Amendment ASA1-AB795

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 substitute amendment 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 substitute amendment also clarifies the definition of "wine" by specifying that wine contains not more than 21 percent of alcohol by volume.

The substitute amendment specifically authorizes wholesalers to sell intoxicating liquor to wineries, manufacturers, and rectifiers for production purposes. The substitute amendment 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 substitute amendment 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 substitute amendment 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 substitute amendment 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 substitute amendment 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 substitute amendment requires DOR to publish monthly reports containing specified information related to the intoxicating liquor industry.

8. Wine collectors. The substitute amendment specifically authorizes, by creating a new license or permit exception, a wine collector to sell to any other wine collector manufacturer-sealed bottles or containers of wine that the seller has held for at least eight years, but limits this exception to one sale in a 12-month period. The substitute amendment also authorizes a wine collector to donate manufacturer-sealed bottles or containers of wine to any charitable organization and allows the charitable organization to use the wine in any event held by the charitable organization or other fund-raising effort of the charitable organization.

9. Effective date. The general effective date of the substitute amendment is October 1, 2008. Notwithstanding any other provision of the substitute amendment, a winery holding a winery permit issued prior to the substitute amendment's effective date may continue to sell its wine at wholesale, in the manner authorized under current law, until June 30, 2009.

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

AB795-ASA1, s. 1 Section 1. 20.566 (1) (ha) of the statutes is amended to read:

AB795-ASA1,6,11 20.566 (1) (ha) Administration of liquor tax and alcohol beverages enforcement. The amounts in the schedule for computer, audit, and enforcement costs incurred in administering the tax under s. 139.03 (2m) and for costs incurred in enforcing the 3-tier system for alcohol beverages production, distribution, and sale under ch. 125. All moneys received from the administration fee under s. 139.06 (1) (a) and any permit fee under s. 125.535 (2) shall be credited to this appropriation. Notwithstanding s. 20.001 (3) (a), at the end of each fiscal year, the unencumbered balance of this appropriation account, minus an amount equal to 10% of the sum of the amounts expended and the amounts encumbered from the account during the fiscal year, shall lapse to the general fund.

AB795-ASA1, s. 2 Section 2. 36.11 (40) of the statutes is amended to read:

AB795-ASA1,6,15 36.11 (40) Center for cooperatives. The board shall maintain a center for cooperatives at the University of Wisconsin-Madison. The center shall comply with the requirements specified in s. 125.545 (5) (a).

AB795-ASA1, s. 3 Section 3. 125.01 of the statutes is amended to read:

AB795-ASA1,7,14 125.01 Legislative intent. This chapter shall be construed as an enactment of the legislature's support for the 3-tier system for alcohol beverages production, distribution, and sale that, through uniform statewide regulation, provides this state regulatory authority over the production, storage, distribution, transportation, sale, and consumption of alcohol beverages by and to its citizens, for the benefit of the public health and welfare and this state's economic stability. Without the 3-tier system, the effective statewide regulation and collection of state taxes on alcohol beverages sales would be seriously jeopardized. It is further the intent of the legislature that without a specific statutory exception, all sales of alcohol beverages shall occur through the 3-tier system, from manufacturers to licensed wholesalers to retailers to consumers. Face-to-face retail sales at licensed premises directly advance the state's interest in preventing alcohol sales to underage or intoxicated persons and the state's interest in efficient and effective collection of tax.

AB795-ASA1, s. 4 Section 4. 125.02 (22) of the statutes is amended to read:

AB795-ASA1,7,20 125.02 (22) "Wine" means products obtained from the normal alcohol fermentation of the juice or must of sound, ripe grapes, other fruits or other agricultural products, imitation wine, compounds sold as wine, vermouth, cider, perry, mead and sake, if such products contain 0.5% or more not less than 0.5 percent nor more than 21 percent of alcohol by volume.

AB795-ASA1, s. 5 Section 5. 125.02 (23) of the statutes is created to read:

AB795-ASA1,7,24 125.02 (23) "Wine collector" means an individual who meets the standards established by the department by rule and who is registered with the department as a collector of wine.

AB795-ASA1, s. 6 Section 6. 125.03 (1) of the statutes is renumbered 125.03 (1) (a).

AB795-ASA1, s. 7 Section 7. 125.03 (1) (b) of the statutes is created to read:

AB795-ASA1,8,5 125.03 (1) (b) The department shall promulgate rules providing for registration of wine collectors and establishing standards of eligibility for registration as a wine collector. The rules shall also specify the form and manner of notice required under s. 125.06 (11m) (a).

AB795-ASA1, s. 8 Section 8. 125.03 (3) of the statutes is amended to read:

AB795-ASA1,8,8 125.03 (3) Violations. No person may violate a rule promulgated under sub. (1) (a) or (2).

AB795-ASA1, s. 9 Section 9. 125.04 (3) (a) 4m. of the statutes is created to read:

AB795-ASA1,8,11 125.04 (3) (a) 4m. If the applicant is a cooperative organized under ch. 185, the identity of the cooperative members, board of directors, and agent.

AB795-ASA1, s. 10 Section 10. 125.06 (11m) of the statutes is created to read:

AB795-ASA1,8,17 125.06 (11m) Wine collectors. (a) The sale by a wine collector to any other wine collector of manufacturer-sealed bottles or containers of wine that the selling wine collector has held for at least 8 years if the selling wine collector has provided prior notice of the sale to the department. No more than one sale in any 12-month period may be conducted by a wine collector under this paragraph.

AB795-ASA1,8,22 (b) The donation by a wine collector of manufacturer-sealed bottles or containers of wine to any charitable organization for use by the charitable organization in any event held by the charitable organization or other fund-raising effort of the charitable organization, and no license or permit under this chapter is required of the charitable organization for such use of the donated wine.

AB795-ASA1, s. 11 Section 11. 125.12 (5) of the statutes is amended to read:

AB795-ASA1,9,6 125.12 (5) Revocations or suspensions of, or refusals to renew, permits by the department. The department may, after notice and an opportunity for hearing, revoke, suspend or refuse to renew any retail permit issued by it for the causes provided in sub. (4) and any other permit issued by it under this chapter for any violation of this chapter or ch. 139, except that, for a violation of sub. (4) (ag) 6. with respect to a license issued under s. 125.51 (4) (v) or a violation of s. 125.535 or 139.035, the department shall revoke the license or permit. A revocation, suspension or refusal to renew is a contested case under ch. 227.

AB795-ASA1, s. 12 Section 12. 125.272 of the statutes is created to read:

AB795-ASA1,9,11 125.272 Face-to-face retail sales. Except as provided in s. 125.26 (2m) and (2s) and except with respect to caterers, a retail license issued under s. 125.25 or 125.26, and a retail permit issued under s. 125.27, authorizes only face-to-face sales to consumers at the premises described in the retail license or permit.

AB795-ASA1, s. 13 Section 13. 125.51 (6) of the statutes is created to read:

AB795-ASA1,9,16 125.51 (6) Face-to-face retail sales. Except as provided in sub. (3) (bm) and (bs) and except with respect to caterers, a retail license or permit issued under this section authorizes only face-to-face sales to consumers at the premises described in the retail license or permit.

AB795-ASA1, s. 14 Section 14. 125.52 (1) of the statutes is amended to read:

AB795-ASA1,9,25 125.52 (1) Authorized activities. The department shall issue manufacturers' and rectifiers' permits which authorize the manufacture or rectification, respectively, of intoxicating liquor on the premises covered by the permit. A person holding a manufacturer's or rectifier's permit may manufacture, and bottle or wholesale wine, pursuant to the terms of the permit, without procuring a winery permit. A manufacturer's or rectifier's permit entitles the permittee to sell intoxicating liquor to wholesalers holding a permit under s. 125.54, to wineries holding a permit under s. 125.53, and to other manufacturers and rectifiers holding a permit under this section, from the premises described in the permit. Holders of rectifiers' permits may sell intoxicating liquor rectified by the permittee to retailers without any other permit. No sales may be made for consumption on the premises of the permittee. Possession of a permit under this section does not authorize the permittee to sell tax-free intoxicating liquor and wines brought into this state under s. 139.03 (5).

AB795-ASA1, s. 15 Section 15. 125.52 (6) of the statutes is repealed.

AB795-ASA1, s. 16 Section 16. 125.52 (8) of the statutes is repealed.

AB795-ASA1, s. 17 Section 17. 125.53 (1) of the statutes is amended to read:

AB795-ASA1,11,2 125.53 (1) The department shall issue only to a manufacturing winery in this state that holds a valid certificate issued under s. 73.03 (50) a winery permit authorizing the manufacture and bottling of wine on the premises covered by the permit for sale at wholesale to other licensees or permittees to wholesalers holding a permit under s. 125.54. A winery permit also authorizes the permittee to, on the winery premises and without obtaining a rectifier's permit, possess intoxicating liquor and mix or blend intoxicating liquor to produce wine sold to wholesalers holding a permit under s. 125.54. A permittee winery holding a permit under this section may offer on the premises taste samples of wine manufactured on the premises to persons who have attained the legal drinking age. A permittee under this section may also have either a one "Class A" license or one "Class B" license, but not both. The "Class A" license or "Class B" license may either be issued for the winery premises or for real estate owned or leased by the winery. If a "Class A" or "Class B" liquor license has also been issued to the winery, the winery may provide wine manufactured, mixed, or blended on the winery premises directly to the "Class A" or "Class B" premises and may offer the taste samples on the "Class A" or "Class B" premises.

AB795-ASA1, s. 18 Section 18. 125.53 (3) of the statutes is repealed.

AB795-ASA1, s. 19 Section 19. 125.535 of the statutes is created to read:

AB795-ASA1,11,9 125.535 Direct wine shippers' permits. (1) Authorized activities. The department shall issue direct wine shippers' permits authorizing 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.

AB795-ASA1,11,12 (2) Annual permit fee. The department may, by rule, establish an annual fee, not to exceed $100, for each permit issued under this section. All fees collected under this subsection shall be credited to the appropriation account under s. 20.566 (1) (ha).

AB795-ASA1,11,15 (3) Persons eligible. (a) A direct wine shipper's permit may be issued under this section to any person that manufactures and bottles wine on premises covered by any of the following:

AB795-ASA1,11,16 1. A manufacturer's or rectifier's permit under s. 125.52.

AB795-ASA1,11,17 2. A winery permit under s. 125.53.

AB795-ASA1,11,19 3. A winery license, permit, or other authorization issued to the winery by any state from which the winery will ship wine into this state.

AB795-ASA1,11,20 4. A federal basic permit for a winery under 27 USC 203 and 204.

AB795-ASA1,11,22 (b) A winery located outside of this state is eligible for a direct wine shipper's permit under par. (a) 3. or 4. if all of the following apply:

AB795-ASA1,11,24 1. The winery holds a valid business tax registration certificate issued under s. 73.03 (50).

AB795-ASA1,12,4 2. The winery submits to the department, with any initial application or renewal for a certificate under s. 73.03 (50) or a permit under par. (a) 3. or 4., a copy of any current license, permit, or authorization issued to the winery by the state from which the winery will ship wine into this state or the winery's federal basic permit.

AB795-ASA1,12,13 (c) Notwithstanding s. 125.04 (5) (a), natural persons obtaining direct wine shippers' permits are not required to be residents of this state. Notwithstanding s. 125.04 (5) (a) 5., a person is not required to complete a responsible beverage server training course to be eligible for a permit under this section. Corporations and limited liability companies obtaining direct wine shippers' permits are subject to s. 125.04 (6) and any other person, including any natural person or cooperative, obtaining a direct wine shipper's permit shall appoint an agent, and be subject to all provisions of s. 125.04 (6), in the same manner applicable to corporations and limited liability companies.

AB795-ASA1,12,16 (4) Labels. Containers of wine shipped to an individual in this state under this section shall be clearly labeled to indicate that the package may not be delivered to an underage person or to an intoxicated person.

AB795-ASA1,12,18 (5) Restrictions. No individual may resell, or use for a commercial purpose, wine received by the individual that is shipped under authority of this section.

AB795-ASA1,12,23 (6) Annual limit. No individual in this state may receive more than 108 liters of wine annually shipped under authority of this section. Each individual shall be responsible for compliance with this annual limit. An individual who violates this annual limit is subject to s. 125.11 (1). This subsection does not apply to purchases made under a permit issued under s. 125.61.

AB795-ASA1, s. 20 Section 20. 125.54 (1) of the statutes is amended to read:

AB795-ASA1,13,10 125.54 (1) Authorized activities. The department shall issue wholesalers' permits authorizing the permittee to sell, from the premises described in the permit, intoxicating liquor at wholesale from the premises described in the permit. Except as provided under s. 125.69 (1) (b) 3., the to retailers and wholesalers, as well as to manufacturers, rectifiers, and wineries for production purposes. The permittee may not sell intoxicating liquor for consumption on the premises. If a wholesale permit is issued to a brewery that holds a "Class B" license, the permit shall authorize the wholesale sale of wine only. Possession of a permit under this section does not authorize the permittee to sell tax-free intoxicating liquor and wine brought into this state under s. 139.03 (5).

AB795-ASA1, s. 21 Section 21. 125.54 (7) (e) of the statutes is created to read:

AB795-ASA1,13,13 125.54 (7) (e) This subsection does not apply to a cooperative wholesaler under s. 125.545.

AB795-ASA1, s. 22 Section 22. 125.54 (8) of the statutes is created to read:

AB795-ASA1,13,19 125.54 (8) Duty to work in good faith. Each wholesaler has an obligation to negotiate in good faith with any manufacturer, rectifier, or winery that seeks to sell its products in this state through the wholesaler. To this end, all wholesalers shall work diligently to ensure that distribution channels are available for the sale of intoxicating liquor products through wholesalers to retailers in this state.

AB795-ASA1, s. 23 Section 23. 125.545 of the statutes is created to read:

AB795-ASA1,13,22 125.545 Small winery cooperative wholesalers. (1) Definitions. In this section:

AB795-ASA1,13,25 (a) "Member" means a small winery that meets the requirements established under this section for membership in a cooperative wholesaler and that has been qualified and accepted for membership in a cooperative wholesaler.

AB795-ASA1,14,2 (b) "Out-of-state winery" means a winery that is located in a state other than this state and that holds a valid direct shipper's permit issued under s. 125.535.

AB795-ASA1,14,4 (c) "Retailer" means any person holding a "Class A", "Class B", or "Class C" license or "Class B" permit issued under s. 125.51.

AB795-ASA1,14,6 (d) "Small winery" means any winery that produces and bottles less than 25,000 gallons of wine in a calendar year.

AB795-ASA1,14,8 (e) "Small winery cooperative wholesaler" or "cooperative wholesaler" means an entity established under this section.

AB795-ASA1,14,10 (f) "Wisconsin winery" means a winery operating under a permit issued under s. 125.53.

AB795-ASA1,14,17 (2) Creation and organization. (a) 1. A cooperative wholesaler may only be created as provided under s. 185.043 (2) and this section. Each cooperative wholesaler operating under authority of this section shall be organized under ch. 185 but shall be subject to the limitations on such cooperatives imposed by this section. Subject to subd. 3., only small wineries may be members of a cooperative wholesaler. The principal purpose of a cooperative wholesaler shall be to sell and distribute wine manufactured, blended, or mixed, and also bottled, by its members.

AB795-ASA1,14,20 2. Notwithstanding s. 185.08 (1), a cooperative wholesaler shall include in its articles of incorporation under ch. 185 a single location for its agent and principal office, which location shall be in this state.

AB795-ASA1,14,22 3. A small winery may become a member of a cooperative wholesaler only if all of the following apply:

AB795-ASA1,14,23 a. The small winery holds a direct shipper's permit under s. 125.535.

AB795-ASA1,14,25 b. The small winery is certified by the department under sub. (6) (a) as a small winery.

AB795-ASA1,15,6 (b) In addition to the requirements specified in s. 185.31 for the board of directors of a cooperative wholesaler, a director representing a member that is a Wisconsin winery shall be either an owner or an employee of that Wisconsin winery. If any out-of-state winery is a member of the cooperative wholesaler, at least one director shall be either an owner or an employee of an out-of-state winery that is a member of the cooperative wholesaler.

AB795-ASA1,15,11 (c) Notwithstanding any provision of ch. 185, a cooperative wholesaler may not employ any owner or employee of a member. However, an individual that is an owner or an employee of a member may act as a volunteer to assist that cooperative wholesaler in the sale and distribution of wine to retailers and other wholesalers in the manner authorized under this section.

AB795-ASA1,15,19 (3) Authorization and activities. (a) 1. Within 7 days after filing its articles of incorporation under ch. 185, a cooperative wholesaler shall apply to the department for a wholesaler's permit under s. 125.54. The provisions of s. 125.04 (5) (c) and (6) shall apply to a cooperative wholesaler as if the cooperative wholesaler were a corporation or a limited liability company and, for each of these provisions, the department shall determine whether the cooperative wholesaler is most similar to a corporation or a limited liability company in the context of that provision and apply that provision to the cooperative wholesaler accordingly.

AB795-ASA1,15,25 2. Notwithstanding s. 125.54 (6), the department may issue not more than one wholesaler's permit to any cooperative wholesaler. The department may not issue more than a total of 6 wholesalers' permits to cooperative wholesalers in this state. The department may not issue any new wholesaler's permit to a cooperative wholesaler after December 31, 2008, but may renew wholesalers' permits that were initially issued to cooperative wholesalers prior to that date.

AB795-ASA1,16,2 3. No cooperative wholesaler may operate in this state without a wholesaler's permit.

AB795-ASA1,16,7 (b) 1. Notwithstanding s. 125.54 (1), and except as provided in subd. 3., a cooperative wholesaler issued a wholesaler's permit under par. (a) is authorized to sell and distribute only wine. Except as provided in subd. 3., a cooperative wholesaler may not sell or distribute any alcohol beverages, or any other product, except wine.

AB795-ASA1,16,14 2. A cooperative wholesaler shall purchase on consignment wine from its members to be resold to retailers and other wholesalers. Notwithstanding s. 125.69 (5), a cooperative wholesaler may not purchase wine from any person other than a member. A cooperative wholesaler may not resell or distribute wine unless it has been purchased on consignment from a member. Notwithstanding s. 125.54 (1), a cooperative wholesaler may not sell or distribute wine except to a retailer or to a wholesaler holding a permit under s. 125.54.

AB795-ASA1,16,20 3. A cooperative wholesaler may purchase ancillary wine industry trade goods such as bottles, corks, and other supplies used by wineries in the bottling and sale of wine if such trade goods do not include any alcohol beverages. Any wine industry trade goods purchased by a cooperative wholesaler under this subdivision may be offered for resale to the cooperative wholesaler's members or to any winery that was formerly a member of the cooperative wholesaler.

AB795-ASA1,16,24 4. A cooperative wholesaler shall work with all of its members on evenhanded terms. Any preferential treatment by a cooperative wholesaler for the benefit of a member that is a Wisconsin winery, and any discrimination against a member that is an out-of-state winery, is prohibited.

AB795-ASA1,17,5 (c) Neither a cooperative wholesaler nor its members are subject to any restriction on dealings under s. 125.69 (1) between wholesalers and wineries. Except as provided in s. 125.54 (7) (e) and as otherwise provided in this section, all provisions of this chapter and ch. 139 that apply to a wholesaler issued a permit under s. 125.54 also apply to a cooperative wholesaler issued a permit under s. 125.54.

AB795-ASA1,17,10 (4) Exclusive distribution. A member of a cooperative wholesaler may make its wine available for purchase by a retailer or another wholesaler only through the cooperative wholesaler of which it is a member. A member of a cooperative wholesaler may not sell its wine directly to any other wholesaler or directly to a retailer.