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

This is a series, check out Part I if you haven’t seen it 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 3-Tier System:

Currently, the country operates on a “3-tier system”.  The gist of this is that an alcohol producer cannot sell directly to the public (except in special cases such as brewery/winery/distillery gift shops and bars, which we will talk about another day).  See the following diagram:

This means that there is a built-in middle-man in almost every alcohol purchase you make.  Obviously, this goes against the ideal of a lot of companies that emphasize low prices – they’d love to get that product to you at “wholesale” costs and take that middle-man’s profit margin for themselves.  Not to say that I don’t want lower prices; I think that the 3-tier system is broken.  I just don’t know that 1183 fixes it (or even helps us get better prices).

The details:  right now only the state (or state-selected contractor) is allowed to act as the final distributor (for example, a restaurant cannot buy liquor directly from a sales representative, but instead has to ask the state to order that product through their distributor, and then buy it from the state).  Only the state can warehouse liquor for future sale.

The New 3.5-Tier? System:

1183 passes, and now things get muddled.  Look at that pretty diagram up there again.  We don’t have to worry about warehouses – only the state can sell from them.  Suddenly, warehouses are a big deal, as are things called “endorsements”.  Take a gander:Yikes!  Ok, let’s say a distributor did all his/her distribute-y things, and a case of sumpn’-sumpn’ shows up at the doorstep of your friendly local grocer (now legally authorized to sell liquor).  Said grocer has some options: he can

  1. sell it to you at the retail tax rate, or he can
  2. tell the delivery guy “no, no, it goes to our warehouse down the street!”, at which point, it can
  1. be delivered to another store in the chain that is authorized to sell liquor, it can
  2. be sold to that restaurant or bar down the street (if the case is wine and the grocer has a “wine retailer reseller endorsement”, or if the grocer is operating under a spirits retail license instead of a grocery store license), it can
  3. be sold to another warehouse registered by a licensed seller, or it can even
  4. be sold to a legal purchaser out-of-state.

To make it even more confusing, every time a retailer sells to another retailer for resale (not consumption), the first retailer is considered a distributor.  Why?  An item can only be taxed at the distributor rate once (this guarantees that a case that makes the circuit among 50 sellers is taxed pretty much the same as a case that goes from producer-distributor-retailer-you directly).  [See sections 103 and 104 of 1183 to see this for yourself.]  What are the perks of this?  Your favorite savvy local businesses can form a group to warehouse their own stock, allowing them to make (or split) bulk purchases and save money.  Warehouses are legal for “associations, cooperatives, or comparable groups of retailers”, so long as there is “at least one retailer licensed to sell spirits” [103.3d].

This is a mess, and it actually increases the middle-men!  Why would we pass this?!  Well, because Costco threw a lot of bucks at it.  And they did it because they plan on being that first retailer and registered warehouse that sells to other retailers (like all those mini-marts that just might have their loophole to get in on selling liquor – we’ll discuss that later).  Chances are, Costco will probably go for a distributor license in some way or other as well, so they can distribute their private label, removing the middle-man on some products and winning their customers with bottles that are a few bucks cheaper.  Meanwhile, we can expect prices to go up in boutique locations that don’t deal directly with distributors because they don’t do bulk business.  (Many distributors have something  called a “broken case fee” that can add a buck or two per bottle for any purchase less than a whole case.  This makes small, diverse purchases very expensive.)  And of course, the wine clause in 1183 will make that even more visible, as bulk purchases of wine can now be discounted (though beer bulk discounts are, sadly, still illegal).

Next Up:

Taxes!

I have refrained from politics on my blog, but I have a lot of friends asking me what will happen now that Washington (a notoriously strict control state) has passed what is possibly one of the loosest liquor laws in the country.  The following series is my best attempt at a summary.

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:

Initiative Summary:

Initiative 1183 (1183 from here on out) primarily affects liquor distribution, retail and pricing, but it also changes a few rules on wine distribution.  The objective is to maintain the so-called “sin tax” for  2 years at its current level, while taking the state out of the business of sales and placing it firmly into enforcement, thereby allowing a free market system with non-uniform pricing and increased variety based on demand.  Nothing in 1183 should affect beer production, distribution, or sale.

Why You Should Care:

If you live or drink in Washington, you obviously are somewhat vested in this initiative.  If you don’t, you may see similar initiatives to privatize liquor or remove the 3-tier distribution system come to your state soon (thanks to that friendly giant, Costco). Oregon, I’m looking at you.  Here’s what may happen:

  • Prices.  Changing the system to a free market has the potential to increase or decrease prices from store to store.  There may be a change in the distribution system, allowing certain retailers to cut out the middle man, which would create much more affordable hooch.  This means we have the possibility of bargain-bin liquor, but it also means we get to hunt for the best deals.  One-stop-shopping?  Maybe.
  • Tax Revenue.  Our state is already in the red; they’ve depended on the liquor sin tax for years.  Now we’re messing with it, and we could see some serious funding issues crop up as the state tries to find new sources of income.  1183 addresses the tax income to a certain extent, but will it play out well?
  • Selection.  Availability of your favorite liquors may change.  Big box and major grocery chains may not have much incentive to stock more than 20-100 of the major brands, which could make it more difficult to get that Maraschino, Buffalo Trace, or even Dolin vermouth.  (And don’t even ask about amaros like Cynar or Fernet Branca.)  On the flip side, we will probably see private labels pop up.  Costco’s line of Kirkland Select is known for being top-shelf product in cheap 1.75 l bottles.  Kroger tequila anyone?
  • Local Economy – Distillers.  1183 could leave local distillers out in the cold.  While they may be able to directly supply local bars and restaurants, the [recently-legalized] craft distilleries have been highly dependent on exposure and shelf space in state stores for the last few years.  Now they may be required to select highly limiting distributors, which is a considerable risk for a new and vulnerable company.
  • Local Economy – Bars & Restaurants.  No matter how it turns out in the end, we’re up for a rough transition in a bad economy.  For some establishments, this transition could be the straw that breaks the camel’s back.  Good news?  Multiple establishments may be able to form groups to own centralized warehouses and gain access to bulk discounts.
  • Local Economy – Liquor Stores.  I’m pretty sure most Washingtonians know about the 900 jobs lost out of the state-run stores.  (Costco has generously offered to hire them, but I’m skeptical about whether the benefits compare.)  Some store managers will work hard to raise the money to buy their stores and separate liquor on the auction block, but many won’t have access to that kind of scratch.  Meanwhile, anyone that wants to open a store has 6 months to do so.  In all likelihood, grocery stores will be the majority provider for liquor in that time, as they will already have a license to sell.  I don’t expect they’ll be hiring a whole lot of new people to man a rearranged beer and wine section.
  • Internet Sales.  No one I’ve spoken to has any idea what happens here.  It depends a lot on  federal interstate commerce laws, so I have no doubt that the WSLCB has a crack team of lawyers assigned to this one.  We just get to wait until they tell us more.

Next Up:

  • The 3-tier system.
  • How 1183 messes with the 3-tier system.

Cocktail 2-fer

May 31, 2011

Another night of cleaning out my liquor cabinet, and the result is a tea influenced night.

Dolin Framboise

2 oz Raspberry infused Rittenhouse 100 [house]
1 oz Dolin Blanco vermouth
1/4 oz lime leaf infused gin [house]
splash of lemon juice
Cherry hibiscus bitters (Evan Martin special)
cherry garnish

One of my friends challenged me to use my raspberry rye, as it seemed fitting for the springlike weather tonight. My first thought was that it was not strong enough in the raspberry department, so I went rummaging for syrups; luckily I thought better and grabbed the Dolin Blanco, which is a lovely sweet white vermouth with berry and citrus notes to it. It added a lot of depth and actually pulled out the raspberry notes in my disappointing infusion, though it begged for a touch of lime. And of course, when a touch of lime is called for, I go for my lime leaf infusions, since they are much less strident than the fruit itself. To tie it all together: a dash of lemon juice (who doesn’t think of raspberry lemonade on a hot day?) and some lovely tart, fruity cherry hibiscus bitters courtesy of Evan Martin at Naga. My friend’s remark: it’s like drinking tea, but alcoholic.

 

4 O’Clock Bracer

2 oz Laird’s Applejack
1 oz buttermilk liqueur
1/2 oz Earl Grey bitters
1/4 oz lemon juice

Since my friend was rocking the tea concept, I decided to up the ante – she challenged me to work with the buttermilk liqueur, which she had in some degree influenced me to make, but I was tired of pairing it with rum. My eyes fell on the Laird’s, and the game was over, though I wasn’t yet working with tea. As I’ve noted before, the buttermilk pairs well with lemon, so that got tossed in, and then, for the hell of it, the earl grey bitters went in, 1/4 oz at first, as the concoction was far too sweet. That didn’t do it, so that solid, manly 1/2 oz of bitters happened, and the drink is pretty much perfect. (Though one could certainly argue to drop the lemon, depending on the night.) Citrusy and floral on the nose, it hits with a taste of apple and tea, finishing with a lovely, but not overwhelming, bitter note. Invigorating and refreshing, yet pretty alcoholic to finish out the day.  So please forgive any errors in phrasing or grammar…

 

Earl Grey bitters

9 parts Earl Grey infusion (1 tsp Earl Grey aged in 2 oz Plymouth and 2 oz 151 Everclear for 7 days)
1 part black walnut leaf infusion (4 tbsp black walnut leaf aged in 4 oz 151 Everclear for 3 weeks)
1 part milk thistle infusion (1 tbsp milk thistle aged in 1 oz 151 Everclear for 1 month)
1 part fringe tree bark infusion (1 tbsp fringe tree bark aged in 1 oz 151 Everclear for 4 days)

These Earl Grey bitters were based primarily on the tea, as it was a surruptitiously stolen teaspoon of a very nice Earl Grey from the UK.  My tendencies are to shy away from Earl Grey, as I don’t much care for bergamot, but these are lovely and mild and taste mostly of black tea and spice, with just a hint of orange.   Still proper bitters, but not too overwhelming, and in no way a problem in large quantities (though if I ever make them again, I will probably try to concentrate the flavors a bit).