TTB Considers Changes to Whiskey-Aging Regulations

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While the bulk of alcohol laws reside at the state and local level, the U.S. Treasury Department's Tax & Trade Bureau (TTB) is the entity that sets out the specific definitions of different alcoholic beverages as well as the types of containers permissible for them. According to WhiskyCast, the TTB is considering some significant regulatory changes in the coming year:

Unless you’re in the alcoholic beverage industry, you’ve probably never heard – or cared – about this section of the United States Code of Federal Regulations. However, if you drink whisky, other distilled spirits, beer, or wine, CFR Title 27, Part 5 affects you on a regular basis. It sets out the specific definitions for all alcoholic beverages sold in the United States, along with labeling requirements, marketing restrictions, and everything right down to the size of bottles that can legally be sold in the U.S. It contains the regulation that requires whiskies be sold in 750ml bottles instead of the 700ml bottles used in most other countries, and it’s also where the official definition of Bourbon lives…

The agency issued a Notice of Proposed Rulemaking in the Federal Register on November 26, and is accepting public comments on proposed changes through March 26, 2019… The most controversial proposal so far asks whether an official definition should be created for “oak barrel” that would specify a “cylindrical oak drum of approximately 50 gallons capacity” and whether smaller barrels or non-cylindrical barrels should be “acceptable for storing distilled spirits.” This could have a direct impact on craft distillers, who often rely on barrels as small as five or ten gallons to mature their spirits. The impact could also be felt by distillers who use much larger ex-Sherry butts or Port wine pipes as “finishing” casks, since the TTB’s proposed language does not cover the use of barrels larger than 50 gallons.

"We use 60 gallon (barrels), mostly.is that approximately 50? I don't know," said Jared Himstedt of Balcones Distilling in Waco, Texas. "For a thing that should be supposedly solving a bunch of way overdue problems, it seems like it's introducing some new ones," he said during an interview at WhiskyFest New York.

Richard Hobbs, the owner of The Barrel Mill cooperage in Avon, Minnesota is even more blunt in his objections. "Small barrels have been used for whiskey for hundreds of years. Ruling that a whisky/ey must be aged in barrels of 50+ gallons would be devastating to our customers, who have millions in aging inventory, and would most likely put us and many other cooperages out of business. We currently employ 50 people.I think that innovation, and more options of available oak and other species for aging is a positive for the consumer, not a negative," he said in an email…

Read more about the proposed changes here.

Renowned spirits writer Chuck Cowdery also discusses some of the other proposed TTB changes in a post for The Whiskey Wash.

Florida "Wall of Separation" Finally on the Way Out?

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As covered on DrinksReform, Florida failed to repeal its law requiring a separate retailing location for distilled spirits sales in grocery stores. But after the failed repeal, the law was challenged in front of an administrative judge, who according to WCTV, has now ruled against the law:

You might soon see whiskey next to the Wheaties in big box stores thanks to an administrative law judge’s ruling, but advocates for traditional liquor stores say the ruling is a far cry from putting an end to the debate over where hard liquor can be sold.

For at least the past five years, dozens of lobbyists have worked lawmakers to allow the sale of hard alcohol in big box stores instead of from a separate storefront. Last year, it passed by one vote, but was vetoed by Governor Rick Scott.

Trying a new strategy, Walmart and Target turned to an administrative law judge, successfully challenging a rule that defined items customarily sold in restaurants…

The state could also choose to appeal. In that case, the ruling would be put on hold until it gets a second look from the First District Court of Appeals.

We reached out to the Department of Business and Professional Regulation for comment, but did not receive a response.

Read more here.

NEW: America's Dumbest Drinks Laws

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In honor of Repeal Day, we released a new drinks report! Earlier this year, our DrinksReform team put out a call for readers to send us examples of the craziest, whackiest, most nonsensical alcohol laws they could find. We scoured the Internet, interviewed industry players, and combed through state legal codes to find the “worst of” when it came to booze laws across the country. Today, we debut the culmination of that effort, a new report titled “America’s Dumbest Drinks Laws.”

That’s right, we picked the 12 dumbest drinks laws in America and ranked them. We’ll let you read the report for the full rankings, but we wanted to pass along one happy note: The “winner” of the #1 worst alcohol law—a 1834 federal law that banned Native Americans from distilling on tribal grounds—was recently relegated to the dustbin of history. A bill repealing this outdated and offensive law passed both the U.S. House of Representatives and Senate and is headed to the President’s desk.

R Street’s Kevin Kosar and Jarrett Dieterle wrote the first article in any mainstream outlet about the Native American distilling ban when they penned an op-ed earlier this year in the New York Times calling for the law’s repeal. We like think to think that we get results at the R Street Institute, and we’re proud that the law we targeted as the #1 worst alcohol law in the country has officially been eliminated.

Now, onward to #2 and #3! (Looking at you, North Carolina and Indiana …)

Check out the full report here—and prepare to be outraged! For a more condensed summary of the report, Dieterle wrote a Repeal Day piece for the Washington Examiner about it.

Additional media coverage for the report:

Oregon Governor Proposes Stealth Tax Via Liquor Markup

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After claiming that she wouldn’t raise taxes on alcohol, Oregon Gov. Kate Brown’s budget proposal includes a call for a 5% increase in the markup for liquor. As reported by Oregon Public Broadcasting:

As she finalized her budget proposal for the next two years, Oregon Gov. Kate Brown made no secret of the fact she’d push for higher tobacco taxes, which she believes should play a larger role in funding health care.

At the same time, Brown said she wouldn’t pursue higher taxes on beer and wine, despite a request by the Oregon Health Authority…

But there was one “sin tax” that Brown didn’t mention — to the media or the industry that would be affected. Brown wants to increase what the state collects from liquor sales.

Tucked toward the back of Brown’s 500-page, $26.3 billion budget proposal released Wednesday is a single mention that the governor hopes to raise the markup on Oregon liquor sales by 5 percent beginning July 2019. The move would bring an extra $21.2 million into the state’s general fund, according to the budget proposal…

Read more here.

Oregon is one of 13 states that controls distilled spirits sales at the retail level—liquor stores are operated by state-appointed liquor agents, but the state sets the prices. As R Street’s Jarrett Dieterle has noted before, control states that increase liquor markups are really instituting a form of stealth tax on their citizens—especially when the money generated from the enhanced markup merely flows to the state’s general fund. (Read Jarrett’s report on control state markups here.)

Virginia ABC Using Taxpayer Dollars to Defend Speech Censorship

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We have previously weighed in on the Pacific Legal Foundation’s legal challenge to Virginia’s happy hour advertising ban, which forbids restaurants in the commonwealth from publicly advertising drink specials and discounts. This week, PLF’s Anastasia Boden updated what’s been going with the lawsuit in the Washington Post, including describing how the state is using taxpayer dollars to be as intransigent as possible in defending its censorship:

It’s been almost a year since Geoff Tracy and his restaurant, Chef Geoff’s, filed a First Amendment lawsuit asking a federal court to strike down Virginia’s happy-hour advertising laws. In the Old Dominion, it’s legal for businesses to offer happy hour. It’s just illegal for them to talk about it. Those that dare to advertise the happy-hour price of a beer or use creative terms such as “Sunday Funday” to pitch the demon rum face big fines or a suspended permit from the state’s Alcoholic Beverage Control Authority. Virginia may be for lovers, but it’s not for lovers of free speech.

After many months of litigation, Tracy is eager to present his arguments to the court. Given clear Supreme Court cases declaring it unconstitutional to restrict people from communicating truthful information about their legal business practices, one might expect ABC and the attorney general’s office, which represents it, to have abandoned the policy of censorship. Instead, the two are doubling down on their efforts to defend Virginia’s paternalistic law, recently adding some of the state’s most senior government lawyers to the case and escalating fights in discovery — which needlessly intimidate plaintiffs and drive up everyone’s expenses. In what ought to be a simple case with nary a disputed fact, the government demanded several depositions of Chef Geoff’s employees, most of whom have nothing to do with the First Amendment case. They also sought thousands of pages in financial reports detailing the sale of every item sold by the hour — every hour going back six years — from nine restaurants (six of which aren’t even in Virginia). So far, Chef Geoff’s has produced more than 68,000 pages of sales information. ABC wants more.

Depositions and document requests are expensive and entail opportunity costs. Don’t high-level officials at the attorney general’s office have serious crimes to prosecute?…

Read Anastasia’s full piece here.

Mini Bottles of Alcohol Banned in Massachusetts Town

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We recently highlighted an article by Wayne Curtis on the history of mini bottles in America and the various government efforts to regulate and ban them over the years. Now comes news from the Boston Globe that the city of Chelsea, Massachusetts is banning them, blaming the bottles for the city’s public drunkenness problem:

This city wants to take a bite out of its public drinking problem. Well, a few nips, anyway. And the liquor industry is fighting back.

Chelsea this year became the first municipality in Massachusetts to ban the sale of the ubiquitous little liquor bottles, blaming them for contributing to public drunkenness in the downtown area it has worked hard to revive.

In pulling nips from store shelves last March, the city took a step that many others have considered without any real success, given the opposition from the package store industry.

Not surprisingly, the clampdown has sparked a backlash from Chelsea’s liquor stores, which have appealed the ban to the state, arguing it was approved without any evidence the stores themselves have done anything wrong…

Read the rest here.


Wisconsin Alcohol Study Committee Avoids the Hard Questions

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Facing pressure to reform the state’s three-tier system of alcohol distribution, Wisconsin lawmakers appointed a study committee to review the state’s alcohol regulations. As the committee completes its work, it looks like it largely avoided delving into the most contested and controversial issues, according to The Cap Times:

Disputes over how Wisconsin's alcohol beverage industry is regulated and enforced are set to continue as a legislative study committee winds down this month, and questions remain about how Democrat Gov.-elect Tony Evers' administration will approach the issue.

The legislative study committee was assembled earlier this year to examine how the state's alcohol beverage laws are enforced, or not. But the committee never dealt with the primary gripe of the state's growing craft beverage industry: that the state's alcohol laws, known as the three-tier system, should be altered and modernized to accommodate a changing business landscape.

The committee instead focused on the interpretation of current alcohol laws by the state Department of Justice, and the degree to which they are enforced by the state Department of Revenue - both of which are ostensibly more unclear with the election of Democrat Evers than they were when the committee convened…

Read more here.

The Battle Over Interstate Wine Shipping Continues to Spread

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Amidst recent crackdowns on interstate wine shipments from retailers—not to mention the Supreme Court’s recent decision to hear the case of Tennessee Wine v. Byrd, which could have profound implications for wine shipping—Florida has become the latest legal battleground on the issue. As reported by Wine-Searcher:

Midwestern attorney Robert Epstein is on a mission to open up as many states as possible to interstate shipping.

"We have pending cases in Missouri, Illinois and Michigan, which is now on appeal," one of the Indianapolis-based founders of Epstein, Cohen, Seif & Flora shares. He has next set his sights on Florida, where he has requested a declaratory statement from the state's Division of Alcoholic Beverages and Tobacco (ABT), requesting that the state permit out-of-state retailers to ship wine into Florida…

Epstein's plan – if successful – is likely to broaden the availability in both Florida, and other markets, to older, unusual wines and those found through the auction market. Lesser-expensive, commercial wines are not likely to be a big factor in future Florida purchases, unlike the less-expensive, over-the-state line purchases that have influenced the Chicago and Maine markets, where taxes are much lower in both neighboring Indiana and New Hampshire

Read more here.

Also of note in the interstate wine shipping wars, the 7th Circuit Court of Appeals recently held in favor of a wine store owner challenging Illinois’ ban on wine shipments from out-of-state retailers.



North Carolina's ABC Limits Product Offerings

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The hits just keep on coming for North Carolina alcohol consumers. After an audit found that the state’s Alcoholic Beverage Control Commission wasted millions in taxpayer money through mismanagement, the commission has now announced that it’s reducing its booze offerings, according to Carolina Journal:

An email to suppliers last week from the N.C. Alcoholic Beverage Commission, in addition to announcing that it’s trimming the number of products it lists, cited the state’s alcohol warehouse operator for its good work.

It’s the same operator, LB&B, which was named in an audit released this past summer that found poor contract administration cost North Carolina taxpayers at least $11.3 million over 13 years. Unused warehouse space potentially cost the state $2.1 million over seven years, and a lack of monitoring left the state underpaid by at least $297,537 over two years…

Read the rest here.

BYOB Restaurants in New Jersey Can Now Advertise

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New Jersey is notorious for its expensive liquor licenses—a result of its quota system that limits the number of licenses available—which unsurprisingly has led many restaurants in the state to allow “BYOB” booze. While BYOB establishments are popular among New Jerseyans, state law forbids restaurants from advertising that they are BYOB. But now a federal judge has struck down this restriction, according to the New Jersey Law Journal:

A federal judge has ruled that New Jersey’s law barring restaurants from advertising “bring your own beer” policies is unconstitutional.

The state ban on advertising policies that allow patrons to bring their own beer and wine to restaurants, known as BYOB, “places a content-based restriction on speech that fails strict scrutiny because it is not supported by a compelling government interest nor is it the least restrictive means of achieving the government’s stated purpose,” U.S. District Judge Joseph Rodriguez of the District of New Jersey ruled in GJJM Enterprises v. City of Atlantic City.

The state Division of Alcoholic Beverage Control “presented no compelling government interest for banning BYOB advertising, while permitting liquor stores and restaurants with liquor licenses to advertise on-site alcohol sales,” Rodriguez said…

Read more here.