This is a series, check out Part I, Part II, and Part III if you haven’t seen them yet!

DISCLAIMER:  I am NOT an expert in either law or the liquor industry.  Anything I write here could be inaccurate, especially due to the varied and changing interpretations of the law as it goes into effect. I will try my best to get things right, and make corrections as need-be, but I make no guarantees as to the accuracy of what I write here.

Resources:

Licenses:

Unless noted otherwise, all license fees are charged on a yearly basis.  (These are only the licenses relevant to the changes in 1183.  For a full list, see RCW 66.24)

  • Spirits Distributor — a person/company who “buys spirits from a domestic distiller, manufacturer, supplier, spirits distributor, or spirits importer, or who acquires foreign-produced spirits from a source outside of the United States, for the purpose of reselling the same . . . or who represents such distiller as agent.”
    • Fee = $1320 + 10% of sales revenue for 2012-14 or 5% of sales revenue after 2013.  (If total state tax revenues from spirits distributors are less than $150m by March 31st, 2013, each distributor faces an additional fee based on sales to meet this value owed to the state.)
  • Spirits Importer — a person/company “who buys distilled spirits from a distiller outside the state of Washington and imports such spirits into the state for sale or export.”
    • Fee = $600
  • Representative — a person/company approved by a “holder of a certificate of approval, a licensed beer distributor, a licensed domestic brewer, a licensed beer importer, a licensed microbrewer, a licensed domestic winery, a licensed wine importer, a licensed wine distributor, or by a distiller, manufacturer, importer, or distributor of spirits, or of foreign-produced beer or wine” to “canvass for, solicit, receive, or take orders for the purchase or sale of liquor”
    • Fee = $25
  • Craft Distiller — A distiller who produces sixty thousand gallons of spirits or less.  At least half of the raw materials used must be grown in Washington.  A craft distillery can sell up to 2 liters a day per person of its own product.
    • Fee = $100
  • Certificate of Approval — a document permitting a winery/distillery to sell to distributors, importers, or retailers.  A direct shipment endorsement is available, which allows the winery/distillery to act as distributor for its product.
    • Fee = Not Stated.
  • Spirits Retailer –A business of  at least 10,000 square feet of retail space within a single structure (including storerooms and other interior auxiliary areas).  Licensees must manage inventory, train employees, supervise employees, and provide measures to prevent theft of liquor by underage or inebriated persons.
    • Fee = $166
  • Grocery Store — A business with a minimum of $3000 of “food products for human consumption” (not including soda or alcohol of any form) may sell wine, beer, or “strong beer” at retail for consumption off-premises.  (Note: this is the loophole for mini-marts.  Any mini-mart that already has a grocery store license that allows them to sell wine or beer will be “deemed to be premises ‘now licensed’ under RCW 66.24.010(9)(a)”.)
    • Fee = $150
  • Wine retailer reseller endorsement — Applies to grocery store licenses, and allows them to sell wine (at retail)  to retailers licensed to sell wine for on-premise consumption, for resale at their licensed premises according to the terms of the license. Single sales are limited to 24 liters, unless the buyer is the manager of a contract-operated liquor store.
    • Fee = $166

Timeline:

  • December 8th, 2011 –
    • The new law goes into effect.  Any suits against potentially illegal legislation in the text of 1183 must be brought to court by this date – I don’t know if they have to be settled or not, as my knowledge of this process is fuzzy.  Some concerns that may be brought up: the 3-tier system is partially legislated by the federal government, and interstate shipping is fully legislated by the federal government, so the state may not have power to change these.
    • WSLCB starts drafting up the new system.
    •   Craft distilleries can start selling directly to restaurants and bars (on-premise retailers).
  • January 1, 2012 –
    • WSLCB must process all applications for spirits distributors.
  • January 2012 –
    • WSLCB will start disposing of property and assets.
    • Some stores could be closed as early as Jan. 1st, though it seems unlikely.
  • March 1st, 2012 –
    • Licensed spirits distributors may start selling in Washington.
  • April 1st, 2012 –
    • WSLCB must process all applications for spirits retailers.
  • June 1st, 2012 –
    • License retailers may start selling in Washington.
    • All state liquor stores must be closed, and liquor inventory must be either sold or returned to the manufacturer.
  • June 1st, 2013 –
    • All WSLCB assets must be sold (liquor stores, warehouses, furnishings, etc).  Department of Revenue takes over any unsold assets.

Next Up:

State & Contract Liquor Store Transition

This is a series, check out Part I and Part II if you haven’t seen them yet!

DISCLAIMER:  I am NOT an expert in either law or the liquor industry.  Anything I write here could be inaccurate, especially due to the varied and changing interpretations of the law as it goes into effect. I will try my best to get things right, and make corrections as need-be, but I make no guarantees as to the accuracy of what I write here.

Resources:

The Current Tax System:

We all know of the dreaded “sin tax”.  Those of us in Washington truly hate it, as it tacks on an additional (approximate) 50% onto the retail bottle price.  Most of this money is marked to go to the State General Fund, and the rest to the Liquor Revolving Fund.  To see the specifics, visit RCW 66.08.190 (that is way beyond my scope, as 1183 doesn’t touch it).  Anyway, there are two incomes on the Liquor Revolving Fund:  yearly licensing fees and sales tax.  We’ll get into the license fees in the licenses section, but we’ll tackle the sales tax here.  There are 3 forms of sales tax a bottle of liquor: a percentage of the sale price, a dollar-rate per liter, and a percentage of the already-calculated taxes (yes, that last one makes me cringe too).  Tax rates are different based on whether the consumption of a bottle is on-premise or off-premise (think restaurant/bar vs store purchase for home use).

What Changes:

Alright, so we know what the taxes are.  Comparing the current law and 1183, the numbers are exactly the same even.  So far so good.  The problem, as I see it, is that instead of dealing with the state’s 51.9% markup, we will now see a tax on the distributor.  For the first two years, it is 10% (and in the first year, that amount must reach a minimum of $150 million, to be divided by proportion of sales between distributors if it is greater than 10% overall sales tax), and then drops to 5%.  We don’t necessarily know how that 51.9% markup was used, so if it was more than sufficient to cover the costs of running stores and distribution centers, the state may see a decrease in income.  Regardless, they were taxing that 1.519% value on a bottle, so if prices on liquor go down, they could still be hurting for cash if enough sales aren’t made.

Next Up:

Licenses & Timeline