Changes to Liqour Control Regulations Introduced

LQC

State Senator Howard Walker introduced legislation (Senate Bill 216) last week which would incorporates nearly all of the Office of Regulatory Reinvention’s (ORR) recommendations for modernizing Michigan’s liquor control system.

Governor Snyder created the ORR to identify excessively burdensome and unnecessary regulations faced by business owners.

 Senate Bill 216 makes a number of changes to the Michigan Liquor Control Code that incorporate the recommendations of the Office of Regulatory Reform’s that were generated by the Liquor Control Advisory Rules Committee.

The Liquor Control Advisory Rules Committee, which included invited members from all three tiers of Michigan’s liquor sector, discussed and made recommendations with the intent of changing Michigan’s current liquor control regulations to “ensure that Michigan’s regulatory environment is simple, fair, efficient, and conducive to business growth and job creation.”

The recommendations contained in the final report were not adopted unanimously, but each of the final recommendations that received a vote garnered at least majority support from the Committee’s members.

Senate Bill 216 includes the following major reforms:

Sec. 105 and Sec. 111 — Updates the definitions for brandy manufacturers and small distillers to allow for the sale of products outside of the state, via distribution through the ADA system, to another Michigan distillery, to a winemaker or small winemaker, or at retail for on- or off-premises consumption at the licensed premises.

Sec. 111 — Creates a new “Small Brewer” license that replaces the current microbrewer and brewpub licenses, which are both eliminated under the bill. A small brewer could brew up to 30,000 barrels of beer and could sell their product to a wholesaler, to a retailer, to a consumer via direct shipment (up to a total of 115 barrels per year), or at retail for on- or off-premises consumption at its licensed premises.

Sec. 111 and Sec. 113 — Updates the definitions of winemaker and small winemaker to allow these suppliers to sell their product out of state, to a wholesaler, to another winery, to a retailer, to a consumer via direct shipment, or at retail for on- or off-premises consumption at its licensed premises. Winemakers and small winemakers can also purchase spirits for the purpose of fortification.

Sec. 205 — Eliminates the current cap on the amount of spirits that on-premises licensees can purchase from off-premises licensees to allow restaurants to more easily control their stock of liquor.

Sec. 205 — Creates a framework for future increases in the “per case fee” for delivering spirits that will reflect the increasing costs of providing this service. The fee will continue to be set by the Michigan Liquor Control Commission and will be adjusted based on inflation.

Sec. 305 and Sec. 403 — Exempts contracts between small brewers or small winemakers and their wholesaler from the Supplier-Distributor Franchise Law if the small brewer’s or small winemaker’s volume through the distributor represents less than 3 percent of the distributor’s book of business. The current franchise law prevents suppliers from taking certain actions against distributors, including forcing them to carry additional brands to maintain a contract, withholding the delivery of orders, or attempting to otherwise influence the business decisions of a distributor. These changes would allow a small supplier of beer or wine the opportunity to negotiate a contract with a supplier that both parties agree to, but is not subject to the terms of the existing franchise law, giving the small supplier greater flexibility when renegotiating the contract.

Sec. 409 — Requires that the excise tax on beer produced out of state is collected at the wholesale, rather than supplier level, to streamline the excise tax collection process.

Sec. 415 — Creates a new special permit to allow small winemakers to sell their wine at Farmer’s Markets.

Sec. 501 — Allows a local legislative body the ability to delegate the final local approval of licenses to the clerk or other administrative officer of the local unit.

Sec. 521a — Allows economic development licenses, which are currently limited to cities, to be issued to locations in villages or townships.

Sec. 525 — Does the following:

  • Prohibits a local unit of government from charging license fees that exceed the application fee required by the Commission, with the exception of the new resort licenses, which can be subject to a $5,000 local fee for law enforcement.
  • Allows an applicant the ability to apply for and receive a conditional liquor license while their request for a permanent license is being reviewed. A conditional license would need to be approved within 20 days and would expire after 1 year or upon the denial of the permanent license application.

Sec. 526 — Expands the current “Beer Festival” special license to allow for “Beer, Wine, or Spirits Festivals.”

Sec. 531 — Does the following:

  • Allows for the transfer of escrowed on-premises licenses, subject to a $10,000 fee, to an adjacent county with the stipulation that the license cannot be subject to an inter-county transfer for five years.
  • Creates 40 new non-transferable resort licenses at a cost of $20,000 for locations where a licensee has invested at least $500,000. A local unit of government could charge an additional $5,000 for this type of license.

Sec. 537 — Allows the following:

  • Allows small winemakers, winemakers, brandy manufacturers, and small distillers to serve beer and wine that was not produced by the licensee at a restaurant operated at the licensed premises or on a contiguous piece of property owned by the licensee.
  • Allows small winemakers the ability to conduct off-site tastings in the same fashion as winemakers, including charging a fee for samples.
  • Allows small distillers and brandy manufacturers to charge a fee for samples at an off-site tasting room.

Sec. 541 — Reduces the general inventory threshold for licensees with motor vehicle fuel pumps from $250,000 to $50,000 and eliminates the requirement that gas pumps be at least 50 feet from the spot where alcohol is purchased.

Sec. 547 — Allows a brewer, brandy manufacturer, small distiller, winemaker, or small winemaker to obtain a “catering permit” to sell, deliver, and serve beer, wine, or spirits at a catered, private off-premises event.

Sec. 603 — Allows an individual licensed as a small winemaker to own property that is leased by an individual licensed as a retailer.

Sec. 701 — Increases the penalties for clerks or servers who serve alcohol to a minor. The current penalty is doubled to $200 for the first offense and increased to $400 for subsequent offenses.

Sec. 707 and Sec. 901 — Amends the standard for most violations by licensees to those acts that they “knowingly” allow to occur. The current standard does not take into account whether the licensee had any knowledge of the fact that an illegal activity had taken place on the premises.

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