor

22is given notice of termination, the matter must be submitted to binding

23arbitration. Unless the parties agree otherwise, such arbitration must

24be conducted in accordance with the American arbitration association

25commercial arbitration rules with each party to bear its own costs and

26attorneys' fees;

27(8) Unless the parties otherwise agree, or the arbitrator for good

28cause shown orders otherwise, an arbitration conducted pursuant to

29subsection (7) of this section must proceed as follows: (a) The notice

30of intent to arbitrate must be served within forty days after the

31terminated distributor receives notice of terminated distribution

32rights; (b) the arbitration must be conducted within ninety days after

33service of the notice of intent to arbitrate; and (c) the arbitrator or

34arbitrators must issue an order within thirty days after completion of

35the arbitration;

36(9) In the event of a material change in the terms of an agreement

37of distribution, the revised agreement must be considered a new

38agreement for purposes of determining the law applicable to the

 1agreement after the date of the material change, whether or not the

 2agreement of distribution is or purports to be a continuing agreement

 3and without regard to the process by which the material change is

 4effected.

 5NEW SECTION. Sec. 215. The following acts or parts of acts are

 6each repealed:

 7(1) RCW 66.08.070 (Purchase of liquor by board--Consignment not

 8prohibited--Warranty or affirmation not required for wine or malt

 9purchases) and 1985 c 226 s 2, 1973 1st ex.s. c 209 s 1, & 1933 ex.s.

10c 62 s 67;

11(2) RCW 66.08.075 (Officer, employee not to represent manufacturer,

12wholesaler in sale to board) and 1937 c 217 s 5;

13(3) RCW 66.08.160 (Acquisition of warehouse authorized) and 1947 c

14134 s 1;

15(4) RCW 66.08.165 (Strategies to improve operational efficiency and

16revenue) and 2005 c 231 s 1;

17(5) RCW 66.08.166 (Sunday sales authorized--Store selection and

18other requirements) and 2005 c 231 s 2;

19(6) RCW 66.08.167 (Sunday sales--Store selection) and 2005 c 231 s

204;

21(7) RCW 66.08.220 (Liquor revolving fund--Separate account--

22Distribution) and 2011 c 325 s 8, 2009 c 271 s 4, 2007 c 370 s 15, 1999

23c 281 s 2, & 1949 c 5 s 11;

24(8) RCW 66.08.235 (Liquor control board construction and

25maintenance account) and 2011 c 5 s 918, 2005 c 151 s 4, 2002 c 371 s

26918, & 1997 c 75 s 1;

27(9) RCW 66.16.010 (Board may establish--Price standards--Prices in

28special instances) and 2005 c 518 s 935, 2003 1st sp.s. c 25 s 928,

291939 c 172 s 10, 1937 c 62 s 1, & 1933 ex.s. c 62 s 4;

30(10) RCW 66.16.040 (Sales of liquor by employees--Identification

31cards--Permit holders--Sales for cash--Exception) and 2005 c 206 s 1,

322005 c 151 s 5, 2005 c 102 s 1, 2004 c 61 s 1, 1996 c 291 s 1, 1995 c

3316 s 1, 1981 1st ex.s. c 5 s 8, 1979 c 158 s 217, 1973 1st ex.s. c 209

34s 3, 1971 ex.s. c 15 s 1, 1959 c 111 s 1, & 1933 ex.s. c 62 s 7;

35(11) RCW 66.16.041 (Credit and debit card purchases--Rules--

36Provision, installation, maintenance of equipment by board--

 1Consideration of offsetting liquor revolving fund balance reduction)

 2and 2011 1st sp.s. c ... (ESSB 5921) s 16, 2005 c 151 s 6, 2004 c 63 s

 32, 1998 c 265 s 3, 1997 c 148 s 2, & 1996 c 291 s 2;

 4(12) RCW 66.16.050 (Sale of beer and wine to person licensed to

 5sell) and 1933 ex.s. c 62 s 8;

 6(13) RCW 66.16.060 (Sealed packages may be required, exception) and

 71943 c 216 s 1 & 1933 ex.s. c 62 s 9;

 8(14) RCW 66.16.070 (Liquor cannot be opened or consumed on store

 9premises) and 2011 c 186 s 3 & 1933 ex.s. c 62 s 10;

10(15) RCW 66.16.100 (Fortified wine sales) and 1997 c 321 s 42 &

111987 c 386 s 5;

12(16) RCW 66.16.110 (Birth defects from alcohol--Warning required)

13and 1993 c 422 s 2;

14(17) RCW 66.16.120 (Employees working on Sabbath) and 2005 c 231 s

155; and

16(18) RCW 66.28.045 (Furnishing samples to board--Standards for

17accountability--Regulations) and 1975 1st ex.s. c 173 s 9.

18NEW SECTION. Sec. 216. The following acts or parts of acts are

19each repealed:

20(1) ESSB 5942 ss 1 through 6, as later assigned a session law

21number and/or codified;

22(2) ESSB 5942 ss 7 through 10, as later assigned a session law

23number; and

24(3) Any act or part of act relating to the warehousing and

25distribution of liquor, including the lease of the state's liquor

26warehousing and distribution facilities, adopted subsequent to May 25,

272011 in any 2011 special session.

28PART III

29MISCELLANEOUS PROVISIONS

30NEW SECTION. Sec. 301. This act does not increase any tax, create

31any new tax, or eliminate any tax. Section 106 of this act applies to

32spirits licensees upon the effective date of this section, but all

33taxes presently imposed by RCW 82.08.150 on sales of spirits by or on

34behalf of the liquor control board continue to apply so long as the

35liquor control board makes any such sales.

 1NEW SECTION. Sec. 302. A new section is added to chapter 66.24

 2RCW to read as follows:

 3The distribution of spirits license fees under sections 103 and 105

 4of this act through the liquor revolving fund to border areas,

 5counties, cities, towns, and the municipal research center must be made

 6in a manner that provides that each category of recipients receive, in

 7the aggregate, no less than it received from the liquor revolving fund

 8during comparable periods prior to the effective date of this section.

 9An additional distribution of ten million dollars per year from the

10spirits license fees must be provided to border areas, counties,

11cities, and towns through the liquor revolving fund for the purpose of

12enhancing public safety programs.

13NEW SECTION. Sec. 303. The department of revenue must develop

14rules and procedures to address claims that this act unconstitutionally

15impairs any contract with the state and to provide a means for

16reasonable compensation of claims it finds valid, funded first from

17revenues based on spirits licensing and sale under this act.

18NEW SECTION. Sec. 304. If any provision of this act or its

19application to any person or circumstance is held invalid, the

20remainder of this act or the application of the provision to other

21persons or circumstances is not affected.

22NEW SECTION. Sec. 305. This act takes effect upon approval by the

23voters. Section 216, subsections (1) and (2) of this act take effect

24if Engrossed Substitute House Bill No. 5942 is enacted by the

25legislature in 2011 and the bill, or any portion of it, becomes law.

26Section 216, subsection (3) of this act takes effect if any act or part

27of an act relating to the warehousing and distribution of liquor,

28including the lease of the state's liquor warehousing and distribution

29facilities, is adopted subsequent to May 25, 2011 in any 2011 special

30session.Originally filed in Office of Secretary of State May 26, 2011.

Approved by the People of the State of Washington in the General Election on November 8, 2011.