SENATE BILL REPORT

SB 5644

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Background: Single Sale. When I-1183 was approved by the voters in November 2011, the sale and distribution of spirits became privatized. A spirits retail licensee can sell spirits to retailers licensed to sell spirits for on-premises consumption such as bars or restaurants. The initiative states that for sales to retailers licensed to sell spirits for on-premises consumption, no single sale may exceed 24 liters, unless it is a sale by a former contract liquor store.

The Liquor Control Board (LCB) adopted regulations that limited the single sale to one per day, for sales to bars or restaurants – retailers licensed to sell spirits for on-premises consumption. Since the initiative already limited single sales to 24 liters, this limited a retail licensee, to sales of 24 liters per day to bars and restaurants. The same limitation applies to grocery store licensees authorized to sell wine to bars and restaurants.

Spirit Sales Revenues Under the License. I-1183 requires each spirits retail licensee to pay a license issuance fee of 17 percent of all spirits sales revenues under the license to LCB for deposit into the liquor revolving fund. This is in addition to other liquor liter and sales taxes.

Article II, section 41 of the Washington State Constitution provides that an initiative passed by the people may not be amended within the first two years following enactment, except by a two-thirds vote of both the House of Representatives and the Senate.

Summary of Bill: The Legislature finds that certain regulations adopted to implement I-1183 are not consistent with the intent of the people to privatize the sale of spirits. The definitions provided in this act are consistent with the original intent of the initiative.

Single sale is defined as a single transaction without regard to when other similar transactions take place. This means that the single sale limit per day to bars and restaurants no longer applies.

Spirits sales revenues under the license no longer include sales of spirits in original containers to on-premise licensees, so the 17 percent license issuance fee does not apply to sales to bars and restaurants.

This act applies to sales on or after August 1, 2013.

Staff Summary of Public Testimony: PRO: Language in this bill restores the original intent of the people. LCB missed the mark and rules they developed negatively affect operators. I-1183 was intended to create competition. Our profit margins are too small. The contract liquor store market may disappear. Because LCB changed its interpretation, we lost 16 out of 18 restaurant accounts. Stores have gone out of business. This levels the playing field and will restore the original intent of the initiative. The rule regarding the 24-liter limit is unenforceable. This bill has a limited scope and benefits bars and restaurants. This is a step in the right direction.

CON: We oppose removal of the 24-liter limit. We provide ready access to the product. The market will change again when the distributor fee goes down. Big-box stores have a huge advantage because of the inventory they carry. This alters the law approved by the voters. We would be the only state with retail-to-retail sales. This is fundamentally unfair and benefits the big-box stores. Rules developed were approved by the Attorney General. Even if this bill passed small retailers would still suffer. This bill is not fair to small business owners. The number of spirits retail stores has grown by a factor of five, and this makes it easier to get alcohol.

OTHER: This measure will further our demise. LCB had six months to implement the law and we relied on the clear language of the initiative to develop the rules.

Persons Testifying: PRO: Bruce Beckett, WA Restaurant Assn., Monique Trudnowski, Adriatic Grill; Adam Chumas, Tom Douglas Restaurants; Jim Rowe, Consolidated Restaurants; Holly Chisa, NW Grocery Assn.; Greg Hanon, Costco; David La Claire, Wine World and Spirits; Trent House, Clearview Spirits; Julie Ganas, Leavenworth Spirits; Darren Smith, Tumwater Liquor and Wine; David Cho, Westgate Liquor.

CON: Jim Halstrom, Southern Wine and Spirits; John Guadnola, Ron Main, Assn. of Spirits & Wine Distributors of WA; Tom Kappenman, Joe Daniels, Young's Market Company; Jan Gee WA Food Industry; Tammy Bailey Bailey's IGA; Bob Broderick NW Grocers; Michael Gonzales, Joint Council of Teamsters #28; Michael Transue, WA Beer and Wine Distributors Assn.; Seth Dawson, WA Assn. for Substance Abuse and Violence Prevention.

Other: Jas Sangha, JusLiquor LLC; Rick Garza, LCB.