LRB-3740/4
ARG&JK:kjf&bk:pg
2007 - 2008 LEGISLATURE
February 13, 2008 - Introduced by Representatives Van Roy, Nygren, Sheridan,
Kreuser, Owens, Shilling, Suder, Montgomery, Townsend, Jorgensen,
Jeskewitz, Mursau, Hahn, Nass, Huebsch, J. Fitzgerald, Vruwink and
Hixson, cosponsored by Senators Wirch, Darling, Kanavas, Breske, Decker
and S. Fitzgerald. Referred to Committee on State Affairs.
AB795,2,2
1An Act to repeal 125.52 (6), 125.52 (8), 125.53 (3), 125.55 (1) (b), 125.58 (4) (a)
21. to 4., 125.58 (4) (b), 125.68 (10) (bm), 125.68 (10) (bs), 125.68 (10) (c), 125.69
3(1) (b) 2. and 3., 125.69 (1) (c) 1. to 3. and 125.69 (4) (c);
to renumber and
4amend 125.58 (4) (a) (intro.), 125.69 (1) (c) (intro.), 139.11 (4) and 185.043;
to
5consolidate, renumber and amend 125.55 (1) (intro.) and (a);
to amend
620.566 (1) (ha), 36.11 (40), 125.01, 125.02 (22), 125.12 (5), 125.52 (1), 125.53 (1),
7125.54 (1), 125.55 (2), 125.58 (1), 125.65 (8), 125.68 (10) (a), 125.68 (10) (b),
8125.69 (1) (a), 125.69 (1) (b) 1., 125.69 (6) (a) and 139.11 (4) (title);
to repeal and
9recreate 139.035; and
to create 77.61 (16), 125.04 (3) (a) 4m., 125.272, 125.51
10(6), 125.535, 125.54 (7) (e), 125.54 (8), 125.545, 139.03 (6), 139.11 (4) (b) and
11185.043 (2) of the statutes;
relating to: the production, sale, and distribution
12of intoxicating liquor, providing an exemption from emergency rule procedures,
1granting rule-making authority, making an appropriation, and providing a
2penalty.
Analysis by the Legislative Reference Bureau
Under current law, the Department of Revenue (DOR) issues various permits
related to intoxicating liquor (which includes wine), including winery permits,
manufacturer's permits, rectifier's permits, wholesaler's permits, and out-of-state
shipper's permits. Wine may be produced and distributed under a winery permit,
manufacturer's permit, or rectifier's permit.
This bill makes changes to the way in which wine may be produced and
distributed in this state, including the following:
1. Direct shipments of wine to consumers. Under current law, a winery located
outside this state may ship wine into this state without an out-of-state shipper's
permit and directly to an individual if the winery is located in a state that has a
reciprocal agreement with this state pertaining to out-of-state shipments of wine to
individuals in the respective states (reciprocal agreement) and if certain other
conditions are met. An individual in this state may not receive more than 27 liters
of wine annually from out-of-state wineries. Also, a winery located in this state that
holds a winery permit, as well as a person in this state holding an intoxicating liquor
manufacturer's or rectifier's permit, may ship wine from this state to individuals in
another state under authorization of a reciprocal agreement if certain conditions are
met. DOR is required to negotiate and, if possible, enter into reciprocal agreements
with other states. Currently this state is a party to such a reciprocal agreement only
with California. Current law also does not authorize intrastate shipments of wine
directly to consumers.
This bill repeals the reciprocal agreement system for authorizing interstate
wine shipments directly to consumers and replaces it with a new permit system
available for both interstate and intrastate shipments of wine directly to consumers.
The bill requires DOR to issue a new permit called a direct wine shipper's permit that
authorizes the permittee to ship wine directly to an individual in this state who is
of the legal drinking age, who acknowledges receipt of the wine shipped, and who is
not intoxicated at the time of delivery. A direct wine shipper's permit may be issued
to any person that manufactures and bottles wine on premises covered by a winery,
manufacturer's, or rectifier's permit issued by DOR, a winery permit issued by
another state, or a federal winery permit. Containers of wine shipped to an
individual in this state must be clearly labeled to indicate that the package may not
be delivered to an underage person or to an intoxicated person. No individual may
resell, or use for a commercial purpose, wine that the individual receives by direct
shipment under the permit. No individual in this state may receive more than 108
liters of wine annually that is shipped under authority of the permit. Holders of
direct wine shippers' permits must report quarterly to DOR specified information
related to wine shipments made under authority of the permit and must include the
amount of the occupational tax in the sales price of the wine and pay the sales or use
tax on the sale of the wine shipped under authority of the permit.
2. Distribution of intoxicating liquor to other licensees and permittees, except
by cooperative wholesalers. Under current law, a winery permit authorizes a winery
to manufacture and bottle wine on the winery premises for sale at wholesale to other
licensees or permittees, such as retailers, other wholesalers, and manufacturers. A
manufacturer's permit or rectifier's permit authorizes a manufacturer or rectifier to
manufacture, bottle, and wholesale wine on the manufacturing or rectifying
premises. A rectifier's permit authorizes the rectifier to sell its own intoxicating
liquor to retailers.
This bill eliminates the authorization of wineries, manufacturers, and
rectifiers to sell wine at wholesale and eliminates the authorization of rectifiers to
sell intoxicating liquor directly to retailers. Under the bill, wineries, manufacturers,
and rectifiers may not sell wine directly to retailers. A winery may only sell wine to
wholesalers. A manufacturer or rectifier may only sell intoxicating liquor, including
wine, to wholesalers, wineries, and other manufacturers and rectifiers.
Under current law, an out-of-state shipper's permit authorizes a person
located outside this state to sell or ship intoxicating liquor into this state to a person
holding a manufacturer's, rectifier's, wholesaler's, industrial alcohol, or medicinal
alcohol permit.
Under this bill, a person holding an out-of-state shipper's permit may only sell
or ship intoxicating liquor into this state to a person holding a wholesaler's permit
or, if shipped from a manufacturer or rectifier in another state, to a person holding
a manufacturer's or rectifier's permit or a winery permit.
The bill also requires each wholesaler to negotiate in good faith with any
manufacturer, rectifier, or winery that seeks to sell its products through the
wholesaler. All wholesalers must work diligently to ensure that distribution
channels are available for the sale of intoxicating liquor products through
wholesalers to retailers in this state.
3. Distribution of wine by cooperative wholesalers. The bill allows certain
wineries holding a winery permit and certain out-of-state wineries to form a
cooperative for purposes of wholesaling their wine. However, the bill requires any
such cooperative to be created between October 1, 2008, and December 31, 2008, and
limits the total number of these cooperatives to six.
Under the bill, a winery that produces and bottles less than 25,000 gallons of
wine in a calendar year (small winery) may organize with other small wineries as a
cooperative known as a small winery cooperative wholesaler (cooperative
wholesaler). The principal purpose of a cooperative wholesaler is to sell and
distribute wine produced and bottled by the members of the cooperative wholesaler.
The membership of a cooperative wholesaler must consist exclusively of small
wineries that hold direct shippers' permits and that are certified as small wineries
by DOR. To form the cooperative, three or more individuals, at least one of whom
must be a resident of this state and all of which must be owners of small wineries,
must sign and file articles of incorporation with the Department of Financial
Institutions. A cooperative wholesaler may not employ any owner or employee of its
member wineries, but such an owner or employee may act as a volunteer to assist the
cooperative wholesaler.
Under the bill, no cooperative wholesaler may operate without a wholesaler's
permit issued by DOR. Within seven days after filing its articles of incorporation as
a cooperative, a cooperative wholesaler must apply to DOR for a wholesaler's permit.
DOR may issue only one wholesaler's permit to any cooperative wholesaler. DOR
may not issue more than a total of six wholesalers' permits to cooperative wholesalers
and DOR may not issue any new wholesaler's permit to a cooperative wholesaler
after December 31, 2008. A cooperative wholesaler issued a wholesaler's permit is
authorized to sell and distribute only wine, including blended or mixed products sold
as wine. A cooperative wholesaler may not sell or distribute any product other than
wine. A cooperative wholesaler may not purchase wine from any person other than
a member and may not resell or distribute wine unless it has been purchased on
consignment from a member. A cooperative wholesaler may only sell or distribute
wine to a retailer or to another wholesaler.
Under the bill, a member of a cooperative wholesaler may not sell its wine
directly to any other wholesaler or directly to a retailer; it must make its wine
available to retailers and other wholesalers only through the cooperative wholesaler.
Under the bill, a cooperative wholesaler is not subject to certain provisions of
current law requiring a wholesaler to physically unload intoxicating liquor at a
warehouse location prior to distribution and requiring a wholesaler to annually sell
and deliver intoxicating liquor to at least ten retailers that do not have any direct or
indirect interest in each other or in the wholesaler. Neither a cooperative wholesaler
nor its winery members are subject to certain provisions of current law restricting
common ownership interests in wineries and wholesalers. Except as provided in the
bill, all provisions of law that apply to a wholesaler also apply to a cooperative
wholesaler.
The bill requires DOR to certify applicants as small wineries if the applicant is
a winery that produces and bottles less than 25,000 gallons of wine in a calendar
year, holds a direct shipper's permit, and submits any other information that DOR
determines is necessary to certify that the winery is operating as a small winery and
is eligible for membership in a cooperative wholesaler. In certifying a winery as a
small winery, DOR must classify the winery as either a Wisconsin winery or an
out-of-state winery. A cooperative wholesaler may not give preferential treatment
to a member that is a Wisconsin winery or discriminate against a member that is an
out-of-state winery.
The bill requires the board of directors of a cooperative wholesaler, at least once
every six months, to meet in person with DOR and the University of Wisconsin
Center for Cooperatives. The bill specifies various requirements related to these
meetings, including that publicly available reports be prepared by DOR and the
Center for Cooperatives as a result of these meetings. The bill also requires each
cooperative wholesaler to annually file a report with DOR that includes specified
information.
Under the bill, any winery that sells or distributes its wine directly to a retailer,
rather than through a wholesaler or cooperative wholesaler, is subject to a fine of not
more than $10,000 and revocation of the permits issued to it by DOR. Any
cooperative wholesaler that provides preferential treatment to a Wisconsin winery
or discriminates against an out-of-state winery is subject to a fine of not more than
$10,000 and revocation of its wholesaler's permit.
4. Blending or mixing wine or distilled spirits. Current law is unclear as to
whether a winery operating under a winery permit may mix or blend wine with other
intoxicating liquor to produce fortified wine and whether a winery may receive
shipments of bulk wine or other intoxicating liquor directly from out-of-state
producers holding an out-of-state shipper's permit.
This bill clarifies that a winery operating under a winery permit may, without
obtaining a rectifier's permit, possess intoxicating liquor and mix or blend
intoxicating liquor to produce wine sold to wholesalers. The bill also clarifies the
definition of "wine" by specifying that wine contains not more than 21 percent of
alcohol by volume.
The bill specifically authorizes wholesalers to sell intoxicating liquor to
wineries, manufacturers, and rectifiers for production purposes. The bill also
specifies that an out-of-state shipper's permittee may sell or ship intoxicating liquor
into this state directly to a winery.
5. Face-to-face retail sales. The bill specifies that an intoxicating liquor or
fermented malt beverages retail license or permit, with limited exceptions,
authorizes only face-to-face sales to consumers at the premises described in the
retail license or permit.
6. Common ownership interests. The bill specifies that certain restrictions on
common ownership interests that apply under current law to manufacturers,
rectifiers, and wholesalers also apply to wineries and out-of-state shipper
permittees. The bill further provides that rectifiers, wineries, and out-of-state
shipper permittees may not hold any direct or indirect interest in any wholesale
permit or establishment and that, except for a retail license issued to a winery, no
retail licensee may hold any direct or indirect interest in any manufacturer, rectifier,
winery, or out-of-state shipper permittee.
Under current law, an exception to the common ownership restrictions allows
a winery to hold one retail license, which may be a "Class A" license or a "Class B"
license. The bill clarifies this exception, including specifying that the retail licensed
premises may be on the winery premises or on real estate owned or leased by the
winery and that the winery may distribute its own wine to its own retail premises
without going through a wholesaler.
7. DOR industry reports. The bill requires DOR to publish monthly reports
containing specified information related to the intoxicating liquor industry.
8. Effective date. The general effective date of the bill is October 1, 2008.
Notwithstanding any other provision of the bill, a winery holding a winery permit
issued prior to the bill's effective date may continue to sell its wine at wholesale, in
the manner authorized under current law, until June 30, 2009.
For further information see the state 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:
AB795, s. 1
1Section
1. 20.566 (1) (ha) of the statutes is amended to read:
AB795,6,112
20.566
(1) (ha)
Administration of liquor tax and alcohol beverages enforcement. 3The amounts in the schedule for computer, audit, and enforcement costs incurred in
4administering the tax under s. 139.03 (2m) and for costs incurred in enforcing the
53-tier system for alcohol beverages production, distribution, and sale under ch. 125.
6All moneys received from the administration fee under s. 139.06 (1) (a)
and any
7permit fee under s. 125.535 (2) shall be credited to this appropriation.
8Notwithstanding s. 20.001 (3) (a), at the end of each fiscal year, the unencumbered
9balance of this appropriation account, minus an amount equal to 10% of the sum of
10the amounts expended and the amounts encumbered from the account during the
11fiscal year, shall lapse to the general fund.
AB795, s. 2
12Section
2. 36.11 (40) of the statutes is amended to read:
AB795,6,1513
36.11
(40) Center for cooperatives. The board shall maintain a center for
14cooperatives at the University of Wisconsin-Madison.
The center shall comply with
15the requirements specified in s. 125.545 (5) (a).
AB795, s. 3
16Section
3. 77.61 (16) of the statutes is created to read:
AB795,6,2017
77.61
(16) A winery that receives intoxicating liquor under s. 125.58 (1) is not
18liable for paying the taxes imposed under this subchapter on the receipt of such
19intoxicating liquor, if the intoxicating liquor is mixed or blended to produce wine for
20resale.
AB795, s. 4
21Section
4. 125.01 of the statutes is amended to read:
AB795,7,13
1125.01 Legislative intent. This chapter shall be construed as an enactment
2of the legislature's support for the 3-tier system for alcohol beverages production,
3distribution, and sale that, through uniform statewide regulation, provides this
4state regulatory authority over the production, storage, distribution, transportation,
5sale, and consumption of alcohol beverages by and to its citizens, for the benefit of
6the public health and welfare and this state's economic stability.
Without the 3-tier
7system, the effective statewide regulation and collection of state taxes on alcohol
8beverages sales would be seriously jeopardized. It is further the intent of the
9legislature that without a specific statutory exception, all sales of alcohol beverages
10shall occur through the 3-tier system, from manufacturers to licensed wholesalers
11to retailers to consumers. Face-to-face retail sales at licensed premises directly
12advance the state's interest in preventing alcohol sales to underage or intoxicated
13persons and the state's interest in efficient and effective collection of tax.
AB795, s. 5
14Section
5. 125.02 (22) of the statutes is amended to read:
AB795,7,1915
125.02
(22) "Wine" means products obtained from the normal alcohol
16fermentation of the juice or must of sound, ripe grapes, other fruits or other
17agricultural products, imitation wine, compounds sold as wine, vermouth, cider,
18perry, mead and sake, if such products contain
0.5% or more not less than 0.5 percent
19nor more than 21 percent of alcohol by volume.
AB795, s. 6
20Section
6. 125.04 (3) (a) 4m. of the statutes is created to read:
AB795,7,2221
125.04
(3) (a) 4m. If the applicant is a cooperative organized under ch. 185, the
22identity of the cooperative members, board of directors, and agent.
AB795, s. 7
23Section
7. 125.12 (5) of the statutes is amended to read:
AB795,8,624
125.12
(5) Revocations or suspensions of, or refusals to renew, permits by
25the department. The department may, after notice and an opportunity for hearing,
1revoke, suspend or refuse to renew any retail permit issued by it for the causes
2provided in sub. (4) and any other permit issued by it under this chapter for any
3violation of this chapter or ch. 139, except that, for a violation of sub. (4) (ag) 6. with
4respect to a license issued under s. 125.51 (4) (v)
or a violation of s. 125.535 or
5139.035, the department shall revoke the license
or permit. A revocation, suspension
6or refusal to renew is a contested case under ch. 227.
AB795, s. 8
7Section
8. 125.272 of the statutes is created to read:
AB795,8,11
8125.272 Face-to-face retail sales. Except as provided in s. 125.26 (2m) and
9(2s) and except with respect to caterers, a retail license issued under s. 125.25 or
10125.26, and a retail permit issued under s. 125.27, authorizes only face-to-face sales
11to consumers at the premises described in the retail license or permit.
AB795, s. 9
12Section
9. 125.51 (6) of the statutes is created to read:
AB795,8,1613
125.51
(6) Face-to-face retail sales. Except as provided in sub. (3) (bm) and
14(bs) and except with respect to caterers, a retail license or permit issued under this
15section authorizes only face-to-face sales to consumers at the premises described in
16the retail license or permit.
AB795, s. 10
17Section
10. 125.52 (1) of the statutes is amended to read:
AB795,9,618
125.52
(1) Authorized activities. The department shall issue manufacturers'
19and rectifiers' permits which authorize the manufacture or rectification,
20respectively, of intoxicating liquor on the premises covered by the permit. A person
21holding a manufacturer's or rectifier's permit may manufacture
, and bottle
or
22wholesale wine, pursuant to the terms of the permit, without procuring a winery
23permit. A manufacturer's or rectifier's permit entitles the permittee to sell
24intoxicating liquor
to wholesalers holding a permit under s. 125.54, to wineries
25holding a permit under s. 125.53, and to other manufacturers and rectifiers holding
1a permit under this section, from the premises described in the permit.
Holders of
2rectifiers' permits may sell intoxicating liquor rectified by the permittee to retailers
3without any other permit. No sales may be made for consumption on the premises
4of the permittee. Possession of a permit under this section does not authorize the
5permittee to sell tax-free intoxicating liquor and wines brought into this state under
6s. 139.03 (5).
AB795, s. 11
7Section
11. 125.52 (6) of the statutes is repealed.
AB795, s. 12
8Section
12. 125.52 (8) of the statutes is repealed.
AB795, s. 13
9Section
13. 125.53 (1) of the statutes is amended to read:
AB795,9,2410
125.53
(1) The department shall issue only to a manufacturing winery in this
11state that holds a valid certificate issued under s. 73.03 (50) a winery permit
12authorizing the manufacture and bottling of wine on the premises covered by the
13permit for sale
at wholesale to other licensees or permittees to wholesalers holding
14a permit under s. 125.54. A winery permit also authorizes the permittee to, on the
15winery premises and without obtaining a rectifier's permit, possess intoxicating
16liquor and mix or blend intoxicating liquor to produce wine sold to wholesalers
17holding a permit under s. 125.54. A
permittee
winery holding a permit under this
18section may offer on the premises taste samples of wine manufactured on the
19premises to persons who have attained the legal drinking age. A permittee under
20this section may also have either
a one "Class A"
license or
one "Class B" license,
21but not both.
The "Class A" license or "Class B" license may either be issued for the
22winery premises or for real estate owned or leased by the winery. If a "Class A" or
23"Class B" liquor license has also been issued to the winery, the winery
may provide
24wine manufactured, mixed, or blended on the winery premises directly to the "Class
1A" or "Class B" premises and may offer the taste samples on the "Class A" or "Class
2B" premises.
AB795, s. 14
3Section
14. 125.53 (3) of the statutes is repealed.
AB795, s. 15
4Section
15. 125.535 of the statutes is created to read:
AB795,10,9
5125.535 Direct wine shippers' permits.
(1) Authorized activities. The
6department shall issue direct wine shippers' permits authorizing the permittee to
7ship wine directly to an individual in this state who is of the legal drinking age, who
8acknowledges receipt of the wine shipped, and who is not intoxicated at the time of
9delivery.
AB795,10,12
10(2) Annual permit fee. The department may, by rule, establish an annual fee,
11not to exceed $100, for each permit issued under this section. All fees collected under
12this subsection shall be credited to the appropriation account under s. 20.566 (1) (ha).
AB795,10,15
13(3) Persons eligible. (a) A direct wine shipper's permit may be issued under
14this section to any person that manufactures and bottles wine on premises covered
15by any of the following:
AB795,10,1616
1. A manufacturer's or rectifier's permit under s. 125.52.
AB795,10,1717
2. A winery permit under s. 125.53.