Washington State

House of Representatives

Office of Program Research

BILL

ANALYSIS

Commerce & Gaming Committee

ESSB 6095

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.

Brief Description: Describing permissible common carrier activities under the three-tier system.

Sponsors: Senate Committee on Labor & Commerce (originally sponsored by Senator Keiser).

Brief Summary of Engrossed Substitute Bill

  • Exempts interstate common carrier licensees (common carriers) from certain prohibited activities under three-tier system requirements, including transporting liquor purchased by ticketed passengers.

  • Allows members of the liquor industry to enter into arrangements to provide tastings to passengers of common carriers, with or without charge.

  • Allows common carriers to purchase alcoholic beverages outside the state and import the beverages for sales and service aboard passenger trains, vessels, and airplanes.

  • Allows the carriers to provide complimentary alcoholic beverages to the passengers.

  • Extends certain retailer exceptions to the moneys' worth prohibition to interstate common carrier licensees, including the provision of branded promotional items and personal services.

Hearing Date: 2/24/20

Staff: Kyle Raymond (786-7190).

Background:

Built into the post-prohibition legal framework regulating liquor manufacturing, distribution, and sales is a separation between the three tiers of the liquor industry: (1) manufacturing; (2) distributing; and (3) retailing. Liquor licensees in the manufacturing and distributing tiers of the industry, and their authorized representatives, are defined as "industry members" for certain purposes in liquor statutes. The full definition of "industry member" is: a licensed manufacturer, producer, supplier, importer, wholesaler, distributor, authorized representative, certificate of approval holder, warehouse, and any affiliates, subsidiaries, officers, directors, partners, agents, employees, and representatives of any industry member.

A "retailer" is defined as the holder of a license issued by the Liquor and Cannabis Board (LCB) to allow for the sale of alcoholic beverages to consumers for consumption on or off premises and any of the retailer's agents, officers, directors, shareholders, partners, or employees. A retailer does not include the LCB or any of its employees.

There are two primary prohibitions that provide the separation between the tiers of the industry. First, generally liquor licensees in the manufacturing and distributing tiers are prohibited from having financial interests in a business within the retail tier of the industry, and vice versa. Secondly, industry members are prohibited from providing "money or moneys' worth," under any type of business practice or arrangement, to a business in the retail tier of the industry. Retailers are similarly prohibited from receiving money or moneys' worth from industry members.

There are specific exceptions authorizing various business practices that may otherwise be prohibited. Examples of exceptions to the moneys' worth prohibition include, among others, the following authorizations:

The performance of personal services may include participation and pouring, bottle signing events, and other similar informational or educational activities related to the manufacturer's products.

Interstate Common Carrier's License.

The interstate common carrier's license authorizes the sale of spirituous liquor, wine, and beer at retail for passenger consumption on a train passenger car, vessel, or airplane, while in or over the territorial limits of the state. Interstate common carrier's licensees (common carriers) may transport and store liquor for later retail sale to passengers in passenger train cars, vessels, or airplanes.

Alcoholic beverages sold and/or served for consumption by common carriers while within or over the territorial limits of this state are subject to the state liquor taxes within the state. Common carriers are required to report sales and/or service and pay taxes in accordance with procedures prescribed by the LCB.

Summary of Bill:

Interstate common carrier licensees (common carriers) are authorized to conduct certain activities, including to:

In addition, common carriers may accept payment from an industry member for advertising if: (1) the advertising appears in a publication produced and distributed to passengers of the common carrier; (2) the amount of the payment is consistent with the advertising rates paid by other advertisers; and (3) the payment is not used to induce or exclude industry member products.

Common carriers may purchase alcoholic beverages outside the state and import the beverages for sales and service aboard passenger trains, vessels, and airplanes. Common carriers may also provide complimentary alcoholic beverages to train, vessel, or airplane passengers. An industry member may enter into an arrangement to provide tastings, with or without charge, to passengers of a common carrier.

Existing exceptions to the moneys' worth prohibition for retailers apply to common carriers, including the following authorizations:

Appropriation: None.

Fiscal Note: Not requested.

Effective Date: The bill takes effect 90 days after adjournment of the session in which the bill is passed.