On the 12th Day of Christmas, the ABC Brought to Me: More Red Tape

By - December 19, 2012 | Alcoholic Beverage Law | Email Will Cheek

Red tape is the gift of choice from the Tennessee ABC. Starting this December, all servers and owners and officers of licensees are required to file a notarized statement of citizenship or proof for foreigners to work in the U.S. The statement has to include a copy of proof of citizenship or authority.

The new requirement is not terribly burdensome, but adds yet another hurdle to an already complicated process. 1980’s Rock Kings The Police understand:

The queue gets longer everyday
I just ain’t got time to stay
I ain’t gonna run away
All I wanna do is play
I don’t want no dead end job

For servers that are not as proficient in English and written forms, we see the rule as a disincentive to apply for or renew server permit cards. Having a server permit card allows recent immigrants to enter a relatively high paying field. We know of many recent immigrants that have waited tables to save enough money to purchase their own convenience store or other small business. The server permit card is often key to the American Dream.

For most servers, it is yet another pain to add to daily life. More red tape.

In all fairness to the ABC, the requirement is part of comprehensive state legislation – it is not really the fault of the ABC.

Is Wine in Tennessee Groceries Wishful Thinking for 2013?

By - December 12, 2012 | Alcoholic Beverage Law | Email Will Cheek

Tennessee media have made wine in groceries headline news this holiday season – and often covered the issue as if it was going to be a done deal.

The Tennessean’s Gail Kerr championed wine in groceries. The Knoxville News Sentinel predicts: Prospects Brighten for Wine in Tenn. Groceries. The Memphis Commercial Appeal concurred with the Sentinel word for word. The Chattanooga Times Free Press opined: Break the Wine Sales Monopoly in Tennessee.

Patsy Cline may be closer to the truth than the media (apologies in advance for butchering a classic):

I’m crazy for trying and crazy for crying
And I’m crazy for loving (wine in my Kroger)

Lawyerly Message

I like to remind folks that we are not paid to take a side on the wine in grocery store issue. We have liquor clients on both sides and try our best to be fair in our coverage.

The Will of the People

The vast majority of Tennessee voters favor wine in groceries and there are lots of reasons the law should reflect the will of the people. But there are also lots of reasons why the will of the people may be doomed – again.

No Quick Fix

First of all, if wine in groceries passes, it is probably going to be late 2013 before you see Yellow Tail grace the aisles of your local supermarket. See our recent post for more detail about timing.

More importantly, there are major obstacles in the legislature that have not changed from prior years.

Local Impact

For nearly four decades,Tennessee liquor laws have required that liquor store owners be Tennessee residents. You can only own one liquor store. Many cities, like Nashville, require that the owners be residents of the city.

By law, Tennessee liquor stores are small mom and pop businesses. In sharp contrast, grocery store chains are almost all large out of state corporations. On the heels of a recession, with lots of local jobs and small businesses at stake, we see the local angle continuing to play well before legislators.

Tax Revenue

Official Tennessee estimates for tax revenue growth from wine in groceries tops $20 million per year. If you need help sleeping at night, read the official report here.  The projection assumes that Tennesseans will drink nearly twice as much wine, if groceries can sell wine.

We question the accuracy of the predicted tax revenue increase. Will the average wine consumer really quaff twice as much wine if they can buy it at Kroger?

If so, no wonder the beer folks are so concerned, and opposed, to wine in groceries. Will thousands of beer customers switch to wine at Kroger if given the chance? Or will wine drinkers drink twice as much?

Neither seems entirely plausible. We are not tax revenue experts, but we doubt the tax revenue projections are accurate.

Although the additional tax revenue sounds great for balancing the budget, we suspect socially conservative legislators will revolt at the thought of doubling the consumption of wine. Is this really a selling point?

Temperance

Keep in mind that many of Tennessee’s legislators represent districts that are largely rural, populated by citizens that often strongly oppose alcohol. In particular, many Tennessee residents do not want to see wine in their local Piggly Wiggly.

In much of Tennessee, beer is tolerated, but the stronger stuff, including wine, is seen as more dangerous and sinful than beer. Wine is treated as liquor in Tennessee, and wine sales have historically been restricted the same way as whiskey.

Beer has been widely available at both urban and rural markets and restaurants following repeal of prohibition in the late 1930’s. The sale of liquor, including wine, was a serious crime until the 1960’s in Nashville and other major Tennessee cities. The sale of wine and liquor in most smaller towns was not approved by citizens until the 1980’s and 1990’s.

Jobs

Wine in grocery store advocates say that 3,000 new jobs will be created. We frankly doubt that big box retailers like Kroger, Wal-Mart and other grocers will add new staff for wine sales. Grocery stores will not expand to add space for wine sales. Most likely, shelf space for wine will be taken from other products. And one wonders why beer sellers are opposed to wine in groceries.

The impact of wine in groceries on liquor store jobs is grim. We suspect that hundreds of liquor stores will go out of business within a few years of wine being legalized in groceries. Although many liquor stores will survive, the business model will be radically altered and we predict that more Tennessee liquor store owners will fail than survive.

Convenience Stores

Wine in convenience stores has avoided the spotlight, so far. Publicity has focused on grocery stores. But wine legislation and lobbying advocates include Mapco, Pilot and other convenience stores.

In Tennessee, wine includes: “fortified wine of an alcoholic content not to exceed twenty-one percent (21%) by volume.”

We predict that many urban legislators will back off support for wine in groceries when they realize that corner markets will be able to sell MD 20/20 and Thunderbird. Particularly in poor neighborhoods, where many markets are magnets for drunks and crime, the prospect of much stronger drinks is a legitimate concern.

On a statewide basis, 42 proof grab and go drinks on ice near check out counters will likely incite MADD and other alcohol control groups. Under current law, beer has an alcohol content of 5% or less alcohol. 21% fortified wine is a game changer.

A Time Honored Battle

Liquor in the U.S. has been a lightening rod for controversy since the pilgrims first settled. Heck, we banned the sale of all alcohol during Prohibition, with disastrous results. Liquor in post-Prohibition Tennessee has a colorful history. It is no surprise that wine in groceries is causing such a stir.

TTB Creates Incentive for Small Brewers to File Tax Returns Quarterly

By - December 08, 2012 | Alcoholic Beverage Law | Email Will Cheek

Tired of filing 25 tax returns each year with the Tax & Trade Bureau?

Small brewers rejoice.

The TTB has temporarily lowered the minimum bond to $1,000 for “small breweries” that elect to file excise taxes on a quarterly basis. A small brewery must have paid less than $50,000 in excise taxes during the preceding year.

The new rule applies for three years, giving the TTB time to gauge whether lowering the bond significantly increases the number of breweries filing on a quarterly basis.

Read the TTB summary of the rule here.

All I Want for Christmas is My Wine at My Kroger

By - December 04, 2012 | Alcoholic Beverage Law | Email Will Cheek

By far, the question we hear most from Tennesseans is “when can I buy wine in my grocery store?” Well Virginia, yes there may be a Santa Claus bound for your nearest Kroger, Publix or Wal-Mart. But he is going to be quite late for Christmas.

This Sunday, The Tennessean reported that “The top two Republicans in the Tennessee General Assembly support allowing the sale of wine in supermarkets, and the influx of new GOP lawmakers is giving them the opportunity to reshape key committees where efforts to make that change have long been corked up by opponents.”

This is big news for wine in grocery store advocates. In the past, industry opponents have bottled up wine in grocery store legislation in committees, which is a time honored way to prevent bills from being enacted into law.

“It’s one of those issues we’ve battled forever,” Senate Speaker Ron Ramsey, R-Blountville, told The Associated Press. “And I think the opponents have held it off for about as long as they can hold it off,” in a quote from The Tennessean.

The Tennessee General Assembly convenes in January 2013 and most successful laws are not effective until July. If wine in grocery store legislation passes, grocery stores will still have to obtain liquor licenses. This means that at the earliest, wine will not be in your local Kroger until fall 2013. Given the complexity of local licensing issues that we expect will not be fully addressed in the legislation, wine may hit the shelves around Christmas 2013 in cities like Nashville.

Although the issue appears simple from the average consumer’s perspective, wine in grocery stores has huge implications for an industry that is currently required by law to be small mom and pop Tennessee businesses. Industry observers predict that wine in grocery stores will force a few hundred locally owned retail liquor stores to go out of business. Especially on the heels of the recession, this will continue to be a compelling argument against wine in grocery stores.

We expect the opposition to continue to be fierce, but will keep you posted.