SENATE BILL REPORT

E2SHB 1807

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: Spirits Retail Licensees. Businesses licensed by the Liquor Control Board (LCB) to sell spirits at the retail level are designated as spirits retail licensees. Such licensees generally fall into two categories: (1) grocery stores and other large retail establishments encompassing at least 10,000 feet of retail space; and (2) smaller liquor stores that are either former state-owned liquor stores or former contract liquor stores that sold liquor on behalf of the state pursuant to contracts with LCB prior to the passage of Initiative 1183 in 2011.

License Issuance Fee. With one exception, all spirits retail licensees must pay an annual license issuance fee to LCB in the amount of 17 percent of all spirit sales revenue. In 2013 the former state liquor stores and former contract liquor stores were granted a limited exemption from the 17 percent fee for spirits sales to retailers licensed to sell spirits for consumption on the premises, i.e. bars and restaurants.

Sanctions for Late Payments. Failure of a spirits retailer licensee to submit its quarterly reports and payments to the board is sufficient grounds for the board to suspend or revoke the business's liquor license. A penalty of 2 percent per month is assessed on any payments postmarked after the twenty-fifth day the quarterly reports are due.

Spirits Delivery Locations. A spirits retail licensee is authorized to accept delivery of spirits shipments either at its licensed premises or at one or more warehouse facilities that have been registered with LCB.

Summary of Bill: Sanctions for Late Payments of the License Issuance Fee. LCB cannot assess a monetary penalty exceeding 1 percent of the balance due against a licensee that fails to timely pay the license issuance fee.

LCB must waive any penalty against a licensee accruing before the effective date of this act as the result of the failure to pay the license issuance fee. All penalty payments made by a licensee prior to the effective date of this act must be credited toward either the outstanding balance or future license fee payments.

During the 24 months following the effective date of this act, an operator of a former contract liquor store or former state liquor store having an outstanding balance of unpaid license issuance fees accrued prior to the effective date of this act cannot be prohibited from either: (1) reopening a closed store; (2) moving a store to a new location; or (3) transferring its licensing rights to a new licensee. Upon the expiration of the 24-month period following the effective date of this act, failure to pay the license issuance fee is sufficient grounds for LCB to suspend or revoke the license.

Volume Discounts and Spirits Delivery Locations. For the purpose of negotiating volume discounts, a group of spirits retail licensees may accept delivery of spirits at their individual licensed premises, at any one of the individual licensees premises, or at a warehouse facility registered with LCB.

Staff Summary of Public Testimony: PRO: This bill retains two pieces that assist small liquor stores that have struggled due to decisions that were beyond their control. It allows group purchases to help them keep their costs down. The bill reduces the interest rates on penalties and waives past penalties. The waiver provision is the cost driver in the bill. This is probably our last effort to save these small stores. LCB has not used the provision that requires LCB to use revenues from the sale of assets to prevent harm to contract liquor stores. The contract liquor stores were profitable before passage of the initiative. The initiative used the California model, but not the California pricing.