AN ACT Relating to the service and sales of spirits, wine, and beer; amending RCW 66.24.145, 66.24.175, 66.24.380, 66.24.495, 82.08.150, and 66.24.630; adding new sections to chapter 66.24 RCW; and adding new sections to chapter 66.20 RCW.

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

Sec. 1.  RCW 66.24.145 and 2014 c 92 s 1 are each amended to read as follows:

(1)(a) Any craft distillery may sell spirits of its own production for consumption off the premises.

(c) A craft distillery selling spirits under this subsection (1) must comply with the applicable laws and rules relating to retailers.

(2) Any craft distillery may contract distilled spirits for, and sell contract distilled spirits to, holders of distillers' or manufacturers' licenses, including licenses issued under RCW 66.24.520, or for export.

(3) Any craft distillery licensed under ((this section))RCW 66.24.140(1) (a) or (d) may provide, free or for a charge, one-half ounce or less samples of spirits of its own production to persons on the premises of the distillery. The maximum total per person per day is two ounces. Every person who participates in any manner in the service of samples must obtain a class 12 alcohol server permit.

(4) A craft distillery licensee who is licensed for more than one distillery location may serve samples and sell spirits of their own production, at retail, at any of their licensed locations.

(6) The board must adopt rules to implement the alcohol server permit requirement and may adopt additional rules to implement this section.

(((5)))(7) Distilling is an agricultural practice.

Sec. 2.  RCW 66.24.175 and 2014 c 105 s 2 are each amended to read as follows:

(1) A qualifying farmers market authorized to allow wineries to sell bottled wine at retail under RCW 66.24.170 ((or microbreweries)), a microbrewery authorized to sell bottled beer at retail under RCW 66.24.244, or ((both,))a craft distillery authorized to sell bottled spirits at retail under RCW 66.24.145 may apply to the liquor control board for an endorsement to allow sampling of wine ((or beer or both. A winery or microbrewery)), beer, or spirits. A winery, microbrewery, or craft distillery offering samples under this section must have an endorsement from the board to sell wine ((or)), beer, or spirits, as the case may be, of its own production at a qualifying farmers market under RCW 66.24.170 ((or 66.24.244, respectively)), 66.24.244, or 66.24.145, respectively. The operator of a qualifying farmers market cannot be compelled to offer samples of wine, beer, or spirits and the operator has the discretion as to which, if any, of the license holders may sample their products in the market.

(2) Samples may be offered only under the following conditions:

(a) No more than three wineries ((or)), microbreweries, or craft distilleries combined may offer samples at a qualifying farmers market per day.

(b) Samples of wine or beer must be two ounces or less. A winery or microbrewery may provide a maximum of two ounces of wine or beer to a customer per day. A craft distillery may provide one-half ounce or less samples of spirits, with a maximum total per person per day of two ounces.

(c) A winery ((or)), microbrewery, or craft distillery may advertise that it offers samples only at its designated booth, stall, or other designated location at the farmers market.

(d) Customers must remain at the designated booth, stall, or other designated location while sampling beer ((or)), wine, or spirits.

(e) Winery ((and)), microbrewery, or craft distillery licensees and employees who are involved in sampling activities under this section must hold a class 12 or class 13 alcohol server permit.

(f) A winery ((or)), microbrewery, or craft distillery must have food available for customers to consume while sampling beer or wine, or must be adjacent to a vendor offering prepared food.

(3) The board may establish additional requirements to ensure that persons under twenty-one years of age and apparently intoxicated persons may not possess or consume alcohol under the authority granted in this section.

(4) The board may prohibit sampling at a farmers market that is within the boundaries of an alcohol impact area recognized by resolution of the board if the board finds that the sampling activities at the farmers market have an adverse effect on the reduction of chronic public inebriation in the area.

(5) If a winery ((or)), microbrewery, or craft distillery is found to have committed a public safety violation in conjunction with tasting activities, the board may suspend the licensee's farmers market endorsement and not reissue the endorsement for up to two years from the date of the violation. If mitigating circumstances exist, the board may offer a monetary penalty in lieu of suspension during a settlement conference.

(6) For the purposes of this section, a "qualifying farmers market" has the same meaning as defined in RCW 66.24.170.

NEW SECTION.  Sec. 3.  A new section is added to chapter 66.24 RCW to read as follows:

(1) A licensed distillery or licensed craft distiller may apply to the board for an endorsement to serve and sell wine and beer at any of its authorized locations. The endorsement permits the sale of beer and wine for consumption on or off the premises allowing the licensee the ability to:

(a) Provide individual servings of wine from a domestic winery, made with grapes from Washington state, for free or for a charge;

(b) Sell, for off-premises consumption, domestic wine in original sealed packages of the manufacturer or bottler;

(c) Sell, for off-premises consumption, domestic wine in kegs or sanitary containers meeting the applicable requirements of federal law brought to the premises by the purchaser or furnished by the licensee and filled at the tap at the time of sale;

(d) Provide individual servings of beer made in Washington state by a domestic microbrewery;

(e) Sell, for off-premises consumption, beer made in Washington state by a domestic microbrewery, in original sealed packages of the manufacturer or bottler; and

(f) Sell, for off-premises consumption, beer made in Washington state by a domestic microbrewery, in a sanitary container brought to the premises by the purchaser or furnished by the licensee and filled at the tap by the licensee at the time of sale.

(2) The annual fee for this endorsement is seventy-five dollars.

(3) The distillery or craft distillery providing wine or beer under this subsection may purchase the products directly from a licensed distributor or from the producer.

NEW SECTION.  Sec. 4.  A new section is added to chapter 66.20 RCW to read as follows:

(1) Upon application, the board may issue a special permit to sell and consume wine, beer, or spirits at a banquet or special occasion, at a specified date and place, if the event is held by a licensee at a winery authorized to sell bottled wine at retail under RCW 66.24.170, a microbrewery authorized to sell bottled beer at retail under RCW 66.24.244, or a craft distillery authorized to sell bottled spirits at retail under RCW 66.24.145. In the case of a craft distillery the sales, service, and on-premises consumption of spirits is to be confined to the distillery's nonbonded area of the premises.

(2) The wine, beer, or spirits served at a banquet or special occasion event must be of the winery, microbrewery, or craft distillery's own production. If permission is obtained from the board prior to the event, the licensee may sell wine, beer, or spirits of their own production in original, unopened containers for off-premises consumption.

(3) The banquet or special occasion permits, available under this section, may only be issued for events that are limited to persons who have a common purpose or interest for attending, either business or social or a combination of both. The permits may not be issued for events that are open to the general public.

(4) The winery, microbrewery, or craft distillery licensees and employees who are involved in providing service under this section must hold a class 12 or class 13 alcohol server permit.

(5) A winery, microbrewery, or craft distillery is not required to offer or provide food as part of the banquet or special occasion permit.

(6) A winery, microbrewery, or craft distillery licensee may not be issued banquet or special occasion permits for more than twelve calendar days per year.

(7) The fee for a banquet or special occasion permit issued under this section is sixty dollars per day.

NEW SECTION.  Sec. 5.  A new section is added to chapter 66.24 RCW to read as follows:

(1)(a) A craft distillery licensed under RCW 66.24.140(1) (a) or (d) may sell by the individual glass, at retail, for consumption on the premises, mixed drinks and cocktails compounded and mixed on the premises with spirits of its own production. The beverages may also be blended with spirits made by other distilleries so long as the majority of the spirits are produced in Washington.

(b) A domestic winery licensed under RCW 66.24.170 or a microbrewery licensed under RCW 66.24.244 may sell by the individual glass, at retail, for consumption on the premises, mixed drinks and cocktails compounded and mixed on the premises with spirits so long as the majority of the spirits served are produced in Washington.

(2) A craft distillery, domestic winery, or microbrewery is limited to serving no more than a total of two mixed drinks or cocktails per person per day.

(3) A craft distillery, domestic winery, or microbrewery may not be required to offer or provide food under this section.

(4) Every person who participates in any manner in the mixing of spirits must hold a class 13 alcohol server permit.

(5) Sales of mixed drinks and cocktails compounded and mixed on the premises under this section may not exceed twenty percent of the craft distillery, domestic winery, or microbrewery's gross revenue.

(6) A craft distillery, domestic winery, or microbrewery serving beverages under this section may purchase the additional spirits for blending beverages directly from a licensed distributor or from the producer.

(7) No additional license or endorsement is required for a craft distillery, domestic winery, or microbrewery to serve mixed drinks and cocktails under this section.

NEW SECTION.  Sec. 6.  A new section is added to chapter 66.24 RCW to read as follows:

(1) A domestic winery licensed under RCW 66.24.170 or a microbrewery licensed under RCW 66.24.244 may sell spirits bottled in their original container, which are made in Washington by a licensed craft distillery, at retail, for consumption off-premises.

(2) A domestic winery or microbrewery selling spirits under this section may purchase the spirits directly from a licensed distributor or craft distillery.

NEW SECTION.  Sec. 7.  A new section is added to chapter 66.20 RCW to read as follows:

(1) The holder of a license to operate a distillery or craft distillery issued under RCW 66.24.140 or 66.24.145 may apply to the board to ship its spirits to a person who is a resident of Washington and is twenty-one years of age or older for that person's personal use and not for resale.

(2) An applicant for a spirits shipper's permit under this section must: (a) Operate a distillery or craft distillery in Washington; (b) certify that it holds all necessary state and federal licenses and permits; and (c) register with the department of revenue under RCW 82.32.030.

(3) Holders of a spirits shipper's permit must: (a) Pay the tax under RCW 66.24.210 for sales of spirits to Washington state residents; and (b) collect and remit to the department of revenue all applicable state and local sales and use taxes imposed by or under the authority of chapters 82.08, 82.12, and 82.14 RCW on all sales of spirits delivered to buyers in this state.

(4) A spirits shipper's permit holder must clearly label all outside shipping packages of spirits sent in this state to indicate that the package cannot be delivered to a person under twenty-one years of age or to an intoxicated person.

(5) A spirits shipper's permit holder must ensure that the private carrier used to deliver spirits: (a) Obtains the signature of the person who receives the spirits upon delivery; (b) verifies the age of the recipient; and (c) verifies that the recipient does not appear intoxicated at the time of delivery.

(6) A spirits shipper's permit holder must report to the board, on or before the twentieth day of each month, all shipments of spirits made during the preceding calendar month directly to Washington consumers under its permit. All reports will be on forms prescribed by the board.

(7) A spirits shipper's permit holder who advertises or offers spirits for direct shipment to customers within this state must clearly and conspicuously display the permit number in its advertising.

(8) A fee for a spirits shipper's permit may be established by the board.

(9) The privilege to ship spirits directly to Washington consumers under a spirits shipper's permit must be suspended or revoked if the distillery or craft distillery fails to comply with the provisions of this section.

Sec. 8.  RCW 66.24.380 and 2012 c 2 s 112 are each amended to read as follows:

There is a retailer's license to be designated as a special occasion license to be issued to a not-for-profit society or organization to sell spirits, beer, and wine by the individual serving for on-premises consumption at a specified event, such as at picnics or other special occasions, at a specified date and place; fee sixty dollars per day.

(1) The not-for-profit society or organization is limited to sales of no more than twelve calendar days per year. For the purposes of this subsection, special occasion licensees that are "agricultural area fairs" or "agricultural county, district, and area fairs," as defined by RCW 15.76.120, that receive a special occasion license may, once per calendar year, count as one event fairs that last multiple days, so long as alcohol sales are at set dates, times, and locations, and the board receives prior notification of the dates, times, and locations. The special occasion license applicant will pay the sixty dollars per day for this event.

(2) The licensee may sell spirits, beer, and/or wine in original, unopened containers for off-premises consumption if permission is obtained from the board prior to the event.

(3) Sale, service, and consumption of spirits, beer, and wine is to be confined to specified premises or designated areas only.

(4) Liquor sold under this special occasion license must be purchased from a licensee of the board.

(5) A not-for-profit society or organization licensed to sell spirits under this section is exempt from collecting and paying the taxes imposed under RCW 82.08.150.

(6) Any violation of this section is a class 1 civil infraction having a maximum penalty of two hundred fifty dollars as provided for in chapter 7.80 RCW.

Sec. 9.  RCW 66.24.495 and 1997 c 321 s 33 are each amended to read as follows:

(1) There shall be a license to be designated as a nonprofit arts organization license. This ((shall be))is a special license to be issued to any nonprofit arts organization ((which))that sponsors and presents productions or performances of an artistic or cultural nature in a specific theater or other appropriate designated indoor premises approved by the board. The license ((shall))must permit the licensee to sell liquor to patrons of productions or performances for consumption on the premises at these events. The fee for the license ((shall be))is two hundred fifty dollars per annum.

(2) For the purposes of this section, the term "nonprofit arts organization" means an organization which is organized and operated for the purpose of providing artistic or cultural exhibitions, presentations, or performances or cultural or art education programs, as defined in subsection (((3)))(4) of this section, for viewing or attendance by the general public. The organization must be a not-for-profit corporation under chapter 24.03 RCW and managed by a governing board of not less than eight individuals none of whom is a paid employee of the organization or by a corporation sole under chapter 24.12 RCW. In addition, the corporation must satisfy the following conditions:

(a) No part of its income may be paid directly or indirectly to its members, stockholders, officers, directors, or trustees except in the form of services rendered by the corporation in accordance with its purposes and bylaws;

(b) Salary or compensation paid to its officers and executives must be only for actual services rendered, and at levels comparable to the salary or compensation of like positions within the state;

(c) Assets of the corporation must be irrevocably dedicated to the activities for which the license is granted and, on the liquidation, dissolution, or abandonment by the corporation, may not inure directly or indirectly to the benefit of any member or individual except a nonprofit organization, association, or corporation;

(d) The corporation must be duly licensed or certified when licensing or certification is required by law or regulation;

(e) The proceeds derived from sales of liquor, except for reasonable operating costs, must be used in furtherance of the purposes of the organization;

(f) Services must be available regardless of race, color, national origin, or ancestry; and

(g) The liquor control board ((shall))must have access to its books in order to determine whether the corporation is entitled to a license.

(3) A nonprofit arts organization licensed to sell spirits under this section is exempt from collecting and paying the taxes imposed under RCW 82.08.150.

(4) The term "artistic or cultural exhibitions, presentations, or performances or cultural or art education programs" includes and is limited to:

(a) An exhibition or presentation of works of art or objects of cultural or historical significance, such as those commonly displayed in art or history museums;

(b) A musical or dramatic performance or series of performances; or

(c) An educational seminar or program, or series of such programs, offered by the organization to the general public on an artistic, cultural, or historical subject.

Sec. 10.  RCW 82.08.150 and 2012 c 2 s 106 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) 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 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) The taxes imposed under this section do not apply to sales conducted by not-for-profit societies or organizations licensed under RCW 66.24.380, or sales conducted by nonprofit arts organizations licensed under RCW 66.24.495.

(11) As used in this section, the terms, "spirits" and "package" have the same meaning as provided in chapter 66.04 RCW.

Sec. 11.  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-premises(([on-premises])) 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) 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, sales conducted by not-for-profit societies or organizations licensed under RCW 66.24.380, or sales conducted by nonprofit arts organizations licensed under RCW 66.24.495.

(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.

NEW SECTION.  Sec. 12.  A new section is added to chapter 66.24 RCW to read as follows:

(1) Any licensee authorized to sell at retail under this chapter may sell gift certificates and gift cards intended to be exchanged for consumer goods, including alcohol, sold by the licensee. The licensee may also sell the gift certificates and gift cards to a third-party retailer for resale to the public. Gift certificates and gift cards may not be redeemed for alcohol by persons under the age of twenty-one.

(2) For the purposes of this section, "gift certificate" and "gift cards" have the same meaning as provided in RCW 19.240.010.

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