BILL REQ. #:  H-2114.1 

Read first time 03/25/13.   Referred to Committee on Government Accountability & Oversight.

     AN ACT Relating to the sales and distribution of spirits by distributors, restaurants, former contract liquor stores, and former state store auction buyers; amending RCW 66.24.630, 66.24.055, and 82.08.150; adding a new section to chapter 66.28 RCW; providing an effective date; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1   RCW 66.24.630 and 2012 2nd sp.s. c 6 s 401 are each amended to read as follows:
     (1) There is a spirits retail license to: Sell spirits in original containers to consumers for consumption off the licensed premises and to permit holders; sell spirits in original containers to retailers licensed to sell spirits for consumption on the premises, for resale at their licensed premises according to the terms of their licenses, although no single sale may exceed twenty-four liters, unless the sale is by a licensee that was a contract liquor store manager of a contract liquor store at the location of its spirits retail licensed premises from which it makes such sales; and export spirits.
     (2) For the purposes of this title, a spirits retail license is a retail license, and a sale by a spirits retailer is a retail sale only if not for resale. Nothing in this title authorizes sales by on-sale licensees to other retail licensees. The board must establish by rule an obligation of on-sale spirits retailers to:
     (a) Maintain a schedule by stock-keeping unit of all their purchases of spirits from spirits retail licensees, indicating the identity of the seller and the quantities purchased; and
     (b) Provide, not more frequently than quarterly, a report for each scheduled item containing the identity of the purchasing on-premise licensee and the quantities of that scheduled item purchased since any preceding report to:
     (i) A distributor authorized by the distiller to distribute a scheduled item in the on-sale licensee's geographic area; or
     (ii) A distiller acting as distributor of the scheduled item in the area.
     (3)(a) Except as otherwise provided in (c) of this subsection, the board may issue spirits retail licenses only for premises comprising at least ten thousand square feet of fully enclosed retail space within a single structure, including storerooms and other interior auxiliary areas but excluding covered or fenced exterior areas, whether or not attached to the structure, and only to applicants that the board determines will maintain systems for inventory management, employee training, employee supervision, and physical security of the product substantially as effective as those of stores currently operated by the board with respect to preventing sales to or pilferage by underage or inebriated persons.
     (b) License issuances and renewals are subject to RCW 66.24.010 and the regulations promulgated thereunder, including without limitation rights of cities, towns, county legislative authorities, the public, churches, schools, and public institutions to object to or prevent issuance of local liquor licenses. However, existing grocery premises licensed to sell beer and/or wine are deemed to be premises "now licensed" under RCW 66.24.010(9)(a) for the purpose of processing applications for spirits retail licenses.
     (c) The board may not deny a spirits retail license to an otherwise qualified contract liquor store at its contract location or to the holder of former state liquor store operating rights sold at auction under RCW 66.24.620 on the grounds of location, nature, or size of the premises to be licensed. The board may not deny a spirits retail license to applicants that are not contract liquor stores or operating rights holders on the grounds of the size of the premises to be licensed, if such applicant is otherwise qualified and the board determines that:
     (i) There is no retail spirits license holder in the trade area that the applicant proposes to serve;
     (ii) The applicant meets, or upon licensure will meet, the operational requirements established by the board by rule; and
     (iii) The licensee has not committed more than one public safety violation within the three years preceding application.
     (d) A retailer authorized to sell spirits for consumption on or off the licensed premises may accept delivery of spirits at its licensed premises or at one or more warehouse facilities registered with the board, which facilities may also warehouse and distribute nonliquor items, and from which the retailer may deliver to its own licensed premises and, pursuant to sales permitted under subsection (1) of this section:
     (i) To other retailer premises licensed to sell spirits for consumption on the licensed premises;
     (ii) To other registered facilities; or
     (iii) To lawful purchasers outside the state. The facilities may be registered and utilized by associations, cooperatives, or comparable groups of retailers, including at least one retailer licensed to sell spirits.
     (4)(a) Except as otherwise provided in (b) and (c) of this subsection, each spirits retail licensee must pay to the board, for deposit into the liquor revolving fund, a license issuance fee equivalent to seventeen percent of all spirits sales revenues under the license, exclusive of taxes collected by the licensee and of sales of items on which a license fee payable under this section has otherwise been incurred. The board must establish rules setting forth the timing of such payments and reporting of sales dollar volume by the licensee, with payments required quarterly in arrears. The first payment is due October 1, 2012.
     (b) This subsection (4) does not apply to craft distilleries.
     (c) This subsection (4) does not apply to a spirits retail licensee that was a contract liquor store manager or a former state store auction buyer with respect to sales from the location of its spirits retail licensed premises to retailers licensed to sell spirits for consumption on the premises, for resale at their licensed premises according to the terms of their licenses. The exemption created by this subsection (4)(c) attaches to any successor, by purchase or otherwise, to the spirits retail license, except that it does not attach to any such successor that owns, directly or indirectly, any interest in a spirits retail licensee that is not derived directly from a former contract liquor store manager or a former state store auction buyer.
     (5) In addition to the payment required under subsection (4) of this section, each licensee must pay an annual license renewal fee of one hundred sixty-six dollars. The board must periodically review and adjust the renewal fee as may be required to maintain it as comparable to annual license renewal fees for licenses to sell beer and wine not for consumption on the licensed premises. If required by law at the time, any increase of the annual renewal fee becomes effective only upon ratification by the legislature.
     (6) As a condition to receiving and renewing a retail spirits license the licensee must provide training as prescribed by the board by rule for individuals who sell spirits or who manage others who sell spirits regarding compliance with laws and regulations regarding sale of spirits, including without limitation the prohibitions against sale of spirits to individuals who are underage or visibly intoxicated. The training must be provided before the individual first engages in the sale of spirits and must be renewed at least every five years. The licensee must maintain records documenting the nature and frequency of the training provided. An employee training program is presumptively sufficient if it incorporates a "responsible vendor program" promulgated by the board.
     (7) The maximum penalties prescribed by the board in WAC 314-29-020 through 314-29-040 relating to fines and suspensions are doubled for violations relating to the sale of spirits by retail spirits licensees.
     (8)(a) The board must promulgate regulations concerning the adoption and administration of a compliance training program for spirits retail licensees, to be known as a "responsible vendor program," to reduce underage drinking, encourage licensees to adopt specific best practices to prevent sales to minors, and provide licensees with an incentive to give their employees ongoing training in responsible alcohol sales and service.
     (b) Licensees who join the responsible vendor program under this section and maintain all of the program's requirements are not subject to the doubling of penalties provided in this section for a single violation in any period of twelve calendar months.
     (c) The responsible vendor program must be free, voluntary, and self-monitoring.
     (d) To participate in the responsible vendor program, licensees must submit an application form to the board. If the application establishes that the licensee meets the qualifications to join the program, the board must send the licensee a membership certificate.
     (e) A licensee participating in the responsible vendor program must at a minimum:
     (i) Provide ongoing training to employees;
     (ii) Accept only certain forms of identification for alcohol sales;
     (iii) Adopt policies on alcohol sales and checking identification;
     (iv) Post specific signs in the business; and
     (v) Keep records verifying compliance with the program's requirements.

Sec. 2   RCW 66.24.055 and 2012 c 2 s 105 (Initiative Measure No. 1183) are each amended to read as follows:
     (1) There is a license for spirits distributors to (a) sell spirits purchased from manufacturers, distillers, or suppliers including, without limitation, licensed Washington distilleries, licensed spirits importers, other Washington spirits distributors, or suppliers of foreign spirits located outside of the United States, to spirits retailers including, without limitation, spirits retail licensees, special occasion license holders, interstate common carrier license holders, restaurant spirits retailer license holders, spirits, beer, and wine private club license holders, hotel license holders, sports entertainment facility license holders, and spirits, beer, and wine nightclub license holders, and to other spirits distributors; and (b) export the same from the state.
     (2) By January 1, 2012, the board must issue spirits distributor licenses to all applicants who, upon December 8, 2011, have the right to purchase spirits from a spirits manufacturer, spirits distiller, or other spirits supplier for resale in the state, or are agents of such supplier authorized to sell to licensees in the state, unless the board determines that issuance of a license to such applicant is not in the public interest.
     (3)(a) As limited by (b) of this subsection and subject to (c) of this subsection, each spirits distributor licensee and each industry member acting as a distributor under RCW 66.24.640 or 66.28.330(4) must pay to the board, for deposit into the liquor revolving fund, a license issuance fee calculated as follows:
     (((i) In each of the first two years of licensure,)) Ten percent of the total revenue from all the licensee's sales of spirits made during the year for which the fee is due((, respectively; and
     (ii) In the third year of licensure and each year thereafter, five percent of the total revenue from all the licensee's sales of spirits made during the year for which the fee is due, respectively)).
     (b) The fee required under this subsection (3) is calculated only on sales of items which the licensee was the first spirits distributor in the state to have received:
     (i) In the case of spirits manufactured in the state, from the distiller; or
     (ii) In the case of spirits manufactured outside the state, from an authorized out-of-state supplier.
     (c) By March 31, 2013, all persons holding spirits distributor licenses on or before March 31, 2013, must have paid collectively one hundred fifty million dollars or more in spirits distributor license fees. If the collective payment through March 31, 2013, totals less than one hundred fifty million dollars, the board must, according to rules adopted by the board for the purpose, collect by May 31, 2013, as additional spirits distributor license fees the difference between one hundred fifty million dollars and the actual receipts, allocated among persons holding spirits distributor licenses at any time on or before March 31, 2013, ratably according to their spirits sales made during calendar year 2012. Any amount by which such payments exceed one hundred fifty million dollars by March 31, 2013, must be credited to future license issuance fee obligations of spirits distributor licensees according to rules adopted by the board.
     (d) A retail licensee selling for resale must pay a distributor license fee under the terms and conditions in this section on resales of spirits the licensee has purchased on which no other distributor license fee has been paid. The board must establish rules setting forth the frequency and timing of such payments and reporting of sales dollar volume by the licensee, with payments due quarterly in arrears.
     (e) No spirits inventory may be subject to calculation of more than a single spirits distributor license issuance fee.
     (f) In addition to the fee set forth in (a) of this subsection, all persons who first hold a spirits distributor license anytime following March 31, 2013, must pay a surcharge equal to one hundred percent of the total revenue from all the licensee's sales of spirits made during the year for which the fee is due. This surcharge expires two years from the date that such persons are granted a spirits distributor license.
     (4) In addition to the payment set forth in subsection (3) of this section, each spirits distributor licensee renewing its annual license must pay an annual license renewal fee of one thousand three hundred twenty dollars for each licensed location.
     (5) There is no minimum facility size or capacity for spirits distributor licenses, and no limit on the number of such licenses issued to qualified applicants. License applicants must provide physical security of the product that is substantially as effective as the physical security of the distribution facilities currently operated by the board with respect to preventing pilferage. License issuances and renewals are subject to RCW 66.24.010 and the regulations promulgated thereunder, including without limitation rights of cities, towns, county legislative authorities, the public, churches, schools, and public institutions to object to or prevent issuance of local liquor licenses. However, existing distributor premises licensed to sell beer and/or wine are deemed to be premises "now licensed" under RCW 66.24.010(9)(a) for the purpose of processing applications for spirits distributor licenses.

Sec. 3   RCW 82.08.150 and 2012 c 2 s 106 (Initiative Measure No. 1183) are each amended to read as follows:
     (1) There is levied and collected a tax upon each retail sale of spirits in the original package at the rate of fifteen percent of the selling price.
     (2) There is levied and collected a tax upon each sale of spirits in the original package at the rate of ten percent of the selling price on sales by a spirits distributor licensee or other licensee acting as a spirits distributor pursuant to Title 66 RCW to restaurant spirits retailers.
     (3)(a) There is levied and collected an additional tax upon each sale of spirits in the original package by a spirits distributor licensee or other licensee acting as a spirits distributor pursuant to Title 66 RCW to a restaurant spirits retailer ((and)) at the rate of sixty-five cents per liter.
     (b) There is levied and collected an additional tax upon each retail sale of spirits in the original package by a licensee of the board at the rate of one dollar and seventy-two cents per liter.
     (4) An additional tax is imposed equal to fourteen percent multiplied by the taxes payable under subsections (1), (2), and (3) of this section.
     (5) An additional tax is imposed upon each sale of spirits in the original package by a spirits distributor licensee or other licensee acting as a spirits distributor pursuant to Title 66 RCW to a restaurant spirits retailer and upon each retail sale of spirits in the original package by a licensee of the board at the rate of seven cents per liter. All revenues collected during any month from this additional tax must be deposited in the state general fund by the twenty-fifth day of the following month.
     (6)(a) An additional tax is imposed upon retail sale of spirits in the original package at the rate of three and four-tenths percent of the selling price.
     (b) An additional tax is imposed upon retail sale of spirits in the original package to a restaurant spirits retailer at the rate of two and three-tenths percent of the selling price.
     (c) An additional tax is imposed upon each sale of spirits in the original package by a spirits distributor licensee or other licensee acting as a spirits distributor pursuant to Title 66 RCW to a restaurant spirits retailer and upon each retail sale of spirits in the original package by a licensee of the board at the rate of forty-one cents per liter.
     (d) All revenues collected during any month from additional taxes under this subsection must be deposited in the state general fund by the twenty-fifth day of the following month.
     (7)(a) An additional tax is imposed upon each retail sale of spirits in the original package at the rate of one dollar and thirty-three cents per liter.
     (b) All revenues collected during any month from additional taxes under this subsection must be deposited by the twenty-fifth day of the following month into the general fund.
     (8) The tax imposed in RCW 82.08.020 does not apply to sales of spirits in the original package.
     (9) The taxes imposed in this section must be paid by the buyer to the seller, and each seller must collect from the buyer the full amount of the tax payable in respect to each taxable sale under this section. The taxes required by this section to be collected by the seller must be stated separately from the selling price, and for purposes of determining the tax due from the buyer to the seller, it is conclusively presumed that the selling price quoted in any price list does not include the taxes imposed by this section. Sellers must report and return all taxes imposed in this section in accordance with rules adopted by the department.
     (10) As used in this section, the terms, "spirits" and "package" have the same meaning as provided in chapter 66.04 RCW.

NEW SECTION.  Sec. 4   A new section is added to chapter 66.28 RCW to read as follows:
     (1) Two or more retail licensees of the same type may agree to participate in a group purchase of wine or spirits from a licensed distributor, distiller, rectifier, importer, or certificate of approval holder. The purchasing group must use a designated agent to conduct its group purchase using a master purchase order.
     (2)(a) The designated agent must have a retail license of the same type as the licensees of the purchasing group and must be operating a retail business under that license.
     (b) A designated agent may not act as an agent for more than one purchasing group and a purchasing group may not have more than one designated agent to conduct its group purchases.
     (c) The purchasing group must submit the name of the designated agent to the board.
     (3)(a) The designated agent must prepare a master purchase order and submit it to the distributor, distiller, rectifier, importer, or certificate of approval holder. Each retail licensee of the purchasing group must provide the designated agent with a signed order setting forth the retail licensee's order. Each retail licensee's signed order must be attached to or made a part of the designated agent's master purchase order.
     (b) Each retail licensee of the purchasing group is responsible for full payment of its own order as set forth in the signed order. Each retail licensee is responsible for accounting for any of its own product loss that might occur. In the event a retail licensee member of the purchasing group is unable or unwilling to tender payment in full for its order at or before the time the group takes delivery of the order, the other members of the group are responsible for the shortage in payment, in proportion to their participation in the order, unless the seller agrees to terminate the transaction in its entirety.
     (4)(a) The wine and spirits purchased by the purchasing group must be delivered to and stored in a single warehouse facility or single licensed premises owned and operated by one of the retail licensee members of the group. Alternatively, the purchasing group may arrange for a common carrier approved for such purpose by the board to pick up the wine or spirits at the licensed premises of the distributor, distiller, rectifier, importer, or certificate of approval holder from which the product is purchased and deliver it to such licensed location or locations operated by the members of the purchasing group as the members may direct.
     (b) Payment in full for the entire group purchase must be tendered to the seller by the designated agent at or before the time of delivery in accordance with RCW 66.28.270.
     (c) If the group elects to arrange for pickup of the product at the seller's licensed premises, delivery is deemed to occur at the time of pickup and payment in full for the entire order must be tendered to the seller at or before such time in compliance with RCW 66.28.270. All costs of the pickup and subsequent delivery must be borne by the group.

NEW SECTION.  Sec. 5   (1) Except as provided otherwise in subsection (2) of this section, this act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately.
     (2) Section 3 of this act takes effect January 1, 2014.