AAIAC

The Alliance of Alcohol Industry Attorneys & Consultants is a select organization of alcoholic beverage licensing and compliance professionals.

Ring in the New Year by Forgetting About Tennessee’s Crazy High Gravity Beer Laws

On January 1, 2017, the legal definition of beer in Tennessee changes from 5% to 8% alcohol by weight.  Meaning that beers with less than roughly 10% alcohol by volume no longer fall into that crazy category known as high gravity beer.

In Tennessee, beers stronger than 5% by weight or around 6.5% by volume were taxed and distributed as alcoholic beverages.  For consumers, it meant higher prices and not being able to buy a high grav beer at a grocery or convenience store.

No longer.  Although there are a few serious suds stronger than 8% by weight, the vast majority of high gravity beers will magically become regular “beer” in the New Year.  You can Kroger for high grav.  You will no longer pay the 15% alcoholic beverage tax at restaurants and bars.

The ancient and odd (at least to us) New Year’s traditional tune Auld Lang Syne comes to mind:

we’ll take a cup of kindness yet,
for auld lang syne.
And surely you’ll buy your pint cup!
and surely I’ll buy mine!

The new law fails to anticipate a number of details, which we expect will confuse industry members for some time.  But, please, everyone say thanks to the Tennessee Legislature for fixing the high gravity beer problem.

Original author: William T. Cheek III
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Wine is Probably a Bad Idea for a Holiday Present from a Tennessee Restaurant

We often get this question during the holidays?  Can my restaurant or bar give a bottle of wine or spirits to a vendor or good customer for Christmas in Tennessee?

We recommend not.

First, we suspect that an ABC agent will presume that the restaurant is giving away alcohol for off-premises consumption, which is a huge no no.

Legally, we think that an owner of a restaurant should be able to purchase alcohol at a liquor store and give it as a gift.  The dilemma is that the owner will certainly include a card that indicates that the gift is on behalf of the restaurant.  It looks like the restaurant is making the gift.

Although you may be able to contest the citation, the gift of alcohol raises too many problems and we recommend against it.

A Christmas classic cones to mind:

Mom got drunk and Dad got drunk at our Christmas party
We were drinking champagne punch and homemade eggnog
Little sister brought her new boyfriend
He was a Mexican
We didn’t know what to think of him until he sang
Feliz Navidad, Feliz Navidad

 

Original author: William T. Cheek III
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Tentative 2017 Legislative Wish List for Tennessee ABC

We love the transparency of the new Tennessee ABC regime under relatively new Director Clay Byrd.  For example, at the regular December ABC meeting, Assistant Director Zach Blair announced the following issues for the 2017 legislative session.

Please keep in mind that this is our take on the announcement and not official positions of the ABC.

· Conflicts of interest at ABC – currently relatives of ABC staff and commissioners cannot hold server permits. The ABC wants to permit this.
· Delinquencies with wholesalers – current law requires an automatic admin hearing if more than two delinquencies occur in a given period of time. The ABC wants to remove the mandatory hearing and be able to issue citations.
· Indirect interests – the ABC wants to define this by statute, probably similar to what the draft proposed rules say.
· Underage sale citations – the ABC wants to expand the civil penalty options.
· Donated alcohol to special occasion licenses – the ABC wants to permit this expressly for auctioning off the bottles.
· Private party – the ABC wants to codify a definition for this; we are not sure what it will be.
· Seasonal closings – the ABC wants to expand the areas where this is permitted; currently only allowed in river resort districts.
· Eligibility for server permits – the ABC wants to codify the felonies that prohibit someone from getting a server permit.
· Revocations – the ABC wants to codify the draft proposed rule that surrendering a license can be treated as a revocation when there is an agreed order signed.

Special thanks to Bone alcoholic beverage team member Rob Pinson for this summary.

Brings to mind the AC/DC classic “Breaking the Rules”

Just keep on breakin’ the rules
C’mon get ready to rule
Just keep on breakin’ the rules

 

Original author: William T. Cheek III
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TTB Establishes Waiver Process for Late Excise Tax Filings for Gatlinburg and Pigeon Forge Distilleries Affected by Fires

A small but important silver lining for moonshiners in Sevier County.  After the tragic fire, we asked the TTB to consider easing the deadlines on reporting and paying excise taxes – to give impacted distilleries time to recover.  We blogged about it here.

The announcement from TTB is great news and here is the e-mail:

The Alcohol and Tobacco Tax and Trade Bureau (TTB) recognizes that the devastation caused by wildfires in and around Gatlinburg, Tennessee, may have affected your operations. As a result, you may not be able to timely file returns or timely pay or deposit the excise taxes administered by TTB, as required by the Internal Revenue Code. TTB will consider waiving late filing, payment, or deposit penalties on a case-by case basis. Waivers will be approved based on the statutory standard of reasonable cause and a lack of willful neglect.

To qualify for such a waiver, you must:

1) Demonstrate, to the satisfaction of the appropriate TTB officer, that the wildfires or related events directly affected your ability to timely file tax returns and/or pay or deposit excise taxes; and

2) Contact the TTB National Revenue Center at

550 Main St, Ste 8002
Cincinnati, OH 45202-5215
Toll free: 1-877-882-3277
Direct: (513) 684-3334
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

One of Willa’s favorites by Alan Jackson comes to mind:

Pop a top again
I think I’ll have another round
Set ’em up my friend
Then I’ll be gone and you can let some other fool sit down.

Original author: William T. Cheek III
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New Rules for Tennessee Wholesalers & Restaurants and Bars

The new leadership at the Tennessee ABC has been issuing informal guidelines on a variety of subjects.  We love the informal rules and hope they keep coming.

At the links are FAQS for wholesalers and liquor-by-the-drink, aka restaurants, bars, hotels, venues and other on-premise license holders.

final-wholesaler-faq-12-07-2016

final-lbd-faq-12-07-2016

Made our buddy Willa think about Charlie Daniel’s hit Drinkin’ My Baby Goodbye:

Well I’m a
Sitting on a bar stool
Acting like a dern fool

Original author: William T. Cheek III
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Gatlinburg Fire Impacts Tennessee Distilleries and Restaurants

Reliable industry sources indicate that miraculously, all of the numerous distilleries in Sevier County, Tennessee escaped wildfires that ravished Gatlinburg, Pigeon Forge and surrounding areas.  The fires on the strip of Gatlinburg came perilously close.  Here is a photo from the security cameras at one distillery on the strip:

Fire off the Gatlinburg Pakway

Fire off the Gatlinburg Parkway

At this time, we understand that a few restaurants were mostly likely destroyed by the fires, but we have no specific information.  Keep in mind that civilians have not been allowed back into Gatlinburg since the fires.

 

Although distillery facilities escaped direct impact from the fires, we expect that there may be smoke damage, difficulty with retrieving records and certainly time-related pressure for filing returns.  We have reached out to our contacts at TTB and have requested that TTB consider a procedure for late filing and payment of taxes for impacted distilleries.  You can learn more about the TTB claims process at this link:

https://www.ttb.gov/public_info/disaster_claims_packet.shtml

Rob Pinson and Will Cheek have agreed to provide complimentary legal services to assist impacted distilleries with immediate legal needs resulting from the fires.  If you have questions concerning TTB, ABC or Tennessee Department of Revenue issues from the fire, please reach out to us at This email address is being protected from spambots. You need JavaScript enabled to view it. or This email address is being protected from spambots. You need JavaScript enabled to view it..

Although distilleries escaped the worst of the fires, several distillery employees lost their homes and nearly everything they own.  Our thoughts go out to these folks and we encourage everyone to consider making a donation to help these industry members.  We know of the following assistance funds that have already been set up.

Ole Smoky:

Go Fund Me https://www.gofundme.com/displaced-families-of-ole-smoky

 

Sugarlands:

1)         Monetary donations can be mailed to:

CNB, 2661 Parkway, Pigeon Forge, TN 37865

Sugarlands Employee Emergency Assistance Fund – Account Number 4036124

2)         Gift card donations can be mailed to:

Sugarlands Employee Emergency Assistance, C/O Sugarlands Distilling Company,

P.O. Box 1517, Pigeon Forge, TN 37865

If any distillery has a fund to add to this list, please e-mail us at This email address is being protected from spambots. You need JavaScript enabled to view it..

We wish the best to our friends during this tragic time.

Original author: William T. Cheek III
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UPDATE: Hotels CANNOT Sell Bottles of Booze in Tennessee

UPDATE: Apparently we had a miscommunication with the ABC.  Hotels CANNOT sell spirits by the bottle.  Hotels can sell wine by the bottle in connection with food service, including room service.  There is no change in the policy.

____________________________________________________

Old dogs can learn new tricks.  Today, we found out that the Tennessee ABC has been quietly advising that hotels can sell spirits by the bottle at gift shops, with some conditions.

Tennessee law generally prohibits the sale of bottles of spirits at any business holding an on-premise liquor license, like a restaurant or bar.  You cannot order a bottle of Jack Daniels to your table at a honky tonk.  Only wine can be sold by the bottle.

Hotels are a little different.  You have a room.  What you do in your room is your own business.  The ABC apparently recognized this difference.

Here are the rules for bottle sales, as we understand them:

The bottle must be opened by a hotel employee.  Guests cannot purchase a sealed bottle. The bottles must be priced at or above cost.  Ensure that the bottle is scheduled on your price schedule filed with Revenue. The hotel must pay the liquor-by-the-drink tax. The bottle must be consumed on property. We strongly encourage hotels to post signage instructing that alcohol must be consumed in the hotel and cannot be taken off property. The hotel must ID check to ensure the purchaser is 21 or over.

It logically follows that a hotel can also sell a bottle of spirits through room service.  We are cautiously advising hotels that it is legal to sell a bottle of Jack to a room, using the same guidelines.

Instead of signage, we recommend that the room service include a card that says that alcohol must be consumed in the hotel and cannot be taken off property.  We think most hotels will prefer to include a card that says that alcohol must be consumed in your room.  Who wants guests wandering around the property with drinks from their room?

Brings to mind a Van Halen classic, Take Your Whiskey Home:

Well, my baby, she don’t want me around
She said she’s tired of watchin’ me fall down
She wants the good life (ow) only the best
But I like that bottle better than the rest

Original author: William T. Cheek III
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Tennessee Liquor Industry Big Player in Money and Politics – Again

We could not help noticing the enormous amounts of money donated by liquor industry associations in the second quarter of 2016.      Nothing really new, but it confirms just how important the state political process is to the wholesalers and retailers, which were massively impacted by wine in groceries (WIGS) and scored a number of victories in the final WIGS law.

According to our friends at The Tennessee Journal, the liquor wholesalers topped the list of all PACS with $106,000 contributed in the second quarter.  Although retail liquor stores were 11th on the list at $39,500, their stellar lobbyists – McMahan Winstead – donated an additional $45,250.

In comparison, the second highest contributor are the Teachers at $63,450.  The hotel restaurant association logged $42,500.

Reminds us of one of our favorite lines from a movie – Richard Pryor in the 1970’s classic “Car Wash”

Cause money walks…..and bullshit talks…

Original author: William T. Cheek III
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What Kinds of Wine Can a Grocery Store Sell in Tennessee

Food stores licensed to sell wine in Tennessee under WIGS can only stock certain kinds of wine.  As WIGS has rolled out, confusion over what can be sold at a grocery has been a major issue.

There are no final rules yet from the ABC – its early and we do not expect final rules yet – but here is our summary of what wine we believe a grocery store can sell in Tennessee:

Wine.  The law defines wine as being the product of fermented grapes.  Think Chardonnay, Merlot, Champagne. Blackberry and other Fruit Wines.  As long as the wine is made from fermented berries, groceries can sell it.  Flavored fruit wines are probably not allowed. Wine Coolers.  This is a product being discussed, but for now, wine coolers can be sold by grocery stores. Beer up to 5% by weight, which is roughly 6.4% by volume.  This goes up to 8% by weight, roughly 10% by volume, starting January 1, 2017.

A grocery cannot sell:

Fortified alcoholic beverages, like port alcoholic beverages and sherry, unless the wine is under 18% alcohol by volume MD 20/20, Thunderbird, Night Train and Wild Irish Rose are all under the maximum strength of alcoholic beverages and can be sold at food stores Alcohol derived from alcoholic beverages that has had substantial changes to the alcoholic beverages due to the addition of flavorings and additives Sake Spirits like whiskey, vodka and run Liqueurs and cordials like Frangelico, Schnapps, Baileys and Grand Marnier Beer over 5% alcohol by weight or 6.4% alcohol by volume

Our buddy Willa reminds us of the Gordon Lightfoot tune Blackberry Wine:

There’s a new moon risin’ and the wind sings its old song
Pass it on over it’s a sin to be sober too long

Original author: William T. Cheek III
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WIGS 20% Minimum Markup Massively Mystifies Tennessee Groceries

Wine in groceries has been legal in Tennessee for just 18 days.  But the WIGS law seems to have raised more questions than answers.

The statutory 20% minimum markup has been a constant source of questions for grocers.  Here is one of our favorites:

When the wholesale price of wine drops, what is the minimum price that can be charged?

For example, say you have purchased wine at $10 per bottle.  You price the wine at $12, the lowest legal price.

The wholesaler offers you the same wine for $9 a bottle.  You can price this at $10.80.  You buy the $9 wine, but have wine on the shelves that you purchased at $10.

Can you sell the all of the wine at $10.80, including the wine you purchased at $10?

Our best guess is yes.  We think the last invoice price will be the rule for WIGS pricing.  Look to the last invoice price and make sure the price is marked up at least 20%.

The Eagles comes to mind:

Wastin’ our time
On cheap talk and wine

There is no guidance from the ABC yet.  Given the huge number of WIGS questions, we do not fault the ABC.  Things are moving at the speed of light.

 

Original author: William T. Cheek III
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Hot Off the Press: Tennessee ABC Issues FAQS for WIGS

Moments ago, TABC Director Clay Byrd released final guidance for wine in grocery stores, which we affectionately call WIGS.  Here is your very own copy.

WIGS has been live for consumers for 11 days, but the euphoria is still palpable.  We hear the Pointer Sisters classic:

I’m so excited, and I just can’t hide it
I’m about to lose control and I think I like it

Original author: William T. Cheek III
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Shot Gun Marriage: Tennessee Department of Revenue Releases Guide for Terminating Your Liquor Wholesaler

Shot gun marriage pretty much sums it up.  For distilleries, wineries and breweries, choosing a wholesaler in Tennessee is like marrying your high school sweat heart.  She may look great when you are in high school, but as you grow older, you have to ask “Did I find the right partner for life.”

Unlike your high school sweat heart, divorce is not really an option for your Tennessee wholesaler.  Tennessee law protects wholesalers and makes terminating the relationship practically impossible.

The Tennessee Department of Revenue recently issued a guideline for terminating a wholesale contract.  Download a copy here Guide.

Wholesale termination reminds us of the J. Geils Band tune:

You love her but she loves him
And he loves somebody else you just can’t win
And so it goes till the day you die
This thing they call love it’s gonna make you cry
I’ve had the blues the reds and the pinks
One thing for sure
Love stinks yeah, yeah
(Love stinks)

In order to start the termination process, a manufacturer has to tell its wholesaler in writing that it wants to terminate the relationship and provide specific reasons why the wholesaler is inadequate. The wholesaler has 30 days to fix the problems.

This is not something any reasonable business person would do. Why tell someone you cannot divorce that you do not like them and tell them why?

We know of no manufacturer that has terminated a wholesaler contract in Tennessee. Although scuffles between manufacturers and wholesalers sometimes result in trading brands, between wholesalers, the brand termination process in Tennessee is heavily weighted in favor of the wholesaler.

Original author: William T. Cheek III
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