Monday, June 1, 2015

Got a Cool Old Bottle to Sell? Try North Carolina

The North Carolina Senate Finance Committee passed House Bill 909 last week, which will make several significant changes to North Carolina alcoholic beverage control ("ABC") laws. House Bill 909 now heads to the full Senate for a vote. If it passes the Senate, it will be presented to the Governor for signature and will become effective immediately thereafter.

Here are the two sections that caught my eye.

Section 1 - Antique Spirituous Liquor

The bill allows restaurants, bars, and other entities holding mixed beverage permits to obtain antique spirituous liquor permits and sell antique spirituous liquor to customers. Antique spirituous liquor is liquor that has not been produced or bottled in more than twenty years, is unopened, and is not owned by a distillery. The bill provides a means for retailers to purchase antique spirituous liquor from local ABC Boards, which will purchase the antique liquor from private sellers. This process will enable retailers to obtain mixed beverage tax stamps and pay taxes on antique spirituous liquor, just as they do for other types of liquor. The North Carolina ABC Commission will adopt temporary rules by 1 September 2015 to outline this process.

I have some questions about details, such as is a bottle of A. H. Hirsch gold foil, distilled in 1974, bottled in 2003, considered 41-years-old or 12-years-old? If it was removed from wood more than 20 years ago, does that count? I suspect the rule will be interpreted as 'bottled.' The wording also suggests that pre-1995 Old Grand-Dad won't be allowed, since Old Grand-Dad is still produced. Or how about Very Very Old Fitzgerald? Old Fitzgerald is still produced but it has been more than 20 years since VVOF was.

I know of no state that has this type of law in effect.

Section 4 - Distillery Sales

The bill allows distilleries producing less than 100,000 gallons per year to sell one bottle of liquor per calendar year to each visitor to the distillery. This is a change from current law, which allows only ABC stores to sell bottles of liquor. Sales of bottles of liquor at the distillery shall be at the same price as sales at ABC stores, including the same taxes. Distilleries will remit applicable taxes to the North Carolina Department of Revenue. Bottles will have labels stating "North Carolina Distillery Tour Commemorative Spirit." The bill would allow each visitor to purchase one bottle of spirituous liquor per calendar year. Distilleries will be required to maintain electronic records verifying visitor purchases.

This is similar to the way sale at the distilleries was first legalized in Kentucky and Tennessee, including the labeling requirement as a 'commemorative' product. It is looser now. The limit in Kentucky now is three liters per person per visit.

The new law surely is not everything North Carolina distillers want, but it's a start, and it's interesting to see how a control state handles this sort of thing.

To the best of my knowledge, there are no distilleries in North Carolina that produce 100,000 gallons or more per year, but why should they be excluded?


KJ said...

Does Piedmont (Junior Johnson and Cat Daddy) not do over 100,000 Proof Gallons? Good to see NC liberalizing their laws a little!

Sam Komlenic said...

The Antique Spirituous Liquor inclusion is brilliant and very forward-thinking. I think its intent has no bearing on the brand, but only on the date of production or bottling regardless of whether the brand is still in existence or not.

The one bottle per year at the distillery ruling is stupid. If taxes are being paid, why not sell as much as the customer wants?

Chuck Cowdery said...

I believe they're a Potemkin Distillery, bottling GNS made elsewhere, but not distilling. Which certainly means they're distilling less than 100,000 proof gallons.

Unknown said...

Look for the lobbyists behind every legislative bill. One bottle per calendar year? Please. When national Prohibition ended in 1933 the regulation of alcohol was left to individual states. Many states opted to establish state-operated distilled spirits distribution systems. The underlying rationale for putting government in control of liquor distribution was to exclude Prohibition-era bootleggers from the distilled spirits market. Simple observation shows that we no longer need worry about bootleggers. For this reason and more, the continued existence of state liquor control boards should be vanquished.

Erik Fish said...

"For this reason and more, the continued existence of state liquor control boards should be vanquished"

Philosophically, I agree. Practically, it's a different story. When Washington State became a free state a couple of years ago, their selection got somewhat better, since stores could order what they wanted; I occasionally cross the river because there's a better chance of finding something not on the state list here in Oregon. But prices went up; a $20 bottle here is closer to $25 up there. It was recently reported here that Oregon liquor stores close to the border have seen up to a 30% increase in sales, mostly due to liquor refugees from Washington stocking up.
It's just like with self-service gasoline being illegal in Oregon. Philosophically, it seems ridiculous. But then you go to California and realize that a) pumping gas is work, b) you can get dirty, and c) you still pay more for gas there than in Oregon.
Sometimes freedom isn't all it's cracked up to be.

Anonymous said...

there's a lot of fear in NC about the loss of 'Control' over liquor sales. the distillery bill turned out to be very controversial among certain factions. surprising to me, because the antique liquor bill caused little controversy and discussion, and that seems much more likely to create 'bootlegging' opportunities.
slowly moving forward here in the old north state.

Unknown said...

Eric Fish: Taxes, taxes, taxes.
In Washington state, the average price per liter, after tax, from June 2013 to April 2014 was $24.39, about 11 percent higher than in the same period two years prior, before privatization.

The culprit: fees created by the privatization initiative to make the state whole after giving up its monopoly. Those include a 10 percent fee paid by distributors, which will drop by half this year for many, and a 17 percent fee paid by retailers.

Data posted by the Tax Foundation, a Washington, D.C.-based think tank, indicates that Washington residents pay about $35.22 per gallon in spirits taxes, about $8.52 more than before privatization, even though Washington already was the state that taxed liquor the most.

Perhaps some of these privatization taxes will sunset and you will see prices fall? Consider also the distribution network in WA. Most of the market is controlled by just two companies: Young's Market and the pervasive Goliath, Southern Wine & Spirits. They can dictate prices for a while until more distribution licenses are issued which ought to increase competition and lower prices.

Having said all that, Eric, I don't know what spirits you buy, but I buy mostly American whiskey and Bourbon and I have seen those prices climb like a monkey lately. Perhaps Chuck can speak to this price trendline, but, here in New Mexico, retailers tell me they are experiencing skinner allocations on Bourbon. Some have said the key driver is China discovering Bourbon. Of course it's always easy to blame the Chinese for everything, isn't it?

Anonymous said...

I'm with TG: get rid of the whole "control state" bull-dinky. I live in one of the eighteen (?) god-forsaken states subjected to this and I can't get hold of anything other than what the nanny-state minded nincompoops will allow to be sold, i.e. the usual big-volume swill (coffee brandy's BIG here, yech!!)...repeal the 21st Amendment, it's no good!! (oh, wait - that one repealed the 18th, which was even worse) :-/

Dan said...

If I am reading your summary right, I am really interested to see what type of process the local boards will use to "purchase" the bottles from private resellers. Will they run some sort of auction, whereby a bottle would be given to the abc from a private reseller to auction, and if it sells the state takes a cut? Or will they only purchase it on paper and the ultimate purchaser (e.g. a bar) just sends in a tax payment with some paperwork? Otherwise, I don't understand how this works. Is the abc going to negotiate with each private seller on the price they will pay?

Chuck Cowdery said...

No one knows how it will work. I'm told this proposal came from one bar owner who wants to be able to sell whiskey from his own collection and also to buy bottles from collectors for that purpose.

I assume the buyer and seller will make the deal, which the government will bless in return for its cut.

It's funny that, because NC is a control state, he can't get away with just doing it like the bars in Chicago do.