During its meeting on Tuesday, September 26, 2017, the TABC voted to approve “Version B” of the draft rules proposed by the TABC staff. The Staff has worked extremely hard and considered input from all industry members in order to propose a new set of rules. The new rules provide some new rights and impose some new restrictions on industry members based upon recent legislative changes and inaccuracies or inconsistencies existing within the current body of rules.
The room was full of representatives from the manufacturer, wholesaler and retailer industry members. Representatives from the Distilled Spirits Counsel (DISCUS), the Tennessee Malt Beverage Association, the Tennessee Wine and Spirits Retailers Association, the Tennessee Distillers Guild, and the Wine & Spirit Wholesalers of Tennessee (WSWT) were all present. An awareness and understanding of these new rules is a must for any industry member operating in Tennessee. A few examples of some of the recent clarifications and changes are as follows:
- Social Media Posting: Manufacturers, importers, non-resident sellers, non-manufacturer non-resident sellers, wholesalers, or any representative thereof may place posts or messages on social media to identify to customers the retail locations where the industry member’s product may be purchased. (TABC Rule 0100-03-.01(3)(c))
- Advertising to Minors: For any direct communications, measures must be taken to prevent such communications from targeting individuals under the age of twenty-one (21). Any direct communications must afford the consumer the ability to opt out of the communications. (TABC Rule 0100-03-.01 (3)(d))
- Who May Supply and Install Point of Sale Advertising: Subject to the provisions of Rule 0100-06-.03, manufacturers, importers, non-resident sellers, and non-manufacturer non-resident sellers, or any representative thereof may give, rent, loan or sell to Tennessee licensed wholesalers, but to no other person, signs, posters, placards, decorations, employee clothing, devices, statuettes or geographic displays – printed, painted or electric – for point-of-sale brand advertising, provided such items include branding or advertising of products or brands directly controlled by the manufacturers, importers, non-resident sellers, non-manufacturer non-resident sellers, providing such items may install or set up such materials in the windows or elsewhere in the interior of a retail establishment. Retailers may not give, rent, loan, or sell such material referenced above to a consumer. (TABC Rule 0100-03-.06)
- A Wholesaler May Hold a NRSP or a NMNRSP: An importer, non-resident seller, non-manufacturer non-resident seller, or representative of the same may have a direct or indirect interest in a wholesaler. (TABC Rule 0100-01-.16(c))
- Ownership in Both a Manufacturer and in a Retailer: No manufacturer, or representative of the same, shall have any kind of direct or indirect interest in any wholesaler or any retail on-premise or off-premise establishment in Tennessee. A prohibited interest includes the possessing of any financial or other interest in the establishment, providing or having interest in any fixtures or furnishings, stock ownership, loans, gifts, the securing of loans, the guaranteeing of any loan payment, or participating in the profits.
“Indirect interest” as used in this Rule means any kind of interest in the wholesaler, retail on-premise, or retail off-premise establishment by way of stock ownership, loan partner’s interest, or control, including the use of a brand name, trademark, or sponsorship of the manufacturer, wholesaler, importer, non-resident seller, non-manufacturer non-resident seller, or representative of the same.
Here is where the TABC enacted through rule what has previously been practiced without a clear standard; these are the methods by which a relative of the owner of a manufacturer may have an interest in a retailer:
“Direct or indirect interest” between 1) a manufacturer, importer, non-resident seller, non-manufacturer non-resident seller, or representative of the same and 2) an on-premise establishment does not include:
1. An interest held by a spouse or child over the age of twenty-one (21) as separate and distinct property; provided, that there is no commingling of assets or sharing of control in such arrangement;
2. An interest of a person or entity having less than a five percent (5%) ownership interest in a manufacturer, importer, non-resident seller, non-manufacturer non- resident seller, or on-premise establishment; or
3. An interest held in an irrevocable trust by an independent trustee.
(TABC Rule 0100-03-.16(e))
- New Rules for Charitable Donations: Any licensee shall be permitted to make withdrawals from inventory for donations to any organization that has been recognized as exempt from federal taxes under § 501(c) of the Internal Revenue Code (26 U.S.C. § 501(c)) and that will serve or sell the donated products at a special occasion licensed event. A donation may occur before a qualified entity receives a special occasion license from the Commission.
Donations made pursuant to this rule may be delivered by the licensee to the recipient organization or may be picked up by the recipient organization at the licensee’s premises.
Licensee’s making donations under this rule shall maintain adequate records of the donation, including the amount donated, the FEIN of the recipient organization, and a copy of the letter from the IRS granting exempt status to such recipient organization received by the licensee from recipient organization. Upon request, licensees shall present documentation to the Commission of such withdrawals.
Licensees making donations under this rule are responsible for paying all required state and federal taxes for the donated product. Failure to do so could lead to suspension, revocation, or a fine not to exceed the statutory maximum. (TABC Rule 0100-03-.20)
- When an Event is Exempt from Licensing: A license or permit is not required for an event where alcoholic beverages are served if:
(1) The event is private and includes a bona fide guest list restricting access to invited guests only;
(2) The hosts or bona fide guests of the event are providing all of the alcoholic beverages;
(3) All alcoholic beverages are served without charge;
(4) There is no admission cost for the event, including ticket price, required donation, or door charge; and
(5) There is no commercial purpose related to the sale, marketing, or promotion of alcoholic beverages for the private party or event. (TABC Rule 0100-03-.22)
- Product Samples: An industry member may furnish or give a sample of branded distilled spirits, wine, or alcoholic beverages to a retailer (including, without limitation, any of their managers, salespersons, or bartenders) for the purposes of enhancing sales of its products at retail. For each retail establishment, the industry member may give not more than 1.75 liters of any brand of distilled spirits or wine per sampling. If a particular product is not available in a size within the quantity limitations of this section, an industry member may furnish to a retailer the next largest size. An industry member may only provide such a sampling of a specific brand once every three months. An industry member who furnishes a container for sampling or tasting purposes must conspicuously mark the container as “not for resale.” (TABC Rule 0100-06-.03)
Before the rules become final and binding, they must continue to make their way through the formal rule-making process set forth in the Tennessee Uniform Administrative Procedures Act. The next stop for the proposed rules is the Attorney General’s Office for consideration of the scope of the rules through the lens of existing statutes. If approved, the rules will then be filed with the Secretary of State which will put them 90 days away from taking effect.
Please feel free to contact me if you have any questions pertaining to how any of these rule changes may affect your business.
Last modified: October 11, 2017