H. B. 2546


(By Delegates Ashcraft and Mezzatesta, By Request)
[Introduced March 11, 1993; referred to the
Committee on the Judiciary.]




A BILL to amend and reenact sections two, three, twenty-two, twenty-eight, thirty and thirty-two, article eight, chapter sixty of the code of West Virginia, one thousand nine hundred thirty-one, as amended, relating to the sale of wines; contracts between wineries and distributors; dock sales; charitable auction licenses; redefining certain terms; prohibiting exclusive franchise agreements; and prohibiting credit sales.

 Be it enacted by the Legislature of West Virginia:
That sections two, three, twenty-two, twenty-eight, thirty and thirty-two, article eight, chapter sixty of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted to read as follows:
ARTICLE 8. SALE OF WINES.

§60-8-2. Definitions.

Unless the context in which used clearly requires a different meaning, as used in this article:
"Commissioner" or "commission" means the West Virginia alcohol beverage control commissioner.
"Distributor" means any person whose principal place of business is within the state of West Virginia, and who is engaged in selling or distributing wine to retailers, licensed private club or private wine restaurants and selling or distributing port, sherry and Madeira wines to wine specialty shops under authority of this article and actually maintains a warehouse in this state for the distribution of wine with a representative inventory of wine that actually transfers to the West Virginia warehouse before it is delivered to the retailer, private wine restaurants or wine speciality shops or licensed private clubs.
"Fortified wine" shall mean any wine to which brandy or other alcohol has been added and shall include dessert wines which are not fortified.
"Grocery store" means any retail establishment, commonly known as a grocery store, supermarket, delicatessen, caterer or party supply store, where food, food products and supplies for the table are sold for consumption off the premises with average monthly sales (exclusive of sales of wine) of not less than five hundred dollars and an average monthly inventory (exclusive of inventory of wine) of not less than three thousand dollars. The term "grocery store" shall also include and mean a separate and segregated portion of any other retail store which is dedicated solely to the sale of food, food products and supplies for the table for consumption off the premises with average monthly saleswith respect to such separate or segregated portion (exclusive of sales of wine) of not less than three thousand dollars and an average monthly inventory (exclusive of inventory of wine) of not less than three thousand dollars.
"Licensee" means the holder of a license granted under the provisions of this article.
"Private wine restaurant" means a restaurant which: (1) Is a partnership, limited partnership, corporation, unincorporated association or other business entity which has as its principal purpose the business of serving meals on its premises to its members and their guests; (2) is licensed under the provisions of this article as to all of its premises or as to a separate segregated portion of its premises to serve wine to its members and their guests when such sale accompanies the serving of food or meals; and (3) admits only duly elected and approved dues paying members and their guests while in the company of a member, and does not admit the general public.
"Retailer" means any person licensed to sell wine at retail to the public at his established place of business for off- premises consumption and who is licensed to do so under authority of this article.
"Supplier" means any manufacturer, producer, processor, distributor or supplier of wine who sells or offers to sell or solicits or negotiates the sale of wine to any licensed West Virginia distributor.
"Tax" includes within its meaning interest, additions to taxand penalties.
"Taxpayer" means any person liable for any tax, interest, additions to tax or penalty under the provisions of this article and any person claiming a refund of tax.
"Varietal wine" means any wine labeled according to the grape variety from which such wine is made.
"Vintage wine" or "vintage-dated wine" means wines from which the grapes used to produce such wine are harvested during a particular year or wines produced from the grapes of a particular harvest in a particular region of production.
"Wine" means any beverage obtained by the fermentation of the natural content of fruits, or other agricultural products or honey containing sugar, and includes, but is not limited to, still wines, champagne and other sparkling wines, carbonated wines, imitation wines, vermouth, cider, perry, sake, port, sherry, Madeira or other products offered for sale or sold as wine containing not less than seven percent nor more than twenty-four percent alcohol by volume and shall exclude any product defined as or embraced within the definition of nonintoxicating beer: Provided, That for the purposes of these regulations, wine shall include wine coolers and similar beverages containing not less than one half of one percent nor more than seven percent alcohol by volume.
"Wine" means any alcoholic beverage obtained by the natural fermentation of the natural content of grapes, other fruits or honey or other agricultural products containing sugar and towhich no alcohol has been added and shall include table wine, and shall exclude fortified wine and shall also exclude any product defined as or embraced within the definition of nonintoxicating beer under the provisions of article sixteen, chapter eleven of this code.
"Wine specialty shop" means a retailer who shall deal principally in the sale of table wine, certain fortified wines, wine accessories and food or foodstuffs normally associated with wine and (1) who shall maintain a representative number of such wines for sale in his inventory which are designated by label as varietal wine, vintage, generic and/or according to region of production and the inventory shall contain not less than fifteen percent vintage or vintage-dated wine by actual bottle count and (2) who, any other provisions of this code to the contrary notwithstanding, may maintain an inventory of port, sherry and Madiera wines having an alcoholic content of not more than twenty-two percent alcohol by volume and which have been matured in wooden barrels or casks.
§60-8-3. Licenses; fees; general restrictions.

(a) Except as to farm wineries as defined by section five-a, article one of this chapter, no person may engage in business in the capacity of a distributor, retailer or private wine restaurant without first obtaining a license from the commissioner, nor shall a person continue to engage in any such activity after his license has expired, been suspended or revoked. No person may be licensed simultaneously as adistributor and a retailer, as a distributor and a private wine restaurant, or as a retailer and a private wine restaurant.
(b) The commissioner shall collect an annual fee for licenses issued under this article, as follows:
(1) Twenty-five hundred dollars per year for a distributor's license and each separate warehouse or other facility from which a distributor sells, transfers or delivers wine shall be separately licensed and there shall be collected with respect to each such location the annual license fee of twenty-five hundred dollars as herein provided.
(2) One hundred fifty dollars per year for a retailer's license.
(3) Fifty dollars per year for a wine tasting license.
(4) Fifty dollars for each sales representative of or employed by a licensed distributor.
(5) Two hundred fifty dollars per year for a private wine restaurant license, and each separate restaurant from which a licensee sells wine shall be separately licensed and there shall be collected with respect to each such location the annual license fee of two hundred fifty dollars as herein provided.
(6) Twenty-five dollars per year for a West Virginia wine retailer's license, and each separate retail outlet from which a West Virginia wine retailer sells West Virginia wine shall be separately licensed and there shall be collected with respect to each such location the annual license fee of twenty-five dollars as herein provided. The holder of such a license may sell nowines except those produced by West Virginia farm wineries as defined by section five-a, article one of this chapter. Except for the amount of the license fee and the restriction to sales of West Virginia wines, a West Virginia wine retailer is subject to all other provisions of this article which are applicable to a retailer as defined in section two of this article.
(c) The license period shall begin on the first day of July of each year and end on the thirtieth day of June of the following year, and if granted for a less period, the same shall be computed semiannually in proportion to the remainder of the fiscal year.
(d) No retailer may be licensed as a private club as provided by article seven of this chapter.
(e) No retailer may be licensed as a Class A retail dealer in nonintoxicating beer as provided by article sixteen, chapter eleven of this code: Provided, That a delicatessen, a caterer or party supply store which is a grocery store as defined in section two of this article and which is licensed as a Class A retail dealer in nonintoxicating beer may be a retailer under this article: Provided, however, That any delicatessen, caterer or party supply store licensed in both such capacities must maintain average monthly sales exclusive of sales of wine and nonintoxicating beer which exceed the average monthly sales of nonintoxicating beer.
(f) A retailer under this article may also hold a wine tasting license authorizing such retailer to serve complimentarysamples of wine in moderate quantities for tasting. Such retailer shall organize a winetaster's club, which has at least fifty duly elected or approved dues paying members in good standing. Such club shall meet on the retailer's premises not more than one time per week and shall either meet at a time when the premises are closed to the general public, or shall meet in a separate segregated facility on the premises to which the general public is not admitted. Attendance at tastings shall be limited to duly elected or approved dues paying members and their guests.
(g) A retailer who has more than one place of retail business shall obtain a license for each separate retail establishment. A retailer's license may be issued only to the proprietor or owner of a bona fide grocery store or wine specialty shop.
(h) The commissioner may issue a special license for the retail sale of wine at any festival or fair which is endorsed or sponsored by the governing body of a municipality or a county commission. Such special license shall be issued for a term of no longer than ten consecutive days and the fee therefor shall be two hundred fifty dollars regardless of the term of the license unless the applicant is the manufacturer of said wine on a farm winery as defined in section five-a, article one of this chapter, in which event the fee shall be twenty-five dollars. The application for such license shall contain such information as the commissioner may reasonably require and shall be submitted tothe commissioner at least thirty days prior to the first day when wine is to be sold at such festival or fair. A farm winery licensed under this subsection may exhibit, conduct tastings, not to exceed a reasonable serving, and may sell wine only for consumption off the premises of such festival or fair. A special license issued other than to a farm winery may be issued to a "wine club" as defined hereinbelow. The festival or fair committee or the governing body shall designate a person to organize a club under a name which includes the name of the festival or fair and the words "wine club". The license shall be issued in the name of the wine club. A licensee may not commence the sale of wine as provided for in this subsection until the wine club has at least fifty dues paying members who have been enrolled and to whom membership cards have been issued. Thereafter, new members may be enrolled and issued membership cards at any time during the period for which the license is issued. A wine club licensed under the provisions of this subsection may sell wine only to its members, and in portions not to exceed eight ounces per serving. Such sales shall take place on premises or in an area cordoned or segregated so as to be closed to the general public, and the general public shall not be admitted to such premises or area. A wine club licensee under the provisions of this subsection shall be authorized to serve complimentary samples of wine in moderate quantities for tasting.
A license issued under the provisions of this subsection and the licensee holding such license shall be subject to all otherprovisions of this article and the rules, regulations and orders of the commissioner relating to such special license: Provided, That the commissioner may by rule, regulation, or order provide for certain waivers or exceptions with respect to such provisions, rules, regulations, or orders as the circumstances of each such festival or fair may require, including, without limitation, the right to revoke or suspend any license issued pursuant to this section prior to any notice or hearing notwithstanding the provisions of section twelve of this article: Provided, however, That under no circumstances shall the provisions of subsection (c) or (d), section twenty of this article be waived nor shall any exception be granted with respect thereto.
A license issued under the provisions of this subsection and the licensee holding such license shall not be subject to the provisions of subsection (g) of this section.
(i) A license to sell wine granted to a private wine restaurant under the provisions of this article entitles the operator to sell and serve wine, for consumption on the premises of the licensee, when such sale accompanies the serving of food or a meal to its members and their guests in accordance with the provisions of this article. Such licensees are authorized to keep and maintain on their premises a supply of wine in such quantities as may be appropriate for the conduct of operations thereof. Any sale of wine so made shall be subject to all restrictions set forth in section twenty of this article. Aprivate wine restaurant may also be licensed as a Class A retail dealer in nonintoxicating beer as provided by article sixteen, chapter eleven of this code.
(j) With respect to subsections (h) and (i) of this section, the commissioner shall promulgate legislative rules in accordance with the provisions of chapter twenty-nine-a of this code with regard to the form of the applications, the suitability of both the applicant and location of the licensed premises and such other legislative rules deemed necessary to carry the provisions of such subsections into effect.
(k) The commissioner shall promulgate legislative rules in accordance with the provisions of chapter twenty-nine-a of this code to allow restaurants to serve West Virginia wine with meals, but not to sell the wine by the bottle. Each restaurant so licensed shall be charged a fee less than that charged for a wine license to a retail outlet, such fees to be set forth in the aforementioned rules promulgated pursuant to this subsection.
(l) The commissioner shall establish guidelines to permit West Virginia wines to be sold in state stores.
(m) Farm wineries as defined in section one-a of this article may advertise off premises as provided in section seven, article twenty-two, chapter seventeen and in any other media, including, but not limited to, newspaper, radio, television, magazines and direct mail solicitation.
The commissioner may issue a special license for the retail sale of wine at a charitable auction which is endorsed orsponsored by a nonprofit organization for the express purpose of raising funds for a bona fide, legitimate charity. Such special license shall be issued for a term of no longer then ten consecutive days and the fee therefore shall be two hundred fifty dollars, regardless of the term of the license. Such sales shall take place on premises with an area that can be cordoned or segregated so as to be closed to the general public. Such sales can be held in a private club or private wine restaurant. A licensee under the provisions of this subsection shall be authorized to serve samples of wine in moderate quantities for tasting. All taxes collected when wine is sold at retail also is imposed upon wine sold at auction.
§60-8-22. Sales on credit prohibited; exception.

It shall be unlawful for a distributor to sell or offer to sell, or a retailer to purchase or receive, any wine except on a cash basis, and no right of action exists to collect any claims for credit extended contrary to the provisions of this subdivision: Provided, That nothing herein prohibits, as a credit on any subsequent sale, the crediting of the purchase price charged for wine returned by the purchaser because of damage, spoilage, erroneous shipments or orders, and other such reasons customary in the trade: Provided, however, That consignment sales are considered to be credit sales and therefore prohibited to the extent, but not limited to, the exchanging of product on display at the end of one selling period for another product to be put on display at the beginning of another sellingperiod.
§60-8-28. Registration of labels.

Every distributor and farm winery offering wine for sale under this article shall register with the tax commissioner each label offered for sale in the state and shall pay a fee of three dollars for the registration of such label. No wine may be sold under this article unless its label has been registered.
Every manufacturer, supplier, winery, or importer offering wine for sale to a distributor under this article shall register with the department of tax and revenue each label offered for sale within the state and shall pay a flat fee of twenty-five dollars for the registration of such label inclusive for all distributors representing the wine. Only one registration shall be required irrespective of the number of various sizes or vintage changes. Label registration shall consist of the sole submittal of the B.A.T.F. form number 1649: Provided, That a product which does not require B.A.T.F. form number 1649 can be registered with an unattached label.
§60-8-30. Exclusive franchise agreements prohibited.

It shall be illegal for any manufacturer to enter into any exclusive franchise agreement with any distributor whereby any such distributor is given the exclusive right within this state or in any given territory within this state to distribute the product or products of such manufacturer which are to be sold or distributed pursuant to the provisions of this article: Provided, That it shall be unlawful for any supplier ormanufacturer to transfer or deliver to a distributor or in-state West Virginia suppliers any wine or fortified wine without first having entered into an equitable sales agreement with such distributor, which sales agreement shall be in writing, shall be identical as to terms and conditions with all other sales agreements between such suppliers and manufacturers and its other distributors or in-state West Virginia supplier in this state and which shall contain a provision in substance or effect as follows:
The sales agreement will only designate a distributor's primary area of responsibility. Nothing contained herein provides for exclusive franchised areas, as these franchised areas are expressly prohibited by section thirty, article eight of chapter sixty. The supplier or manufacturer recognized that the distributor or in-state West Virginia supplier is free to manage his business in a manner the distributor or in-state West Virginia supplier deems best, and that this perogative rests in the distributor or in-state West Virginia supplier the exclusive right to establish his selling prices, to select the brands of wine or fortified wines he wishes to handle, and to determine the efforts and resources which the distributor or in-state West Virginia supplier will exert to develop and promote the sale of the supplier's or manufacturer's products handled by the distributor or in-state West Virginia supplier.
Whenever the manufacturing, bottling production or import rights for the sale of wine or fortified wine at wholesale of anysupplier or manufacturer is acquired by another supplier or manufacturer, the distributor or in-state West Virginia supplier of the selling manufacturer or supplier shall be entitled to continue distributing the selling manufacturers or suppliers wine or fortified wine products as authorized in the distributors or in-state West Virginia supplier existing sales agreement, and the acquiring supplier of manufacturer shall market all the selling supplier or manufacturers wine or fortified wine products through the distributor or in-state West Virginia suppliers as though the acquiring manufacturer or supplier had made the sale agreement.
It is unlawful for any supplier or manufacturer or distributor, or in-state West Virginia supplier, or any officer, agent, or representative of any supplier, or manufacturer or distributor or in-state West Virginia supplier, to cancel, terminate or rescind without due regard for the equities of such supplier, manufacturer, distributor or in-state West Virginia supplier, and without just cause, any sales agreement. The cancellation, termination or rescission of any such sales agreement shall not become effective for at least ninety days after written notice of such cancellation, termination or rescission has been served on the affected party by certified mail, return receipt requested: Provided, That the ninety-day period and the notice of cancellation, termination or rescission is agreed to in writing by both the supplier or manufacturer and the distributor or in-state West Virginia supplier involved.
Whenever a supplier, manufacturer, distributor or in-stateWest Virginia supplier cancels, terminates or rescinds the sales agreement, the supplier or manufacturer must purchase back at laid in cost which includes freight and taxes all wine or fortified wine inventory currently held at the distributor's or in-state West Virginia supplier's warehouse. In addition, the supplier or manufacturer must purchase back point of sale material purchased by the distributor or in-state West Virginia supplier.
§60-8-32. Where wine may be sold at retail.

Except as to sales permitted to be made by farm wineries as defined by section five-a, article one of this chapter, wine sold pursuant to this article may be sold at retail only by the commissioner and in and by grocery stores and wine specialty shops as defined by section two of this article: Provided, That if grocery stores or wine speciality shops do not stock fine vintage and estate bottled wine, the distributor may sell the wine at retail from the distributor's warehouse. The distributors are responsible for remitting all taxes that would have been collected at the retail level on the sale of the wine.



NOTE: The purpose of this bill is to modify current statutes relating to the sale of wine. The bill changes the definition of wine; provides for issuance of a special license for charitable wine auctions; permits some sales of wine at the warehouse, and prohibits consignment sales. The bill places a fee for registration if a winery, manufacturer, supplier or importer of wine and it prohibits exclusive franchise agreements.

Strike-throughs indicate language that would be stricken from the present law, and underscoring indicates new languagethat would be added.