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Home > Blogs > Uncorked > Archives > 2007 > June > 14 > Entry
New wine laws dropped into state budget bill with little examination or debate
**UPDATE: With the help of an Ohio Senate staffer, I have finally found a link to the new wine shipping and wholesaler language that appears poised to become law, in a much easier-to-read format. After clicking on this link, scroll to page 72 of the pdf file, item number 135 (On the printed document itself, the page number is listed as 68). END UPDATE
Well, apparently a version of the wine amendment that we mentioned a couple weeks ago was dropped into the state budget bill which passed the Ohio Senate yesterday unanimously and which will now go to a House-Senate conference committee to resolve differences between the two versions before heading to Gov. Strickland for his signature.
So the provisions of the new wine laws (click on “continue reading” to access the amendment’s language) appear likely to become law with precious little examination or debate, as a free-standing bill would receive.
Those who represent the Wine and Beer Wholesalers of Ohio and the Ohio Wine Producers Association appear satisfied with the new laws. Now, tell me who was at the table representing consumers’ interests when the lobbyists hammered out this language?
I invite those who had a hand in forming this legislation to let us know how consumers will benefit from these changes in Ohio’s wine laws, and why attaching this amendment to the budget bill was a preferred method of creating law than allowing the legislation to move through the General Assemblyl as a separate bill.
To view the amendment (my apologies for the confusing “line breaks” in the amendment), click on “continue reading” and let us know what you think of these new regulations.
Cheers!
Mark Fisher
127HB119-SC2455/KB Am. Sub. H.B. 119 As Passed by the House SC-2455 _________ moved to amend as follows: In line 172, after “4141.09,” insert “4301.24,”; after “4301.43,” insert “4303.03,” 1 2 In line 215, after “3701.135,” insert “4303.071, 4303.232, 4303.233,” 3 4 Between lines 30561 and 30562, insert: 5 “Sec. 4301.24. Except as provided in section 4301.242 of the Revised Code, no manufacturer shall aid or assist the holder of any permit for sale at wholesale, and no manufacturer or wholesale distributor shall aid or assist the holder of any permit for sale at retail, by gift or loan of any money or property of any description or other valuable thing, or by giving premiums or rebates. Except as provided in section 4301.242 of the Revised Code, no holder of any such permit shall accept the same, provided that the manufacturer or wholesale distributor may furnish to a retail permittee the inside signs or advertising and the tap signs or devices authorized by divisions (E) and (F) of section 4301.22 of the Revised Code. 6 7 8 9 10 11 12 13 14 15 16 17 No manufacturer shall have any financial interest, directly or indirectly, by stock ownership, or through interlocking directors in a corporation, or otherwise, in the establishment, 18 19 20 maintenance, or promotion in the business of any wholesale distributor. No retail permit holder shall have any interest, directly or indirectly, in the operation of, or any ownership in, the business of any wholesale distributor or manufacturer. 21 22 23 24 No manufacturer shall, except as authorized by section 4303.021 of the Revised Code, have any financial interest, directly or indirectly, by stock ownership, or through interlocking directors in a corporation, or otherwise, in the establishment, maintenance, or promotion of the business of any retail dealer. No wholesale distributor or employee of a wholesale distributor shall have any financial interest, directly or indirectly, by stock ownership, interlocking directors in a corporation, or otherwise, in the establishment, maintenance, or promotion of the business of any retail dealer. No manufacturer or wholesale distributor or any stockholder of a manufacturer or wholesale distributor shall acquire, by ownership in fee, leasehold, mortgage, or otherwise, directly or indirectly, any interest in the premises on which the business of any other person engaged in the business of trafficking in beer or intoxicating liquor is conducted. All contracts, covenants, conditions, and limitations whereby any person engaged or proposing to engage in the sale of beer or intoxicating liquors promises to confine the person’s sales of a particular kind or quality of beer or intoxicating liquor to one or more products, or the products of a specified manufacturer or wholesale distributor, or to give preference to those products, shall to the extent of that promise be void. The making of a promise in any such form shall be cause for the revocation or suspension of any permit issued to any party. This section does not prevent the holder of an A permit from securing and holding a wholesale distributor’s permit or permits and operating as a wholesale distributor. 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 127HB119-SC2455 Page 2 No manufacturer shall sell or offer to sell to any wholesale distributor or retail permit holder, no wholesale distributor shall sell or offer to sell to any retail permit holder, and no wholesale distributor or retail permit holder shall purchase or receive from any manufacturer or wholesale distributor, any beer, brewed beverages, or wine manufactured in the United States except for cash. No right of action shall exist to collect any claims for credit extended contrary to this section. This section does not prohibit a licensee from crediting to a purchaser the actual prices charged for packages or containers returned by the original purchaser as a credit on any sale or from refunding to any purchaser the amount paid by that purchaser for containers or as a deposit on containers when title is retained by the vendor, if those containers or packages have been returned to the manufacturer or distributor. This section does not prohibit a manufacturer from extending usual and customary credit for beer, brewed beverages, or wine manufactured in the United States and sold to customers who live or maintain places of business outside this state when the beverages so sold are actually transported and delivered to points outside this state. No wholesale or retail permit shall be issued to an applicant unless the applicant has paid in full all accounts for beer or wine, manufactured in the United States, outstanding as of September 6, 1939. No beer or wine manufactured in the United States shall be imported into the state unless the beer or wine has been paid for in cash, and no supplier registration for any such beer or wine manufactured in the United States shall be issued by the division of liquor control until the A-2, B-1, or B-5 permit holder establishes to the satisfaction of the division that the beer or wine has been paid for in cash. 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 This section does not prevent a manufacturer from securing and holding any financial interest, directly or indirectly, by 82 83 127HB119-SC2455 Page 3 stock ownership or through interlocking directors in a corporation, or otherwise, in the establishment, maintenance, or promotion of the business or premises of any C or D permit holder, provided that the following conditions are met: 84 85 86 87 (A) Either the manufacturer or one of its parent companies is listed on a national securities exchange. 88 89 (B) All purchases of alcoholic beverages by the C or D permit holder are made from wholesale distributors in this state or agency stores licensed by the division of liquor control. 90 91 92 (C) If the C or D permit holder sells brands of alcoholic beverages that are produced or distributed by the manufacturer that holds the financial interest, the C or D permit holder also sells other competing brands of alcoholic beverages produced by other manufacturers, no preference is given to the products of the manufacturer, and there is no exclusion, in whole or in part, of products sold or offered for sale by other manufacturers, suppliers, or importers of alcoholic beverages that constitutes a substantial impairment of commerce. 93 94 95 96 97 98 99 100 101 (D) The primary purpose of the C or D permit premises is a purpose other than to sell alcoholic beverages, and the sale of other goods and services exceeds fifty per cent of the total gross receipts of the C or D permit holder at its premises. 102 103 104 105 This section does not prevent a manufacturer from giving financial assistance to the holder of a B permit for the purpose of the holder purchasing an ownership interest in the business, existing inventory and equipment, or property of another B permit holder, including, but not limited to, participation in a limited liability partnership, limited liability company, or any other legal entity authorized to do business in this state. This section does not permit a manufacturer to give financial assistance to the holder of a B permit to purchase inventory or equipment used in 106 107 108 109 110 111 112 113 114 127HB119-SC2455 Page 4 the daily operation of a B permit holder. 115 This section does not prevent a manufacturer from securing and holding a B-2a permit or permits and operating as a wholesale distributor.” 116 117 118 127HB119-SC2455 Page 5 Between lines 30612 and 30613, insert: 119 “Sec. 4303.03. Permit A-2 may be issued to a manufacturer to manufacture wine from grapes or other fruits; to import and purchase wine in bond for blending purposes, the total amount of wine so imported during the year covered by the permit not to exceed forty per cent of all the wine manufactured and imported; to manufacture, purchase, and import brandy for fortifying purposes; and to sell those products either in glass or container for consumption on the premises where manufactured, for home use, in sealed containers for consumption off the premises where manufactured, and to retail and wholesale permit holders under the rules adopted by the division of liquor control. 120 121 122 123 124 125 126 127 128 129 130 The fee for this permit is one hundred twenty-six seventy-six dollars for each plant to which this permit is issued. 131 132 127HB119-SC2455 Page 6 Sec. 4303.071. (A)(1) Except as otherwise provided in division (A)(2) of this section, permit B-2a may be issued to a person that manufactures wine, is the brand owner or United States importer of wine, or is the designated agent of a brand owner or importer for all wine sold in this state for that owner or importer. If the person resides outside this state, the person shall comply with the requirements governing the issuance of licenses or permits that authorize the sale of intoxicating liquor by the appropriate authority of the state in which the person resides or by the tax and trade bureau in the United States department of the treasury. 133 134 135 136 137 138 139 140 141 142 143 (2) A B-2a permit shall not be issued to a manufacturer of wine that is not entitled to a tax credit under 27 C.F.R. 24.278 and that produces one hundred fifty thousand gallons or more of wine per year. 144 145 146 147 (3) The fee for the B-2a permit is twenty-five dollars. 148 (4) The holder of a B-2a permit may sell wine to a retail permit holder, but a B-2a permit holder who is a wine manufacturer may sell to a retail permit holder only wine that the B-2a permit holder has manufactured. 149 150 151 152 (5) The holder of a B-2a permit shall renew the permit in accordance with section 4303.271 of the Revised Code, except that renewal shall not be subject to the notice and hearing requirements established in division (B) of that section. 153 154 155 156 (B) The holder of a B-2a permit shall collect and pay all applicable taxes relating to the delivery of a wine to a retailer including, but not limited to, taxes levied under section 4301.43 and Chapters 5739. and 5741. of the Revised Code. 157 158 159 160 (C) The holder of a B-2a permit shall comply with this chapter, Chapter 4301. of the Revised Code, and any rules adopted 161 162 127HB119-SC2455 Page 7 by the liquor control commission under section 4301.03 of the Revised Code. 163 164 127HB119-SC2455 Page 8 Sec. 4303.232. (A)(1) Except as provided in division (A)(2) of this section, permit S may be issued to a person that manufactures wine, is the brand owner or United States importer of wine, or is the designated agent of a brand owner or importer for all wine sold in this state for that owner or importer. If the person resides outside this state, the person shall comply with the requirements governing the issuance of licenses or permits that authorize the sale of intoxicating liquor by the appropriate authority of the state in which the person resides or by the tax and trade bureau of the United States department of the treasury. 165 166 167 168 169 170 171 172 173 174 (2) An S permit shall not be issued to a manufacturer of wine that is not entitled to a tax credit under 27 C.F.R. 24.278 and that produces one hundred fifty thousand gallons or more of wine per year. 175 176 177 178 (3) The fee for the S permit is twenty-five dollars. 179 (4) The holder of an S permit may sell wine to a personal consumer by receiving and filling orders that the personal consumer submits to the permit holder. The permit holder shall sell only wine that the permit holder has manufactured to a personal consumer. 180 181 182 183 184 (5) The holder of an S permit shall renew the permit in accordance with section 4303.271 of the Revised Code, except that the renewal shall not be subject to the notice and hearing requirements established in division (B) of that section. 185 186 187 188 (6) The division of liquor control may refuse to renew an S permit for any of the reasons specified in section 4303.292 of the Revised Code or if the holder of the permit fails to do any of the following: 189 190 191 192 (a) Collect and pay all applicable taxes specified in division (B) of this section; 193 194 127HB119-SC2455 Page 9 (b) Pay the permit fee; 195 (c) Comply with this section or any rules adopted by the liquor control commission under section 4301.03 of the Revised Code. 196 197 198 (B) The holder of an S permit shall collect and pay all applicable taxes relating to the delivery of wine to a personal consumer, including, but not limited to, taxes levied under section 4301.43 and Chapters 5739. and 5741. of the Revised Code. 199 200 201 202 (C)(1) The holder of an S permit shall send a shipment of wine that has been paid for by a personal consumer to that personal consumer via the holder of an H permit. Prior to sending a shipment of wine to a personal consumer, the holder of an S permit, or an employee of the permit holder, shall make a bona fide effort to ensure that the personal consumer is at least twenty-one years of age. The shipment of wine shall be shipped in a package that clearly has written on it in bold print the words “alcohol enclosed.” No person shall fail to comply with division (C)(1) of this section. 203 204 205 206 207 208 209 210 211 212 (2) Upon delivering a shipment of wine to a personal consumer, the holder of the H permit, or an employee of the permit holder, shall verify that the personal consumer is at least twenty-one years of age by checking the personal consumer’s driver’s or commercial driver’s license or identification card issued under sections 4507.50 to 4507.52 of the Revised Code. 213 214 215 216 217 218 (3) The holder of an S permit shall keep a record of each shipment of wine that the permit holder sends to a personal consumer. The records shall be used for all of the following: 219 220 221 (a) To provide a copy of each wine shipment invoice to the tax commissioner in a manner prescribed by the commissioner. The invoice shall include the name of each personal consumer that 222 223 224 127HB119-SC2455 Page 10 purchased wine from the S permit holder in accordance with this section and any other information required by the tax commissioner. 225 226 227 (b) To provide annually in electronic format by electronic means a report to the division. The report shall include the name and address of each personal consumer that purchased wine from the S permit holder in accordance with this section, the quantity of wine purchased by each personal consumer, and any other information requested by the division. The division shall prescribe and provide an electronic form for the report and shall determine the specific electronic means that the S permit holder must use to submit the report. 228 229 230 231 232 233 234 235 236 (c) To notify a personal consumer of any health or welfare recalls of the wine that has been purchased by the personal consumer. 237 238 239 (D) As used in this section, “personal consumer” means an individual who is at least twenty-one years of age, is a resident of this state, does not hold a permit issued under this chapter, and intends to use wine purchased in accordance with this section for personal consumption only and not for resale or other commercial purposes. 240 241 242 243 244 245 127HB119-SC2455 Page 11 Sec. 4303.233. No family household shall purchase more than twenty-four cases of nine-liter bottles of wine in one year.” 246 247 In line 50142, after “4141.09,” insert “4301.24,”; after “4301.43,” insert “4303.03,” 248 249 In line 41 of the title, after “4141.09,” insert “4301.24,”; after “4301.43,” insert “4303.03,” 250 251 In line 97 of the title, after “3701.135,” insert “4303.071, 4303.232, 4303.233,” 252 253 The motion was __ agreed to. SYNOPSIS Sale of Wine 254 R.C. 4301.24, 4303.03, 4303.071, 4303.232, and 4303.233 255 Creates the S liquor permit and authorizes the permit to be issued to certain manufacturers and distributors of wine inside and outside of Ohio, establishes a $25 permit fee, allows the holder of an S permit to ship wine directly to personal consumers in accordance with specified procedures and requirements, defines “personal consumer,” and applies current statutes that impose a state tax on the sale and distribution of wine to S permit holders; creates the B-2a liquor permit and authorizes the permit to be issued to a person who manufactures wine, is the brand owner or United States importer of wine, or is a designated agent of a brand owner or importer for all wine sold in Ohio for that owner or importer to sell wine to retail permit holders if the B-2a permit holder produces less than 150,000 gallons of wine per year, establishes a $25 permit fee, and specifies that the statute 256 257 258 259 260 261 262 263 264 265 266 267 268 269 127HB119-SC2455 Page 12 establishing restrictions on manufacturers and wholesale distributors of beer and intoxicating liquor does not prevent a manufacturer from securing and hold a B-2a liquor permit or permits and operating as a wholesale distributor; eliminates existing authority for A-2 liquor permit holders (wine manufacturers) to sell wine and wine products for home use and to retail permit holders, allows A-2 liquor permit holders to sell wine and wine products in sealed containers for consumption off the premises where manufactured, and lowers the permit fee for an A-2 liquor permit from $126 to $76; and prohibits a family household from purchasing more than 24 cases of nine-liter bottles of wine annually, but does not define “family household.” 270 271 272 273 274 275 276 277 278 279 280 281 127HB119-SC2455 Page 13
Comments
By Linda
June 18, 2007 8:45 AM | Link to this
My point was I didn’t know what you wanted. I think you’re not being practical if you think “everyone” will be heard. This isn’t law yet. The supreme court’s requirement to get the ball rolling is being met. Now the talking will continue - maybe forever. If you feel strongly enough about your agenda I’m sure you’ll get in all the proper faces. We’ve got all we can handle with our own particular legislative issues - like getting the state to allow us to sell our own brandy, vodka, bourbon and whisky. That might even benefit you. Our business hasn’t changed yet and neither has yours. Let us know when the ball hits the ground.By Nancy
June 17, 2007 11:39 AM | Link to this
Linda, you miss the point. It’s not what we want or got that’s important. It’s whether all affected parties were heard. Consumers and retailers were deliberately left out of discussions. So were the majority of Ohio wineries. Woody admits with considerable understatement that the amendment is not perfect. Then why not take the time to fix it? Why not incorporate the suggestions of WineAmerica, a national organization with much experience nationwide in this legislation? Ohio is an open state now and in compliance with Granholm. So why the rush? Wine consumers are not going to be pleased when they find out what has occurred. Inevitably, this will reflect poorly on the broader Ohio wine industry, and not just on the twelve wineries instigating this. That bothers us and should bother everyone serious about making and selling fine wine in Ohio.By Linda
June 15, 2007 10:09 PM | Link to this
Amount to each, Nancy. This is a collection of interests, not a single entity. I don’t think I really need to point that out. Maybe I do. But, weighted statements and emotional outbursts don’t help with a bunch of lawyers. They’re schooled in re-directing that kind of energy. What didn’t you get that you wanted?By Don "Woody" Woodward
June 15, 2007 6:06 PM | Link to this
Okay, everyone. This is not perfect legislation, but it’s the best we are going to get to comply to Granholm, the famous Supreme Court decision that everyone thought would open up direct shipping. The State of Ohio certainly was NOT in compliance under their old rules prohibiting out of state wineries to ship. I am certain that there will ALWAYS be court challenges around the nation to various licensing and shipping laws; I do feel that ours will pass muster. Lastly, I can tell you that as a small winery, I feel that a majority of the Ohio wineries, big and small, came to a concesus that this legislation is good for consumers, good for the Ohio wineries, and good for the State of Ohio. -Woody-By Nancy
June 15, 2007 10:05 AM | Link to this
Hmmm. I wouldn’t call almost $900,000 in political contributions to legislators and political parties (this data is through March 2006) small potatoes. See the Common Cause report “Under the Influence: A Profile of the Wholesale Beer and Wine Association of Ohio: How They Influenced Legislation and Used the Increased Campaign Finance Limits to their Advantage.” Search Common Cause Under the Influence Ohio on google, or see http://www.commoncause.org/site/apps/nl/content2.asp?c=dkLNK1MQIwG&b=194883&ct=3770009By Linda
June 15, 2007 8:42 AM | Link to this
Well, I see two winemakers with completely different takes on the situation. I’d say, offhand, Keith probably sells more on-premise and Ron wants more off-premise. Woodstone Creek hasn’t paid much attention to outside sales so we’re more intent to see how this could shake out in the next phase. However … whenever legislation appears to be linked to a special interest group, like the distributors, even the average consumer could jump to the conclusion there’s something to hide. Everyone loves a good scandal. But, the brutal fact is: the average consumer is just as happy to buy for less than $10 at the grocery. Checking on political campaign contributions of the wholesalers, I found the amounts were pretty pitiful. Legislators should hold out for more money if that’s part of the equation. If the distributors are trying to cap us down - I’ll take that as a sign we’re giving them a reason. I noticed there’s more regional wine in groceries around Cleveland. Found out those guys are getting distributors. Of course, it also appears they get more attention from local governments up there, too. I’ve never presumed I’m powerless in the face of the law. I’m also not too rigid to work around it. Plant your grapes, Glen. If you’re close by, we might need them.By Keith Pritchard
June 14, 2007 1:41 PM | Link to this
All this does is bring the state in to compliance of treating all permit holders without discrimination. Some of the caps such as the 150,000 gallon thing are under court test in other states as discrimination. For us small wineries in Ohio to contimue to sell to a retailer or an individual by shipping, the state has to treat out of state wineries the same. Most all of the other states are going to this system of having to buy a permit to be able to ship to a consumer in their state. This has barred me as a small winery from being able to ship out of state to consumers as I can’t keep track of such a compliance nightmare. Ohio is now treating other states wineries the way they will be treating us. So, now we are back to square one for small wineries after all the big direct shipping hoopla. The more things change the more they stay the same. But with this new system maybe some businesses will be developed that just specialize in shipping wine from each state and take care of the compliance issues. As it is now Ohio is wide open to shipping in to consumers, but not to shipping out as each winery has to meet the compliance issues of every state they ship to. This language actually helps protect the small Ohio wineries ability to sell directly to consumers and to retailers. The gentleman who was looking at planting grapes, I would go ahead as it really doesn’t affect how a small winery does business in Ohio. Just changes the structure slightly so as not to discriminate against small wineries out of state if they choose to purchase the s permits to do business in Ohio. The consumer who likes to have wine shipped to themselves from small wineries out of state is the one who really is the only loser in this.By John
June 14, 2007 1:13 PM | Link to this
A quick read of the wording seems to indicate the state wants to stop wine makers from participating at wine tastings. It also seems the wording prevents consumers from getting more than 9 liters of wine annually directly from wineries. This, of course, prevents folks from getting around the markups wholesalers put on wines before sending them on to retail stores. Clearly the state wants to get in between consumers and wine makers to make sure their ‘friends’ in the wholesale sector stay very profitable.By Ron Barrett
June 14, 2007 11:31 AM | Link to this
Just to let everyone know… most Ohio wineries and all of the new wineries in Southwest Ohio were left out of the discussions. It’s a bad deal for wineries and a terrible deal for consumers. WBWAO and OWPA leadership never have supported wine consumer interests. They and the twelve wineries pushing this know that this legislation would not likely survive the hearing process intact. They adopted the Hugo Chavez approach. Authoritarian si, democratic no.By Glenn Midlam
June 14, 2007 11:09 AM | Link to this
I have 74 acres and was concidering growing and processing grapes but not now.