The Tennessee Legislature had a busy 2015 session for new liquor laws. Many industry pundits expected a relatively quiet year in the wake of the passage of wine in groceries law n 2014. Not so.
Courtesy of our friend and lobbyist to the stars, Baylor Bone Swindell of Windrow Phillips Group, attached is a preliminary summary of liquor laws passed this last session. Passed Alcohol Bills 2015
AC/DC knows alcohol all too well and immortalizes cocktailing:
So don’t worry ’bout tomorrow
Take it today
Forget about the cheque we’ll get hell to pay
Have a drink on me
Beer Tied House
The new tied house law for beer is perhaps the most sweeping change this session. The legislature adopted a traditional three-tier system for beer. Download the new law here Beer Tied House.
Prior Tennessee beer laws lacked a strong three-tier system. The law did not clearly prohibit a brewer like Anheuser-Busch from holding a wholesaler permit and cutting out Tennessee beer wholesalers. That would not be popular with Anheuser-Busch’s wholesalers, who we suspect were behind the legislation.
10 Day Credit Rule
Much ado has been made over the ambiguous “elimination” of the 10 day credit rule for sales by wholesalers to retailers. This session, the law was amended to provide that 10 day credit sales are legal, if payment is made by electronic funds transfer or escrow payment.
We have always seen the 10 day credit rule as protecting wholesalers from credit risk. The new law is no exception. The law creates a rebuttable presumption that a licensee is not financially responsible if the licensee fails to satisfy its obligations to any wholesaler twice within a twelve-month period. The ABC is required to set a hearing upon notification by the wholesaler, to determine if the licensee can rebut the presumption. The ABC may issue a fine, suspend or revoke the license, or make any other order it deems appropriate, upon finding that the licensee is not financially responsible.
We love hearing from entrepreneurs inspired by consumer demand. One of the most-frequent questions we hear is “how can I deliver alcohol to consumers?” Tennessee liquor laws and Tennessee ABC policies clearly prevented delivery of wine and spirits.
Legislation passed this year legalizes delivery of alcohol to consumers, but limits the practice to meal delivery services. The new law is here. Delivery Law. We find it odd that the delivery service must derive at least 50% of its income from the delivery of food, but rather than delivering alcohol from a restaurant, the delivery service must transport alcohol from a retail package store. The new law establishes a new license for delivery services.
Temporary Liquor License
The Legislature also codified a simple fix for a problem with sales of restaurants and hotels that hold liquor-by-the-drink licenses. The common practice was to enter into an Interim Management Agreement to allow the purchaser to use the seller’s liquor license. From a legal perspective, the Interim Management Agreement made no sense. It was merely a formality to allow a sale to close before a new licenses could be approved.
The new law is not perfect, but provides:
Notwithstanding any law or rule to the contrary, upon collection of a fifty-dollar licensing fee, the commission may issue temporary licenses not to exceed thirty (30) days to any new applicant for a license issued pursuant to this chapter.
We expect the ABC to adopt formal or informal guidance on how to qualify for the new temporary permit. Based on our experience, the 30 day period is too short and may create problems. We see the new law as limiting temporary permits to 30 days, with no authority to extend the 30-day period. We suspect that the ABC will stop recognizing Interim Management Agreements, meaning that the 30 day temporary is the only option for sales.
We advise folks to pay close attention to this change.
Tennessee Whiskey Wars
In the waning hours of the 2015 legislative session, a bill was amended to require that “Tennessee Moonshine” be distilled in Tennessee. The penalty is a one year suspension or revocation of the distillery license. The effective date of the requirement is July 1, 2016, which allows the bill to be revised next legislative session before it becomes binding law.