Connecticut Seal

General Assembly

File No. 193

    February Session, 2018

Substitute House Bill No. 5368

House of Representatives, April 4, 2018

The Committee on General Law reported through REP. D'AGOSTINO of the 91st Dist., Chairperson of the Committee on the part of the House, that the substitute bill ought to pass.

AN ACT CONCERNING ALCOHOLIC LIQUOR MANUFACTURER PERMITS.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 30-16 of the 2018 supplement to the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

(a) A manufacturer permit shall allow the manufacture of alcoholic liquor and the storage, bottling and wholesale distribution and sale of alcoholic liquor manufactured or bottled to permittees in this state and without the state as may be permitted by law; but no such permit shall be granted unless the place or the plan of the place of manufacture has received the approval of the Department of Consumer Protection. The holder of a manufacturer permit who produces less than twenty-five thousand gallons of alcoholic liquor in a calendar year may sell at retail from the premises sealed bottles or other sealed containers of alcoholic liquor manufactured on the premises for consumption off the premises, provided such holder shall not sell to any one consumer more than one and one-half liters of alcoholic liquor per day nor more than five gallons of alcoholic liquor in any two-month period. Retail sales by a holder of a manufacturer permit shall occur only on the days and times permitted under subsection (d) of section 30-91. A holder of a manufacturer permit, alone or in combination with any parent or subsidiary business or related or affiliated party, who sells more than ten thousand gallons of alcoholic liquor in any calendar year may not sell alcoholic liquor at wholesale to retail permittees within this state. Such permit shall also authorize the offering and tasting, on the premises of the permittee, of free samples of spirits distilled on the premises. Such free samples may be offered individually or as ingredients in cocktails or mixed drinks prepared on the premises. Tastings shall not exceed [two] a total of three ounces of spirits per patron per day and shall not be allowed on such premises on Sunday before eleven o'clock a.m. and after eight o'clock p.m. and on any other day before ten o'clock a.m. and after eight o'clock p.m. No tastings shall be offered to or allowed to be consumed by any minor or intoxicated person. A holder of a manufacturer permit may apply for and shall receive an out-of-state shipper's permit for manufacturing plants and warehouse locations outside the state owned by such manufacturer or a subsidiary corporation thereof, at least eighty-five per cent of the voting stock of which is owned by such manufacturer, to bring into any of its plants or warehouses in the state alcoholic liquors for reprocessing, repackaging, reshipment or sale either (1) within the state to wholesaler permittees not owned or controlled by such manufacturer, or (2) outside the state. The annual fee for a manufacturer permit shall be one thousand eight hundred fifty dollars.

(b) A manufacturer permit for beer shall be in all respects the same as a manufacturer permit, except that the scope of operations of the holder shall be limited to beer, but shall permit the storage of beer in any part of the state. Such permit shall also authorize the offering and tasting, on the premises of the permittee, of free samples of beer brewed on such premises and the selling at retail from the premises of sealed bottles or other sealed containers of such beer for consumption off the premises. The offering and tasting may be limited to visitors who have attended a tour of the premises of the permittee. Such selling at retail from the premises of sealed bottles or other sealed containers shall comply with the provisions of subsection (d) of section 30-91 and shall permit not more than [nine] eleven and one-half liters of beer to be sold to any person on any day on which such sale is authorized under the provisions of subsection (d) of section 30-91. The annual fee for a manufacturer permit for beer shall be one thousand dollars.

(c) A manufacturer permit for cider not exceeding six per cent alcohol by volume and apple wine not exceeding fifteen per cent alcohol by volume shall allow (1) the manufacture, storage, bottling and wholesale distribution and sale at retail of such cider and apple wine to permittees and nonpermittees in this state as may be permitted by law; but no such permit shall be issued unless the place or the plan of the place of manufacture has received the approval of the department; (2) the sale and shipment by the holder of such permit of such cider and such apple wine to persons outside the state and to consumers in this state in the same manner and subject to the same conditions as such sale and shipment is permitted for wine by a farm winery manufacturer permittee pursuant to subsection (e) of this section; and (3) the offering and tasting, on the premises of the permittee, of free samples of cider and apple wine manufactured on such premises. Tastings shall not exceed two ounces per patron and shall not be allowed on such premises on Sunday before eleven o'clock a.m. and after eight o'clock p.m. and on any other day before ten o'clock a.m. and after eight o'clock p.m. No tasting shall be offered to or allowed to be consumed by any minor or intoxicated person. Offerings and tastings may be limited to visitors who have attended a tour of the premises of the permittee. The annual fee for a manufacturer permit for cider shall be two hundred dollars.

(d) A manufacturer permit for apple brandy and eau-de-vie shall be in all respects the same as a manufacturer permit, except that the scope of operations of the holder shall be limited to apple brandy or eau-de-vie, or both. The annual fee for a manufacturer permit for apple brandy and eau-de-vie shall be four hundred dollars.

(e) (1) A manufacturer permit for a farm winery shall be in all respects the same as a manufacturer permit, except that the scope of operations of the holder shall be limited to wine and brandies distilled from grape products or other fruit products, including grappa and eau-de-vie. As used in this section, "farm winery" means any place or premises that is located on a farm in the state in which wine is manufactured and sold.

(2) Such permit shall, at the single principal premises of the farm winery, authorize (A) the sale in bulk by the holder thereof from the premises where the products are manufactured pursuant to such permit; (B) as to a manufacturer who produces one hundred thousand gallons of wine or less per year, the sale and shipment by the holder thereof to a retailer of wine manufactured by the farm winery permittee in the original sealed containers of not more than fifteen gallons per container; (C) the sale and shipment by the holder thereof of wine manufactured by the farm winery permittee to persons outside the state; (D) the offering and tasting of free samples of such wine or brandy, dispensed out of bottles or containers having capacities of not more than two gallons per bottle or container, to visitors and prospective retail customers for consumption on the premises of the farm winery permittee; (E) the sale at retail from the premises of sealed bottles or other sealed containers of such wine or brandy for consumption off the premises; (F) the sale at retail from the premises of wine or brandy by the glass and bottle to visitors on the premises of the farm winery permittee for consumption on the premises; and (G) subject to the provisions of subdivision (3) of this subsection, the sale and delivery or shipment of wine manufactured by the permittee directly to a consumer in this state. Notwithstanding the provisions of subparagraphs (D), (E) and (F) of this subdivision, a town may, by ordinance or zoning regulation, prohibit any such offering, tasting or selling at retail at premises within such town for which a manufacturer permit for a farm winery has been issued.

(3) A permittee, when selling and shipping wine directly to a consumer in this state, shall: (A) Ensure that the shipping labels on all containers of wine shipped directly to a consumer in this state conspicuously state the following: "CONTAINS ALCOHOL—SIGNATURE OF A PERSON AGE 21 OR OLDER REQUIRED FOR DELIVERY"; (B) obtain the signature of a person age twenty-one or older at the address prior to delivery, after requiring the signer to demonstrate that he or she is age twenty-one or older by providing a valid motor vehicle operator's license or a valid identity card described in section 1-1h; (C) not ship more than five gallons of wine in any two-month period to any person in this state; (D) pay, to the Department of Revenue Services, all sales taxes and alcoholic beverage taxes due under chapters 219 and 220 on sales of wine to consumers in this state, and file, with said department, all sales tax returns and alcoholic beverage tax returns relating to such sales; (E) report to the Department of Consumer Protection a separate and complete record of all sales and shipments to consumers in the state, on a ledger sheet or similar form which readily presents a chronological account of such permittee's dealings with each such consumer; (F) not ship to any address in the state where the sale of alcoholic liquor is prohibited by local option pursuant to section 30-9; and (G) hold an in-state transporter's permit pursuant to section 30-19f or make any such shipment through the use of a person who holds such an in-state transporter's permit.

(4) No licensed farm winery may sell any such wine or brandy not manufactured by such winery, except a licensed farm winery may sell from the premises (A) wine manufactured by another farm winery located in this state, and (B) brandy manufactured from fruit harvested in this state and distilled off the premises in this state.

(5) The farm winery permittee shall grow on the premises of the farm winery or on property under the same ownership and control of said permittee or leased by the backer of a farm winery permit or by said permittee within the farm winery's principal state an average crop of fruit equal to not less than twenty-five per cent of the fruit used in the manufacture of the farm winery permittee's wine. An average crop shall be defined each year as the average yield of the farm winery permittee's two largest annual crops out of the preceding five years, except that during the first seven years from the date of issuance of a farm winery permit, an average crop shall be defined as three tons of grapes for each acre of vineyard farmed by the farm winery permittee. Such seven-year period shall not begin anew if the property for which the farm winery permit is held is transferred or sold during such seven-year period. In the event the farm winery consists of more than one property, the aggregate acreage of the farm winery shall not be less than five acres.

(6) A holder of a manufacturer permit for a farm winery, when advertising or offering wine for direct shipment to a consumer in this state via the Internet or any other on-line computer network, shall clearly and conspicuously state such liquor permit number in its advertising.

(7) A holder of a manufacturer permit for a farm winery may sell and offer free tastings of wine manufactured from such winery at a farmers' market, as defined in section 22-6r, that is operated as a nonprofit enterprise or association, provided such farmers' market invites such holder to sell wine at such farmers' market and such holder has a farmers' market wine sales permit issued by the Commissioner of Consumer Protection in accordance with the provisions of subsection (a) of section 30-37o.

(8) The annual fee for a manufacturer permit for a farm winery shall be three hundred dollars.

(f) (1) A manufacturer permit for a farm brewery shall be in all respects the same as a manufacturer permit, except that the scope of operations of the holder shall be limited to the production of not more than seventy-five thousand gallons of beer in a calendar year. As used in this section, "farm brewery" means any place or premises that is located on a farm in the state in which beer is manufactured and sold.

(2) Such permit shall, at the single principal premises of the farm brewery, authorize (A) the sale of sealed bottles or other sealed containers of beer brewed on such premises to the holder of a wholesaler permit issued pursuant to section 30-17; (B) the offering and tasting of free samples of beer manufactured by the farm brewery permittee, dispensed out of bottles or other sealed containers to visitors and prospective retail customers for consumption on the premises of the farm brewery permittee; (C) the sale at retail from the premises of not more than [nine] eleven and one-half liters of such beer to any person per day, in sealed bottles or other sealed containers, for consumption off the premises; and (D) the sale at retail from the premises of beer by the glass and bottle to visitors on the premises of the farm brewery permittee for consumption on the premises. Notwithstanding the provisions of subparagraphs (A) to (D), inclusive, of this subdivision, a town may, by ordinance or zoning regulation, prohibit any such offering, tasting or selling at retail at premises within such town for which a manufacturer permit for a farm brewery has been issued.

(3) The farm brewery permittee shall use not less than twenty-five per cent of a combination of hops, barley, cereal grains, honey, flowers or other fermentables grown or malted within the state of Connecticut in the manufacture of the farm brewery permittee's beer for the first year of issuance for any such permit and not less than fifty per cent of such hops, barley, cereal grains, honey, flowers or other fermentables in the manufacture of the farm brewery permittee's beer for the second and any subsequent year of issuance for any such permit. Any such beer may be advertised and sold by the farm brewery permittee as "Connecticut Craft Beer".

(4) A holder of a manufacturer permit for a farm brewery may sell beer manufactured from such brewery at a farmers' market, as defined in section 22-6r, that is operated as a nonprofit enterprise or association, provided such farmers' market invites such holder to sell beer at such farmers' market and such holder has a farmers' market beer sales permit issued by the Commissioner of Consumer Protection in accordance with the provisions of subsection (a) of section 30-37r.

(5) The annual fee for a manufacturer permit for a farm brewery shall be three hundred dollars.

(g) A manufacturer permit for a brew pub shall allow: (1) The manufacture, storage and bottling of beer, (2) the retail sale of alcoholic liquor to be consumed on the premises with or without the sale of food, (3) the selling at retail from the premises of sealed bottles or other sealed containers of beer brewed on such premises for consumption off the premises, and (4) the sale of sealed bottles or other sealed containers of beer brewed on such premises to the holder of a wholesaler permit issued pursuant to subsection (b) of section 30-17, provided that the holder of a manufacturer permit for a brew pub produces at least five thousand gallons of beer on the premises annually. Such selling at retail from the premises of sealed bottles or other sealed containers shall comply with the provisions of subsection (d) of section 30-91 and shall permit not more than [nine] eleven and one-half liters of beer to be sold to any person on any day on which such sale is authorized under the provisions of subsection (d) of section 30-91. The annual fee for a manufacturer permit for a brew pub shall be three hundred dollars.

(h) A manufacturer permit for beer and brew pub shall be in all respects the same as a manufacturer permit for beer, as defined in subsection (b) of this section, and shall allow those additional permissible uses specified in the manufacturer permit for a brew pub, as defined in subsection (g) of this section, provided the holder of a manufacturer permit for beer and brew pub produces at least five thousand gallons of beer on the premises annually. The annual fee for a manufacturer permit for beer and brew pub shall be one thousand five hundred dollars.

(i) (1) A manufacturer permit for a farm distillery shall be in all respects the same as a manufacturer permit, except that the scope of operations of the holder shall be limited to the production of not more than ten thousand gallons per calendar year of distilled alcohol or spirits including, but not limited to, whiskey, gin, vodka and rum. As used in this section, "farm distillery" means any place or premises that is located on a farm in the state in which distilled spirits or alcohol are manufactured and sold.

(2) Such permit shall, at the single principal premises of the farm distillery, authorize (A) the sale in bulk by the holder thereof from the premises where the products are manufactured pursuant to such permit; (B) the sale and shipment by the holder thereof to a retailer of distilled alcohol or spirits manufactured by the farm distillery permittee in the original sealed containers of not more than fifteen gallons per container; (C) the offering and tasting of free samples of such distilled alcohol or spirits, in amounts not to exceed [two] a total of three ounces per day per person of such distilled alcohol or spirits, which samples may be offered individually or as ingredients in cocktails or mixed drinks prepared on the premises, to visitors and prospective retail customers for consumption on the premises of the farm distillery permittee; and (D) the sale at retail from the premises of sealed bottles or other sealed containers, in amounts not to exceed four and one-half liters per customer per day, of such distilled alcohol or spirits for consumption off the premises. Notwithstanding the provisions of subparagraphs (C) and (D) of this subdivision, a town may, by ordinance or zoning regulation, prohibit any such offering, tasting or selling at retail at premises within such town for which a manufacturer permit for a farm distillery has been issued.

(3) No licensed farm distillery may sell any such distilled alcohol or spirits not manufactured by such distillery.

(4) The farm distillery permittee shall grow on the premises of the farm distillery or on property under the same ownership and control of said permittee or leased by the backer of a farm distillery permit or by said permittee within the farm distillery's principal state an average crop of fruit or crops equal to not less than twenty-five per cent of the fruit or crops used in the manufacture of the farm distillery permittee's distilled alcohol or spirits. An average crop shall be defined each year as the average yield of the farm distillery permittee's two largest annual crops out of the preceding five years. In the event the farm distillery consists of more than one property, the aggregate acreage of the farm distillery shall not be less than five acres.

(5) The annual fee for a manufacturer permit for a farm distillery shall be three hundred dollars.

Sec. 2. Section 12-435 of the general statutes is repealed and the following is substituted in lieu thereof (Effective January 1, 2019):

Each distributor of alcoholic beverages shall pay a tax to the state on all sales within the state of alcoholic beverages, except sales to licensed distributors [,] and sales of alcoholic beverages which, in the course of such sales, are actually transported to some point without the state, [and except malt beverages which are consumed on the premises covered by a manufacturer's permit,] at the rates for the respective categories of alcoholic beverages listed below:

(a) Beer, seven dollars and twenty cents for each barrel, three dollars and sixty cents for each half barrel, one dollar and eighty cents for each quarter barrel and twenty-four cents per wine gallon or fraction thereof on quantities less than a quarter barrel;

(b) Liquor, five dollars and forty cents per wine gallon;

(c) Still wines containing not more than twenty-one per cent of absolute alcohol, except as provided in subsections (g) and (h) of this section, seventy-two cents per wine gallon;

(d) Still wines containing more than twenty-one per cent of absolute alcohol and sparkling wines, one dollar and eighty cents per wine gallon;

(e) Alcohol in excess of 100 proof, five dollars and forty cents per proof gallon;

(f) Liquor coolers containing not more than seven per cent of alcohol by volume, two dollars and forty-six cents per wine gallon;

(g) Still wine containing not more than twenty-one per cent of absolute alcohol, produced by a person who produces not more than fifty-five thousand wine gallons of wine during the calendar year, eighteen cents per wine gallon, provided such person presents to each distributor of alcoholic beverages described in this section a certificate, issued by the commissioner, stating that such person produces not more than fifty-five thousand wine gallons of wine during the calendar year. The commissioner is authorized to issue such certificates, prescribe the procedures for obtaining such certificates and prescribe their form; and

(h) Cider containing not more than seven per cent of absolute alcohol shall be subject to the same rate as applies to beer, as provided in subsection (a) of this section.

This act shall take effect as follows and shall amend the following sections:

Section 1

from passage

30-16

Sec. 2

January 1, 2019

12-435

GL

Joint Favorable Subst.

 

The following Fiscal Impact Statement and Bill Analysis are prepared for the benefit of the members of the General Assembly, solely for purposes of information, summarization and explanation and do not represent the intent of the General Assembly or either chamber thereof for any purpose. In general, fiscal impacts are based upon a variety of informational sources, including the analyst's professional knowledge. Whenever applicable, agency data is consulted as part of the analysis, however final products do not necessarily reflect an assessment from any specific department.


OFA Fiscal Note

State Impact:

Agency Affected

Fund-Effect

FY 18 $

FY 19 $

FY 20 $

Department of Revenue Services

Various - Potential Revenue Gain

Minimal

Less than 25,000

Less than $25,000

Department of Revenue Services

GF - Revenue Gain

None

Less than 25,000

Less than $50,000

Note: GF=General Fund; Various=Various

Municipal Impact: None

Explanation

The bill results in the following impacts listed below.

Section 1 results in a potential sales tax1 revenue gain of less than $25,000 annually by increasing the allowable amount of beer that may be sold by beer manufacturers. There may also be a potential minimal revenue gain in FY 18 dependent upon the date of passage.

Section 2, which eliminates an alcoholic beverages tax exemption for certain beer sales, is estimated to result in a revenue gain of less than $25,000 in FY 19 (partial year) and less than $50,000 annually thereafter. It is anticipated that this provision would impact between 50 and 60 beer manufacturers currently paying approximately $250,000 annually in Alcoholic Beverage Tax on taxable beer sales.

The Out Years

The annualized ongoing fiscal impact identified above would continue into the future subject to inflation.

Source:

Department of Revenue Services

OLR Bill Analysis

sHB 5368

AN ACT CONCERNING ALCOHOLIC LIQUOR MANUFACTURER PERMITS.

SUMMARY

This bill (1) increases the amounts of beer and spirits certain manufacturer permittees may serve or sell and (2) requires manufacturer permittees to pay the alcoholic beverages tax (i.e., excise tax) on malt beverages (e.g., beer) they sell for on-premises consumption, by eliminating the tax exemption allowed under current law. By law, the rate for beer is $7.20 per barrel (31 gallons) and $0.24 per “wine gallon” (i.e., 128 fluid ounces) or fraction under barrel.

EFFECTIVE DATE: Upon passage, except the tax provision is effective January 1, 2019

BEER MANUFACTURERS

The bill increases, from nine to 11.5 liters, the amount all the various beer manufacturer permittees may sell per customer per day for off-premises consumption. This includes the permittees for beer, brew pub, beer and brew pub, and farm brewery.

By law, the beer may only be sold during the same hours as other retailers that sell for off-premises consumption (e.g., package and grocery stores), which are on Monday through Saturday, from 8:00 a.m. to 10:00 p.m., and Sundays, from 10:00 a.m. to 6:00 p.m. Permittees cannot sell or dispense alcohol on Thanksgiving Day, New Year's Day, or Christmas Day (CGS 30-91(d)).

DISTILLERY SAMPLES

The bill also increases, from two to three ounces, the amount of free distilled alcohol or spirit samples a manufacturer permittee or farm distillery permitee may allow a patron to taste per day for on-premises consumption. It also specifically allows these permittees to offer the liquor as part of a cocktail or mixed drink.

By law, a manufacturer permittee may only allow such tastings on Monday through Saturday, from 10:00 a.m. to 8:00 p.m. and on Sundays, from 11:00 a.m. to 8:00 p.m.

ALCOHOLIC BEVERAGES TAX

The bill requires manufacturer permittees for brew pub, beer and brew pub, and farm breweries to pay the alcoholic beverages tax on malt beverages (e.g., beer) they sell for on-premises consumption. By law, these are the only manufacturer permittees allowed to sell beer for on-premises consumption.

By law, the alcoholic beverages tax is generally levied on distributors (i.e., wholesaler or manufacturer permittees) before they sell their product to retailers (e.g., package store or grocery store) or consumers. The distributors must report to the Department of Revenue Services each month on the total number of gallons of each alcoholic beverage sold during the month, their opening and closing inventories, and the amount of tax due.

COMMITTEE ACTION

General Law Committee

Joint Favorable Substitute

Yea

15

Nay

2

(03/20/2018)

TOP

1 Current law requires a diversion of a portion of the sales tax generated into (1) the Special Transportation Fund and (2) the Municipal Revenue Sharing Account beginning in FY 20. The general sales and use tax rate, from which the diversion occurs, remains at 6.35%.