WSR 26-14-112 (26-14)

[Filed July 1, 2026, 10:34 a.m.]

Preproposal statement of inquiry was filed as WSR 26-09-065.

Title of Rule and Other Identifying Information: Implementing 2SHB 1701, chapter 196, Laws of 2026. The Washington state liquor and cannabis board (LCB) is proposing to create a new rule and amend existing rules as follows:

WAC	Amended/New	Name
314-02-006	New	Liquor licensee leases
314-07-020	Amended	Liquor licensee qualifications and application process
314-12-140	Amended	Prohibited practices—Contracts—Gifts—Rebates, etc.

Additionally, some rule making previously done to implement EHB 1602 from last session should have included revisions to WAC 314-07-020 and 314-12-140 that are being done here.

Hearing Location(s): On Wednesday, August 12, 2026, at 10:00 a.m. Public hearings related to LCB rule-making activity will be held in a "hybrid" environment. This means that the public will have options for in-person or virtual attendance and for providing verbal comments during public rules hearings. A meeting room will be set up at Headquarters Building, 1025 Union Avenue, Olympia, WA 98504, for in-person attendance and the public may also log in using a computer or a device, or call-in using a phone, to listen to the meeting through the Microsoft Teams application. Please note that although the meeting room will be staffed during the hearing, LCB staff may appear virtually.

LCB encourages those who would like to provide public comment to register in advance. Those who have not registered by 10:00 a.m. on the hearing date, or who arrive after the hearing has started, cannot be guaranteed the opportunity to speak.

For questions about providing verbal comments at rules public hearings, and to register in advance to provide verbal comments, please email publichearings@lcb.wa.gov. For more information about providing verbal comments at rules public hearings, please visit https://lcb.wa.gov/publichearings.

Date of Intended Adoption: No earlier than September 2, 2026.

Submit Written Comments to: Daniel Jacobs, Rules and Policy Coordinator, P.O. Box 48030, Olympia, WA 98504-3080, email rules@lcb.wa.gov, fax 360-704-5027, beginning July 1, 2026, 12:00 p.m., by August 12, 2026, 10:00 a.m.

Assistance for Persons with Disabilities: Contact Jonnita Thompson, ADA coordinator, human resources, phone 360-974-9591, fax 360-664-9689, TTY 711 or 1-800-833-6388, email jonnita.thompson@lcb.wa.gov, by August 5, 2026.

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The purpose of these proposed rules is to implement 2SHB 1701, chapter 196, Laws of 2026, codified at RCW 66.24.010(13) and 66.28.295(16). There are additionally minor changes to WAC 314-07-020 implementing EHB 1602 (chapter 141, Laws of 2025).

Changes to existing rules: Existing rules at WAC 314-07-020 and 314-12-140 are amended to include language specifically allowing the new activity allowed by 2SHB 1701. Additionally, recently completed rule making implementing EHB 1602 (see WSR 26-10-096) is also referenced.

Definitions in new rule (WAC 314-02-006(1)): The definitions of "lease," "lessor," and "lessee," are adapted from RCW 62A.2A-103, the Uniform Commercial Code section defining terms dealing with leases. The definition of "person" is deliberately broader than that used in RCW 66.04.010 to include the use of limited liability corporations and nonlicensees.

Requiring submission and retention of leases (WAC 314-02-006(2)): RCW 66.24.010 (13)(c) permits the agency to require submission of leases, and LCB is opting to require submission, as well as licensee retention of any submitted leases, consistent with existing recordkeeping requirements.

Leasing of kitchen space (WAC 314-02-006(3)): Clarifies that secure separate liquor storage remains a requirement, consistent with other rules that allow licensees to share adjacent spaces. Also, clarifies that the sharing of kitchen space is not the same thing as contracting out required food service, which is permitted as described in separate rule making recently completed.

Leases cannot require illegal activity or promote undue influence (WAC 314-02-006(4)): Clarifies that leases cannot require illegal activity, nor require a lessee to sell or promote a lessor's product, reflecting concerns related to tied-house laws.

Rule is not an expansion of shared space (WAC 314-02-006(5)): While the legislature has permitted licensees to share the same space, and expanded those opportunities through other rule making, this is not meant as a further expansion. This rule making addresses where licensees occupy adjacent spaces on the same premises, but do not share the same area of the same premises, hence the definition of "separate spaces."

Reasons Supporting Proposal: The reasons supporting these proposed rules, in addition to those described above, are identified in the tables herein.

Below are the tables for the proposed amendments to existing rules:

WAC 314-07-020
Section	Old Language	New Language	Reason
(7)	The board will conduct an investigation to establish the applicant's exclusive right to the real and personal property and to verify the true party(ies) of interest.	(Renumbered as subsection (7)(a))	Renumbered subsection (7) to subsection (7)(a) to reflect addition of subsections (7)(b)-(d).
(7)(a)	(See above)
(7)(b)	N/a	Licensees are permitted to engage in leases consistent with RCW 66.24.010(13) and 66.28.295(16), and WAC 314-02-006.	Added language to allow new activities as permitted in 2SHB 1701.
(7)(c)	N/a	Beer and/or wine licensees are permitted to engage in contracts, leases, or subleases to satisfy food service requirements consistent with RCW 66.24.240, 66.24.244, and 66.24.320, and WAC 314-02-045.	Added language to allow new activities as permitted in rule making implementing EHB 1602 from the 2025 legislative session, completed effective June 6 (see WSR 26-10-096).
(7)(d)	N/a	Spirits, beer, and wine licensees are permitted to engage in contracts, leases, or subleases to satisfy food service requirements consistent with RCW 66.24.240, 66.24.244, and 66.24.400, and WAC 314-02-015 and 314-02-035.

WAC 314-12-140
Section	Old Language	New Language	Reason
(4)	No industry member or employee thereof shall, directly or indirectly, give, furnish, rent or lend to, or receive from, any retailer, any equipment, fixtures, supplies or property of any kind, nor shall any retail licensee, directly or indirectly, receive, lease or borrow from, or give or offer to, any industry member any equipment, fixtures, supplies or property of any kind. Sales authorized in this regulation shall be made on a cash on delivery basis only.	(Renumbered as subsection (4)(a))	Renumbered subsection (4) to subsection (4)(a) to reflect addition of subsection (4)(b).
(4)(a)	(See above)
(4)(b)	N/a	Licensees are permitted to engage in leases consistent with RCW 66.24.010(13), 66.28.295(16), and WAC 314-02-006.	Added language to allow new activities as permitted in 2SHB 1701.

This table below describes the new rule at WAC 314-02-006:

WAC 314-02-006
Section	Proposed Language	Reason
(1)	Definitions. The following definitions apply within this rule:
(1)(a)	"Lease" means a transfer of the right to possession and use of real or personal property for a term in return for consideration.	Definitions are based on those used in RCW 62A.2A-103, which defines the terms for the Uniform Commercial Code.
(1)(b)	"Lessee" means a person who acquires the right to possession and use of real or personal property under a lease.
(1)(c)	"Lessor" means a person who transfers the right to possession and use of real or personal property under a lease.
(1)(d)	"Person" means an individual or entity such as a partnership, association, limited liability corporation, not-for-profit organization, or a corporation.	Definition is deliberately broader than RCW 66.04.010 to allow for nonlicensees and other entities.
(1)(e)	"Separate space" as used in RCW 66.28.295(16), means areas separated by physical barriers.	Includes spaces separated by walls but does not require the use of walls.
(2)(a)	Consistent with RCW 66.24.010 (13)(c), all lease agreements, operating agreements, and other contracts in existence between licensees, businesses, and the lessor, and between lessors and lessees, and amongst lessees, must be submitted to the board.	See RCW 66.24.010 (13)(c).
(2)(b)	All agreements and contracts described in (a) of this subsection must also be kept and maintained consistent with WAC 314-11-095.	Clarifying that any documents that need to be submitted to LCB also need to be kept and maintained by the licensee consistent with existing record-keeping requirements.
(3)	Lease of kitchen space: A lessor that leases use of its kitchen to a lessee must comply with the following:	Leasing kitchen space involves separate considerations of liquor storage, food service requirements, and is specifically identified as permitted by the legislation.
(3)(a)	Lessor must ensure that the lessee holds all required state and local business licenses before operating out of the kitchen;	See RCW 66.24.010 (13)(b).
(3)(b)	Licensees must maintain separate secure storage of their alcohol inventory when leasing kitchen space; and	Separate storage of liquor is required when sharing space, consistent with existing requirements in WAC 314-03-200 (4)(c).
(3)(c)	A licensee may lease out their kitchen space but may not contract out their food service unless:	Refers to permitted contracting of food service consistent with rule making implementing EHB 1602 from the 2025 legislative session, completed effective June 6 (see WSR 26-10-096).
(3)(c)(i)	The licensee does not have a food service requirement; or
(3)(c)(ii)	As permitted in WAC 314-02-015, 314-02-035, or 314-02-045.
(4)	All leases under this section must comply with the following:	See RCW 66.24.010 (13)(d).
(4)(a)	Leases shall not contain any profit or revenue sharing;
(4)(b)	Leases shall not require that the lessee serve products made by the lessor;
(4)(c)	Leases shall not require that the lessee advertise products made by the lessor; and	This is a logical parallel of the prohibition in RCW 66.24.010 (13)(d).
(4)(d)	Leases shall not require any activity prohibited by WAC 314-12-140 or other sections of Title 314 WAC.	Reflecting the general principle that a contract cannot require illegal activity.
(5)	Nothing in this rule allows licensees to share space beyond what is permitted in RCW 66.24.1472, 66.24.710(7), and 66.24.800.	Beyond the leasing of kitchen space provisions, clarifying that this rule is not intended to expand permissible space sharing.

Statutory Authority for Adoption: RCW 66.08.030, 66.24.010, 66.24.246, and 66.28.295.

Statute Being Implemented: EHB 1602 (chapter 141, Laws of 2025), 2SHB 1701, (chapter 196, Laws of 2026); and RCW 66.04.010, 66.24.010, 66.24.240, 66.24.244, 66.24.420, 66.24.400, 66.24.410, and 66.28.295.

Rule is not necessitated by federal law, federal or state court decision.

Name of Proponent: LCB, governmental.

Name of Agency Personnel Responsible for Drafting: Daniel Jacobs, Rules and Policy Coordinator, 1025 Union Avenue, Olympia, WA 98504, 360-480-1238; Implementation: Becky Smith, Director of Licensing, 1025 Union Avenue, Olympia, WA 98504, 360-664-1753; and Enforcement: Lawrence Grant, Director of Enforcement and Education, 1025 Union Avenue, Olympia, WA 98504, 360-974-9567.

A school district fiscal impact statement is not required under RCW 28A.305.135.

A cost-benefit analysis is not required under RCW 34.05.328. The proposed amended rules do not qualify as a type of rule requiring a cost-benefit analysis under RCW 34.05.328(5). LCB is not a listed agency under RCW 34.05.328 (5)(a)(i), so the cost-benefit analysis requirements in RCW 34.05.328 are not applicable to the proposed rules unless voluntarily applied or made applicable by the joint administrative rules review committee under RCW 34.05.328 (5)(a)(ii).

This rule proposal, or portions of the proposal, is exempt from requirements of the Regulatory Fairness Act because the proposal:

Is exempt under RCW 19.85.025(3) as the rule content is explicitly and specifically dictated by statute.

Explanation of exemptions: These rules are implementing legislation and passed by the Washington state legislature, signed by the governor, and enacted into law and codified in amendments to existing statute. The rule changes are therefore dictated by statute, qualifying under RCW 34.05.310 (4)(e).

Scope of exemption for rule proposal:

WAC 314-02-006Liquor licensee leases.

(1) Definitions. The following definitions apply within this rule:

(a) "Lease" means a transfer of the right to possession and use of real or personal property for a term in return for consideration.

(b) "Lessee" means a person who acquires the right to possession and use of real or personal property under a lease.

(d) "Person" means an individual or entity such as a partnership, association, limited liability corporation, not-for-profit organization, or a corporation.

(e) "Separate space" as used in RCW 66.28.295(16), means areas separated by physical barriers.

(2)(a) Consistent with RCW 66.24.010 (13)(c), all lease agreements, operating agreements, and other contracts in existence between licensees, businesses, and the lessor, and between lessors and lessees, and amongst lessees, must be submitted to the board.

(b) All agreements and contracts described in (a) of this subsection must also be kept and maintained consistent with WAC 314-11-095.

(3) Lease of kitchen space: A lessor that leases use of its kitchen to a lessee must comply with the following:

(a) Lessor must ensure that the lessee holds all required state and local business licenses before operating out of the kitchen;

(b) Licensees must maintain separate secure storage of their alcohol inventory when leasing kitchen space; and

(i) The licensee does not have a food service requirement; or

(ii) As permitted in WAC 314-02-015, 314-02-035, or 314-02-045.

(4) All leases under this section must comply with the following:

(a) Leases shall not contain any profit or revenue sharing;

(b) Leases shall not require that the lessee serve products made by the lessor;

(d) Leases shall not require any activity prohibited by WAC 314-12-140 or other sections of Title 314 WAC.

(5) Nothing in this rule allows licensees to share space beyond what is permitted in RCW 66.24.1472, 66.24.710(7), and 66.24.800.

AMENDATORY SECTION(Amending WSR 15-11-106, filed 5/20/15, effective 6/20/15)

WAC 314-07-020Liquor license qualifications and application process.

Each liquor license application is unique and investigated individually. The board may inquire and request documents regarding all matters in connection with the liquor license application. Following is a general outline of the liquor license application process.

(1) Per RCW 66.24.010, the board shall send a notice to the local authority regarding the liquor license application. The local authority has ((twenty))20 days to respond with a recommendation to approve or an objection to the applicant, location, or both.

(a) The local authority may submit a written request to the board for an extension for good cause shown.

(b) If the application is within a board-recognized alcohol impact area, the board will give the local authority ((sixty))60 days to comment on the liquor license application or assumption (see WAC 314-12-215(((7)))(6) for more information).

(2) For an application for a new liquor license privilege, the board may require a public posting notice to be posted at the site for ((fourteen))14 days.

(3) For an application for a new liquor license privilege, the board shall notify schools, churches, or public colleges or universities within ((five hundred))500 feet of the business (see RCW 66.24.010(9) for more information).

(4) The board will verify that the proposed business meets the minimum requirements for the type of license or privilege requested.

(5) The board may conduct an investigation of the applicants' criminal history and administrative violation history, per WAC 314-07-040 and 314-07-045.

(6) The board may conduct a financial investigation in order to verify the source of funds used for the acquisition and startup of the business.

(7)(a) The board will conduct an investigation to establish the applicant's exclusive right to the real and personal property and to verify the true party(ies) of interest.

(b) Licensees are permitted to engage in leases consistent with RCW 66.24.010(13) and 66.28.295(16), and WAC 314-02-006.

(c) Beer and/or wine licensees are permitted to engage in contracts, leases, or subleases to satisfy food service requirements consistent with RCW 66.24.240, 66.24.244, and 66.24.320, and WAC 314-02-045.

(d) Spirits, beer, and wine licensees are permitted to engage in contracts, leases, or subleases to satisfy food service requirements consistent with RCW 66.24.240, 66.24.244, and 66.24.400, and WAC 314-02-015 and 314-02-035.

(8) The board may provide a briefing on liquor laws and rules.

(9) The board may conduct a final inspection of the proposed licensed business, in order to determine if the applicant has complied with all the requirements of the license or privilege requested.

(10) Per RCW 66.24.010 (2)(a), all applicants must have resided in the state of Washington for at least one month prior to issuance of a liquor license. For a corporation or a limited liability company, the entity meets this residency requirement if the entity was formed in Washington or has a certificate of authority to do business in Washington.

(11) All applicants and true parties of interest must be at least ((twenty-one))21 years of age.

(12) Upon failure to respond to the board licensing and regulation division's requests for information within the timeline provided, the application will be administratively closed.

AMENDATORY SECTION(Amending WSR 21-03-095, filed 1/20/21, effective 2/20/21)

WAC 314-12-140Prohibited practices—Contracts—Gifts—Rebates, etc.

(1) No industry member or retailer shall enter into any agreement which causes undue influence over another retailer or industry member. This regulation shall not be construed as prohibiting the placing and accepting of orders for the purchase and delivery of liquor which are made in accordance with the usual and common business practice and which are otherwise in compliance with the regulations.

(2) Except as permitted under RCW 66.28.310, no industry member shall advance and no retailer, any employee thereof, or applicant for a retail liquor license shall receive money or money's worth under any written or unwritten agreement or any other business practice or arrangement such as:

(a) Gifts;

(b) Discounts;

(d) Premiums;

(e) Rebates;

(f) Free liquor of any kind; or

(g) Treats or services of any nature whatsoever except such services as are authorized in this regulation.

(3) Pursuant to RCW 66.28.310 and 66.44.318 an industry member or licensed agent may perform the following services for a retailer:

(a) Build, rotate, and restock displays, utilizing filled cases, filled bottles or filled cans of its own brands only, from stock or inventory owned by the retailer.

(b) Rotate, rearrange or replenish bottles or cans of its own brands on shelves or in the refrigerators but is prohibited from rearranging or moving displays of its products in such a manner as to cover up, hide or reduce the space of display of the products of any other industry member.

(c) Industry members or any employees thereof may move or handle in any manner any products of any other manufacturer, importer or distributor on the premises of any retail licensee when a two-day notice is given to other interested industry members or their agents and such activity occurs during normal business hours or upon hours that are mutually agreed.

(d) Provide price cards and may also price goods of its own brands in accordance with the usual and common business practice and which are otherwise in compliance with the regulations.

(e) Provide point of sale advertising material and brand signs.

(f) Provide sales analysis of beer and wine products based on statistical sales data voluntarily provided by the retailer involved for the purpose of proposing a schematic display for beer and wine products. Any statistical sales data provided by retailers for this purpose shall be at no charge.

(g) Such services may be rendered only upon the specific approval of the retail licensee. Displays and advertising material installed or supplied for use on a retailer's premises must be in conformity with the board's advertising rules as set forth in chapter 314-52 WAC.

(h) Licensees holding nonretail class liquor licenses are permitted to allow their employees between the ages of ((eighteen))18 and ((twenty-one))21 to stock, merchandise, and handle liquor on or about the:

(i) Nonretail premises if there is an adult ((twenty-one))21 years of age or older on duty supervising such activities on the premises; and

(ii) Retail licensee's premises, except between the hours of 11:00 p.m. and 4:00 a.m., as long as there is an adult ((twenty-one))21 years of age or older, employed by the retail licensee, and present at the retail licensee's premises during the activities.

Any act or omission of the nonretail class liquor licensee's employee occurring at or about the retail licensee's premises, which violates any provision of this title, is the sole responsibility of the nonretail class liquor licensee.

(4)(a) No industry member or employee thereof shall, directly or indirectly, give, furnish, rent or lend to, or receive from, any retailer, any equipment, fixtures, supplies or property of any kind, nor shall any retail licensee, directly or indirectly, receive, lease or borrow from, or give or offer to, any industry member any equipment, fixtures, supplies or property of any kind. Sales authorized in this regulation shall be made on a cash on delivery basis only.

(b) Licensees are permitted to engage in leases consistent with RCW 66.24.010(13), 66.28.295(16), and WAC 314-02-006.

(5) No industry member or employee thereof shall sell to any retail licensee or solicit from any such licensee any order for any liquor tied in with, or contingent upon, the retailer's purchase of some other beverage, alcoholic or otherwise, or any other merchandise, property or service.

(6) In selling equipment, fixtures, supplies or commodities other than liquor, no industry member shall grant to any retailer, nor shall such retailer accept, more favorable prices than those extended to nonlicensed retailers. The price thereof shall be not less than the industry member's cost of acquisition. In no event shall credit be extended to any retailer.

(7) Any industry member who sells what is commonly referred to as heavy equipment and fixtures, such as counters, back bars, stools, chairs, tables, sinks, refrigerators or cooling boxes and similar articles, shall immediately after making any such sales have on file and available for inspection, records including a copy of the invoice covering each such sale, which invoice shall contain the following information:

(a) A complete description of the articles sold;

(b) The purchase price of each unit sold together with the total amount of the sale;

(d) The date of such sale and affirm that full cash payment for such articles was received from the retailer as provided in subsection (4) of this section.

(8) If the board finds in any instance that any licensee has violated this regulation, then all licenses involved shall be held equally responsible for such violation.

Note:

WAC 314-12-140 is not intended to be a relaxation in any respect of section 90 of the Liquor Act (RCW 66.28.010). As a word of caution to persons desiring to avail themselves of the opportunity to sell to retail licensees fixtures, equipment and supplies subject to the conditions and restrictions provided in section 90 of the act and the foregoing regulation, notice is hereby given that, if at any time such privilege is abused or experience proves that as a matter of policy it should be further curtailed or eliminated completely, the board will be free to impose added restrictions or to limit all manufacturers and distributors solely to the sale of liquor when dealing with retail licensees. WAC 314-12-140 shall not be considered as granting any vested right to any person, and persons who engage in the business of selling to retail licensees property or merchandise of any nature voluntarily assume the risk of being divested of that privilege and they will undertake such business subject to this understanding. The board also cautions that certain trade practices are prohibited by rulings issued under the Federal Alcohol Administration Act by the United States Bureau of Alcohol, Tobacco and Firearms, and WAC 314-12-140 is not intended to conflict with such rulings or other requirements of federal law or regulations.