Sunday, December 30, 2012

The Year Behind, The Year Ahead

Dear FWWS Member.

An excellent proverb reminds us that while we are measuring our aspirations by looking forward we should remember to measure our progress by looking back. 2012 has certainly been a year to look back upon with some satisfaction.

FWWS Tax Reporting Relief Bill Passed
After five long years of effort our small wineries tax reporting relief bill passed the legislature in 2012! With signature by the Governor and rulemaking completed by the WSLCB, wineries selling less than 6,000 gallons of wine in Washington may now report and pay their liquor taxes as infrequently as annually (previously required monthly). Aside from drastically reducing the paperwork burden for in-state wineries, this bill also makes Washington one of the nation’s leaders in reducing the burden of interstate shipping of small quantities of artisan wine.

What is a Winery Bill defeated.
Sometimes what is prevented from happening is as important as what is affirmatively created. This was the case with a bill intended to drastically raise the bar for what it takes to be licensed as a winery in Washington. This bill, which was shown to the world five days before it’s first legislative hearing last session, would have made wine “production” synonymous with “fermentation” (currently any change in federal tax class of wine is production from the federal perspective and “crushing, aging in bulk or blending” are considered production in the state view). It would also have required that a winery “produce by fermentation” at least 200 gallons of wine per year on a rolling two year average in a facility owned and controlled by the winery (currently the standard is “more than zero gallons” at least every other year). The most bizarre aspect of this proposal was that, while it prohibited the smallest wineries from making wine under custom crush arrangements, once the 300 gallon threshold was reached the prohibition completely disappeared. This would have allowed business as usual for the state’s largest wineries that produce literally millions of gallons of wine annually through such custom crush arrangements. By shedding light on the logical inconsistencies of this bill and raising questions over its purpose FWWS was instrumental in preventing this misguided and unnecessary proposal from receiving a vote. We will remain vigilant should another attempt be made to introduce and pass such a senseless proposal on short notice.

Initiative 1183 Implemented
Initiative 1183 was implemented in 2012 through state rulemaking. As a result, a number of new businesses such as Total Wine and More and BevMo took up residence in Washington and significant pricing and distribution channel reforms were enacted. During the rulemaking process, some of the members of the pro-initiative 1183 coalition sued the WSLCB with regard to the Liquor Boards restrictive interpretation of the retailer to retailer sales allowed under I-1183. A discussion of the issues involved is beyond the scope of this re-cap.

Rulemaking, Some Good, Some Not so Much
FWWS was pleased that The WSLCB sided with our position in continuing to allow retailers to price wine below cost of acquisition in order to meet a competitor’s price. Prior to passage of I-1183 this aspect of state law was meaningless since all producer prices except close outs were required to be uniform. With delivery charges and volume discounts now allowed in producer pricing, it makes sense to allow a retailer to reduce their prices in order to meet a competitor’s price assuming the lower price they are meeting is due to the lower acquisition cost of their competitor. We argued that the allowance should remain. The Board agreed in a 2:1 decision

Less welcome was the WSLCB’s unilateral decision to eliminate enforcement of NSF checks used to pay for wine. While FWWS was willing to accept this suggestion by the Liquor Board last legislative session as part of a comprehensive reform of the credit ban, also allowing voluntary limited credit terms for checks similar to what is allowed for Electronic Funds Transfers, the elimination of NSF check enforcement by itself is not in our view a reasonable or fair outcome. While wineries are still required by law to receive payment on delivery and are subject to WSLCB sanction for failing to do so, if the check they receive on delivery bounces, no specific sanctions against the retailer remain in law.

Looking Ahead
FWWS will continue to tirelessly advocate for positive improvements in wine regulation and will remain watchful to prevent burdensome and unnecessary changes in the law such as the “What is a Winery” proposal. A couple of things we hope to advance in the coming year are:

  • Allowing the sale of Wine In “Growlers”                                                                                                                      Federal Policy prohibits the sale of wine in re-fillable “growlers” the way beer may be sold, unless such containers are filled at a bonded wine facility. FWWS has been pursuing this issue for over two years now and will continue work with federal legislators on the issue. We believe the popularity of this most “green” of all packaging formats (studies show that 65% of a winery’s carbon footprint is in the glass packaging) will continue to grow.
  • Allowing Multiple Licenses for the Same Premise                                                                                                              A number of our member wineries have expressed interest in having activities in their premises which require multiple licenses for the same premise (i.e. serving beer in their tasting room, selling another winery’s wine in their tasting room). The WSLCB has indicated that they do not believe that they have the authority to issue such multiple licenses for a singe premise, but has not identified a public policy reason why this should be prohibited. FWWS will seek legislation to affirmatively grant the WSLCB such authority.
With your help we’re making a difference! Happy holidays and best wishes for a prosperous New Year.

Your FWWS Board

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