Rule-Making Notices (Hearing Notices)

The Michigan Liquor Control Commission issues beer manufacturer licenses to: brewers authorizing the licensee to manufacture and sell the beer they brew. (Michigan Complied Laws Sections 436.1105 through 436.1113, 436.1201, and 436.1203, and administrative code sections 436.1601 through 436.1659.)

The Minnesota Department of Public Safety Alcohol and Gambling Enforcement Division issues manufacturer's licenses to brewers, who may also be issued a wholesaler's license to sell the brewer's product at wholesale provided the brewer was selling their own products at wholesale in Minnesota on January 1, 1991. A licensed brewer may sell the brewer's products at wholesale only if the brewer has been issued a wholesaler's license. (2011 Minnesota statutes 340A.301, and Minnesota Administrative Rule Chapter 7515).

Summary of factual data and analytical methodologies

2011 Wisconsin Act 32 amended numerous sections in Chapter 125 Subchapter II affecting the three-tier system regulating the production, distribution and sale of fermented malt beverages (beer) in Wisconsin. The amendments converted the municipal beer wholesaler's license from a license issued by a local municipality to a statewide permit issued by the Department of Revenue. Act 32 also changed the requirements for obtaining a beer wholesaler's permit and for obtaining an out-of-state shipper's permit, and restructured the brewer's permit.

In consultation with manufacturers, wholesalers and retailers of fermented malt beverages, the department has created this proposed rule order to satisfy the above requirements. No other data was used in the preparation of this proposed rule order or this analysis.

Analysis and supporting documents used to determine effect on small business

This proposed rule is created in accordance with 2011 Wisconsin Act 32 to administer and enforce statutory requirements relating to the production, distribution and sale of fermented malt beverages, consistent with the legislature's support for the three-tier system and with the Federal Alcohol Administration Act as implemented by the Alcohol and Tobacco Tax and Trade Bureau (TTB). As explained above, the proposed rule is created to reflect changes to Wisconsin law regulating fermented malt beverages. As the rule itself does not impose any significant financial or other compliance burden, the department has determined that it does not have a significant effect on small business.

Anticipated costs incurred by private sector

This proposed rule does not have a significant fiscal effect on the private sector.

Effect on Small Business

This proposed rule does not have a significant effect on small business.

Initial Regulatory Flexibility Analysis

This proposed rule order does not have a significant economic impact on a substantial number of small businesses.

Agency Contact Person

Please contact Dale Kleven at [phone] or [e-mail], if you have any questions regarding this proposed rule.

Text of Rule

SECTION 1. Tax 7.23 (title) and (1) are amended to read:

Tax 7.23 (title) Activities of brewers, bottlers, out-of-state shippers, and wholesalers.

(1) In this rule section and in ss. 125.02, 125.04, 125.06, 125.07, 125.09, 125.26, 125.28, 125.29, 125.295, 125.30, 125.33, 125.34, and 139.01, Stats.:

SECTION 2. Tax 7.23 (1) (a) to (d) are renumbered 7.23 (1) (b) and (g) to (i)

SECTION 3. Tax 7.23 (1) (a), (c), (d), (e), and (f) and (2) (title) are created to read:

Tax 7.23 (1) (a) “Brewer" as defined in ss. 125.92 (2) and 139.01 (2), Stats., includes any person who manufactures fermented malt beverages for sale or transportation using an agent to directly manufacture fermented malt beverages.

(c) “Out-of-state shipper" means the holder of an out-of-state shipper's permit issued under s. 125.30, Stats., and includes holders of a Federal Basic Importer's Permit.

(d) “Ownership interest" is a level of ownership in a sole proprietorship, partnership, tax option corporation, limited liability company, corporation, estate, or trust as an individual, partner, shareholder, member, or beneficiary.

(e) “Production brewer" means a brewer who directly manufactures fermented malt beverages for another brewer.

(f) “Recipe-brewer" means a person who contracts with an agent to directly manufacture fermented malt beverages for sale or transportation by that person.

(2) (title) Brewers permit restriction and exceptions.

SECTION 4. Tax 7.23 (3) (intro.) is amended to read:

Tax 7.23 (3) (intro.) Subject to the limitations in sub. (2) (a) and (b), examples of conduct prohibited by s. 125.33 (1), Stats., and this section include, but are not limited to:

SECTION 5. Tax 7.23 (4) and (5) are created to read:

Tax 7.23 (4) Brewer's permit requirements. (a) A brewer producing or selling fermented malt beverages in this state shall file an application for a brewer's permit with the department in the manner prescribed by the department.

(b) A production brewer is required to obtain federal label approval and a federal brewer's notice from the Alcohol and Tobacco Tax and Trade Bureau.

(c) 1. An application filed under par. (a) shall include a certification by the recipe-brewer as to both of the following:

a. The recipe-brewer is contracting with a production brewer to produce fermented malt beverages.

b. The contract between the recipe-brewer and production brewer specifically provides the production brewer is an agent of the recipe-brewer and the recipe-brewer has retained the right to control the work contracted for.

2. Upon request of the department, a recipe-brewer shall provide the contract under subd. 1. a. and b. for the department's inspection.

3. A contract under subd. 1. a. and b. may be contingent upon the recipe-brewer receiving a permit under s. 125.29, Stats.

(d) An application filed under par. (a) shall designate the premises where the fermented malt beverages will be manufactured as the exclusive permitted brewery premises and provide the permit number of the production brewer.

(e) 1. All applications for issuance or renewal of permits under s. 125.29, Stats., shall be processed by department personnel generally familiar with activities of fermented malt beverage brewers. The issuance and renewal of permits shall be done in coordination with the enforcement of the requirements of s. 125.29 (1) and (2), Stats.

2. A permit issued or renewed under this paragraph is specific to the premises of the production brewer. If the recipe-brewer seeks to have fermented malt beverages manufactured at multiple locations, it must submit brewer's permit applications for each new premise.

(f) For purposes of s. 139.05 (2), Stats., the recipe-brewer is the brewer whom must file tax returns.

(g) A recipe-brewer shall include fermented malt beverages manufactured in a contract brewing arrangement in the report required under s. 139.11 (2), Stats. A production brewer shall exclude fermented malt beverages manufactured in a contract brewing arrangement from the report required under s. 139.11 (2), Stats.

(h) For purposes of the eligible producers tax credit under s. 139.02, Stats., the recipe-brewer is the producer.

(5) Fermented malt beverage wholesaler warehouse facilities. (a) Minimum requirements for warehouse facilities. The premises described in a permit issued under s. 125.28, Stats., shall be a minimum of 1,000 square feet of floor space and shall be located in a free-standing building that is not part of or connected to a premises covered by a retail license or permit issued under s. 125.25, 125.26, or 125.27, Stats.

(b) Exception to minimum requirements. The secretary of revenue may waive the requirement that a premises described in a permit issued under s. 125.28, Stats., be a minimum of 1,000 square feet of floor space when the secretary determines the waiver fair and equitable, if the applicant or permittee does both of the following:

1. Submits a written request for a waiver along with the application for issuance or renewal of a permit.

2. Clearly indicates how the requirements described in par. (a) and s. 125.28 (5) (a), Stats., other than the requirement that the premises described in the permit be a minimum of 1,000 square feet of floor space, will be or have been met.

(c) Purchases by a wholesaler. Every permittee under s. 125.28, Stats., shall retain invoices covering all purchases of fermented malt beverages stored at the premises described in the permit for 4 years from the date of the invoice. The invoices shall be retained on the premises described in the permit for 2 years from the date of the invoice, and shall be open to inspection at all reasonable times by any representative of the department.

(d) Inventory records. Every permittee under s. 125.28, Stats., shall complete a written inventory listing the entire stock of fermented malt beverages stored at the premises described in the permit as of the close of business on the last day of every month. A copy of the inventory listing shall be retained by the permittee for 4 years from the date the inventory is completed. The inventory listing shall be retained on the premises described in the permit for 2 years from the date the inventory is completed, and shall be open to inspection at all reasonable times by any representative of the department.

(e) Inspections of warehouse facilities. Before issuing a permit under s. 125.28, Stats., the department shall conduct a site inspection of the premises described in the permit application to determine if such premises meets the minimum requirements described in sub. (a). The department shall also conduct periodic site inspections of premises described in permits issued under s. 125.28, Stats. Site inspections shall be conducted by department personnel generally familiar with activities of fermented malt beverage wholesalers.

(f) Background investigations of applicants. Before issuing a permit under s. 125.28, Stats., the department shall conduct a background investigation to determine that the applicant is qualified to hold the permit. The background investigation shall be limited to obtaining information that is necessary to enable the department to verify that the applicant meets the eligibility requirements described in s. 125.28 (1) (a) and (2) (b), Stats.

(g) Processing of permits by the department. All applications for issuance or renewal of permits under s. 125.28, Stats., shall be processed by department personnel generally familiar with activities of fermented malt beverage wholesalers. The issuance and renewal of permits shall be done in coordination with the enforcement of the requirements of s. 125.28 (5) (e), Stats.

ADMINISTRATIVE RULES FISCAL ESTIMATE AND ECONOMIC IMPACT ANALYSIS
Type of Estimate and Analysis
X Original Updated Corrected
Administrative Rule Chapter, Title and Number
Section Tax 7.23 – Activities of brewers, bottlers, out-of-state shippers, and wholesalers
Subject
The production, distribution, and sale of fermented malt beverages
Fund Sources Affected			Chapter 20 , Stats. Appropriations Affected
GPR FED PRO PRS SEG SEG-S
Fiscal Effect of Implementing the Rule
X No Fiscal Effect Indeterminate	Increase Existing Revenues Decrease Existing Revenues		Increase Costs Could Absorb Within Agency's Budget Decrease Costs
The Rule Will Impact the Following (Check All That Apply)
State's Economy Local Government Units		Specific Businesses/Sectors Public Utility Rate Payers
Would Implementation and Compliance Costs Be Greater Than $20 million? Yes X No
Policy Problem Addressed by the Rule
The rule does not create or revise policy, other than to reflect a statutory change.
Summary of Rule's Economic and Fiscal Impact on Specific Businesses, Business Sectors, Public Utility Rate Payers, Local Governmental Units and the State's Economy as a Whole (Include Implementation and Compliance Costs Expected to be Incurred)
As indicated in the attached fiscal estimate, the fiscal effect of modifying the regulation of fermented malt beverages was included in the fiscal effect of 2011 Wisconsin Act 32. The rule itself does not create any further economic or fiscal impact or implementation and compliance costs beyond the statutes it interprets. No comments concerning the economic effect of the rule were submitted in response to the department's solicitation.
Benefits of Implementing the Rule and Alternative(s) to Implementing the Rule
Clarifications and guidance provided by administrative rules may lower the compliance costs for businesses, local governmental units, and individuals. If the rule is not implemented, section Tax 7.23 will be incomplete in that it will not reflect current law.
Long Range Implications of Implementing the Rule
No long-range implications are anticipated.
Compare With Approaches Being Used by Federal Government
N/A
Compare With Approaches Being Used by Neighboring States (Illinois, Iowa, Michigan and Minnesota)
Illinois, Iowa, Michigan, and Minnesota have their own unique provisions concerning the regulation of fermented malt beverages, which differ from Wisconsin's provisions substantively enough to prohibit consideration of these approaches.

Assumptions used in arriving at fiscal estimate

2011 Wisconsin Act 32 made several modifications to Wisconsin's three-tier system for the regulation of fermented malt beverages. The act converted the municipal beer wholesaler's license to a statewide permit issued by the Department of Revenue (DOR). It also modified the requirements for obtaining a beer wholesalers permit and restructured the brewers permit. Act 32 further required DOR to promulgate rules to administer and enforce the new wholesaler provisions, including minimum requirements for and periodic inspections of warehouse facilities. The specific directive included in Act 32 to promulgate rules supplemented DOR's existing rule-making authority pertaining to alcohol regulation under s. 125.03 (1).

The proposed rule enacts certain administrative provisions consistent with and required by the Act 32 changes. The proposed rule establishes the requirements for issuance and renewal of fermented malt beverage wholesalers' permits, describes the minimum requirements for fermented malt beverage wholesaler warehouse facilities, and explains the process for applying for wholesalers' permits. The minimum square feet of floor space for a fermented malt beverage wholesaler warehouse facility is set at 1,000 square feet (but a waiver may be granted provided certain statutory requirements are met).

Since the proposed rule merely implements certain provisions and requirements of 2011 Wisconsin Act 32, the proposed rule itself has no fiscal effect.

Notice of Hearing

Revenue

rulemaking_notices CR 12-015 CR 12-015

NOTICE IS HEREBY GIVEN that, pursuant to sections 77.54 (57) (a) 1m. and 227.11 (2) (a), Stats., the Department of Revenue will hold a public hearing to consider permanent rules creating section Tax 11.07, relating to sales and use tax exemptions for biotechnology.

Hearing Information

The hearing will be held:

Date:   Monday, February 27, 2012

Time:   11:00 A.M.

Location:   State Revenue Building
  Events Room
  2135 Rimrock Road
  Madison, WI 53713

Handicap access is available at the hearing location.

Appearances at the Hearing and Submittal of Written Comments

Interested persons are invited to appear at the hearing and may make an oral presentation. It is requested that written comments reflecting the oral presentation be given to the department at the hearing. Written comments may also be submitted to the contact person listed below no later than February 27, 2012, and will be given the same consideration as testimony presented at the hearing.

Dale Kleven

Department of Revenue

Mail Stop 6-40

2135 Rimrock Road

P.O. Box 8933

Madison, WI 53708-8933

Telephone: [phone]

E-mail: [e-mail]

Analysis Prepared by the Department of Revenue

Statutes interpreted

Section 77.54 (57), Stats.

Statutory authority

Sections 77.54 (57) (a) 1m. and 227.11 (2) (a), Stats.

Explanation of agency authority

Section 77.54 (57) (a) 1m., Stats., provides: “`Biotechnology business' means a business, as certified by the department in the manner prescribed by the department, that is primarily engaged in the application of biotechnologies that use a living organism or parts of an organism to produce or modify products to improve plants or animals, develop microorganisms for specific uses, identify targets for small molecule pharmaceutical development, or transform biological systems into useful processes and products."

Section 227.11 (2) (a), Stats., provides “[e]ach agency may promulgate rules interpreting the provisions of any statute enforced or administered by the agency, if the agency considers it necessary to effectuate the purpose of the statute..."

Related statute or rule

There are no other applicable statutes or rules.

Plain language analysis

The proposed rule prescribes the manner in which a biotechnology business will be certified. It also prescribes the manner of determining the percent needed to establish if the definition of “primarily," which is defined as “more than 50%" under s. 77.54 (57) (a) 4., Stats., is met.

Summary of, and comparison with, existing or proposed federal regulation