CR 25-050 Rule Text

7.17 Full-service retail sales by producers creates a requirement for producers to apply for on-and off-premises sales approval from the Division of Alcohol Beverages, requires that applications be made 15 days prior to desired commencement of full-service retail sales, explains how production volumes will be calculated and verified, provides guidance on when during the year a producer may apply for full-service retail sales, and provides several examples of how cumulative production volume is calculated if a legal business entity is merged, acquired, reorganized, or restructured. The section also creates a revocation, suspension, and refusal to renew process for these privileges, and creates invoice and recordkeeping requirements.

7.19 Returns of alcohol beverages codifies long-standing department guidance allowing retailers to make refunds to consumers, but not returns of the alcohol beverages. The rule also prohibits retailers from returning alcohol beverages from producers, distributors, and out-of-state shippers. The rule allows producers, distributors, and out-of-state shippers to replace alcohol beverages sold to retailers that were expired, spoiled, or recalled with identical brand, flavor, quantity, and size as long as the transaction is documented.

7.20 Retail premises codifies long-standing department guidance that specifies that a premises is fixed location describing land and buildings, that the licensee must have complete control over that premises, and that two premises separated by floor-to-ceiling walls, each with separate entrances, are not connecting premises.

7.21 Possession with intent to sell clarifies that alcohol beverages kept on a licensed or permitted premises is evidence that the products are kept with intent to sell and if a license or permit is invalid for any reason all alcohol beverages on the previously licensed or permitted premises must be removed from public exposure for sale.

7.22 No-sale event venue permits clarifies that the definition of "rent" or "lease," in s. 125.09(1) and 125.24, Wis. Stats. requires consideration in any form in exchange for use of real property, requires no-sale event venue permit applicants to use the form prescribed by the department to apply for the permit, and outlines the required documentation for purposes of qualifying for the qualifying event venue certification.

Tax 7.32 Out-of-state shippers of fermented malt beverages clarifies that a wholesaler in another state that holds a federal basic importers permit is eligible to obtain an out-of-state shipper permit.

New rules relating to alcohol beverage taxation: The following provisions of Chapter Tax 8 are new:

8.01 Authority and purpose cites statutory authority for the chapter and outlines the responsibility of the Department of Revenue.

8.08 Contract production explains when an out-of-state recipe supplier is responsible for reporting and paying Wisconsin excise tax as a party to a contract production agreement.

8.09 Transfers of alcohol beverages between production premises and full-service retail outlet confirms that alcohol beverages removed from the production premises for transfer to a full-service retail outlet is a removal for consumption or sale and Wisconsin excise tax is imposed.

Amended existing rules: Attached is a comparison chart of the changes the division and department have made to existing provisions of Tax 7 and 8.

Summary of, and comparison with, existing or proposed federal regulation: Federal regulations and administrative provisions allow alternating proprietorships and contract manufacturing of fermented malt beverages and intoxicating liquor. See federal TTB Industry Circulars 2005-2, 2008-4, 2018-3 for more information.

For alternating proprietorships, the federal Alcohol and Tobacco Tax and Trade Bureau (TTB) requires all entities sharing a premises to be properly permitted. The host and tenant producers each hold title to their own ingredients and pay tax on their own products when removed from the bonded area.

For contract production purposes, federal regulations provide that only the production brewer is required to hold a permit and the production brewer holds title to the ingredients and pays the tax on the product produced under the agreement. In contrast, s. 125.21 (3) (b) and (e), Stats., requires both the production and recipe brewers to hold state-issued permits, and the recipe brewer is responsible for reporting and paying tax on the alcohol beverages produced under the agreement.

2023 Wisconsin Act 73 legalized alternating proprietorships and authorized contract production agreements for all types of alcohol beverage production. Wisconsin law is consistent with federal regulations relating to alternating proprietorships. However, contract production agreements have different reporting and regulatory requirements than federal law; specifically Wisconsin law reflects the tax, reporting, and regulatory responsibilities that previously existed for brewers in s. Tax 7.23, Wis. Adm. Code. This rule order repeals s. Tax 7.23, Wis. Adm. Code, because contract production requirements are specified in s. 125.21, Stats.

Federal labeling requirements for intoxicating liquor and fermented malt beverages are found in 27 CFR parts 4, 5, 7, 24, and 25. These sections of the federal code outline what products must be labelled and what information must appear on the alcohol beverage container and packaging. The department has referenced federal code sections for labeling requirements since 1978, in existing ss. Tax 7.21 and 8.52(2), Wis. Adm. Code. The rule order adds the specific federal code reference for distilled spirits.

Federal standards of fill are established in 27 CFR parts 4 and 5 and governs the amount of liquid that is placed in the bottle, can, or other vessel used to hold the alcohol beverage.

Federal labelling requirements and standards of fill are adopted by reference in Tax 7.07 and Tax 7.41 of this rule order.

The adoption of federal standards of fill and labelling standards by reference was approved by the Attorney General on June 20, 2025.

There are no federal regulations applicable to other new provisions in this rule order.

Summary of comments received during preliminary comment period and public hearing on the statement of scope:

A comment period was opened on February 19, 2024, with notice in the Administrative Register. Interested and impacted parties were also contacted on February 20, 2024, via email message through the department's Administrative Rules and Alcohol Beverage email lists. A public hearing, noticed in the Administrative Register on February 19, 2024, was held via Microsoft Teams on February 23, 2024, with the purpose of soliciting feedback from impacted parties to inform the rule drafting process. 88 people registered to attend. 80 people attended the hearing. One person appeared offering testimony. Five people provided written testimony the day of the hearing. The comment period was open until 11:59PM on February 23, 2024. The comments from the public hearing and comment period and DOR's response follow.

1 1. Ron Hockersmith, Founder and Director of Beer at Amorphic Beer testified relating to the expansion of off-site retail privileges to all producers. Amorphic Beer is a small brewery in Milwaukee and has historically had the use of off-site retail privileges to conduct beer gardens, charitable events, and other outdoor activities across Wisconsin. Hockersmith's request is for the department to keep the simplicity and cost-effective nature of existing off-site retail permitting processes to sell beer at offsite events, further Hockersmith requests the department create a process and form that can be universally used by all Wisconsin municipalities. Hockersmith also requested that the department involve the industry directly in the rulemaking process by asking for their input.

a a. DOR Response: DOR will consider Hockersmith's comments through the rulemaking process.

2 2. Jack Zelinka, Director of the Caribou Bay Retreat provided written comments regarding qualifying event venue licenses. Zelinka expressed concern that the forms to apply for qualifying event venue certification are not yet available and was unsure about the status of an event the business had booked for October 2024. Zelinka also asked questions regarding the cost of an above quota license issued to a qualifying event venue. Finally, Zelinka noted that the pricing structure for Caribou Bay Retreat will have to be adjusted to accommodate a new business model and this is a disadvantage compared to other venues that have an existing liquor license.

b b. DOR Response: Provisions relating to qualifying event venue certification and above quota licenses do not take effect until January 1, 2026. The department is implementing provisions of Act 73 in order of effective date. Zelinka was informed that this Act will not impact the event scheduled at the venue for October 2024.

3 3. Nicole Lyddy, the Deputy Clerk of the City of Mauston provided written comments to express concern regarding the operator licensing process. Lyddy mentioned that simplifying the licensing process will result in consistency and fairness in who will hold an operator license in any given municipality and statewide. Lyddy also requested the department consider rules that prevent individuals who have been denied municipal operator's licenses from bypassing the process and obtaining an operator's permit from the state.

c c. DOR Response: The existing operator's license process and qualifications are untouched in 23 Wisconsin Act 73 and are therefore outside of the scope of rulemaking. The department does recognize the importance of consistent operator licensing and will consider this feedback outside of this rule process. The department has considered and shares the concern about operator permittees obtaining state permits to undermine a municipal operator license decision. Rulemaking may be required on this topic.

4 4. Emily Chelberg, Co-Owner of Sunflower Hill Wedding and Event Venue, provided written comments regarding the impact of liquor licensing on event venues that are zoned for agricultural use with special exemptions. Sunflower Hill is an active farm with cattle and flower fields, both of which provide income streams outside of the event venue business. Chelberg would like the department to consider the impacts of zoning laws and liquor licensing on event venue businesses that are still actively farming.

d d. DOR Response: The department will consider these comments as it relates to 2023 Wisconsin Act 73 and SS 009-24.

5 5. Erich Weidner, from Erich Weidner Consulting, provided written comments expressing concern that 2023 Wisconsin Act 73 was rushed and the structure of the effective dates of different provisions would make it difficult to track implementation.

e e. DOR Response: This comment is related to the legislative process. It cannot be addressed through rulemaking.

A few attendees had questions about the contents of 2023 Wisconsin Act 73. Department staff provided resources to those attendees to get their questions answered.

Summary of comments received during comment period and public hearing on the emergency rule promulgated under the same scope statement (EmR 2419):

A comment period was opened on January 13, 2025, with notice in the Administrative Register. Interested and impacted parties were also contacted on January 13, 2025, via email message through the department's Administrative Rules and Alcohol Beverage email lists. A public hearing, noticed in the Administrative Register on January 13, 2025, was held via Microsoft Teams on January 24, 2025, with the purpose of soliciting feedback from impacted parties to inform the permanent rule drafting process. 80 people registered to attend. 59 people attended the hearing. Two people appeared offering testimony. Nine people provided written testimony on or before day of the hearing. The comment period was open until 11:59PM on January 24, 2025. The comments from the public hearing and comment period and DOR's response follow.

1 1. Maureen Busalacchi, testifying on behalf of the Wisconsin Public Health Association, Wisconsin Association of Local Health Directors and Boards, and the Comprehensive Injury Center at the Medical College of Wisconsin, requests the following changes to state law:

a a. Increased permit fees to support administration and decrease excessive alcohol harms.

i i. DOR Response: The department heard from industry stakeholders during the emergency rule promulgation process that the permit fees were too high. Further, state statue limits how expensive permit fees may be. Due to the breadth of comments from stakeholders across the industry regarding permit fees, the department did not make changes to permit fees.

b b. Incorporate verification of identity standards into the responsible beverage server course standards in Tax 7.06, and require additional material such as de-escalation techniques, and identifying symptoms of depression and suicidality.

ii ii. DOR Response: The department agrees that these are worthy topics but does not have experience with this material, nor is it convinced that these are appropriate topics for an RBS course. Further, the department does not have capacity to add brand new course material requirements but will continue engage public health on RBS course material at the next opportunity.

c c. Define growler.

iii iii. DOR Response: The term "growler" is not used in statute. Rather than create a defined term for "growler," the department chose to use the exact language in s. 125.295(1)(c) for purposes of the exemption to labelling requirements outlined in s. Tax 7.07.

d d. Establish a size limit on cocktails to go.

iv iv. DOR Response: s. 125.03(2) establishes a total limit on spirits containers. This limit applies to cocktails-to-go, which is the equivalent of a large pitcher. Municipalities may place more restrictive limits on cocktails-to-go if desired. To create a limit as requested would undermine local control. For this reason, the department has not made changes to this rule draft to reflect this request.

e e. Create a mechanism for municipalities to file complaints requiring revocation, suspension, or refusal to renew operator's permits.

v v. DOR Response: The department is working with the League of Wisconsin Municipalities to address this issue outside of the rules process.

f f. Local approval and input when full-service retail sales authorizations are issued to producers, and a mechanism for municipalities to report violations of law to the division.

vi vi. DOR Response: Municipal approval of full-service retail outlets is required per state statute. To align with the treatment of retail licensees, s. Tax 7.17(3) requires a municipal governing body to decide, which requires a public meeting and local feedback. The department is working with the League of Wisconsin Municipalities to create a mechanism for municipalities to report violations of producers relating to full-service retail sales.

2 2. Susan Quam, testifying for the Wisconsin Restaurant Association, requests changes to s. Tax 7.06 relating to responsible beverage server training course standards. WRA requests dropping the passing threshold from 80% to 75% to align with food safety industry standards for a passing score, suggests alternative language to ensure that course exams are rigorous and cheat proof, and that the department eliminate the requirement that courses show the student incorrect responses, and information regarding the correct response.

g g. DOR Response: The department disagrees that the passing score threshold should be reduced. There is a public health and regulatory interest in ensuring alcohol beverage licensees and permittees have a firm grasp on Chapter 125 and the effects of alcohol beverages on the human body. Further, the department engaged with other states on their standard for passage of a beverage server training course, and 80% is aligned with many other states. The department engaged with WRA on identifying standards that better reflect the professional exam community but were unable to come to an agreement on a best practice. The conversation is ongoing, and changes could be a part of future rulemaking. The department did make changes to reflect WRA's request about incorrect responses and instead requiring exams to provide a content domain breakdown.

3 3. Michael Semmann, on behalf of the Wisconsin Grocers Association, writes to request the department reduce the operator's permit fee to more closely align with municipal operator's license fees.

h h. DOR Response: State law created the operator's permit as an alternative to a municipally issued operator's license, but did not replace municipally-issued operator's licenses. Bartenders in Wisconsin have the choice to obtain the permit, valid statewide, or a license, valid in the municipality where it is issued. To that end, the operator's permit is extremely valuable. A bartender holding an operator's permit may operate in all Wisconsin municipalities. Applying for a state-issued permit is convenient, saving a bartender application time and fees in multiple municipalities. The department considered municipal fees in determining the operator's permit fee. Because the value of the permit is equal to all the fees of each municipality combined, the $200 fee is reasonable.

4 4. Toni Herkert, representing the League of Wisconsin Municipalities, writes to request the department amend s. Tax 7.11 to include a mechanism for municipalities to report to the department when an operator's license was denied, or a person who holds an operator's permit has violated state or local regulations relating to alcohol beverages that could result in suspension or revocation of that permit.

i i. DOR Response: Ensuring compliance of permitted operators is a priority of the department. The department is working with the League of Wisconsin Municipalities to ensure that information relating to violations of state or local law by permitted operators is available to the department. The department will not include a process in administrative rule, however.

5 5. Ron Zimmerman, Town of Harrison Chairperson, requests that retail licensees retain proof that they have purchased alcohol beverages from a wholesaler. He notes his experience with a licensee in his community that violated this law for a decade.

j j. DOR Response: State law requires retail licensees to purchase alcohol beverages from a permitted Wisconsin wholesaler. Tax 7.08 provides additional guidance to all alcohol beverage industry members about proper invoicing to comply with this requirement.

6 6. The Distilled Spirits Council of the United States via Andy Deloney, Senior Vice President and Head of State Public Policy requests that the department incorporate the federal standards of fill by reference.

k k. DOR Response: The department is in the process of requesting Attorney General approval to incorporate federal standards of fill and labelling requirements by reference.

7 7. Jean Bahn, Owner of Farmview Event Barn, commented that while Act 73 made changes to event venue and public place laws, EmR 2419 did not contain any rules relating to no-sale event venue permits or qualifying event venue certification. Bahn further commented that the event venue owners and groups were not engaged in the process of adopting EmR 2419. Finally, Bahn commented that event venues will incur significant costs associated with obtaining a retail alcohol beverage license or no-sale event venue permit.

l l. DOR Response: EmR 2419 did not contain rules relating to no-sale event venue permits or qualifying event venue certification, because the laws do not go into effect until January 1, 2026. Permanent rules relating to both provisions are contained within this rule. The division did not engage event venues as stakeholders in EmR 2419 because they were not impacted by it. The division has since engaged with the Wisconsin Agricultural Tourism Association and received feedback relevant to this rule order. Finally, the license or permit requirement for event venues was created under 2023 Act 73. The department cannot change the law through rulemaking.

8 8. Scott Eickschen, hotel consultant and agricultural event space owner/operator, requests that the department repeal Act 73 as it relates to event venues. Eickschen provided data demonstrating the economic impact that Act 73 will have on event venues.

m m. DOR Response: The department cannot repeal a law through rulemaking.

9 9. Ron Hockersmith, Founder and Director of Beer at Amorphic Beer, provided written comments regarding the process for approval of an off-site full-service retail outlet. Hockersmith points out that 2023 Act 73 heightened the requirements for approvals of off-site retail outlets, including requiring municipal governing body approval. Hockersmith requests that instead of breweries having to submit complete full-service retail sales applications 15 days prior to the event as stated in EmR 2419, the standard should be an outright approval or denial within 5 days of submission.

n n. DOR Response: The department cannot undo what has been done in the law. To ease the burden on municipalities and producers engaging in full-service retail sales, this rule order allows a municipality to adopt an ordinance similar to those for temporary retail licenses, that delegates the authority to a designated municipal official for events less than four days.

10 10. Jessica Gibson of Triglav Wines, LLC, requests that the department rescind the minimum square footage requirement for wholesalers.

o o. DOR Response: This standard has been in administrative rule for many years. The department does not find a compelling reason to change course at this time.

11 11. Christopher Schroeder of Lake Whispers Brewing, LLC, requests the department reconsider charging $500 for each brewery permit issued for the same premises, like under a contract production agreement.

p p. DOR Response: State law generally requires that both parties to a contract production agreement hold the same alcohol beverage production permit. The department does agree that producers engaging in contract production should only be required to hold one permit for the location where the alcohol beverages made under the contract are produced. This is reflected in sec. Tax 7.14(4).

Comparison with rules in adjacent states:

Tax 7.01 Authority and Purpose cites the statutory authority for the chapter and outlines the responsibilities of the Division of Alcohol Beverages.