AN ACT Relating to assisting small businesses licensed to sell spirits in Washington state; amending RCW 66.24.630, and 66.28.330; adding a new section to chapter 66.28 RCW; creating a new section; and declaring an emergency.

NEW SECTION. Sec. 1. The legislature finds that in the wake of the implementation of Initiative Measure No. 1183, many small business owners suffered severe losses in assuming the operation of state-owned and contract liquor stores. Approximately one-third of these small businesses have already failed, and many more are in imminent danger of failure. These losses were due, in part, to regulatory actions of the state and unintentional misrepresentations of market conditions and the applicability of certain taxes and fees on the business being sold or transferred to these private parties. The state received over thirty million dollars from these small business people, the majority of whom are minority business owners, for the right to continue operations that were previously state-owned and operated. It is the intent of the legislature to mitigate the economic hardships facing these small businesses and create opportunities for them to restructure their enterprises to meet current market conditions.

(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:

(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:

(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:

(d) A retailer authorized to sell spirits for consumption on or off the licensed premises may accept delivery of spirits at its licensed premises, at another licensed premises as designated by the retailer, 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:

(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 RCW 66.24.632, or in (b) or (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) Those licensees who are either holders of former state liquor store operating rights under RCW 66.24.620, or the owners of former contract liquor stores, who are qualified as a small business under RCW 19.85.020 and are licensed under subsection (3)(c) of this section, are subject to the following requirements regarding the payment of license issuance fees:

(i) Licensees with monthly gross receipts of three hundred thousand dollars or less must pay a license issuance fee of seven percent on the first fifty thousand dollars of its monthly retail spirits sales revenues and must pay seventeen percent on the remainder of its monthly retail spirits sales revenues; and

(ii) Licensees with monthly gross receipts of more than three hundred thousand dollars must pay a license issuance fee of seventeen percent on the full amount of its monthly retail spirits sales revenues.

(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 retail 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 retail 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.

(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.

(1) If a licensee subject to the license issuance fee requirements of RCW 66.24.630(4) fails to submit its quarterly reports or payment to the board, the board may assess a penalty at a rate no higher than one-half percent per month on the balance of the unpaid license issuance fee.

(2) Any penalty imposed on a licensee for its failure to pay the license issuance fee that accrued prior to the effective date of this section shall be waived, and all penalty payments made by licensees prior to the effective date of this section, if any, must be credited towards any outstanding balance of unpaid license issuance fee or towards the future payments of its license issuance fee.

(3) A holder of the right to operate a former contract liquor store or former state liquor store who has any outstanding balance of unpaid license issuance fee accrued prior to the effective date of this section shall not be denied the ability to reopen its closed store, to relocate its store to a new location, or to lease its right to a new licensee during the twenty-four months following the effective date of this section, for reason of nonpayment of the license issuance fee. The right holder's failure to pay the license issuance fee until after said twenty-four months will be a sufficient ground for suspending or revoking its license or any third party's license then associated with the holder's operating right.

(1) No price for spirits or wines sold in the state by a distributor, retailer, or other licensee acting as a distributor or retailer pursuant to this title may be below acquisition cost unless the item sold below acquisition cost has been stocked by the seller for a period of at least six months. The seller may not restock the item for a period of one year following the first effective date of such below cost price. For the purpose of this section, "acquisition cost" includes any license issuance fee imposed on the licensee by operation of law on the selling price of the sale of spirits.

(2) Spirits sold to retailers for resale for consumption on or off the licensed premises may be delivered to the retailer's licensed premises, to a location specified by the retailer and approved for deliveries by the board, or to a carrier engaged by either party to the transaction.

(3) In selling spirits to another retailer, to the extent consistent with the purposes of chapter 2, Laws of 2012, a spirits retail licensee must comply with all provisions of and regulations under this title applicable to wholesale distributors selling spirits to retailers.

(4) A distiller holding a license or certificate of compliance as a distiller under this title may act as distributor in the state of spirits of its own production or of foreign-produced spirits it is entitled to import. The distiller must, to the extent consistent with the purposes of chapter 2, Laws of 2012, comply with all provisions of and regulations under this title applicable to wholesale distributors selling spirits to retailers.

(5) With respect to any alleged violation of this title by sale of spirits at a discounted price, all defenses under applicable trade regulation laws are available, including without limitation good faith meeting of a competitor's lawful price and absence of harm to competition.

(6) Notwithstanding any other provision of law, no licensee may import, purchase, distribute, or accept delivery of any wine that is produced outside of the United States or any distilled spirits without the written consent of the brand owner or its authorized agent.

NEW SECTION. Sec. 5. 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.


State of Washington	64th Legislature	2015 Regular Session