AB492: Bill Text

LRB-3614/1

ARG:emw&ahe

2017 - 2018 LEGISLATURE

2017 Assembly BILL 492

September 12, 2017 - Introduced by Representatives Tauchen, Zimmerman, Kooyenga, Macco, Kulp, Duchow, Gannon, Hutton, Brandtjen, Skowronski, Ott, Wachs, Murphy, Allen and Pope, cosponsored by Senators Harsdorf, Stroebel, Kapenga, Ringhand and Bewley. Referred to Committee on State Affairs.

AB492,2,7 An Act to repeal 125.28 (5) (b) and 125.54 (7) (a) 2.; to renumber 125.54 (7) (a) 1.; to renumber and amend 125.51 (4) (br) 2. and 125.69 (1) (a); to amend 125.02 (10), 125.02 (15) (b), 125.02 (16) (intro.), 125.02 (21), 125.04 (9), 125.10 (4), 125.25 (2) (b) 5., 125.28 (5) (c), 125.29 (3) (h), 125.295 (1) (a), 125.295 (2) (a) 1., 125.295 (2) (a) 6. a., 125.295 (2) (a) 6. b., 125.295 (2) (a) 6. e., 125.295 (3) (a), 125.295 (3) (b), 125.295 (3) (c), 125.33 (9), 125.51 (2) (am), 125.51 (3) (f), 125.51 (4) (a) 1., 125.52 (1) (b) 1., 125.52 (3), 125.54 (1), 125.54 (8), 125.545 (1) (d), 125.58 (1), 125.68 (4) (c) 3m., 125.68 (9) (b), 125.68 (9) (d), 125.68 (10), 125.69 (title), 125.69 (1) (b) 1., 125.69 (1) (c), 125.69 (1) (d), 125.69 (3), 125.69 (4) (e), 125.69 (6) (a), 125.70, 139.01 (5), 139.01 (6), 139.01 (10), 139.03 (2x) (a), 139.04 (4), 139.06 (3), 139.08 (4), 139.09, 139.11 (2), 139.11 (3), 139.11 (4) (b) 2., 139.18 (2), 139.22 and 346.93 (1); and to create 125.02 (5g), (5i) and (5k), 125.295 (3m), 125.51 (4) (br) 1. i., 125.51 (4) (br) 2. b., 125.52 (8), 125.525, 125.53 (3), 125.69 (1) (a) 3., 125.69 (1) (b) 3., 125.69 (4) (c) and 139.01 (2o) of the statutes; relating to: creating a distillpub permit authorizing the manufacture, rectification, and sale of distilled spirits; retail interests relating to distillpubs and brewpubs; quotas for retail intoxicating liquor licenses; location and production limits on brewpubs; retail sales of intoxicating liquor by brewers; retail licenses held by wineries and closing hours for retail sales by wineries; small winery cooperative wholesalers; minimum customer requirements for alcohol beverage wholesalers; and granting rule-making authority.

Analysis by the Legislative Reference Bureau

Distillpub permits

This bill creates a distillpub permit issued by the Department of Revenue that authorizes the manufacture, rectification, and sale of intoxicating liquor other than wine (distilled spirits). The bill authorizes certain retail interests and activities of distillpubs and, if a person holds both a distillpub permit and brewpub permit, modifies the permissible retail interests for the brewpub.

Under current law, alcohol beverages are generally distributed to consumers under a three-tier distribution system: the producer sells to a wholesaler; the wholesaler sells to a retailer; and the retailer sells to a consumer. With specific exceptions, no person may sell outside the three-tier system and no person may sell alcohol beverages to a consumer unless the seller possesses a license or permit authorizing the sale. A Class “B" license authorizes the retail sale of fermented malt beverages (beer) for consumption on or off the premises. A “Class B" license authorizes the retail sale of intoxicating liquor for consumption on the licensed premises and, subject to various restrictions, the retail sale of intoxicating liquor in original packages for consumption off the licensed premises. Intoxicating liquor includes wine and distilled spirits. Class “B” licenses and “Class B” licenses are generally issued together for establishments such as restaurants, bars, and taverns. Class “A” and “Class A” licenses authorize the retail sale of, respectively, beer and intoxicating liquor in original packages for consumption off the licensed premises. Class “A” licenses and “Class A” licenses are often issued together for establishments such as grocery stores, liquor stores, and convenience stores. A “Class C" license, which may be issued only for a restaurant, authorizes the retail sale of wine by the glass or in an opened original container for consumption on the premises. Each of these retail licenses is issued by a municipality.

Also under current law, DOR issues permits to producers of alcohol beverages. A manufacturer's permit or rectifier's permit issued by DOR authorizes the permittee to, respectively, manufacture or rectify intoxicating liquor and sell it to wholesalers. Current law prohibits a manufacturer or rectifier from holding an interest in a retail liquor license and prohibits a retail liquor licensee from holding an interest in a manufacturer, but a manufacturer's permit or rectifier's permit authorizes limited retail sales without a retail license. Under the manufacturer's permit or rectifier's permit, a manufacturer or rectifier may make retail sales of intoxicating liquor manufactured or rectified on the premises, for consumption on or off these premises.

Under current law, to authorize commercial brewing operations, DOR may issue a brewpub permit or a brewer's permit, but no person may hold both permits. To be eligible for a brewpub permit, a person must meet certain requirements, including that 1) the person manufactures not more than 10,000 barrels of beer per year in all locations, 2) the person operates on the brewpub premises a restaurant for which a Class “B" license is issued, and 3) the person does not hold, or have an interest in, a Class “A” license or a Class “B" or “Class B" license other than one issued for a restaurant on brewpub premises. A brewpub permit authorizes, among other activities 1) the manufacture of up to 10,000 barrels of beer per year, 2) the retail sale of alcohol beverages through a Class “B" or “Class B" license issued for the brewpub's restaurant on brewpub premises, and 3) the annual distribution of up to 1,000 barrels of the brewpub's beer to retailers, excluding the brewpub's own retail locations.

This bill creates a distillpub permit, issued by DOR, authorizing all of the following: 1) the manufacture and rectification of distilled spirits not exceeding a total of 300,000 gallons per year at all distillpub locations; 2) the bottling of distilled spirits manufactured or rectified by the distillpub; 3) the possession and storage of intoxicating liquor on distillpub premises; 4) the transportation of distilled spirits manufactured or rectified on the distillpub premises between these premises and other distillpub premises or the distillpub's retail locations (discussed below); 5) the sale and delivery of distilled spirits manufactured or rectified by the distillpub to wholesalers; 6) the sale and delivery of up to 30,000 gallons per year of distilled spirits manufactured or rectified by the distillpub to retailers, except that retail locations operated by the distillpub (discussed below) are not counted toward this 30,000 gallon limit; 7) the retail sale on distillpub premises, without a retail license, of distilled spirits manufactured or rectified by the distillpub, in original unopened packages or containers, for off-premise consumption; 8) the retail sale and direct shipment to consumers at their residences or other designated addresses, without a retail license, of distilled spirits manufactured or rectified by the distillpub if the consumer arranges while physically present on the distillpub premises to receive periodic direct shipments from the distillpub; and 9) the sale of alcohol beverages at retail in accordance with the terms of any retail license authorized to be held by the distillpub (discussed below). The bill defines “rectify” or “rectification” as blending, mixing, purifying, refining, aging, or otherwise processing distilled spirits, including with wine or other ingredients, but not including distilling. For DOR to issue a distillpub permit to an applicant, the applicant must meet all of the following requirements: 1) the applicant manufactures or rectifies not more than a total of 300,000 gallons of distilled spirits per year in all locations; 2) the applicant operates a restaurant on the distillpub premises; 3) the applicant holds a “Class B" license and the restaurant is located on the “Class B” licensed premises; 4) on the “Class B" licensed premises, the applicant offers for sale intoxicating liquor made by others, in addition to its own distilled spirits; and 5) except as discussed below, the applicant does not hold, or have an interest in, a Class “A" or “Class A” retail license, a Class “B" or “Class B" retail license, a “Class C" retail license, a wholesaler's permit, a liquor manufacturer's permit, a rectifier's permit, a brewer's permit, or an alcohol beverage warehouse permit. A distillpub may hold only the following retail licenses: 1) any “Class B” license for which the licensed premises includes a restaurant on distillpub premises; 2) not more than six “Class B” licenses in addition to those that include a restaurant on distillpub premises if any of these additional six “Class B” licenses was initially issued prior to January 1, 1983; 3) a Class “B” license for any premises for which a “Class B” license is issued; 4) one Class “A” license and one “Class A” license, both issued for the same premises and initially issued prior to January 1, 1990; and 5) if the distillpub also holds a brewpub permit issued in the same name, any Class “B” or “Class B” or “Class C” retail license authorized for a brewpub. Each retail license authorized for a distillpub must be issued in the name of the distillpub. A “Class B” license issued to a distillpub is not subject to the liquor license quota system and, unlike most other retailers, a distillpub is not required to obtain a Class “B” license in order to hold a “Class B” license. A distillpub may hold permits for not more than six distillpub locations. If more than one permit is issued to a distillpub, the distillpub is not required to manufacture or rectify distilled spirits at each location for which a permit is issued. The bill also includes various provisions that treat distillpubs similar to manufacturers, including provisions that allow intoxicating liquor to be shipped directly to distillpubs and to be sold by wholesalers to distillpubs for production purposes.

This bill also modifies the interest restrictions applicable to brewpubs. Under the bill, if a brewpub also holds a distillpub permit in the same name, the brewpub may hold any retail license authorized for the brewpub or distillpub, and the brewpub may self-distribute its own beer directly to any of these retail licensed premises, without this distribution counting toward the brewpub's 1,000 barrel self-distribution limit.

Quota for retail liquor licenses

Current law prohibits a person from selling alcohol beverages at retail unless the seller possesses a license or permit authorizing the sale. Except when issued to a winery, a “Class B" license authorizes the retail sale of intoxicating liquor for consumption on the licensed premises and, subject to various restrictions, the retail sale of intoxicating liquor in original packages for consumption off the licensed premises. Current law imposes a quota on the number of “Class B" liquor licenses that a municipality may issue, subject to certain exceptions. The quota is generally determined by a formula based on the number of licenses previously issued by the municipality and the municipality's population. For purposes of the quota system, a reserve “Class B" license is a “Class B" liquor license first issued on or after December 1, 1997.

This bill increases municipalities' liquor license quotas by increasing by 10 percent, rounded up to the nearest whole number, the number of reserve “Class B" liquor licenses that a municipality may issue.

Brewpub regulations

Under current law, a person is eligible for a brewpub permit issued by DOR if the person meets certain requirements, including that the person manufactures not more than 10,000 barrels of beer per year in all locations. A brewpub permit authorizes, among other activities, the manufacture of up to 10,000 barrels of beer per year and the retail sale of beer through a Class “B" beer license issued for a restaurant on the brewpub premises. A person may not hold more than six brewpub permits.

This bill increases, from 10,000 to 20,000 barrels per year, the amount of beer that a brewpub may manufacture. The bill also increases, from six to 12, the number of locations for which a person may hold a brewpub permit.

Allowing brewers holding brewer's permit to sell wine and distilled spirits for on-premises consumption

Under current law, a brewer's permit issued by DOR authorizes a brewer to, among other activities, sell at retail, without a retail license, the brewer's own beer and other Wisconsin-made beer at the brewery premises and at one off-site retail outlet of the brewer. A brewer may make retail sales of intoxicating liquor only if the brewer held a retail intoxicating liquor license on June 1, 2011.

This bill allows any brewer holding a brewer's permit to sell intoxicating liquor at retail for on-premise consumption at the brewery premises or the brewery's off-site retail outlet. As under current law, intoxicating liquor sold by the brewer must be purchased from a wholesaler.

Winery regulations

Current law allows a winery to hold a retail “Class B" license authorizing the retail sale of wine. A winery operating under a retail “Class B" license may not remain open for retail sales of wine between the hours of 9 p.m. and 8 a.m.

This bill changes the closing hour for wineries operating under a retail “Class B" license from 9 p.m. to 2 a.m., but allows municipalities to establish, by ordinance, more restrictive closing hours for these wineries.

The bill also specifies that a winery may hold a Class “B" license authorizing the retail sale of beer if the winery holds, for the same premises, a “Class B" license authorizing the retail sale of wine.

Eligibility criteria for membership in a small winery cooperative wholesaler

Under current law, between October 1 and December 31, 2008, DOR was authorized to issue intoxicating liquor wholesalers' permits to small winery cooperatives (cooperative wholesalers). Only wineries certified by DOR as small wineries can be members of a cooperative wholesaler. A small winery is defined as a winery that produces and bottles less than 25,000 gallons of wine in a calendar year. The only alcohol beverage product a cooperative wholesaler can sell and distribute is the wine of its members.

This bill changes the definition of small winery so that a winery that produces and bottles less than 50,000, rather than 25,000, gallons of wine in a calendar year may become a member of an existing cooperative wholesaler.

Eliminating requirement that beer and intoxicating wholesalers have a minimum number of customers

Under current law, a beer wholesaler must annually sell and deliver beer to at least 25 separate and independent retail licensees or wholesalers, and an intoxicating liquor wholesaler must annually sell and deliver intoxicating liquor to at least ten separate and independent retail licensees or permittees. If a wholesaler fails to satisfy this requirement, certain penalties apply and the wholesaler's permit cannot be renewed.

This bill repeals this requirement.

For further information see the state and local fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB492,1 Section 1. 125.02 (5g), (5i) and (5k) of the statutes are created to read:

AB492,6,2 125.02 (5g) “Distillpub” means a permittee under s. 125.525.

AB492,6,4 (5i) “Distillpub group" means a distillpub, including all premises for which the distillpub holds a permit issued under s. 125.525, together with all of the following:

AB492,6,7 (a) All distillpubs that share membership with the distillpub in a controlled group of distillpubs, as determined according to rules applicable under 26 USC 5041 (c) (4).

AB492,6,9 (b) All distillpubs considered with the distillpub as one taxpayer under the federal Internal Revenue Code.

AB492,6,10 (c) All franchisees, as defined in s. 553.03 (5), of the distillpub.

AB492,6,12 (d) All franchisees, as defined in s. 553.03 (5), of the distillpub's franchisor, as defined in s. 553.03 (6).

AB492,6,13 (e) The franchisor, as defined in s. 553.03 (6), of the distillpub.

AB492,6,15 (5k) “Distillpub premises" means any premises covered by a permit issued under s. 125.525.

AB492,2 Section 2. 125.02 (10) of the statutes is amended to read:

AB492,7,3 125.02 (10) “Manufacturer" means a person, other than a rectifier or distillpub, that ferments, manufactures, or distills intoxicating liquor.

AB492,3 Section 3. 125.02 (15) (b) of the statutes is amended to read:

AB492,7,7 125.02 (15) (b) With respect to intoxicating liquor, the manufacturer, the rectifier, the distillpub, or the exclusive agent designated by the manufacturer or, rectifier, or distillpub.