AB455: Bill Text

LRB-2880/1

ARG:wj:nwn

2007 - 2008 LEGISLATURE

2007 Assembly BILL 455

July 12, 2007 - Introduced by Representatives Newcomer, Black, Pocan, Pope-Roberts, Musser, Kestell, Vos, Kleefisch, Suder, Montgomery, Tauchen, Van Akkeren, Roth, Boyle, Gronemus, Shilling, Sinicki, Nelson, Petrowski, Van Roy, Sheridan, Turner, Travis, Berceau, Mursau, Seidel, Richards, Meyer, Zepnick, F. Lasee, Honadel, Nygren and A. Ott, cosponsored by Senators Risser, Schultz, Breske, Hansen, Kanavas, Jauch, Kapanke, Cowles, Coggs, Harsdorf, Lehman, Leibham, Miller, Darling, Ellis, Lassa, Plale, Grothman and Kedzie. Referred to Committee on State Affairs.

AB455,2,2 An Act to repeal 125.31 (1) (a) 1. (intro.) and 125.31 (1) (a) 3.; to renumber 125.31 (1) (a) 1. a. to e.; to amend 125.02 (2), 125.02 (21), 125.04 (9), 125.07 (4) (bm) 1., 125.10 (4), 125.26 (2) (b) 1., 125.28 (2) (b) 2., 125.31 (1) (a) 2., 125.31 (1) (a) 4., 125.32 (5) and (7) (a), 125.33 (title), (1), (2) (intro.), (a), (d), (j), (k), (L) 2., 3. and 4., (n) 2. and (p) 1., (2s), (6), (7) (a) 1. a. and b., (b), (c) and (d), (7m), (8), (9), (10) (a) 1. to 4., (b) and (c) 1. and 3. and (11), 125.34 (title), (1) (a) and (c), (2) (a), (bg) and (bm), (3) (a) 1. and 2., (4) (a) and (5), 125.54 (1), 139.01 (1) and (2), 139.04 (2), 139.08 (4), 139.09, 139.11 (2), (3) and (4), 139.18 (1), 139.22 and 346.93 (1); and to create 125.015, 125.02 (2d) (intro.), (2h), (2p) and (2t), 125.25 (2) (b) 5., 125.28 (2) (b) 1. e., 125.29 (5) and (6), 125.295, 125.69 (1) (d) and 139.01 (2c) and (2e) of the statutes; relating to: creating a brewpub permit authorizing the manufacture and sale at wholesale of fermented malt beverages, authorizing other brewpub interests and operations and limiting certain operations of brewers.

Analysis by the Legislative Reference Bureau

Under current law, alcohol beverages are generally distributed to consumers under a three-tier distribution system: the manufacturer may sell only to a wholesaler or rectifier; the wholesaler or rectifier may sell only to a wholesaler or to a retailer; the retailer may sell only to the consumer. With specific exceptions, no person may sell outside the three-tier system, and no person may sell alcohol beverages at retail unless the person possesses a license or permit authorizing the sale on the premises where sold.

Under current law, a brewer of fermented malt beverages (beer) must hold a permit issued by the Department of Revenue (DOR). A brewer's permit authorizes the brewer to manufacture, possess, and store beer on the brewery premises. A beer wholesaler's license, issued by a municipality, authorizes the license holder to sell to retailers or wholesalers beer in original packages that may not be consumed on the wholesaler's premises. A brewer may hold a wholesaler's license and may own, maintain, and operate a warehouse for which the brewer holds a wholesaler's license. The brewer may transport beer between the brewery premises and the brewer's warehouse. The brewer may sell beer at wholesale to beer retailers and beer wholesalers if the brewer holds a wholesaler's license. With various limitations discussed below, the brewer may sell beer at retail if the brewer holds a retailer's license. A brewer may also hold a limited intoxicating liquor wholesaler's permit, for wine only.

Under current law, a brewer may hold a Class "A" retail license, which authorizes the retail sale of beer in original packages for consumption off the licensed premises, but, with exceptions, may not hold a Class "B" license, which authorizes the retail sale of beer for consumption on or off the premises where sold. One exception allows a brewer to maintain and operate, and hold a Class "B" license for, one retail premises on brewery premises and one retail premises on property owned by the brewer or its subsidiary or affiliate. Under another exception, in addition to these two Class "B" licenses, a brewer may possess a Class "B" license for not more than four restaurants in which the sale of alcohol beverages accounts for less than 50 percent of gross receipts if the brewer is a "small brewer" (generally one that manufactures less than 4,000 barrels of beer annually), the restaurant also sells other brewers' beer, and the brewer's own beer is purchased by the restaurant from an independent wholesaler. A brewer may hold both a wholesaler's license and Class "B" license but, with an exception for grandfathered licenses, may not hold both a wholesaler's license and a Class "A" license. A "Class B" license authorizes the retail sale of intoxicating liquor for consumption on or off the licensed premises, which authorization is subject to certain limitations, some of which depend on whether the issuing municipality has adopted an ordinance related to "Class B" licenses. A "Class C" license authorizes the retail sale of wine by the glass or in an opened original container for consumption on the licensed premises and may be issued only for a restaurant. Because a "Class B" license may be issued only to the holder of a Class "B" license, a brewer is limited in the number of "Class B" licenses it may hold.

Under current law, beer may not be sold, transported, or delivered to a Class "A" licensee or Class "B" licensee unless the beer is first unloaded at and distributed from a licensed beer wholesaler's warehouse, which generally must be at a location that is physically separate from any retail premises or brewery premises. However, there are a number of exceptions to this prohibition, including exceptions that apply to certain brewers that hold wholesale and retail licenses or that manufacture 50,000 barrels of beer or less annually. Also under current law, deliveries of beer to retailers may be made only by licensed wholesalers and must be made to retailers only at their retail premises. No retailer may transport beer from one retail premises to another retail premises to sell it unless a brewer operates both retail premises. Current law also requires, with limited exceptions, that beer wholesalers enter into written agreements with brewers supplying beer brands that grant to the wholesalers distribution rights within exclusive designated sales territories in order for the beer to be distributed, and further imposes requirements on the termination of these agreements. A brewer, in providing beer to its own retail premises, is not subject to restrictions on the sale, transportation, and delivery of beer generally applicable to wholesalers and retailers.

This bill creates a brewpub permit issued by DOR. An applicant is eligible to obtain a brewpub permit if all of the following apply:

1. The applicant manufactures not more than 10,000 barrels of beer each year.

2. The applicant's entire beer manufacturing process occurs on the brewpub premises.

3. The applicant operates a restaurant on the brewpub premises in which the sale of alcohol beverages accounts for less than 60 percent of the restaurant's gross receipts.

4. The applicant holds a Class "B" license for the restaurant and offers for sale in the restaurant, in addition to its own beer, beer manufactured by other brewers.

5. The applicant holds a business tax registration certificate issued by DOR.

6. The applicant does not hold or have an interest in a Class "A" license, a beer wholesaler's license, a brewer's permit, or an alcohol beverage, warehouse permit, and does not hold or have an interest in a Class "B," "Class B," or "Class C" license other than one for brewpub premises.

If an applicant for a brewpub permit has no current operations, the applicant can certify that the applicant will comply with these requirements prior to or upon commencing operations under the brewpub permit. If an applicant for a brewpub permit holds a brewer's permit, wholesale license, or any other prohibited license or permit at the time of the application, the applicant can certify that the applicant will surrender any such license or permit upon issuance of the brewpub permit.

A brewpub permit authorizes a brewpub to do all of the following:

1. Manufacture beer on the brewpub premises, up to 10,000 barrels each year for all brewpub premises, if the entire manufacturing process occurs on these premises.

2. Bottle on the brewpub premises beer that has been manufactured on these premises.

3. Package in refillable containers exceeding 24 ounces in volume, on brewpub premises, beer that has been manufactured on these premises, and possess and store on brewpub premises any beer.

4. Transport beer that has been manufactured on the brewpub premises between these premises and any other brewpub premises or brewpub Class "B" premises.

5. Sell at wholesale, ship, transport, and deliver to wholesalers, from the brewpub premises, beer manufactured on these premises or on other brewpub premises.

6. Sell at wholesale, ship, transport, and deliver to retailers, from the brewpub premises, beer manufactured on these premises or on other brewpub premises, but only up to 1,000 barrels of beer each year, not including beer provided to the brewpub's own retail premises.

7. Sell alcohol beverages at retail on the brewpub premises in accordance with the terms of any Class "B," "Class B," or "Class C" license held by the brewpub.

A brewpub may not hold more than six permits for brewpub locations. A brewpub may hold only Class "B," "Class B," and "Class C" licenses for restaurants on brewpub premises.

Like the holder of a brewer's permit, a brewpub, in providing beer to its own retail premises, is not subject to restrictions on the sale, transportation, and delivery of beer generally applicable to wholesalers and retailers. However, a brewpub does not hold a wholesaler's license and may maintain wholesale operations, including the sale, transportation, and delivery to retailers if otherwise authorized, from its brewpub premises. To distribute its beer through licensed beer wholesalers, a brewpub must enter into written agreements with the wholesalers for each brewpub brand distributed providing exclusive designated sales territories to the wholesalers for these brands. A brewpub is also subject to certain requirements generally applicable to wholesalers when selling its own beer to unaffiliated retailers.

Current law prohibits a person from operating a restaurant unless the person has been issued a restaurant permit. This bill prohibits a person issued a brewer's permit after the bill's effective date from holding a restaurant permit, thereby requiring a person who intends to begin manufacturing beer and operating a restaurant after this date to obtain a brewpub permit if the person is otherwise eligible for a brewpub permit.

The bill also repeals the authorization for a small brewer to possess a Class "B" license for not more than four restaurants in which the sale of alcohol beverages accounts for less than 50 percent of the restaurant's gross receipts.

Current law includes a global severability provision applicable to all statutes, which states that the provisions of the statutes and of any session law are severable. If any provision of the statutes or of a session law is invalid, or if the application of either to any person or circumstance is invalid, the invalidity does not affect other provisions or applications that can be given effect without the invalid provision or application.

This bill includes another severability provision specifically applicable to chapter 125 of the statutes relating to alcohol beverages. The bill states that if any provision or clause of chapter 125 or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the chapter that can be given effect without the invalid provision or application, and to this end the provisions of the chapter are severable.

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:

AB455, s. 1 Section 1. 125.015 of the statutes is created to read:

AB455,5,6 125.015 Severability. If any provision or clause of this chapter or its application to any person or circumstance is held invalid, the invalidity shall not affect other provisions or applications of this chapter that can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable.

AB455, s. 2 Section 2. 125.02 (2) of the statutes is amended to read:

AB455,5,10 125.02 (2) "Brewer" means any person who manufactures fermented malt beverages for sale or transportation, except that "brewer" does not include a permittee under s. 125.295.

AB455, s. 3 Section 3. 125.02 (2d) (intro.), (2h), (2p) and (2t) of the statutes are created to read:

AB455,5,15 125.02 (2d) (intro.) "Brewer group" means a brewer, including all premises for which the brewer holds a permit issued under s. 125.29, together with all of the following:

AB455,5,16 (2h) "Brewpub" means a permittee under s. 125.295.

AB455,5,18 (2p) "Brewpub group" means a brewpub, including all premises for which the brewpub holds a permit issued under s. 125.295, together with all of the following:

AB455,6,2 (a) All brewpubs that share membership with the brewpub in a controlled group of brewpubs, as determined under 26 USC 5051 (a) (2) (B).

AB455,6,4 (b) All brewpubs considered with the brewpub as one taxpayer under 27 CFR 25.111b (b).

AB455,6,5 (c) All franchisees, as defined in s. 553.03 (5), of the brewpub.

AB455,6,7 (d) All franchisees, as defined in s. 553.03 (5), of the brewpub's franchisor, as defined in s. 553.03 (6).

AB455,6,8 (e) The franchisor, as defined in s. 553.03 (6), of the brewpub.

AB455,6,10 (2t) "Brewpub premises" means any premises covered by a permit issued under s. 125.295.