SB 5375 — Concerning taxation of low-proof beverages.

(4)(a) Except as otherwise provided in RCW 66.24.632, section 2, chapter 48, Laws of 2021, or in (b) or (c) of this subsection, each spirits retail licensee must pay to the board, for deposit into the liquor revolving fund, a license issuance fee equivalent to ((seventeen)) 17 percent of all spirits sales revenues under the license, exclusive of taxes collected by the licensee and of sales of items on which a license fee payable under this section has otherwise been incurred.

The board must establish rules setting forth the timing of such payments and reporting of sales dollar volume by the licensee, with payments required quarterly in arrears.

The first payment is due October 1, 2012.

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10 SB 5375 (b) This subsection (4) does not apply to craft distilleries for sales of spirits of the craft distillery's own production.

(c) This subsection (4) does not apply to sales of low-proof beverages.

(5) In addition to the payment required under subsection (4) of this section, each licensee must pay an annual license renewal fee of ((one hundred sixty-six dollars)) $166.

The board must periodically review and adjust the renewal fee as may be required to maintain it as comparable to annual license renewal fees for licenses to sell beer and wine not for consumption on the licensed premises.

If required by law at the time, any increase of the annual renewal fee becomes effective only upon ratification by the legislature.

(6) As a condition to receiving and renewing a spirits retail license the licensee must provide training as prescribed by the board by rule for individuals who sell spirits or who manage others who sell spirits regarding compliance with laws and regulations regarding sale of spirits, including without limitation the prohibitions against sale of spirits to individuals who are underage or visibly intoxicated.

The training must be provided before the individual first engages in the sale of spirits and must be renewed at least every five years.

The licensee must maintain records documenting the nature and frequency of the training provided.

An employee training program is presumptively sufficient if it incorporates a "responsible vendor program" adopted by the board.

(7) The maximum penalties prescribed by the board in WAC 314-29-020 through 314-29-040 relating to fines and suspensions are doubled for violations relating to the sale of spirits by spirits retail licensees.

(8)(a) The board must adopt regulations concerning the adoption and administration of a compliance training program for spirits retail licensees, to be known as a "responsible vendor program," to reduce underage drinking, encourage licensees to adopt specific best practices to prevent sales to minors, and provide licensees with an incentive to give their employees ongoing training in responsible alcohol sales and service.

(b) Licensees who join the responsible vendor program under this section and maintain all of the program's requirements are not subject to the doubling of penalties provided in this section for a single violation in any period of ((twelve)) 12 calendar months.

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11 SB 5375 (c) The responsible vendor program must be free, voluntary, and self-monitoring.

(d) To participate in the responsible vendor program, licensees must submit an application form to the board.

If the application establishes that the licensee meets the qualifications to join the program, the board must send the licensee a membership certificate.

(e) A licensee participating in the responsible vendor program must at a minimum:

(i) Provide ongoing training to employees;

(ii) Accept only certain forms of identification for alcohol sales;

(iii) Adopt policies on alcohol sales and checking identification;

(iv) Post specific signs in the business;

and (v) Keep records verifying compliance with the program's requirements.

(f)(i) A spirits retail licensee that also holds a grocery store license under RCW 66.24.360 or a beer and/or wine specialty shop license under RCW 66.24.371 may, upon board approval and pursuant to board rules, transition to a combination spirits, beer, and wine license pursuant to RCW 66.24.035.

(ii) An applicant that would qualify for a spirits retail license under this section and that qualifies for a combination spirits, beer, and wine license pursuant to RCW 66.24.035 may apply for a license pursuant to RCW 66.24.035 instead of applying for a spirits retail license under this section.

NEW SECTION.

Sec.

3.

(4) A holder of a spirits out-of-state certificate with a direct shipment endorsement that self-distributes under the terms of its license shall pay the tax imposed by this section on sales to spirits retailers.

812 SSBSB 5375 Sec.(4) A holder of a spirits out-of-state certificate with a direct shipment endorsement that self-distributes under the terms of its license shall pay the tax imposed by this section on sales to spirits retailers.

3.Sec.

4.

RCW 66.24.055 and 2013 2nd sp.s.

c 12 s 1 are each amended to read as follows:

(1) There is a license for spirits distributors to (a) sell spirits purchased from manufacturers, distillers, or suppliers including, without limitation, licensed Washington distilleries, licensed spirits importers, other Washington spirits distributors, or suppliers of foreign spirits located outside of the United States, to spirits retailers including, without limitation, spirits retail licensees, special occasion license holders, interstate common carrier license holders, restaurant spirits retailer license holders, spirits, beer, and wine private club license holders, hotel license holders, sports entertainment facility license holders, and spirits, beer, and wine nightclub license holders, and to other spirits distributors;

and (b) export the same from the state.

(2) By January 1, 2012, the board must issue spirits distributor licenses to all applicants who, upon December 8, 2011, have the right to purchase spirits from a spirits manufacturer, spirits distiller, or other spirits supplier for resale in the state, or are agents of such supplier authorized to sell to licensees in the state, unless the board determines that issuance of a license to such applicant is not in the public interest.

(3)(a) As limited by (b) of this subsection ((and subject to (c) of this subsection)), each spirits distributor licensee must pay to the board, for deposit into the liquor revolving fund, a license issuance fee calculated as follows:

(i) In each of the first ((twenty-seven)) 27 months of licensure, ((ten)) 10 percent of the total revenue from all the licensee's sales of spirits made during the month for which the fee is due, respectively;

and (ii) In the ((twenty-eighth)) 28th month of licensure and each month thereafter, five percent of the total revenue from all the licensee's sales of spirits made during the month for which the fee is due, respectively.

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13 SB 5375 (b) The fee required under this subsection (3) is calculated only on sales of items which the licensee was the first spirits distributor in the state to have received:

(i) In the case of spirits manufactured in the state, from the distiller;

or (ii) In the case of spirits manufactured outside the state, from an authorized out-of-state supplier.

(c) ((By March 31, 2013, all persons holding spirits distributor licenses on or before March 31, 2013, must have paid collectively one hundred fifty million dollars or more in spirits distributor license fees.

If the collective payment through March 31, 2013, totals less than one hundred fifty million dollars, the board must, according to rules adopted by the board for the purpose, collect by May 31, 2013, as additional spirits distributor license fees the difference between one hundred fifty million dollars and the actual receipts, allocated among persons holding spirits distributor licenses at any time on or before March 31, 2013, ratably according to their spirits sales made during calendar year 2012.

Any amount by which such payments exceed one hundred fifty million dollars by March 31, 2013, must be credited to future license issuance fee obligations of spirits distributor licensees according to rules adopted by the board.

(d))) A retail licensee selling for resale must pay a distributor license fee under the terms and conditions in this section on resales of spirits the licensee has purchased on which no other distributor license fee has been paid.

The board must establish rules setting forth the frequency and timing of such payments and reporting of sales dollar volume by the licensee, with payments due quarterly in arrears.

(((e))) (d) No spirits inventory may be subject to calculation of more than a single spirits distributor license issuance fee.

(e) The fees in this subsection (3) do not apply to the sale of low-proof beverages.

(4) In addition to the payment set forth in subsection (3) of this section, each spirits distributor licensee renewing its annual license must pay an annual license renewal fee of ((one thousand three hundred twenty dollars)) $1,320 for each licensed location.

(5) There is no minimum facility size or capacity for spirits distributor licenses, and no limit on the number of such licenses issued to qualified applicants.

License applicants must provide physical security of the product that is substantially as effective p.

14 SB 5375 as the physical security of the distribution facilities currently operated by the board with respect to preventing pilferage.

License issuances and renewals are subject to RCW 66.24.010 and the regulations promulgated thereunder, including without limitation rights of cities, towns, county legislative authorities, the public, churches, schools, and public institutions to object to or prevent issuance of local liquor licenses.

However, existing distributor premises licensed to sell beer and/or wine are deemed to be premises "now licensed" under RCW 66.24.010(9)(a) for the purpose of processing applications for spirits distributor licenses.

Sec.

5.

(6)(a)p. An additional tax is imposed upon retail sale of spirits in the original package at the rate of ((three and four-tenths)) 3.4 percent of the selling price.

15 SB 5375 (6)(a) An additional tax is imposed upon retail sale of spirits in the original package at the rate of ((three and four-tenths)) 3.4 percent of the selling price.

p.(d) All revenues collected during any month from additional taxes under this subsection must be deposited in the state general fund by the ((twenty-fifth)) 25th day of the following month.

9 SSB 5375 (d) All revenues collected during any month from additional taxes under this subsection must be deposited in the state general fund by the ((twenty-fifth)) 25th day of the following month.

(b) Until July 1, 2023, for the purposes of the taxes imposed under this section, the term "spirits" does not include mini-bottles of spirits sold by a person who possesses a valid endorsement under sectionp. 2(6), chapter 48, Laws of 2021 and is licensed as a spirits, beer, and wine restaurant under RCW 66.24.400.

(c)16 ForSB the5375 purposessection of2(6), subsectionschapter (3),48, (5),Laws (6)(c),of (7),2021 and (8)is oflicensed thisas section,a thespirits, termbeer, "spirits"and doeswine notrestaurant includeunder low-proof beverages as defined in RCW 66.04.010.66.24.400.

(c) For the purposes of this section, the term "spirits" does not include low-proof beverages as defined in RCW 66.04.010.

1017 SSBSB 5375