BILL REQ. #:  H-1681.1 

Read first time 02/25/13.   Referred to Committee on Finance.

     AN ACT Relating to exempting former contract liquor stores from spirits retail license provisions applicable to the sales of spirits to on-premise licensees and providing conditions of the sale of such stores; amending RCW 66.24.630; and creating a new section.

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

NEW SECTION.  Sec. 1   The legislature finds that the adoption and implementation of Initiative No. 1183 has had certain unanticipated adverse consequences for former contract store owners who elected to continue operations as private liquor store owners. Many of those former contract store owners believe they were misled by the liquor control board with respect to the applicability of the seventeen percent retailer license issuance fee established by the initiative in part because RCW 66.24.630(1) exempts such stores from the twenty-four liter limit applicable to retail sales to restaurants.
     The legislature further finds that, to mitigate the hardships suffered by former contract store owners, to support small business owners in less populous regions of the state, in partial satisfaction of claims that former contract store owners have asserted or may assert against the state based on alleged misrepresentations by the liquor control board, it is appropriate to modify certain of the rights and obligations of former contract store owners.

Sec. 2   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 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 licensee, except that it will 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.
     (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.