EFFECTIVE JANUARY 1, 2024, CA WINERIES AND DISTILLERIES WILL HAVE REPORTING AND PAYMENT OBLIGATIONS TO CALRECYCLE UNDER THE BOTTLE BILL
With the passage of Senate Bill No. 1013, beginning on January 1, 2024, wine and spirits will be included in California’s state container deposit system established by the California Beverage Container Recycling and Litter Reduction Act (known as the “Bottle Bill”). As such, wineries and distilleries will now be required to comply with the Bottle Bill’s CA Redemption Value (CRV) payment and reporting obligations beginning January 1, 2024, and CRV labeling requirements for all wine and spirits sold after July 1, 2025. Beer and certain other non-alcoholic beverages were already previously covered by the Bottle Bill.
Importantly, because all wines and spirits sold in California after July 1, 2025 must be labeled with some type of approved CRV statement, producers should start including this information on their bottles and/or labels as soon as possible.
Below we have included a brief summary of the rules applicable to wines and spirits under Bottle Bill, the new registration and payment obligations, and labeling changes required to comply with the new laws.
TYPES OF BEVERAGES:
The Bottle Bill applies to beer, malt beverages, wine, spirits, wine and spirit coolers (regardless of ABV), and certain other non-alcoholic beverages intended for sale in California. Section 14504 and 14560
CA REDEMPTION VALUES (CRV): Section 14560
- For bottles smaller than 750 mL (less than 24 fluid ounces), the CRV is 5 cents/bottle.
- For bottles 750 mL or larger (24 fluid ounces or more), the CRV is 10 cents/bottle.
- For boxes, bladders, pouches, or similar containers, the CRV is 25 cents/container.
REGISTRATION & PAYMENT OBLIGATIONS BEGINNING JANUARY 1, 2024:
- Prior to January 1, 2024, all wineries and distilleries should register with CalRecycle (information regarding registration can be found here).
- All wineries and distilleries should register as a Beverage Manufacturer.
- Any wineries and distilleries that sell wine or spirits in California Direct to Consumer or Direct to a Retailer (for wine) should also register as a Distributor.
2. Pay the applicable CRV to CalRecycle.
- The winery or distillery may pass on this cost to consumers (as the consumers can return the bottles to a recycling center for the redemption). Section 14560
- Wineries and distilleries do NOT need to pay the CRV for sales made to California wholesalers or sales outside of California.
3. Pay the applicable Processing Fee.
- The processing fee is paid on all containers a winery or distillery sells, whether to wholesalers, retailers, or consumers. Section 14575(g)
- The processing fee is variable, but is currently 0.426 cents/glass bottle or for new containers, 0.574 cents/container. The Wine Institute has noted that the hope is for the processing fee to be reduced to zero.
LABELING OBLIGATIONS FOR ALL WINES AND SPIRITS SOLD AFTER JULY 1, 2025:
- All wines and distilled spirits sold in California after July 1, 2025 must be labeled with: “CA Redemption Value,” “CA Cash Refund,” “California Cash Refund,” or “CA CRV” . This statement can be added on the actual label or by sticker, stamp, embossment, or other similar method.
- Currently, there is no exemption for wines or spirits labeled before July 1, 2025. While the Wine Institute is working on legislation to create an exemption for wines labeled before January 1, 2024, wineries and distilleries should start including the required labeling on all applicable containers as soon as possible.
EXCEPTION FOR TASTING ROOM SALES:
If any wines or spirits are sold exclusively in a tasting room, then those products are exempt from the Bottle Bill’s requirements. Section 14510.
For more information regarding Bottle Bill compliance, please contact Bahaneh Hobel at [email protected] or Theresa Barton Cray at [email protected].
End in Sight for Temporary Covid Relief Measures from CA ABC
The California Department of Alcoholic Beverage Control announced today end dates for the temporary relief measures announced in 2020 in response to the Covid-19 pandemic. Depending on the specific regulatory relief in question, the relief granted by ABC, and the expanded privileges granted to many licensees during Covid, will come to an end on either June 30 or December 31, 2021.
To assist licensees during the difficulties that arose from shut downs and restricted operations during Covid, the ABC issued various Notices of Regulatory Relief, advising the industry that certain practices would essentially be temporarily permitted With the end of Covid somewhat in sight here in California, the ABC has now provided the end dates for these measures.
The following Notices of Regulatory relief will be rescinded and no longer effective as of the close of business on June 30, 2021.
- Returns of Alcoholic Beverages
- Retail-to-Retail Transactions
- Extension of Credit
- Drive-Thru Windows for Off-Sale Transactions
- Hours of Operations for Retail Sales
- Delivery Hours Extended to Midnight
- Distilled Spirits Manufacturers Providing High-Proof Spirits for Disinfection Purposes
- Virtual Wine Tastings
- Extension of Regulatory Relief for Club Licenses: Type 50, 51 and 52
The ABC is allowing certain items of regulatory relief to remain in place until the end of the year. The following Notices of Regulatory Relief will thus temporarily remain in place until December 31, 2021 and rescinded immediately thereafter.
- On-Sale Retailers Exercising Off-Sale Privileges
- Sales of Alcoholic Beverages To-Go
- Deliveries to Consumers
- Free Delivery
- Expansion of Licensed Footprint
- On-Sale Licensees without Kitchen Facilities
- “Virtual” Meet the Winemaker or Brewer Dinners
- Renewal of Relief for Charitable Promotions and Sales
- Relief from Type-75 Requirement to Produce 100 Barrels of Beer Annually
These changes will have a big impact on industry members who have spent over a year incorporating some of these practices into their sales, marketing and distribution programs. For example, as of June 30, Virtual Wine Tastings with consumers (where samples of wine were shipped to the consumer for the tasting) will no longer be permitted, although Virtual Winemaker Dinners in conjunction with licensed retailers can continue until December 31.
Absent legislative changes to the ABC Act, none of the regulatory relief measures provided by ABC during Covid will become permanent, so licensees should start preparing now to make these shifts. It should be noted that proposals are already pending in the legislature to keep some of these measures in place for the long term. For example, a bill is currently pending that would allow certain licenses to donate a portion of their proceeds to charities, which was previously prohibited.
For more information on what each of the Notices of Regulatory Relief specifically provided, please visit https://www.abc.ca.gov/law-and-policy/coronavirus19/ or contact Bahaneh Hobel.
ABC Launches New Online Portal for Mandatory Alcohol Beverage Server Training
The California Department of Alcoholic Beverage Control (ABC) has launched a new Responsible Beverage Service (RBS) portal to provide mandatory alcohol beverage service training and certification.
Under the Responsible Beverage Services Training Act, starting on July 1, 2022, all California licensees with on-premise consumption privileges (including bars, restaurants, and wineries, breweries, and distilleries with tasting rooms) must require all alcohol beverage servers and managers to attend responsible beverage service training. All servers and managers in licensees’ employment as of July 1, 2022, must attend this training and pass an online RBS exam by August 30, 2022. If any servers or managers were hired after July 1, 2022, then they must attend training and pass the RBS exam within 60 days after their hire date.
The ABC designed the RBS portal to be a one-stop shop for servers, managers, licensees, and RBS trainers and provides customized access based on user roles. Servers and managers can use the RBS portal to register as servers with the ABC, search for approved training providers, and, after completing training, take an alcohol server certification exam on the RBS portal. Licensees can soon use the RBS portal to confirm server certification and maintain online records. In addition, prospective RBS trainers who will provide training to servers on safe and responsible beverage service can submit their applications using the RBS portal.
The purpose of the mandatory training is to provide licensees, servers, and managers with tools and knowledge to promote responsible consumption and community safety and to reduce underage drinking, including by educating trainees on alcohol beverage control laws and on the impact of alcohol on the body.
All licensees with on-sale privileges should become familiar with the RBS portal and begin preparing their servers and managers to meet the training and certification deadlines above. Although the RBS training does not become mandatory until July 1, 2022, servers may use the RBS portal to search for RBS training providers and take the online certification exam now. There is no harm in fulfilling RBS training and certification requirements before July 1, 2022, so servers may want to register and complete their requirements on the RBS portal sooner rather than later. The RBS portal is available here. For any specific questions, please reach out to Bahaneh Hobel (Head of Alcohol Beverage Law) or Michael Mercurio (Law Clerk).
Prop 65 Warnings Streamlined for Alcohol Beverages Sold Online
California’s Proposition 65 warning regulations were recently amended to modify the delivery of the required state warnings for alcoholic beverages. The modified regulations somewhat ease compliance, as they will now allow for the required warning to be provided to the customer electronically for alcoholic beverages ordered online or via catalog. However, they muddle the standard for other orders that are placed for delivery.
Proposition 65, adopted in 1986, generally requires in California for a statement to be provided before the purchase of products that contain certain chemicals that may cause cancer or reproductive toxicity. Stores are generally required to post signs along-side listed products. The warning methods and language are product-specific, but there is also a requirement that, for products that are sold on line, the warning be provided via electronic device to the customer, without requiring the purchaser to seek out the warning, prior to or during the purchase of the product. Under the existing regulations for internet purchases of products, including alcoholic beverages, the warning or a clearly marked hyperlink using the word “WARNING” must be provided on the product display page or by otherwise prominently displaying the applicable warning to the customer prior to completing the purchase on the website. This rule is not changing.
In addition to the warning on the website, a copy of the alcohol beverage exposure warning was also required to be included on or in all alcohol packages when delivered in California. This portion of the rule is changing, making it easier for online orders, but more convoluted in the case of orders placed other than via the internet or catalog.
Going forward, for an order that is to be delivered to customers in California at a location other than the point of sale that is not made online or from a catalog – for example, for wines ordered in a tasting room for delivery to the customer at another location within California – the product-specific warning must be provided prior to or during the purchase of the wines. The regulation does not specify how the warning must be provided however, but presumably notice should be provided by signage similar to in-store sales, a printed warning on a sales document, or – although not spelled out specifically in the regulation –verbally for phone orders. The regulation is specific though that the warning be provided prior to or at the time of the purchase – not at the time of delivery as was the case previously.
While such transactions are now less clear, with respect to internet or catalog orders of alcoholic beverages, the warning has gotten simpler to deliver. The prior method of a warning on or in the package is still allowed, but the rule has been streamlined to instead allow the required warning to be included in an email or text message with the purchase confirmation rather than having to be printed and included with the shipment. Providing the warning as part of the electronically delivered receipt or confirmation should simplify shipping and can potentially reduce liability for inadvertent warning omissions in shipments to California.
All businesses that employ more than 10 employees that produce or sell alcoholic beverages to consumers in California are subject to Proposition 65 and must be in compliance with the modified regulations by April 1, 2021. Because the definition of “employee” under the regulations is imprecise, we recommend that all applicable Proposition 65 warnings be complied with, even if a winery or retailer has fewer than 10 employees.
For more on this and related issues, please contact Josh Devore.
TTB Adds New Standards of Fill for Wine and Distilled Spirits
On December 29, 2020, the U.S. Tax and Trade Bureau (TTB) published a final rule in the Federal Register that, among other things, expands the number of available standards of fill (or container/bottle sizes) for wine and distilled spirits, effective immediately.
Under the final rule, wine may now use the following new standards of fill: 200 mL, 250 mL, and 355 mL. No previously existing standards of fill were removed. As a result, the complete list of available standards of fill for wine are: 50 mL, 100 mL, 187 mL, 200 mL, 250 mL, 355 mL, 375 mL, 500 mL, 750 mL, 1 L, 1.5 L, and 3 L. In addition, wine can also be bottled in containers larger than 4 L if such containers are filled and labeled in quantities of whole liters (e.g., 4L, 5 L, 6 L).
Similarly, distilled spirits may now use the following new standards of fill: 700 mL, 720 mL, 900 mL, and 1.8 L. No previously existing standards of fill were removed. As a result, the complete list of available standards of fill for distilled spirits are: 50 mL, 100 mL, 200 mL, 375 mL, 700 mL, 720 mL, 750 mL, 900 mL, 1 L, 1.75 L, and 1.8 L. In addition, distilled spirits in metal containers that are generally shaped and designed like a can (i.e., cannot be readily reclosed after opening), can be filled at the following sizes: 50 mL, 100 mL, 200 mL, and 355 mL.
Furthermore, the final rule codifies the TTB’s current policy that distilled spirits may be labeled with the U.S. equivalent measurement in addition to the mandatory metric measurement, and that malt beverages may be labeled with the equivalent metric measure in addition to the mandatory U.S. measure.
The TTB expressly declined to eliminate standard of fill requirements generally and also declined to adopt an administrative approval system that would have allowed the TTB to approve additional container sizes. The TTB also noted, however, that it was committing to a future rulemaking proposing new standards of fill for wine of 180 mL, 300 mL, 360 mL, 550 mL, 720 mL, and 1.8 L, in accordance with the U.S.-Japan Free trade Agreement.
This final rule provides greater flexibility for both importers and domestic producers. Importers may now import into the U.S. certain bottle sizes that are already standard in the global marketplace and approved in other countries. Likewise, domestic producers now have more options for bottling or canning their products. In particular, the newly available 250 mL and 355 mL container sizes for wine make canned wine more viable; these can sizes are readily available since they are already mass-produced for beer and soda, and cans are often preferable to glass or large containers at certain venues or occasions.
The final rule is available here. For any specific questions, please reach out to Bahaneh Hobel (Head of Alcohol Beverage Law) or Michael Mercurio (Law Clerk).
IMPACT OF CALIFORNIA’S NEW MARKETPLACE FACILITATOR ACT ON ALCOHOL BEVERAGE LICENSEES
During all the chaos that has been 2020, alcohol beverage licensees and third party providers may have missed the enactment of a new law that actually went into effect near the end of 2019. The Marketplace Facilitator Act (the “Act”) has changed the rules and regulations regarding which businesses must collect and remit sales tax for transactions occurring on third party “marketplaces,” which include electronic platforms, apps or websites where a marketplace seller or third party provider sells or offers for sale tangible merchandise for delivery in California In brief, the Act provides that third party providers, referred to as marketplace facilitators, must collect and remit the sales tax for each sale facilitated through the third party provider’s website. The Act applies to marketplace facilitators that either (1) have physical presence in California or (2) have economic nexus with California (i.e. annual sales of tangible personal property delivered to California consumers greater than $500,000).
This new regulation may seem unusual and contrary to ABC requirements for alcohol beverage licensees, who are the actual seller of the alcohol beverage products on a third party provider website. Typically, where alcoholic beverages are sold on a third party provider’s website or marketplace, the third party provider of alcohol beverages does not hold a license from the California Department of Alcoholic Beverage Control (“ABC”). Because only licensees may sell alcoholic beverages and exercise license privileges, including sales and controlling all funds arising from such transactions, the third party provider would not be considered the seller of the alcoholic beverages since it does not hold a license. All sales of alcoholic beverages are made by the licensee. This is problematic since the Act defines the third party provider as the seller.
The ABC recently addressed this contradiction in an industry advisory. Finding that the collection and remittance of sales tax does not constitute sharing in the profits or revenue from the sale of alcoholic beverages, the ABC stated that the third party provider could be the seller for tax purposes, while the licensee would be the seller of the alcoholic beverages for purposes of exercising license privileges, ABC licensees must continue to keep control over the revenue from sales facilitated by the marketplace facilitator on the marketplace, but may segregate the sales tax component of the transaction and provide those funds directly to the marketplace facilitator for remittance.
As the seller under the Act, a third party marketer either located in California or with nexus in California must therefore register with the California Department of Tax and Fee Administration (“CDTFA”) for a Seller’s Permit or Certificate of Registration, and report and pay sales tax on all retail sales of alcoholic beverages sold on its platform for delivery to California customers. A licensee selling alcohol on a third party marketplace for delivery to consumers in California will also report such sales as part of its total sales to the CDTFA, but would claim an “other” deduction since no tax is owed. Note that these new provisions only apply to sales made for delivery in California, and thus a third party provider would not collect and remit taxes for sales made by alcohol beverage licensees for delivery outside of California.
For more information, please contact Bahaneh Hobel, head of DP&F’s Alcohol Beverage Group or Elizabeth Lance.
TTB Increases Flexibility for Calorie Labeling and Advertising in Wine, Spirits, and Malt Beverages
On September 28, 2020, the U.S. Tax and Trade Bureau (TTB) issued TTB Ruling 2020-1 and TTB Procedure 2020-1 expanding the tolerance range for voluntary calorie statements in labeling and advertising alcohol beverages – making the TTB’s rules more consistent with the food labeling requirements of the US Food and Drug Administration (FDA).
The TTB permits alcohol beverage industry members to make voluntary nutrient content statements – such as calorie or carbohydrate content – on their products’ labels and advertisements, provided such statements are truthful and not misleading. The TTB periodically verifies nutrient content claims by analyzing samples of alcohol beverage products. In analyzing such claims, the TTB has certain “tolerance ranges” to allow for normal production and analytical variables, while continuing to ensure that the labeling or advertising does not mislead the consumer.
The new rules expand the TTB’s tolerance range for calorie content statements. Such statements will now be considered acceptable as long as the TTB’s analysis determines that the calorie content of the products are either:
- Within a “reasonable range” below the labeled or advertised amount (within good manufacturing practice limitations); or
- Not more than 20% above the labeled or advertised amount.
Previously, the TTB tolerance range for calorie content claims was only a range of plus 5 or minus 10 calories of the labeled or advertised amount. The new rules have no impact on the TTB’s tolerance ranges for carbohydrates and fats (20% tolerance for understatements) and proteins (20% tolerance for overstatements).
Importantly, the TTB clarified that industry members may use a number of reasonable methods to support their calorie content claims. Lab analyses of each product batch are not required; industry members may instead rely on databases and “typical value” charts. Regardless of the method used to support their calorie content claims, industry members remain responsible for ensuring that their claims are reliable, accurate, and fall within the tolerance ranges set by the TTB.
The new rules are a boon for both producers and restaurants. Producers now have greater flexibility for making calorie content claims on their labels and advertisements, if they choose to do so. Restaurants that are subject to the FDA’s menu labeling requirements also often rely on the nutrient content claims of alcohol beverage products, and the new rules may incentivize producers to provide calorie statements on more alcohol beverage products.
TTB Ruling 2020-1 is available here. TTB Procedure 2020-1 is available here. For questions regarding the above or general labeling questions, please contact Bahaneh Hobel (Partner) or Michael Mercurio (Law Clerk).
Napa County Moves to Orange Reopening Tier
On Tuesday, October 20, Napa County was approved to move to the Orange, Moderate Risk Level reopening tier under California’s Blueprint for a Safer Economy. As a result, effective Wednesday, October 21, many businesses will be able to expand their activities under the Orange Tier guidelines.
Wineries will begin to be allowed indoor tasting, with capacity limited to 25% or 100 people, whichever is less.
Restaurants will be allowed to increase their inside dining capacity to 50% or 200 people, whichever is less.
Bars, breweries and distilleries that have not previously been allowed to open without food service will be allowed to reopen, though only for outside activities.
Information on other businesses and their allowed activities under different tiers is available at https://www.countyofnapa.org/2739/Coronavirus-COVID-19
Napa County is expected to issue additional specific local guidance on reopening requirements in advance of the official change to Orange Tier operations. Additional information from the County and answers to Frequently Asked Questions can be found on the County website.
CA ABC and TTB Provide Guidance to Wineries on Virtual Tastings
In light of the wide-spread shut-downs and disruptions resulting from the Covid-19 pandemic, both the California Department of Alcoholic Beverage Control and the Alcohol and Tobacco Tax and Trade Bureau have recently provided guidance to wineries that are now venturing into the new world of “virtual” wine tastings that occur online.
ABC’s latest Notice of Regulatory Relief on Virtual Wine Tastings, issued on Friday April 24, provided certain guidelines for wineries conducting such virtual tastings while their licensed wine premises or tasting rooms are closed:
- Samples or tastes for wine tastings cannot be given for free to consumers. Such samples or tastes must either be sold to the consumer, or included as part of a sale of wine or other products to the consumer.
- Any wine shipped to consumers, including small tasting samples, must be sent in a manufacturer sealed container.
- While there are no limits on the size of the tasting sample, any containers in which the tasting samples are sent must meet the federal regulatory guidelines for both labeling and standards of fill and any applicable state labeling regulations.
- Acceptable standards for fill for wine under federal law include the following: 3 Liters, 1.5 Liters, 1 Liter, 750ml, 50ml, 375ml, 187ml, 100ml (3.4 fl. oz.) and 50ml (1.7 fl. oz).
- Importantly, this means that shipping “tastes” to consumers in small vials that do not meet the above criteria would not be legal under federal or state law.
- Such shipments are subject to sales and/or other applicable taxes, just as typical direct to consumer sales would be.
- In accordance with ABC’s previous regulatory guidance, ABC is temporarily allowing the free shipment of wine to consumers, including samples for virtual wine tastings, during the Covid-19 emergency.
- Finally, it should be noted that the ABC’s latest Notice of Regulatory Relief specifically applies to the sale and shipping of wine and tasting samples within California. Any sales and shipments of wines, including tasting samples, to consumers outside of California will need to comply with the laws of the applicable state to which the wines will be shipped.
The full text of the Third Notice of Regulatory Relief can be found here.
In response to an inquiry by Wine Institute, TTB provided guidance regarding virtual tasting samples being provided by wineries to consumers. (see – https://wineinstitute.org/news-alerts/tasting-samples-for-virtual-winery-experiences-approved-by-ttb/ )
Per Wine Institute, TTB has stated that it will treat these wines just like any other taxable removals, subject to standard production and labeling requirements, payment of excise tax and applicable reporting. TTB’s guidance included the following:
- As noted above, samples must be provided in an approved standard of fill.
- Wine tasting containers must be properly labeled.
- If the tasting sample is a wine that already has an approved Certificate of Label Approval (“COLA”), the winery is permitted to change the net contents on the wine as an allowable revision without having to submit a new COLA. If no COLA was previously obtained, the winery must apply for and obtain COLA approval prior to labeling of the wine tasting sample.
- As a reminder, domestic wines must include the following information on the brand or back label as required under the regulations: Brand name, Class and type designation, Appellation of origin (if required), Alcohol content, Bottler’s name and address statement, Government health warning statement, Net contents and Sulfite declaration. Assuming that the tasting samples being sent to consumers are in containers smaller than 187ml, please note that the minimum type size for all of the foregoing under federal regulations is 1mm.
- As noted above, wines use for tasting samples are treated just like any other removals for sales or consumption – the wines must be tax paid, all required records must be kept and all required reports must be filed. Shipments of these containers must be treated the same as other types of removals from bond – for example, the wine must be tax-determined, and wineries must maintain the required removal from bond records.
For additional information on conducting virtual wine tastings, please contact Bahaneh Hobel or John Trinidad.
CA ABC Provides Additional Coronavirus Regulatory Relief; CA ABC and TTB Postpone Due Dates for Certain Payments and Filings
Over the past forty-eight hours, the California Department of Alcoholic Beverage Control (“CA ABC”) has provided additional regulatory relief to licensees, including information relevant to industry members engaged in fundraising in connection with Coronavirus-related charities. In addition, CA ABC and the Alcohol Tobacco Tax and Trade Bureau (”TTB”) announced that industry members will be permitted to delay certain payments and filings. We have summarized each of these notices below, but the full text of these notices can be accessed through the links below:
- CA ABC Second Notice of Regulatory Relief
- CA ABC Notice re Renewal Fees
- TTB Industry Circular re Postponement of Payments and Filings
1. CA ABC Second Notice of Regulatory Relief
CA ABC issued a Second Notice of Regulatory Relief on April 1, 2020 (the “Second Notice”) temporarily loosening it’s enforcement of certain regulations during the period that shelter-in-place restrictions are in place.. CA ABC had previously announced certain regulatory relief measures in its first Notice of Regulatory Relief (“First Notice”) on March 19, 2020 and we summarized that notice in this blog post.
Below is a summary of ABC’s Second April Notice.
FREE DELIVERY OF ALCOHOLIC BEVERAGES TEMPORARILY ALLOWED: ABC has temporarily provided licensees that can ship or deliver alcoholic beverages, whether pursuant to the ABC Act or pursuant to the First Notice, the right to deliver or ship to consumers for free, without violating Business and Professions Code Section 25600, which prohibits licensees from providing any “premium, gift, or free goods” in connection with the sale or marketing of alcoholic beverages.
DELIVERY HOURS OF ALCOHOL TO RETAILERS EXTENDED TO MIDNIGHT: Licensees (including manufacturers, winegrowers, and wholesalers) may now deliver alcoholic beverages to retailers between 12 AM and 8 PM (rather than starting at 3AM). The prohibition against Sunday deliveries remains in effect. Note that if a retail licensee has a condition on its license limiting the hours during which it may allow deliveries, such condition shall remain in full effect.
CERTAIN CHARITABLE PROMOTIONS RELATED TO SALES OF ALCOHOL: The CA ABC is relaxing its enforcement of restrictions on charitable promotions during this challenging time. Manufacturers, wholesalers, or other supplier-type licensees may advertise that a portion of the purchase price of the alcoholic beverages will be donated to a specified charitable organization related to Coronavirus-related relief, subject to the following limitations:
- The donation and promotion involve a bona fide charitable organization providing relief related to the COVID-19 pandemic;
- The promotion is in connection with the sale of sealed containers and does not encourage or promote the consumption of alcoholic beverages; and
- The donation and promotion do not identify, advertise, or otherwise promote or involve any retail licensee.
Any promotions under this provision must conclude no later than June 30, 2020. ABC has stated it will reassess this measure at that time and determine if it should be extended further.
ABC previously stated in its FAQs that donations to nonprofits benefiting restaurant and hospitality workers in general are permissible, so long as it is just a donation to an organization and does not identify or involve any quid pro quo with specific retailers. In addition, gifts or donations (such as meals or gift cards) may not be made directly to retailer employees.
DISTILLED SPIRITS MANUFACTURERS PROVIDING HIGH-PROOF SPIRITS FOR DISINFECTION PURPOSES: Licensed distilled spirits manufacturers (Type 04) and craft distillers (Type 74) may produce denatured high proof spirits if such distilled spirits are produced for use in accordance with guidance from the Food and Drug Administration, which may be found in the FDA’s Policy (PDF). Undenatured distilled spirits are not included in this relief as they are considered alcoholic beverages. Licensees may provide such distilled spirits for free to any person, including retail licensees, if they are not used to promote the manufacturer’s alcoholic beverage products and are not provided in exchange for an agreement to purchase anything produced or distributed by the manufacturer.
Licensees should note that all of the above changes are only temporary and ABC will provide the industry 10 days’ notice before these guidelines terminate. And although these provisions relax ABC’s enforcement of certain provisions of the ABC Act, the ABC did remind industry members that “[a]ll provisions of the Alcoholic Beverage Control Act, including …tied-house and trade practice restrictions, remain in effect and subject to enforcement unless the Department has provided express notice that specific provisions will not be enforced.”
As we noted in our earlier post, local regulations and restrictions may restrict the ability of licensees to engage in these activities, so you should always confirm that any activity in which you engage is permitted by local zoning or use permits.
2. CA ABC Grants 30 Day Grace Period for License Renewal Fees and Penalties
The CA ABC is providing licensees a 30 day grace-period for paying their annual renewal fees.
For Licensees who have previously missed their license renewal deadline and owe penalties as a result of failing to pay their renewal fee in a timely manner, the ABC is also granting a 30 day grace period.
The ABC has provided helpful tables in its notice that lay out the exact deadlines that have been extended and new due dates for license renewals.
3. TTB Postpones Tax Payment and Filing Deadlines
To help ease the burden on the alcohol beverage industry dealing with the impact of COVID-19 the TTB is postponing several filing and payment due dates for 90days where the original due date falls on or after March 1, 2020, through July 1, 2020. The TTB’s relief actions include:
- Postponing tax payment due dates for wine, beer, distilled spirits, tobacco products, cigarette papers and tubes, firearms, and ammunition excise taxes.
- Postponing filing due dates for excise tax returns.
- Postponing filing due dates for submission of operational reports.
- Postponing filing due dates for claims for credit or refund by producers.
- Postponing filing due dates for claims by manufacturers of non-beverage products.
- Postponing due dates for submission of export documentation.
- Considering emergency variations from regulatory requirements for affected businesses on a case-by-case basis.
- Reviewing requests for relief from penalties based on reasonable cause.
For a list of Coronavirus related resources, please see our Resources Page.
If you have any questions regarding alcohol beverage licensing, please contact John Trinidad or Bahaneh Hobel.
Coronavirus (COVID-19) Resources
Updated August 2, 2021
In addition to our periodic blog posts on Coronavirus related news, DPF has compiled a list of Coronavirus resources, including those specifically aimed at the alcohol beverage and hospitality industries, that may be of interest to our clients.
CALIFORNIA STATE RESOURCES
CA Coronavirus Regional Stay Home Order: https://covid19.ca.gov/stay-home-except-for-essential-needs/
CA Coronavirus Safer Economy Guide: https://covid19.ca.gov/safer-economy/
CA Coronavirus Roadmap – Counties: https://covid19.ca.gov/roadmap-counties/
CA Coronavirus Roadmap Reopening Guidance: https://covid19.ca.gov/roadmap/#guidance
CA Coronavirus Industry Reopening Guidance: https://covid19.ca.gov/industry-guidance/
CA Coronavirus Portal: https://covid19.ca.gov/
03/19/2020 Governor’s Executive Order re Shelter in Place Order: https://covid19.ca.gov/img/N-33-20.pdf
03/20/2020 List of Designated Essential Workforce under Executive Order: https://covid19.ca.gov/img/EssentialCriticalInfrastructureWorkers.pdf
Face Covering Mandate: https://www.countyofnapa.org/DocumentCenter/View/17329/Napa-County-Health-Officer-Recommendations-For-Wearing-Face-Coverings?bidId
County Coronavirus Site: https://www.countyofnapa.org/2739/Coronavirus-COVID-19
COVID-19 Exposure Guidance: https://www.countyofnapa.org/DocumentCenter/View/18019/Guidance-for-Employers-and-the-Community_Positive-or-Exposed-Employees
Social Distancing Protocol: https://www.countyofnapa.org/DocumentCenter/View/17123/Appendix-A-Social-Distancing-Protocol?bidId=
Industry Guidance: https://www.countyofnapa.org/2840/Industry-Guidance
Dine In: https://www.countyofnapa.org/DocumentCenter/View/17584/Restaurant-Sector-Reopening-Guidelines
Professional Services (offices): https://www.countyofnapa.org/DocumentCenter/View/17586/Professional-Services-Sector-Reopening-Guidelines
Restaurant Specific Facts: https://www.countyofnapa.org/DocumentCenter/View/17712/Restaurant-Specific-FAQs-ENG
Health Notice for Public Pool and Spa Operation: https://www.countyofnapa.org/DocumentCenter/View/17696/Health-Notice-for-Public-Pools-and-Spas-in-Napa-County-5-19-2020
Social Distancing and Sanitation Protocol – Public Swimming Pools:https://www.countyofnapa.org/DocumentCenter/View/17695/Swimming-Pool-Social-Distancing-and-Sanitizing-in-Napa-County-5-19-202
Updates to Napa County Shelter at Home Orders (Updated May 6, 2020): https://www.countyofnapa.org/2813/Shelter-at-Home-Order
04/02/2020 Shelter at Home Order Extension: https://www.countyofnapa.org/DocumentCenter/View/17112/Shelter-at-Home-Order-4-3-2020–?bidId=
03/20/2020 Shelter at Home Order (Updated 03/22/2020): https://www.countyofnapa.org/DocumentCenter/View/16684/Shelter-at-Home-FAQ_ENGLISH
Face Covering Order Effective 08.03.21: https://socoemergency.org/order-of-the-health-officer-of-the-county-of-sonoma-c19-25
Face Covering Order 05.24.21: https://socoemergency.org/face-covering-order
County Coronavirus site:https://socoemergency.org/emergency/novel-coronavirus/
Santa Rosa City Temporary Sick Leave Ordinance for COVID-19:https://srcity.org/3348/Temporary-Sick-Leave-Ordinance
Outdoor Dining Guidance:https://socoemergency.org/wp- content/uploads/2020/05/COVID-19-Guidance-Outdoor- Dining-ENG-05232020.pdf
Covid-19 Check App FAQs:https://sonomacounty.ca.gov/Health/Disease-Control/Coronavirus/FAQ-COVID-app/
Economic Development Board – COVID – 19 App/Strategies to Help Reopen Local Businesses:http://sonomaedb.org/Business-Assistance/Coronavirus/Business-Management-Plans/
04/01/20 Extension of Shelter in Place Order: https://socoemergency.org/order-of-the-health-officer-shelter-in-place-extended/
Original Shelter in Place Order: https://socoemergency.org/order-of-the-health-officer-shelter-in-place/
Mask Mandate Effective 08.02.21: https://coronavirus.marinhhs.org/masks
County Coronavirus site:https://coronavirus.marinhhs.org/
Specific Protection Plan:https://storage.googleapis.com/proudcity/marinrecoversca/uploads/2020/05/COVID-19-Site-Specific-Protection-Plan-SPP-Fillable-accessible.pdf
Guidelines for Businesses: https://marinrecovers.com/agencies/guidelines-for-businesses/
Golf Courses and Racket Clubs: https://marinrecovers.com/parks-outdoor-recreation/
Outdoor Recreational Activity Businesses: https://marinrecovers.com/parks-outdoor-recreation/
Recreational Equipment Rentals: https://marinrecovers.com/parks-outdoor-recreation/
Pet Groomers: https://marinrecovers.com/personal-services/
Summer/Sports Camps and Child Care:https://marinrecovers.com/summer-camps-youth-activities/
Shelter in Place Order: https://coronavirus.marinhhs.org/marin-public-health-order-may-15-2020
Other County Shelter in Place Orders and county-specific COVID-19 sites Information:
Mendocino County (Red Tier): https://www.mendocinocounty.org/community/novel-coronavirus
Contra Costa County Order 08.02.21: https://813dcad3-2b07-4f3f-a25e-23c48c566922.filesusr.com/ugd/84606e_8a1ea8e1a6cd4e33a3509521f661237d.pdf
Contra Costa County (Red Tier):https://www.coronavirus.cchealth.org/
Alameda County Order 08.02.21: https://covid-19.acgov.org/covid19-assets/docs/press/joint-release-2021.08.02.pdf
San Francisco County Mask and Face Coverings effective 08.03.21: https://sf.gov/information/masks-and-face-coverings-added-protection-coronavirus
San Francisco County Order 08.02.21: https://covid-19.acgov.org/covid19-assets/docs/press/joint-release-2021.08.02.pdf
Solano County (Red Tier):https://www.solanocounty.com/depts/ph/ncov.asp
ALCOHOL BEVERAGE INDUSTRY RESOURCES
U.S. Department of Treasury’s Alcohol and Tobacco Tax and Trade Bureau (TTB) Coronavirus Specific Information (updated 3/30/2020): https://www.ttb.gov/coronavirus
03/31/2020 TTB Industry Circular re Postponement of Tax Payment and Filing Due Dates: https://www.ttb.gov/industry-circulars/ttb-industry-circulars-2020-2
California Department of Alcoholic Beverage Control COVID-19 Updates: https://www.abc.ca.gov/law-and-policy/coronavirus19/
05/20/2020 Fifth Notice re Regulatory Relief: https://www.abc.ca.gov/fifth-notice-of-regulatory-relief/
05/15/2020 Fourth Notice re Regulatory Relief: https://www.abc.ca.gov/fourth-notice-of-regulatory-relief/
04/21/2020 Third Notice re Regulatory Relief: https://www.abc.ca.gov/third-notice-of-regulatory-relief/
04/01/2020 Second Notice re Regulatory Relief: https://www.abc.ca.gov/second-notice-of-regulatory-relief/
03/19/2020 First Notice re Regulatory Relief: https://www.abc.ca.gov/notice-of-regulatory-relief/
03/21/2020 FAQ re Regulatory Relief: https://www.abc.ca.gov/law-and-policy/coronavirus19/frequently-asked-questions/
California Wine Institute COVID-19 Resources Page: https://wineinstitute.org/news-alerts/coronavirus-covid-19-update
California Wine Institute “Winery Tasting Rooms Reopening Protocols” (posted 5/13/2020):
California Craft Breweries COVID-19 Resources Page: http://californiacraftbeer.com/covid-19-resources-for-craft-breweries-ongoing-list/
Brewers Association Coronavirus Resource Center: https://www.brewersassociation.org/brewing-industry-updates/coronavirus-resource-center/
Distilled Spirits Council of the U.S. COVID-19 Page: https://www.distilledspirits.org/news/discus-monitoring-covid-19-industry-news/
California Artisanal Distillers Guild Updates: https://twitter.com/CADISTILLERS
Note that regional trade associations are also providing their members with significant helpful information regarding the Coronavirus outbreak and regulatory response.
HOSPITALITY, TOURISM AND TRAVEL INDUSTRY RESOURCES
California Restaurant Association Coronavirus Resources: https://www.calrest.org/coronavirus-resources
National Restaurant Association COVID-19 Resources: https://restaurant.org/covid19
California Hotel & Lodging Association: https://calodging.com/coronavirus-information-resources
U.S. Travel Association: https://www.ustravel.org/toolkit/emergency-preparedness-and-response-coronavirus-covid-19
Napa County Tourism (Visit Napa Valley): https://www.visitnapavalley.com/
Sonoma County Tourism: https://www.sonomacounty.com/
EMPLOYER RESOURCES: FEDERAL
EEOC Question and Answer Page (added 05/06/20): https://www.eeoc.gov/eeoc/newsroom/wysk/wysk_ada_rehabilitaion_act_coronavirus.cfm
PPP Loan Forgiveness Guidance (added 05/20/20)
The U.S. Department of the Treasury – SBA Form PPP Forgiveness Application: https://home.treasury.gov/system/files/136/3245-0407-SBA-Form-3508-PPP-Forgiveness-Application.pdf
The U.S Department of the Treasury PPP Loan Resource page: https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf
Cares Act Resource (added 04/01/20)
The U.S. Department of the Treasury CARES Act Resource page: https://home.treasury.gov/cares
The SBA CARES Act Resource page: https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources
IRS – CORONAVIRUS TAX RELIEF: https://www.irs.gov/coronavirus
The following were added on 04/01/20
The IRS FAQs regarding tax credits for paid leave under the FFCRA: https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs
The IRS FAQs regarding CARES Act: https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act
IRS new tax form, Form 7200, that can be used to request the advance tax credits under both the FFCRA and the CARES Act. The form and the draft instructions (final instructions are expected shortly), can be found here: https://www.irs.gov/forms-pubs/about-form-7200
CYBERSECURITY AND INFRASTRUCTURE SECURITY AGENCY (CISA) GUIDANCE ON ESSENTIAL CRITICAL INFRASTRUCTURE WORKERS: https://www.cisa.gov/sites/default/files/publications/CISA-Guidance-on-Essential-Critical-Infrastructure-Workers-1-20-508c.pdf
FEDERAL MOTOR CARRIER SAFETY ADMINISTRATION: https://www.fmcsa.dot.gov/newsroom/us-department-transportation-issues-national-emergency-declaration-commercial-vehicles
U.S. SMALL BUSINESS ADMINISTRATION: https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources
U.S. OFFICE OF PERSONNEL MANAGEMENT TELEWORK GUIDANCE: https://www.telework.gov/guidance-legislation/telework-guidance/emergency-telework/
DEPARTMENT OF LABOR RESOURCES
COBRA Premium Subsidy: https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra/premium-subsidy
Families First Coronavirus Response Act (FFCRA) requirements and questions:
Questions about Coverage and the Poster:
Poster Questions: https://www.dol.gov/agencies/whd/pandemic/ffcra-poster-questions
Coverage Questions: https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave
EMPLOYER RESOURCES: STATE AND COUNTY
STATE OF CALIFORNIA EMPLOYMENT DEVELOPMENT DEPARTMENT
COVID-19 FAQ: https://www.edd.ca.gov/about_edd/coronavirus-2019/faqs.htm
Work Sharing Program: https://www.edd.ca.gov/unemployment/Work_Sharing_Program.htm
Disaster Unemployment Assistance: https://edd.ca.gov/about_edd/disaster_related_services.htm
Emergency and Disaster Payroll Tax Extension: https://edd.ca.gov/Payroll_Taxes/Emergency_and_Disaster_Assistance_for_Employers.htm
DEPARTMENT OF INDUSTRIAL RELATIONS (DIR):
COVID-19 Cal/Osha Regulations: https://www.dir.ca.gov/dosh/coronavirus/Revisions-FAQ.html
COVID- 19 6.9.2021 Press Release: https://www.dir.ca.gov/DIRNews/2021/2021-60.html
COVID- 19 6.3.21 Press Release: https://www.dir.ca.gov/DIRNews/2021/2021-58.html
COVID-19 Recent Proposed Changes from ETS: https://www.dir.ca.gov/oshsb/documents/Jun032021-COVID-19-Prevention-Emergency-txtcourtesy-Readoption.pdf
COVID-19 Proposed Changes From ETS: https://www.dir.ca.gov/OSHSB/documents/COVID-19-Prevention-Emergency-txtcourtesy-Readoption.pdf
COVID-19 2021 Resources: https://www.dir.ca.gov/dlse/COVID19Resources/FAQ-for-SPSL-2021.html
COVID-19 2021 Supplemental Paid Sick Leave Poster: https://www.dir.ca.gov/dlse/2021-COVID-19-Supplemental-Paid-Sick-Leave.pd
Cal/OSHA webinars: https://www.dir.ca.gov/dosh/coronavirus/webinars.html
Cal/OSHA regulations: https://www.dir.ca.gov/OSHSB/documents/COVID-19-Prevention-Emergency-apprvdtxt.pdf
Cal/OSHA requirements: https://www.dir.ca.gov/dosh/coronavirus/Health-Care-General-Industry.html
COVID-19 AB 685 FAQ: https://www.dir.ca.gov/dosh/coronavirus/AB6852020FAQs.html
COVID-19 Emergency Temporary Standards – Fact Sheets – Model Written Program: https://www.dir.ca.gov/dosh/coronavirus/ETS.html
COVID-19 Emergency Temporary Standards FAQ: https://www.dir.ca.gov/dosh/coronavirus/COVID19FAQs.html
COVID-19 FAQ: https://www.dir.ca.gov/dlse/2019-Novel-Coronavirus.htm
Workers’ Comp. Notice Requirement – SB 1159: https://www.dir.ca.gov/dwc/Covid-19/FAQ-SB-1159.html
Expansion of CA COVID-19 Supplemental Paid Sick Leave – AB 1867: https://www.dir.ca.gov/dlse/FAQ-for-PSL.html
Poster for non-food sector employers with 500 or more employees can be accessed here: https://www.dir.ca.gov/dlse/COVID-19-Non-Food-Sector-Employees-poster.pdf
Worker Safety in Wildfire Regions: https://www.dir.ca.gov/dosh/Worker-Health-and-Safety-in-Wildfire-Regions.html
Heat Illness Prevention and High Heat Requirements: https://www.dir.ca.gov/DOSH/HeatIllnessInfo.html
Cal/OSHA Guidance on Face Coverings: https://www.dir.ca.gov/dosh/coronavirus/Face-coverings-poster.pdf
Cal/OSHA Guidance on Requirements to Protect Workers from Coronavirus: https://www.dir.ca.gov/dosh/coronavirus/Health-Care-General-Industry.html
Cal/OSHA Guidance on Protecting Workers During a Pandemic: https://www.osha.gov/Publications/OSHAFS-3747.pdf
Cal/OSHA Guidance on Developing an Emergency Action Plan: https://www.dir.ca.gov/dosh/dosh_publications/iipp.html
Exception to Cal WARN Act 60-day notice requirement for layoffs: https://www.gov.ca.gov/wp-content/uploads/2020/03/3.17.20-EO-motor.pdf
Waiver of one-week waiting period for UI benefits and SDI: https://www.gov.ca.gov/wp-content/uploads/2020/03/3.12.20-EO-N-25-20-COVID-19.pdf
The latest orders can be found on the Governor’s website here: https://www.gov.ca.gov/newsroom/#:~:text
LABOR AND WORKFORCE DEVELOPMENT AGENCY: https://www.labor.ca.gov/coronavirus2019/
CALIFORNIA GOVERNOR’S OFFICE OF BUSINESS AND ECONOMIC DEVELOPMENT: https://business.ca.gov/coronavirus-2019/
STATE OF CALIFORNIA FRANCHISE TAX BOARD: https://www.ftb.ca.gov/about-ftb/newsroom/news-releases/2020-2-more-time-to-file-pay-for-california-taxpayers-affected-by-the-covid-19-pandemic.html
NAPA/SONOMA SMALL BUSINESS DEVELOPMENT CENTER (Includes Coronavirus-specific Business Assistance Webinars and Small business “survival guide”): https://www.napasonomasbdc.org/covid-19
HEALTH SERVICES RESOURCES
For the latest information about the coronavirus in Sonoma County and advice from health experts on prevention and care, call 2-1-1, text your zip code to 898-211 or visit (copy/paste) https://socoemergency.org/
For the latest information about the coronavirus in Napa County visit https://www.countyofnapa.org/2739/Coronavirus. You may also call Napa County’s information line at (707) 253-4540 (Monday – Friday, from 9am to 12pm and 1pm to 5pm).
CA Dept. of Public Health Resource Page:
California Correctional Health Care Services: https://cchcs.ca.gov/covid-19-interim-guidance/
CDC – Covid Data Tracker: https://covid.cdc.gov/covid-data-tracker/#county-view
CDC – Centers for Disease Control & Prevention: https://www.cdc.gov/coronavirus/2019-ncov/community/organizations/businesses-employers.html
Coronavirus – How to Protect Yourself/If You Think You Are Sick:
EPA EXPANDS COVID-19 DISINFECTANT LIST: https://www.epa.gov/newsreleases/epa-expands-covid-19-disinfectant-list
CA ABC Loosens Regulations for Alcohol Beverage Retailers and Delivery
The California Department of Alcoholic Beverage Control issued a notice on March 19, 2020 temporarily loosening certain regulations during the current state of affairs. While primarily focused on retailers, there are some potentially helpful provisions that impact alcohol beverage producers, too.
A few things to keep in mind. First, local regulations and restrictions may also govern and restrict the ability of licensees to engage in these activities. Second, this move by the ABC is temporary. ABC plans to notify the industry 10 days before these guidelines terminate.
Below is a summary of ABC’s March 19 notice.
3/21/2020 Update: CA ABC has issued a FAQ for it’s 3/19/2020 Notice of Regulatory Relief
For a full list Coronavirus-related links and resources compiled by DPF attorneys, please click here.
ON-PREMISE RETAILERS SELLING ALCOHOL “TO GO”
ALCOHOL IN MANUFACTURER PRE-PACKAGED CONTAINERS: If you hold an on-premise retail license that allows you to sell beer and wine or beer wine and spirits, you can sell that beer and wine to go for off-premise consumption in the original container/bottle (barring any condition on your license). That was true prior to the ABC notice, and still holds. However, if you hold an on-premise retail license that allows you to sell beer, wine and spirits, you can now sell all those beverages (beer, wine and spirits) in the original container/bottle.
ALCOHOL IN RETAILER PACKAGED CONTAINER: Under ABC’s new notice, if you operate a restaurant / “bona fide eating place”, you can now package whatever alcohol your license allows you to sell (beer and wine only for a Type 41; beer, wine, and premixed cocktails/drinks if you are a Type 47) in a container with a “secure lid or cap” so long as that cap does not have a sipping hole or opening for a straw, or could otherwise be consumed without removing the lid/cap. However, that container must be sold in conjunction with a meal prepared for pick-up or delivery.
Retailers that want engage in this type of activity must have a prominent posting (either on the premise, online, or in any way possible to alert consumers or the person transporting the beverage) that states, “Alcoholic beverages that are packaged by this establishment are open containers and may not be transported in a motor vehicle except in the vehicle’s trunk; or, if there is no trunk, the container may be kept in some other area of the vehicle that is not normally occupied by the driver or passengers (which does not include a utility compartment or glove compartment (Vehicle Code section 23225)). Further, such beverages may not be consumed in public or in any other area where open containers are prohibited by law.” UPDATE 3/24/2020: ABC has created a PDF of that notice so that retailers can easily print and post.
TAKE OUT WINDOWS: Some licensees have conditions on their license that prohibit the sale / delivery of alcohol to persons in cars or to consumers outside of the licensed premises through a take-out window or slide-out tray. Those prohibitions are temporarily lifted.
DELIVERY TO CONSUMERS: Even before the emergency notice, most business that hold a license that permits them to sell alcohol to consumers for off-premise consumption can also deliver those beverages to the consumer, so long as the sales transaction (other than the delivery) takes place at the licensed premise. In other words, the order must be received at the licensed premise, and payment is processed there. You can’t just show up at someone’s door and swipe a credit card there.
The temporary notice now allows for the following:
- If you are allowed to sell to consumers for off-premise consumption, you can accept payment, including cash, at the point of delivery.
- Although the CA ABC Act is silent as to whether Craft Distillers have the right to make deliveries away from the premises, the notice now allows Type 74 craft distillers can also deliver to consumers, but must limit sales to 2.25 liters per consumer per day.
- These delivery privileges are not limited to delivery to a consumer’s residence, but also allow for curbside delivery to consumers immediately outside the licensed premises.
HOURS OF OPERATION: State law prohibits the retail sale of alcohol between 2:00am and 6:00am. Some licensees have even more restrictive hours through conditions placed on their license. However, those license conditions are now lifted for off-premise sales, though the 2am-6am state law is still in place.
RETURNS: Generally, there are restrictions on the ability of producers and wholesalers from accepting returns from retailers. Those restrictions are temporarily lifted. It doesn’t mean that wholesalers and producers are required to accept all returns from retailers, just that they can if they choose to. However, producers/wholesalers cannot condition the acceptance of a return on a requirement to purchase in the future. This is consistent with TTB latest guidance on returns as well.
RETAILER-TO-RETAILER SALES: Under California law, retailers cannot purchase alcohol from other retailers. Under the temporary guidance, an off-premise retailer (grocery store, bottle shop, etc.) can now buy inventory from on-premise retailers (such as bars and restaurants).
EXTENSION OF CREDIT: Normally, California law imposes a maximum 30 day credit on the purchase of alcohol by a retailer from a wholesaler or producer. That 30 day limit is temporarily lifted. Note, however, once the temporary guidance is revoked, the extended credit term will also terminate (i.e., the retailer will have to pay the amount due at that time).
For a list of Coronavirus related resources, please see our Resources Page.
If you have any questions regarding alcohol beverage licensing, please contact John Trinidad or Bahaneh Hobel.
Additional Guidance For Wineries in Light of Recent Government Actions
Since the Governor’s announcement on Sunday recommending the temporary suspension of on-premise alcoholic beverage businesses, including winery tasting rooms, certain cities and counties have instituted “Shelter-in-Place” ordinances, and both the California ABC and the California Wine Institute have issued additional guidance on the operation of alcohol beverage licensed premises, including wineries.
Given the various orders and guidance currently in place, we have provided below a brief summary of the current state of play for wineries. Please note that things are rapidly changing and while we will do our best to issue updates, we highly recommend that all licensees sign up for the California ABC email updates, and also keep an eye on orders from their local governments.
GOVERNOR’S DIRECTIVE – Statewide Recommendations
- On Sunday, March 15, 2020, Governor Gavin Newsom announced that he was directing the closure of “all bars, nightclubs, wineries, brewpubs, and the like.”
- The California ABC has since clarified that the directive is aimed at suspending on-premise retail privileges (that is, the service of alcohol for consumption at the licensed premises). For wineries, the directive applies to their tasting room and event operations in pouring wine and serving customers for on-premise consumption. It has no impact on their production operations, and wineries can continue to have consumers purchase and pick up wine for off-premise consumption, subject to any further local restrictions such as the shelter-in-place orders discussed below.
- After discussing the directive with the Governor’s office, Wine Institute has recommended that wineries take the following steps:
- Ensure visitor and employee safety by intensify cleaning and sanitation procedures;
- Operate the facility in compliance with social distancing guidance (such as instituting procedures to keep individuals 6 feet apart);
- Implement recommendations from the CDC and California Department of Public Health re washing hands, avoiding close interpersonal contact, encouraging employees to remain at home when sick, and instituting additional precautions for older employees and customers.
For other operational recommendations, please see our Employer Guide to Navigating COVID-19 from earlier this week.
LOCAL GOVERNMENT “SHELTER-IN-PLACE” ORDERS – Enforceable Restrictions
- As of March 18, 2020, a number of counties in Northern California (including Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Santa Cruz, and Sonoma) have issued shelter-in-place orders.
- Wineries that have operations in any jurisdiction that have implemented such an order have legal obligations to alter their current operations to comply with their specific county’s order.
- In its recent guidance, issued prior to the Sonoma County order, Wine Institute concluded that winery businesses meet the definition of “essential businesses” because they constitute “businesses that supply other essential businesses (grocery stores and other food outlets) with the support or supplies necessary to operate.” According to Wine Institute, wineries can engage in the following activities in those Shelter in Place jurisdictions: “vineyard management, wine production operations, bottling, warehousing, sales, delivery and shipping.” However, this “does not include wine tasting and events ….”
- The Sonoma County order includes a provision that more directly addresses winery operations. Specifically, the following activities are deemed “essential” under the Sonoma County Ordinance: “Agriculture, food, and beverage cultivation, processing, and distribution, including but not limited to, farming, ranching, fishing, dairies, creameries, wineries and breweries in order to preserve inventory and production (not for retail business).” It is unclear whether, by excluding “retail business,” Sonoma County is restricting wineries and tasting rooms from engaging in the sale of wine in sealed containers for off-premise consumption, or whether the language is only meant to address retail sales for on-premise consumption.
- Napa County’s order goes into effect at 12:01am on Friday March 20. It includes a provision that deems the following businesses as “essential”: “Any form of cultivation of products for personal consumption or use, including farming, ranching, livestock, and fishing, and associated activities including but not limited to activities or businesses associated with planting, growing, harvesting, processing, cooling, storing, packaging, and transporting such products, or the wholesale or retail sale of such products, provided that, to the extent possible, such businesses comply with Social Distancing Requirements set forth in subsection (j) of this Section 10 and otherwise provide for the health and safety of their employees.”
Please note that this is a rapidly evolving situation, and many more cities and counties may implement Shelter-in-Place measures over the next days and weeks ahead. It is also possible that the ordinances on which this blog post, and Wine Institute’s guidance are based, may be revised.
ADDITIONAL ABC GUIDANCE
- ABC has issued additional guidance regarding the Governor’s directive on steps licensees can take to minimize risk.
- ABC has stated that retail licensees that comply with the Governor’s directive or local government restrictions will not have their licenses suspended.
- ABC offices in shelter in place jurisdictions are closed to the public. ABC Staff will be available to answer questions over the phone, and you can still mail applications to those local offices. Other ABC local office closures will be posted here.
- ABC is not currently accepting, processing, or approving special event or daily licenses in light of guidance on gatherings.
ADDITIONAL WINE INSTITUTE INFORMATION
- Wine Institute has been in direct communication with ABC and has shared the following information:
- ABC will not enforce state regulations that limit the extension of credit to 30 days.
- ABC is looking at additional relaxation of regulations in light of the current situation.
- For more information, go to https://wineinstitute.org/news-alerts/ca-abc-suspends-ca-credit-regulations-enforcement-clarifies-wine-take-out-sales-in-restaurants
- In addition, TTB has informed Wine Institute that “it does not expect any service interruptions but urges all wineries to register and utilize COLAs Online and Permits Online immediately since most of its staff is now teleworking.” For more information, go to https://wineinstitute.org/news-alerts/ttb-relaxes-consignment-sale-restrictions-urges-online-colas-and-permit-submissions
Wine Institute has a helpful resource page dedicated to Coronavirus related updates, which can be accessed here.
If you have any questions regarding alcohol beverage licensing, please contact John Trinidad or Bahaneh Hobel.
For a list of Coronavirus related resources, please see our Resources Page.
TTB Allows Returns of Products Purchased for Events Cancelled due to CORONAVIRUS
Today, TTB announced that it would permit returns of alcoholic beverages that were originally purchased for events that have been canceled due to Coronavirus. As TTB stated: “Given the unexpected and widespread nature of the concerns involving COVID-19, TTB will not consider returns of alcohol beverage products purchased to sell during such cancelled events to violate federal consignment sales rules provided the products were not initially purchased or sold with the privilege of return.”
Federal regulations typically prohibit consignment sales, which they interpret broadly to include the sale or purchase of alcohol beverage products with the privilege of return. (27 CFR 11.21).Typically, returns for ordinary and usual commercial reasons are not permitted, but returns because a product is overstocked or slow-moving does not constitute a return for ordinary and commercial reasons and are prohibited. (27 CFR 11.45.)
Acknowledging that wholesalers and retailers likely had already purchased product for various events such as festivals, concerts and sporting events that have seen widespread cancellations in recent days, TTB has taken the position that returns resulting from these cancellations would be permitted.
Local officials and event organizers have begun announcing cancellations of widely-attended events, such as parades, festivals, fairs, concerts, and sporting events based on concerns about COVID-19. These announcements may be made after wholesalers and retailers purchased large quantities of products to sell during.
Note that returns of alcoholic beverages to retailers would still be considered consignment sales under California law and we are working with California ABC to understand their position on such returns given the mass cancellations of events and gatherings.
For more information about how to address the return of alcoholic beverage products, please contact Bahaneh Hobel.
For a list of Coronavirus related resources, please see our Resources Page.
Governor Issues Guidance / Directive on Closure of CA Bars, Clubs, Winery Tasting Rooms, On-Premise Retailers
On Sunday, March 15, 2020, Governor Gavin Newsom announced that due to efforts to reduce the potential spread of the novel coronavirus, he was directing the closure of “all bars, nightclubs, wineries, brewpubs, and the like.” Restaurants, however, are not directed to close at this time, but are subject to reduction of occupancy and social distancing guidelines. Although the Governor did not explicitly state as much, the closure directive appears aimed at suspending on-premise retail privileges (i.e., the service of alcohol for consumption at the licensed premises), whether those privileges are exercised at stand-alone premises or at locations tied to alcohol beverage production facilities, such as tasting rooms.
The directive is not an order, but has the same force as the Governor’s guidance last week regarding non-essential social functions over 250 attendees.
While the Governor announced that the directive would apply to “wineries,” it appears that this may only apply to a winery’s tasting room operations, and does not impact production operations. A number of on-premise licensees may also have off-premise retail privileges. It is unclear whether the Governor’s directive allows these licensees to sell sealed bottles for consumption off the licensed premises during the closure period.
We have been in contact with representatives of the California Department of Alcoholic Beverage Control and expect further guidance on Monday, March 16. We will update this post with any additional information.
If you have any questions regarding alcohol beverage licensing, please contact John Trinidad or Bahaneh Hobel.
For a list of Coronavirus related resources, please see our Resources Page.
Napa County Winery Permitting in State of Flux
The Napa County Board of Supervisors has undertaken a series of major regulatory moves involving winery and vineyard permitting over the course of the past year. Critics of the various regulatory changes abound on all sides of the issues, with the board navigating a difficult path between wine industry, agricultural, environmental and anti-growth interests.
First, on Dec. 4, 2018, the board adopted Resolution No. 2018-164, generally referred to as the “Compliance Policy.” Among other items, the resolution created a March 29, 2018 deadline for applications to cure existing permitting nonconformance; a process to request a “status determination” of existing rights; and a mandatory winery production volume and grape source reporting program. As expected, this Compliance Policy has generated a greater than normal workload for the county, slowing the processing times for most use permit related applications. The Compliance Policy dictates that future applicants with operations exceeding their use permit limits will need to document compliance with existing use permit limitations for one year before any modification to their permit can be considered.
Second, the board passed the Water Quality and Tree Protection Ordinance (No. 1438) on April 9, 2019. A reaction to the narrow defeat of “Measure C” on the June 2018 ballot, the ordinance increased tree and vegetation retention and preservation requirements, tree mitigation ratios, established setbacks from municipal water supply reservoirs and wetlands, and provides for new stream setbacks for smaller order streams. New projects will need to address the additional limitations created by those rules. It remains to be seen how much impact the new rules will have on prospective development.
Third, with the pendulum swinging back towards permit holders and future applicants, the board at its April 23, 2019, meeting adopted Resolution No. 2019-53 to clarify the applicability of the county’s road and street standards. While in the past all use permit modifications triggered the need to comply with the most current driveway fire safe access standards, those standards have seen multiple updates making even relatively new wineries seeking a minor permit modification incur significant costs to upgrade access to the latest 22-foot width requirements. The policy change clarified that only a major modification to a use permit triggered the need for such roadway updates. This small but significant change makes requesting a minor modification to a use permit much more palatable to many applicants, since it avoids the sometime significant costs of constructing driveway improvements that were previously required for even minor operational changes or small remodeling projects.
And fourth, on May 21, 2019, as a continuation of the swing towards addressing project applicant concerns, the board debated and then directed the planning director to study changes to the use permit application and modification process, with an eye towards making permitting for small wineries easier, as well as clarifying what types of permit modifications fall within the minor and major modification categories. The development of new or revised rules in that regard is ongoing, and will continue to be evaluated by the board throughout the remainder of the year.
The true impact or benefit of these rule changes is not entirely clear at this point. But we can see the beginnings of the impacts of the Compliance Policy. Initial reporting in the North Bay Business Journal indicated that the Compliance Policy had generated significantly fewer applications than anticipated – 54 applications, including 33 for use permits and 21 for status determinations. The first key piece of the Compliance Policy – applications to update or conform activities to permit limits – are slowly working through the county’s planning process. The Compliance Policy provided an incentive that those that applied prior to the deadline could continue with their current operations while their applications are processed.
The second key Compliance Policy option – status determinations – have also been working their way through the County’s review process. ModernNapa county Use Permits are lengthy documents, containing a litany of generally-boilerplate standard conditions of approval, which are tailored to each permit as appropriate. Historic permits vary significantly however, with lesser detail than their modern brethren. This variation between older and newer use permits was one of the policy rationales for including this option as part of the Compliance Policy, as a winery owner may not be fully aware of how the county currently interprets its use permit. To allow for wineries to take advantage of this process, the Compliance Policy provided a tolling of the deadline to submit an application for winery owners who applied for a status determination prior to the March 29, 2018 application deadline. This resulted in an extension of time to file a use permit modification, with the Compliance Policy’s benefits of continuing current operations. Once the owner receives the county’s interpretation of its permit, it can then determine what if any use permit modification for which it might want to apply. As those status determinations are issued, additional applications for modifications of use permits are certain to be submitted. While the status determinations have not been released publicly, we have seen the county consistently opine that the operations approved by a use permit include only those anticipated in the applications for those permits, and additionally limited by the specific conditions in the permit approval documentations.
The last component of the Compliance Policy is the mandatory wine volume and grape source reporting requirement, which as with the other deadlines has seen its stated beginning date of July 1, 2019 come and go with no such program being actually implemented. However, this mandatory reporting program is being developed by the county and when ultimately adopted will require submission of documentation setting forth the volume of wine produced and the source of grapes used in that production at each Napa winery. The mandatory volume and grape source reporting policy is slated to trigger an inspection and full evaluation of all permit compliance if that reporting shows a violation of either limit. The promise of such an inspection may have encouraged voluntary applications to cure existing issues, especially if the recent larger than average harvests caused a production limit exceedance. However, that policy has yet to actually be implemented, and it remains to be seen when it will be put into practice.
In sum, there have been a number of developments that have put the focus on winery permitting in Napa county over the last year. The landscape is likely to change further as additional permitting process changes are evaluated and debated, and the mandatory reporting process goes into effect. Napa county wineries need to stay alert: operating conditions are subject to sudden change.
2 With some limited exceptions for wineries not in Agricultural Preserve or Agricultural Watershed zoning districts, or not subject to the 75% Napa County grape source rule, which do not need to provide grape source data. Volume reporting requirements still apply to all wineries however.
Authored by Joshua S. Devore.
© 2019 North Bay Business Journal. Reproduction in any form prohibited without permission. • Reprint from August 26, 2019 Pages 14 & 15
Supreme Court Decision is a Victory for Alcohol Beverage Retailers
Alcohol beverage retailers won a significant victory before the U.S. Supreme Court this morning. The Court held in Tennessee Wine & Spirits Retailers Association v. Thomas that Tennessee’s two-year durational-residency requirement applicable to retail liquor store license applicants violates the Commerce Clause and is not saved by the Twenty-First Amendment. In doing so, the Court stated that the 2005 decision in Granholm vs. Heald, which prohibited discrimination against out of state alcohol beverage producers, applied with equal force to discrimination against retailers, settling a long dispute in the courts on the applicability of Granholm to retailers. The end result is that states must now defend any discriminatory or protectionist alcohol beverage laws without the luxury of relying on the Twenty-First Amendment, giving retailers wishing to ship across state lines a leg-up in future legal challenges. Today’s decision, however, does not mean that retailers can begin shipping across state boundaries legally. Additional court challenges or legislative changes are needed to fully open the door to retailer direct-to-consumer shipping.
The question of alcohol beverage retailer direct-to-consumer shipping was not directly at issue in the case. Instead, the case centered on the constitutionality of Tennessee’s residency requirements on state licensed alcohol beverage retailers. Petitioner, a Tennessee retail trade association, argued that the residency requirement must be upheld because the 21st Amendment grants states broad authority to regulate alcohol within their borders. The Court rejected that argument and concluded that:
“[Section 2 of the 21st Amendment] allows each State leeway to enact the measures that its citizens believe are appropriate to address the public health and safety effects of alcohol use and to serve other legitimate interests, but it does not license the States to adopt protectionist measures with no demonstrable connection to those interests.”
Leading up to today’s decision, many hoped the Court would issue a ruling that would not only address the residency requirement question, but also adopt a reading of the 21st Amendment that would open the door to retailer direct-to-consumer shipping. Given the Court’s reading and application of Granholm, they may have gotten their wish. States that allow in-state retailers to ship to consumers but prohibit out-of-state retailers from doing so will find such laws difficult to defend in the face of today’s decision. To avoid legal challenges, states may choose to adopt statutes that allow all retailers, regardless of where they are located, the right to ship directly to consumers, or prohibit retailers from doing so altogether.
Attention will now shift to other cases directly challenging laws that prohibit out-of-state retailers from shipping to in-state consumers, such as the appeal in Lebamoff Enterprises v. Snyder before the Sixth Circuit Court of Appeals. The federal district court in that case ruled that, under the precedent set in Granholm, a Michigan state law that permits in-state wine retailers to ship direct to consumers must also grant the same privilege to out-of-state retailers. Case No. 17-10191, (E.D. Mich. Sept. 28, 2018). The appeals court stayed the appeal pending the outcome of the Tennessee Wine & Spirits Retailers case. Retailers now will have significant support for their argument that such state laws are nothing more than protectionist measures that discriminate against out-of-state retailers. States, on the other hand, will need to defend those laws as necessary in order to protect the health and welfare of their citizens. However, given that today’s ruling strips states of any defense under the Twenty-First Amendment for any discriminatory or protectionist laws, retailers have gained a clear upper hand in the legal challenges to come.
The Court’s decision is available through the following link: https://www.supremecourt.gov/opinions/18pdf/18-96_5i36.pdf .
If you have any questions, please contact Bahaneh Hobel or John Trinidad.
Winery Websites and ADA Compliance
The recent news of lawsuits filed against New York wineries has caused industry members to ask if they face any litigation risk if their websites are not accessible to people with disabilities under the Americans with Disabilities Act (“ADA”). The answer is “maybe.” There is considerable ambiguity in the law as to which companies are required to make their websites ADA-compliant and what actually constitutes ADA compliance.
This blog post provides a brief overview of the New York litigation and the current status of federal law governing websites and the ADA. Wineries should check in with their information technology vendors to determine what, if any, accessibility features are currently part of their websites, not only to avoid potential claims, but also to make sure their businesses are open to all consumers.
What’s the New York case all about?
The lead plaintiff in these actions is legally blind and uses screen-reading software to access website content. That software only functions correctly if the website incorporates certain screen-reading compatible features, such as alternatives text for images and videos. Plaintiff claims that the ADA requires the winery to make certain information on their websites accessible to visually impaired persons, including: e-commerce features, wine club membership instructions, ability to book or make reservations, hours of operation, and location of the winery. Plaintiff ultimately claims that Defendant’s failure to remedy such accessibility barriers is a discriminatory practice against blind and visually impaired people, in violation of the ADA and certain New York laws. Plaintiffs are seeking injunctive relief on their ADA claim and an order requiring the wineries to take “all the steps necessary” to make their websites compliant with the ADA.
This type of case is not unique to the wine industry. Over the past two years, there have been a slew of cases filed against businesses for allegedly violating the ADA by not making their websites accessible to people with disabilities.
What is the ADA?
The ADA is a federal civil rights law that prohibits discrimination based on disability. Under Title III of the ADA, any place of “public accommodation,” such as businesses generally open to the public, must provide individuals with disabilities full and equal enjoyment of goods, services, facilities, and accommodations. Places of public accommodation include shops and facilities serving food or drink.
States have also adopted their own laws that require businesses to provide access to persons with disabilities. For example, New York State’s Civil Rights Law and California’s Unruh Civil Rights Act set forth those states’ accessibility requirements. Local governments may have their own regulations, too. Plaintiffs in the New York winery lawsuits have claimed that the wineries are also in violation of the New York City Human Rights Law because they operate a physical location in the city. Note – this blog post focuses solely on the ADA requirements, and compliance with state and local laws regarding accessibility are beyond the scope of this article.
Do winery websites need to be ADA compliant?
Here’s where things get confusing. Courts have been all over the board on which businesses must make their websites ADA compatible.
In general, websites that service places of public accommodation are required to make their websites accessible to visually impaired persons. In the wine industry context, this means that, wineries that have tasting rooms, or that allow for tours, tastings, and on-site purchases, likely need to make their website accessible to the visually impaired under the ADA.
Wineries that have no physical location of their own for customers to visit, taste, or purchase wine are less at risk from an ADA claim. The Ninth Circuit Court of Appeals has held that a website that is not tied to a place of public accommodation or that is attached to a place that does not qualify as a public accommodation is not subject to the ADA. (eg. Weyer v. Twentieth Century Fox Film Corp., 198 F.3d 1104 (9th Cir. 2000)). That being said, there are cases in which courts have concluded that a stand-alone website service without a physical location can itself be considered a place of public accommodation, and subject to ADA requirements. Moreover, in 2014, the DOJ entered into several settlements agreements with online-only vendors, requiring each time, compliance with the WCAG (see below). In other words, not having a physical location may not be enough.
How do I make my website ADA-compliant?
Ready for even more confusion? Currently, there are no federal guidelines for how to make a website ADA compliant. The Department of Justice (“DOJ”) had contemplated adopting a new rule to outline how private companies’ websites can comply with the ADA. But in 2017, the department decided to halt its proposed rulemaking activity on this front.
Although the DOJ failed to issue guidance on website accessibility requirements, the World Wide Web Consortium, an international standards organization, has published coding standards for accessibility, the Web Content Accessibility Guidelines, often referred to as WCAG 2.0 AA.
While there is nothing in federal law that states that implementation of WCAG 2.0 AA automatically means a website is ADA compliant, the complaints filed against the New York wineries all seek relief that would require the wineries to comply with WCAG 2.0 AA. Moreover, the DOJ has previously argued in ADA enforcement actions that companies can comply by making their websites and mobile apps conform to WCAG 2.0 AA standards.
Action Items for Wineries
Given the fluid state of the law surrounding the application of the ADA to websites, there is no clear answer as to which businesses must make their websites ADA-compatible, or even what is required for a website to be considered ADA-compatible under federal law.
Wineries should check in with their IT vendors and professionals to determine if their websites, apps, and mobile sites have implemented accessibility features per the WCAG 2.0 AA, and if not, assess if the cost of doing so would cause hardship to the company. Implementing such features may not only help stave off legal actions, but would also signal that your winery is accessible to all consumers.
For more information about these issues, please contact John Trinidad or Louise Mercier.
UPDATE (11/13/2018): The Wine Institute recently circulated additional information regarding the ADA and winery websites.
A Bridge too Far for Granholm? Florida Importer Challenges California Three-Tier System
A Florida-based wine importer is hoping to shake up the California three-tier system. If successful, any importer or wholesaler in the U.S. may be permitted to sell directly to California retailers.
Earlier this year, Orion Wine Imports, LLC filed a lawsuit against the director of the California Department of Alcoholic Beverage Control arguing that licensed wine importers and wholesalers in California and in other states must be given the same right to sell and deliver wine directly to California-licensed retailers. Orion Wine Imports, LLC v. Applesmith, Case No. 2:18-cv-01721-KJM-DB (E.D. Cal.). Orion argues that, under the U.S. Supreme Court’s decision in Granholm v. Heald, state laws that discriminate against out-of-state importers and wholesalers are unconstitutional.
This argument may sound familiar. In Granholm, the Court invalidated state direct-to-consumer shipping laws that discriminated against out-of-state producers. Since then, a number of lawsuits have been filed arguing that the Granholm holding should also apply to laws that discriminate against out-of-state retailers. As we reported a few weeks ago, the Supreme Court will be hearing a case that may answer that question.
Defendant in the Orion case is likely to argue that applying Granholm to the wholesale tier is a bridge too far. Plaintiff’s are looking to invalidate long-standing provisions of the state’s three-tier licensing structure. The challenged statutes, adopted by the California legislature in 1953 as part of the state’s post-Prohibition codification of the Alcoholic Beverage Control Act, are core to the establishment of the state’s three-tier system.
Orion is also facing opposition from its fellow wholesalers. Two industry trade associations, California Beer and Beverage Distributors and the Wine and Spirits Wholesalers of California, have filed an amicus brief in support of defendant’s position.
The court has scheduled a December 21, 2018 hearing in Sacramento on defendant’s motion to dismiss.
For more information regarding the three-tier system, please contact John Trinidad.
Federal Court Rules in Favor of Wine Retailer DTC Shipments
Wine retailers received a double dose of good news last week.
As we reported earlier, on Thursday, the U.S. Supreme Court agreed to hear an appeal by the Tennessee Wine and Spirits Retailer Association in a case challenging Tennessee’s state residency requirement for persons or entities that hold a state alcohol beverage retail license. Tennessee Wine & Spirits Retailers Ass’n v. Byrd, No. 18-96 (6th Cir., 883 F. 3d 608; cert. granted Sept. 27, 2018). In determining the constitutionality of the state’s residency requirement, the Court may also weigh in on a key question that could have a big impact on direct-to-consumer shipping by wine retailers: does the Supreme Court’s 2005 decision in Granholm v. Heald, which prohibited state from discriminate against out of state wine producers, also prohibit state laws that discriminate against out-of-state retailers.
On Friday, a federal district court in Michigan answered that very question in favor of retailers, and concluded that if the state permits in-state wine retailers to ship direct to consumers, it must also grant the same privilege to out-of-state retailers. Lebamoff Enterprises v. Snyder, Case No. 17-10191, (E.D. Mich. Sept. 28, 2018). The Michigan law in question allowed in-state wine retailers that held a “specially designated merchant license” to ship to Michigan consumers, but prohibited out-of-state retailers from so doing. The court held that the law was not protected by the the 21st Amendment and unconstitutional in light of the Supreme Court’s holding in Granholm. In granting plaintiff retailer’s motion for summary judgment, the court concluded:
“Michigan is … operating an unjustifiable protectionist regime in its consumer wine market, a privilege unsanctioned by the Twenty-first Amendment and forbidden by the dormant Commerce Clause.”
As a remedy, the court opted not to nullify the offending law, but instead extended its shipping privileges to out-of-state retailers. Unless the state legislature repeals the law, then out-of-state wine retailers will be allowed to either apply for the state’s specially designated merchant license or a comparable out-of-state license.