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The WSLCB released this Manufacturer, Importer, Wholesaler (MIW) Bulletin today:
Date: January 20, 2011
To: Industry Members
From: Brian E. Smith, Communications Director
Subject: New Washington State Liquor Control Board Website
On Friday January 21, 2011, the Washington State Liquor Control Board (WSLCB) is scheduled to launch an entirely new website. We hope and expect that the new site will better serve our customers and others seeking information from us online. While the WSLCB will maintain its existing domain on the internet (www.liq.wa.gov), some of your existing bookmarks may break. Please update all bookmarks once the new site is online.
The new site includes features requested by many of the nearly 500 visitors who took an online survey earlier in 2010.
Website Features
The new site will feature online:
- Maps and directions to store locations powered by Google
- One-click website language translations from English to Spanish or Korean
- Search functions to pinpoint the items you need quickly
- Left-hand-side-of-page buttons to help you navigate the site easily
- Clean and simple layout with prominent highlights of emerging news
- Many more user-friendly features
New Feature: Business Portal
One important new feature on the new site is the “Business Portal.” We created this section with you in mind. The Business Portal is a one-stop shopping for business users to access the information they need. Please visit the Business Portal for:
- WSLCB’s online tax reporting and payment system
- Access to tax reporting forms for in-state and out-of-state licensees
- All forms and contact information for listing new products
We Want Your Feedback
If you have just a few minutes after you see the site, please give us feedback via the online survey you’ll see posted. Thanks again for your time and input.
- 2011 session underway, FWWS introduces four bills.
- New FWWS proposal would legalize consumer direct ship by retailers.
- Farmer’s market sampling bill introduced, receives hearing.
- Wine Institute “What is a Winery” proposal still a mystery.
2011 Session Underway
As of this writing, the first week of the 2011 Washington Legislative session is behind us. The FWWS Board has been very busy over the past year preparing for this hectic season. Together with our Lobbying Team of Mark Gjurasic and Terry Kohl, we have secured sponsors in both the House and Senate for a total of four bills – a very ambitious agenda. Three of these bills, our Tax Reporting Relief Act, Payment Parity Act, and Craft Wineries Act have been previously introduced. Our Direct Shipping Bill is new. No hearings have yet been scheduled on any of our bills. Fact sheets and the complete text of all these proposals are available on our website.
FWWS Introduces Direct to Consumers Shipping Bill
FWWS has introduced a new bill this session which we believe has many positive aspects for Washington wineries, consumers, and the State. While Washington wineries and out-of-state wineries presently have the right to ship wine direct to consumers in Washington, both domestic and out-of-state retailers are prohibited from doing so. In other words, any retailers presently shipping to Washington consumers are doing it illegally. We believe creating a legal venue for this practice is a good idea and will accomplish the following:
- Level the playing field for Washington wineries. Presently any wine shipments by out-of-state retailers are shipped without collection of Washington State sales and excise taxes since such shipments are extra legal and outside the tax registration process. This puts your wines at a roughly ten percent competitive disadvantage even before considering the cost of adult signature requirement compliance, presently $4 per package for UPS shipments.
- Adult signature requirements can be extended by regulating such shipments, accomplishing a clear and valuable public safety goal.
- Tax revenue can be generated at a time of tight state budgets from a population that will gladly accept such taxes in exchange for the benefit of being able to bring what we believe is a common practice into the legal daylight.
- Strategically, we believe that seeing such revenues suddenly appear from a currently underground economy, will encourage other states to join the handful that presently allow direct shipment from retailers to consumers. This will allow Washington wineries to sell to Washington retailers, or nationwide retailer intermediaries such as Vinoshipper.com, for resale to consumers in other states, and in quantities that presently make it impossible to either attract the representation of a wholesaler or justify the cost of compliance by an individual Washington winery in such an out-of-state market.
Farmers’ Market Wine Sampling Bill Introduced
A bill has been introduced in both the State House (HB 1172) and Senate (SB 5029) that provides a pilot program allowing wineries to provide tasting samples at farmers’ markets. Currently wineries may apply for a $75 license endorsement to sell wine at farmers markets meeting certain requirements. Tasting at such markets is not allowed. Under the proposal, tasting of samples up to 2 ounces would be allowed with a maximum of 4 ounces per customer, and only at markets currently approved for such wine sales. The pilot program would expire at the end of 2012 unless extended.
FWWS supports this proposal. It has already received a hearing in the house and is presently scheduled for a hearing before the Senate Labor, Commerce, and Consumer Protection Committee on January 18th. We will keep you posted on its progress.
Washington Wine Institute “What is a Winery?” Bill Still a Mystery
Last month we reported to you on the WWI’s “What is a Winery?” concept. The WWI has been discussing concerns in this regard for at least eighteen months. As we reported, last August we became aware through the trade media that the WSLCB shared some concerns being discussed by the WWI. Inquiries to the WSLCB indicated that they expected the WWI to present such a bill in the 2011 session but that the WSLCB could offer no details since they were only providing “technical assistance” to the WWI in this regard. Repeated subsequent requests to the WWI for a draft copy or even an outline of their proposal have gone unanswered.
In December, a legislative committee Chair offered to arrange a meeting between FWWS, the WWI, the WSLCB, and the federal Alcohol and Tobacco TTB in order to discuss agency concerns and the WWI concept. While the WWI refused the invitation, a meeting was subsequently arranged by the WSLCB. Attending were FWWS Board members, our lobbyist, and staff from the TTB and WSLCB. While several issues of regulatory concern were discussed, what became clear from the meeting is that the current State definition of “production” within the licensing statute is not sufficiently clear or comprehensive to cover business models currently being used, models which may be allowable under the current federal statutes, assuming wineries are actually complying with the federal rules. Beyond identifying this fairly straightforward definitional inadequacy in the statute, what was not sufficiently covered in the meeting is; first, to what extent the proposal is being driven by public policy goals arising from the lack of clarity in the licensing rules, and, second, if this is primarily being driven by insufficiency with the current licensing laws, why the WSLCB, rather than the WWI, is not pursuing this legislation as a regulatory reform proposal. We believe that broad industry input on proposals which mandatorily affect all state winery licensees is vital and that the WSLCB, as our regulator, is in the best position to coordinate such input. Thus far, the WWI has not only not solicited such broad industry input, they have been unwilling to accept it, except, presumably, from their membership.
At the present time and one week into the current legislative session, we have not received either a draft bill or an outline of the bill concept from the WWI. We are, therefore, uncertain whether the WWI intends to proceed with such a bill at this time, or why such a bill is necessary beyond a few definition tweaks in the liquor code. Obviously we are in no position to comment on what may or may not be in it. We will keep you posted.
As always we welcome and value your questions, comments, and input.
The Board of FWWS
FWWS Tax Reporting Relief Act Becomes Reality – In Idaho
The State of Idaho recently adopted rules allowing wineries, at their option, to report and pay their liquor taxes annually as long as they have less than $600 in quarterly tax liability. The Idaho rules actually allow qualifying wineries to report monthly, quarterly, semi-annually, or annually, at their option. The rules save time and money for both the wineries and the state – an important virtue in these recessionary times. The Idaho law is very much like what FWWS has been proposing to the Liquor Board and in the Washington Legislature for three years. The Washington Wine Institute has thus far declined to support this legislation citing a “lack of safeguards” similar to federal annual reporting. It is not clear to us what such safeguards might be since Washington has no tax bond requirements even for the largest wineries, but we are hopeful that in future the Wine Institute will join us in supporting our proposal for this positive change. As Idaho has clearly demonstrated, this sort of reform is achievable.
Governor Suspends Agency Rulemaking
On November 17, Governor Gregoire signed Executive Order 10-06 “Suspending Non-Critical Rulemaking and Adoption.” The stated intent of Governor Gregoire’s order is to relieve the burden on small business of implementing and adopting agency rules. FWWS has contacted the Governor’s office to express thanks for her recognition of the adverse effects of such burdensome regulation, and noted that advocating for such regulatory relief is one of the founding purposes of our organization.
An immediate effect of this rule on our industry was to table rulemaking on five topics, including rules proposed by the Washington Beer and Wine Wholesaler’s Association that would have allowed distributors to charge fees for split cases (ironically a form of volume pricing). As noted in a Memo from the Governor’s office, rulemaking may continue for various reasons including implementation of laws or court orders, public safety emergencies, and “negotiated rule making or pilot rule making that involved substantial participation by interested parties.” The grocery store sampling program is proceeding through rulemaking under the latter noted exception. The alcohol energy drink and chronic alcohol impact area rulemaking processes are proceeding under the public safety exception.
What is a Winery, Northwest Style
Much has been heard lately under the subject heading of “What is a Winery?” The Washington Wine Institute (WWI) has been speaking out about this issue for well over a year. FWWS learned this past summer that the Washington State Liquor Control Board (WSLCB) has been working with the WWI since at least June on this issue and apparently shares some of the concerns of the WWI with regard to definition. Since the WSLCB’s involvement clearly makes this an industry-wide issue, we asked for a copy of the bill. We were referred back to the WWI which has repeatedly claimed that the bill is “not yet drafted.” Repeated requests to the WSLCB for an outline of their specific issues of concern that would be addressed by the expected bill have thus far gone unanswered. At this point it is unclear to us what current business models may be in violation of current State statute, and we believe it would be unproductive to speculate on that topic. We are concerned that if not carefully drafted, such a bill could theoretically infringe on business privileges and practices currently enjoyed by Washington wineries. We are presently seeking clarification of this issue via a meeting with the WWI, the WSLCB, and a key legislator. We will present further information on the specifics of this proposal and FWWS’s position when such becomes available.
Interestingly, there is a current proposal in Oregon on the subject of defining a winery. This proposal, by the Oregon Beer and Wine Wholesalers’ Association, has as one central feature a requirement that wineries “produce” at least 75% of the wine they sell. Depending on how the term “produce” is defined, this could result in a severe limitation on “negociant” wines produced under license at facilities owned by others. We believe this is a serious concern given that using the economies of scale inherent in larger facilities is a proven way for small wineries to become larger wineries. We believe negociant wine to be a simple matter of brand ownership and/or alternating premise designation. We are not aware of any Federal law that presently precludes such a practice.
As stated above, we do not wish to speculate on what may or may not be in any eventual bill put forward by the WWI. We stand ready to support any bill which makes legal currently used winery business models that are not presently allowed under State law. Since FWWS has never opposed a proposal of the WWI, and since it would be preferable to have our concerns addressed ahead of time to avoid such an opposing stance, the WWI’s lack of communication on this matter is regrettable. We will keep you posted and hope to be able to report shortly that our concerns in this regard have been satisfactorily answered.
Texas Shipping Ban Survives Another Challenge
In a very unfortunate result, the State of Texas shipping policy, which discriminates against out-of-state retailers, has won another round in court. The Second Circuit Court of Appeals held that Texas’ ban on direct shipments by retailers was constitutional despite the clear violation of the commerce clause. This is a rather stunning result in that it goes completely against the grain of the Granholm decision which found such discrimination in the case of wineries (i.e., discriminating in favor of in-state wineries and against out-of-state wineries with regard to shipping regulations) to be in violation of the commerce clause of the US Constitution. As you are probably aware, the wholesalers have responded to Granholm in the US congress by proposing HR-5034 to have congress give up its exclusive right to regulate interstate commerce with regard to wine, thereby allowing states like Texas to openly and brazenly discriminate against wineries such as yours. Incredibly, the Circuit Courts seem to be suggesting that the commerce clause does not protect wine retailers in interstate commerce the same way that the Supreme Court has ruled it protects wine producers. The Specialty Wine Retailer’s Association, an FWWS affiliate member, has made appeal of this case its highest priority. Since FWWS believes that retailers are in the best position to navigate the myriad state shipping regulations, and since sales margins to retailers are vastly higher than those to wholesalers, we feel this issue is of vital importance to Washington wineries. We will be following this issue closely. Stay tuned!
HR-5034 Becomes Zombie - Stalks Halls of Congress
HR-5034 is the current attempt by the beer and wine wholesalers to have Congress abdicate its right to regulate interstate commerce, and allow states to enact laws which once again openly discriminate against out-of-state wineries in shipping. Despite more than 100 co-sponsors in the House of Representatives, HR-5034 was apparently too blatant to survive intact. Its sponsor, Massachusetts Representative Delahunt, offered changes to the bill in September that gave lip service to concerns about discrimination, yet provided virtually no barrier to the effective overturn of the Granholm decision. So the bill is not dead but lives on like a zombie. Its future is uncertain. While Representative Pelosi’s loss of the House Speaker’s chair removed a potentially overpowering opponent hailing from California, the Country’s largest wine-producing state, Democratic Representative Delahunt, perhaps sensing the same tide that took Speaker Pelosi’s seat, chose not to seek re-election in 2010. Rest assured that the wholesalers’ lobby will not cease their dousing of congress with their large diameter money hose. This issue will require constant vigilance.
In an effort to better serve our members, Family Wineries of Washington State is in the process of developing an internship program which will serve the needs of small wineries as well as the needs of students in the industry. In the weeks to follow we will be sending a brief survey in order to determine where your needs are most heavily concentrated. Your suggestions and feedback are important to our mission, so please feel free to write independently of the survey if you have anything you would like to input.
It is our pleasure to announce our first partnership with South Seattle Community College and the Northwest Wine Academy. Although young, the program is highly respected in the industry for producing talented graduates. Interns are available to assist you in all aspects of your business including the following:
- Marketing and Sales
- Tasting Room Operations
- Reporting Functions
- Cellar Operations
- Chemistry Services
- Bottling / Labeling
- Harvest Production
Our long-term vision for partnerships also include collaboration on:
- Class guest speakers
- Class projects
- Field trips
- Student volunteer work
Thank you for continuing to support Family Wineries of Washington State. You will be kept up-to-date on progress concerning this and future partnerships with other Washington state wine programs. We look forward to hearing from you!
Sincerely,
Jean Marie Elkins
FWWS Friends of the Family Program
JeanMarie.Elkins@familywineriesofwashington.org
http://www.familywineriesofwashington.org
Dear FWWS Member,
At the time of this writing, it appears likely that I-1100 will fall slightly short of the necessary votes needed for approval. We know that some of you will be relieved and and some very disappointed by this outcome. One thing we can likely all agree on is that I-1100 was not an ideal solution to all the regulatory problems faced by small Washington wineries. At the very least this issue engendered open and vigorous debate on the current and future course of the Washington wine industry.
So what's next for FWWS? The short answer is we pick up right where we left off, except that where we left off is a bit of a misnomer since we never stopped working on our legislative proposals. We have already secured a promise for a meeting with the current chair (and at this moment apparently next session's chair) of the Senate Labor, Commerce and Consumer Protection Committee together with representatives of the Liquor Control Board, the Wine Institute and our contract lobbyists, Mark Gjurasic and Terry Kohl. We hope to discuss all of the following:
- Our "Payment Parity Act" that would apply the same terms to business checks and other customary forms of payment as were recently applied to EFT transactions. This would allow you to voluntarily leave wine with vendors without immediate (CoD) payment and not thereby surrender your right to collect the money due because you have broken the law.
- Our "Tax Reporting Relief Act" that would allow wineries producing fewer than 5,000 gallons per year to file state production reports annually rather than monthly at their option.
- Our "Craft Wineries" act that would allow wineries producing fewer than 10,000 cases annually to register, at their option, as a "Craft Winery" and be exempted from many of the restrictions (or some would say "protections") contained in the current liquor code such as delivered pricing, co-advertising restrictions, etc.
- The Wine Institute's proposal to further define the term "winery." Since it has never been apparent to us why this is necessary, we will be able to get some clarification on that point, to give input on keeping any new definitions as simple as possible, and to ensure that in providing for the existence of any potential new business models, the new proposal does not eliminate any rights currently enjoyed by wineries. We are specifically concerned with any potential limitations on the presently unlimited right of wineries to make "negociant" wine at facilities owned by other wineries.
In addition to proceeding with our legislative agenda, we will in the coming weeks be proposing several new bylaw amendments for your consideration as well as electing at least one new board member.
Stay tuned!
The Board
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