First Substitute H.B. 352

Representative Gage Froerer proposes the following substitute bill:


             1     
MANUFACTURING LICENSEE PROVISIONS

             2     
2014 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Gage Froerer

             5     
Senate Sponsor: ____________

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill modifies the Alcoholic Beverage Control Act to address manufacturing
             10      licensees.
             11      Highlighted Provisions:
             12          This bill:
             13          .    addresses unlawful sale or furnishing;
             14          .    grants rulemaking authority to define "bona fide sample";
             15          .    changes references to "sample" to "bona fide sample";
             16          .    permits the consumption of bona fide samples on the premises of a distillery
             17      manufacturing licensee;
             18          .    addresses staff consumption on the premises of a beer manufacturing licensee;
             19          .    refers to bona fide samples of beer, heavy beer, or flavored malt beverages;
             20          .    removes language related to off-premise beer retailer local authority because it is
             21      addressed elsewhere in the Alcoholic Beverage Control Act provisions; and
             22          .    makes technical and conforming amendments.
             23      Money Appropriated in this Bill:
             24          None
             25      Other Special Clauses:


             26          None
             27      Utah Code Sections Affected:
             28      AMENDS:
             29           32B-4-401 , as enacted by Laws of Utah 2010, Chapter 276
             30           32B-11-303 , as enacted by Laws of Utah 2010, Chapter 276
             31           32B-11-403 , as enacted by Laws of Utah 2010, Chapter 276
             32           32B-11-503 , as last amended by Laws of Utah 2011, Chapter 334
             33     
             34      Be it enacted by the Legislature of the state of Utah:
             35          Section 1. Section 32B-4-401 is amended to read:
             36           32B-4-401. Unlawful sale or furnishing.
             37          (1) It is unlawful for a retail licensee, a permittee, or staff of a retail licensee or
             38      permittee to keep for sale, or to directly or indirectly, sell, offer for sale, or furnish to another,
             39      an alcoholic product, except as otherwise provided by this title.
             40          (2) It is unlawful for a person in the business of selling liquor, a manufacturer, a
             41      supplier, an importer of liquor, or staff of the person, manufacturer, supplier, or importer to
             42      sell, ship, transport, or cause to be sold, shipped, or transported liquor from an out-of-state
             43      location directly or indirectly into this state except to the extent authorized by this title to:
             44          (a) the department;
             45          (b) a military installation;
             46          (c) a holder of a special use permit, to the extent authorized in the special use permit;
             47      or
             48          (d) a liquor warehouser licensee licensed to distribute and transport liquor to:
             49          (i) the department; or
             50          (ii) an out-of-state wholesaler or retailer.
             51          (3) (a) It is unlawful for a person in the business of selling beer, a manufacturer, a
             52      supplier, an importer of beer, or staff of the person, manufacturer, or importer to sell, ship,
             53      transport, or cause to be sold, shipped, or transported beer from an out-of-state location directly
             54      or indirectly into this state except to the extent authorized by this title to:
             55          (i) a beer wholesaler licensee;
             56          (ii) a military installation; or


             57          (iii) a holder of a special use permit, to the extent authorized in the special use permit.
             58          (b) Subsection (3)(a) does not preclude a small brewer that holds a certificate of
             59      approval from selling, shipping, or transporting beer to the extent authorized by Subsection
             60      32B-11-503 (5) directly to:
             61          (i) a beer retailer; or
             62          (ii) an event permittee.
             63          (4) (a) It is unlawful for a manufacturer, supplier, or importer of liquor in this state, or
             64      staff of the manufacturer, supplier, or importer to sell, ship, transport, or cause to be sold,
             65      shipped, or transported liquor directly or indirectly to a person in this state except to the extent
             66      authorized by this title to:
             67          (i) the department;
             68          (ii) a military installation;
             69          (iii) a holder of a special use permit, to the extent authorized in the special use permit;
             70      or
             71          (iv) a liquor warehouser licensee who is licensed to distribute and transport liquor to:
             72          (A) the department; or
             73          (B) an out-of-state wholesaler or retailer.
             74          (b) Subsection (4)(a) does not preclude a winery manufacturing licensee located in this
             75      state from selling wine to a person on its winery premises:
             76          (i) to the extent authorized by Subsection 32B-11-303 (4)(c); or
             77          (ii) under a package agency issued by the commission on the winery premises.
             78          (c) Subsection (4)(a) does not preclude a distillery manufacturing licensee located in
             79      this state from selling liquor to a person on its distillery premises:
             80          (i) to the extent authorized by Subsection 32B-11-403 (5)(c); or
             81          (ii) under a package agency issued by the commission on the distillery premises.
             82          (d) Subsection (4)(a) does not preclude a brewery manufacturing licensee located in
             83      this state from selling heavy beer or flavored malt beverages to a person on its brewery
             84      premises:
             85          (i) to the extent authorized by Subsection 32B-11-503 (4)(c); or
             86          (ii) under a package agency issued by the commission on the brewery premises.
             87          (5) (a) It is unlawful for a manufacturer, supplier, or importer of beer in this state, or


             88      staff of the manufacturer, supplier, or importer to sell, ship, transport, or cause to be sold,
             89      shipped, or transported beer directly or indirectly to a person in this state except to the extent
             90      authorized by this title to:
             91          (i) a beer wholesaler licensee;
             92          (ii) a military installation; or
             93          (iii) a holder of a special use permit, to the extent authorized in the special use permit.
             94          (b) Subsection (5)(a) does not preclude:
             95          (i) a small brewer who is a brewery manufacturing licensee located in this state from
             96      selling, shipping, and transporting beer to the extent authorized by Subsection 32B-11-503 (5)
             97      directly to one of the following in this state:
             98          (A) a beer retailer; or
             99          (B) an event permittee; or
             100          (ii) a brewery manufacturing licensee from selling beer to a person on its
             101      manufacturing premises under Subsection 32B-11-503 (4)(c).
             102          (6) It is unlawful for a person other than a person described in Subsection (2) or (3) to
             103      sell, ship, transport, or cause to be sold, shipped, or transported an alcoholic product from an
             104      out-of-state location directly or indirectly into this state, except as otherwise provided by this
             105      title.
             106          (7) It is unlawful for a person in this state other than a person described in Subsection
             107      (4) or (5) to sell, ship, transport, or cause to be sold, shipped, or transported an alcoholic
             108      product directly or indirectly to another person in this state, except as otherwise provided by
             109      this title.
             110          (8) (a) A violation of Subsection (1) is a class B misdemeanor, except when otherwise
             111      provided by this title.
             112          (b) A violation of Subsection (2), (3), (4), or (5) is a third degree felony.
             113          (c) A violation of Subsection (6) or (7) is a class B misdemeanor.
             114          Section 2. Section 32B-11-303 is amended to read:
             115           32B-11-303. Specific authority and operational requirements for winery
             116      manufacturing license.
             117          (1) A winery manufacturing license allows a winery manufacturing licensee to:
             118          (a) store, manufacture, transport, import, or export wine;


             119          (b) sell wine at wholesale to the department and to out-of-state customers;
             120          (c) purchase liquor for fortifying wine, if the department is notified of the purchase and
             121      date of delivery; and
             122          (d) warehouse on the licensed premises liquor that is manufactured or purchased for
             123      manufacturing purposes.
             124          (2) (a) A wine, brandy, wine spirit, or other liquor imported under authority of a winery
             125      manufacturing license shall conform to the standards of identity and quality established in the
             126      regulations issued under Federal Alcohol Administration Act, 27 U.S.C. Sec. 201 et seq.
             127          (b) The federal definitions, standards of identity, and quality and labeling requirements
             128      for wine, in regulations issued under Federal Alcohol Administration Act, 27 U.S.C. Sec. 201
             129      et seq., are adopted to the extent the regulations are not contrary to or inconsistent with the
             130      laws of this state.
             131          (3) If considered necessary, the commission or department may require:
             132          (a) the alteration of the plant, equipment, or licensed premises;
             133          (b) the alteration or removal of unsuitable wine-making equipment or material;
             134          (c) a winery manufacturing licensee to clean, disinfect, ventilate, or otherwise improve
             135      the sanitary and working conditions of the plant, licensed premises, and wine-making
             136      equipment;
             137          (d) that a marc, pomace, or fruit be destroyed, denatured, or removed from the licensed
             138      premises because it is considered:
             139          (i) unfit for wine making; or
             140          (ii) as producing or likely to produce an unsanitary condition;
             141          (e) a winery manufacturing licensee to distill or cause to be distilled or disposed of
             142      under the department's supervision:
             143          (i) any unsound, poor quality finished wine; or
             144          (ii) unfinished wine that will not be satisfactory when finished; or
             145          (f) that a record pertaining to the grapes and other materials and ingredients used in the
             146      manufacture of wine be available to the commission or department upon request.
             147          (4) A winery manufacturing licensee may not permit wine to be consumed on its
             148      premises, except under the following circumstances:
             149          (a) A winery manufacturing licensee may allow its staff to consume on the licensed


             150      premises wine as the winery manufacturing licensee furnishes to the staff without charge.
             151          (b) A winery manufacturing licensee may allow a person who can lawfully purchase
             152      wine for wholesale or retail distribution to consume a bona fide sample of the winery
             153      manufacturing licensee's product on the licensed premises.
             154          (c) A winery manufacturing licensee may [operate on its licensed premises a retail
             155      facility allowing] allow consumption of a bona fide sample on the licensed premises of wine
             156      manufactured by the winery manufacturing licensee as long as food is also available. [This
             157      type of retail facility located] Consumption of a bona fide sample on the licensed premises
             158      shall be operated or supervised by the winery manufacturing licensee.
             159          (d) The commission may define by rule, made in accordance with Title 63G, Chapter 3,
             160      Utah Administrative Rulemaking Act, the term "bona fide sample."
             161          Section 3. Section 32B-11-403 is amended to read:
             162           32B-11-403. Specific authority and operational requirements for distillery
             163      manufacturing license.
             164          (1) A distillery manufacturing license allows a distillery manufacturing licensee to:
             165          (a) store, manufacture, transport, import, or export liquor;
             166          (b) sell liquor to:
             167          (i) the department;
             168          (ii) an out-of-state customer; and
             169          (iii) as provided in Subsection (2);
             170          (c) purchase an alcoholic product for mixing and manufacturing purposes if the
             171      department is notified of:
             172          (i) the purchase; and
             173          (ii) the date of delivery; and
             174          (d) warehouse on its licensed premises an alcoholic product that the distillery
             175      manufacturing licensee manufactures or purchases for manufacturing purposes.
             176          (2) (a) Subject to the other provisions of this Subsection (2), a distillery manufacturing
             177      licensee may directly sell an alcoholic product to a person engaged within the state in:
             178          (i) a mechanical or industrial business that requires the use of an alcoholic product; or
             179          (ii) scientific pursuits that require the use of an alcoholic product.
             180          (b) A person who purchases an alcoholic product under Subsection (2)(a) shall hold a


             181      valid special use permit issued in accordance with Chapter 10, Special Use Permit Act,
             182      authorizing the use of the alcoholic product.
             183          (c) A distillery manufacturing licensee may sell to a special use permittee described in
             184      Subsection (2)(b) an alcoholic product only in the type for which the special use permit
             185      provides.
             186          (d) The sale of an alcoholic product under this Subsection (2) is subject to rules
             187      prescribed by the department and the federal government.
             188          (3) The federal definitions, standards of identity and quality, and labeling requirements
             189      for distilled liquor, in the regulations issued under Federal Alcohol Administration Act, 27
             190      U.S.C. Sec. 201 et seq., are adopted to the extent the regulations are not contrary to or
             191      inconsistent with laws of this state.
             192          (4) If considered necessary, the commission or department may require:
             193          (a) the alteration of the plant, equipment, or licensed premises;
             194          (b) the alteration or removal of unsuitable alcoholic product-making equipment or
             195      material;
             196          (c) a distillery manufacturing licensee to clean, disinfect, ventilate, or otherwise
             197      improve the sanitary and working conditions of the plant, licensed premises, and equipment; or
             198          (d) that a record pertaining to the materials and ingredients used in the manufacture of
             199      an alcoholic product be made available to the commission or department upon request.
             200          (5) A distillery manufacturing licensee may not permit an alcoholic product to be
             201      consumed on its premises, except that:
             202          (a) a distillery manufacturing licensee may allow its staff to consume on the licensed
             203      premises an alcoholic product that the distillery furnishes to the staff without charge; [and]
             204          (b) a distillery manufacturing licensee may allow a person who can lawfully purchase
             205      an alcoholic product for wholesale or retail distribution to consume a bona fide sample of the
             206      distillery manufacturing licensee's product on the licensed premises[.]; and
             207          (c) (i) a distillery manufacturing licensee may allow consumption on the licensed
             208      premises of a bona fide sample of the distillery manufacturing licensee's product as long as
             209      food is also available; and
             210          (ii) consumption of a bona fide sample on the licensed premises shall be operated or
             211      supervised by the distillery manufacturing licensee.


             212          (6) The commission may define by rule, made in accordance with Title 63G, Chapter 3,
             213      Utah Administrative Rulemaking Act, the term "bona fide sample."
             214          Section 4. Section 32B-11-503 is amended to read:
             215           32B-11-503. Specific authority and operational requirements for brewery
             216      manufacturing license.
             217          (1) A brewery manufacturing license allows a brewery manufacturing licensee to:
             218          (a) store, manufacture, brew, transport, or export beer, heavy beer, and flavored malt
             219      beverages;
             220          (b) sell heavy beer and a flavored malt beverage to:
             221          (i) the department;
             222          (ii) a military installation; or
             223          (iii) an out-of-state customer;
             224          (c) sell beer to a beer wholesaler licensee;
             225          (d) in the case of a small brewer, in accordance with Subsection (5), sell beer
             226      manufactured by the small brewer to:
             227          (i) a retail licensee;
             228          (ii) an off-premise beer retailer; or
             229          (iii) an event permittee; and
             230          (e) warehouse on its premises an alcoholic product that the brewery manufacturing
             231      licensee manufactures or purchases for manufacturing purposes.
             232          (2) A brewery manufacturing licensee may not sell the following to a person within the
             233      state except the department or a military installation:
             234          (a) heavy beer; or
             235          (b) a flavored malt beverage.
             236          (3) If considered necessary, the commission or department may require:
             237          (a) the alteration of the plant, equipment, or licensed premises;
             238          (b) the alteration or removal of any unsuitable alcoholic product-making equipment or
             239      material;
             240          (c) a brewery manufacturing licensee to clean, disinfect, ventilate, or otherwise
             241      improve the sanitary and working conditions of the plant, licensed premises, and equipment; or
             242          (d) that a record pertaining to the materials and ingredients used in the manufacture of


             243      an alcoholic product be available to the commission or department upon request.
             244          (4) A brewery manufacturing licensee may not permit any beer, heavy beer, or flavored
             245      malt beverage to be consumed on the licensed premises, except under the circumstances
             246      described in this Subsection (4).
             247          (a) A brewery manufacturing licensee may allow its [off-duty] staff to consume beer,
             248      heavy beer, or a flavored malt beverage on its premises without charge.
             249          (b) A brewery manufacturing licensee may allow a person who can lawfully purchase
             250      the following for wholesale or retail distribution to consume a bona fide sample of the brewery
             251      manufacturing licensee's product on the licensed premises:
             252          (i) beer;
             253          (ii) heavy beer; or
             254          (iii) a flavored malt beverage.
             255          (c) (i) A brewery manufacturing licensee may [operate on its licensed premises a retail
             256      facility allowing] allow consumption on the premises of [beer in a bottle or on draft] a bona
             257      fide sample of beer, heavy beer, and flavored malt beverages manufactured by the brewery
             258      manufacturing licensee if food is also available.
             259          (ii) [A retail facility located] Consumption of a bona fide sample on the licensed
             260      premises of a brewery manufacturing licensee shall be operated or supervised by the brewery
             261      manufacturing licensee.
             262          [(iii) In operating a retail facility under this Subsection (4)(c), a brewery manufacturing
             263      licensee shall comply with the requirements of Chapter 7, Part 2, Off-premise Beer Retailer
             264      Local Authority.]
             265          (d) The commission may define by rule, made in accordance with Title 63G, Chapter 3,
             266      Utah Administrative Rulemaking Act, the term "bona fide sample."
             267          (5) (a) A small brewer shall own, lease, or maintain and control a warehouse facility
             268      located in this state for the storage of beer to be sold to a person described in Subsection (1)(d)
             269      if the small brewer:
             270          (i) (A) (I) is located in this state; and
             271          (II) holds a brewery manufacturing license; or
             272          (B) (I) is located outside this state; and
             273          (II) holds a certificate of approval to sell beer in this state; and


             274          (ii) sells beer manufactured by the small brewer directly to a person described in
             275      Subsection (1)(d).
             276          (b) A small brewer may not sell beer to a person described in Subsection (1)(d) unless
             277      the beer:
             278          (i) is manufactured by the small brewer; and
             279          (ii) is first placed in the small brewer's warehouse facility in this state.
             280          (c) (i) A small brewer warehouse shall make and maintain complete beer importation,
             281      inventory, tax, distribution, sales records, and other records as the department and State Tax
             282      Commission may require.
             283          (ii) The records described in Subsection (5)(c)(i) are subject to inspection by:
             284          (A) the department; and
             285          (B) the State Tax Commission.
             286          (iii) Section 32B-1-205 applies to a record required to be made or maintained in
             287      accordance with this Subsection (5), except that the provision is considered to include an action
             288      described in Section 32B-1-205 made for the purpose of deceiving the State Tax Commission,
             289      or an official or employee of the State Tax Commission.
             290          (6) Subject to Subsection (7):
             291          (a) A brewery manufacturing licensee may not sell beer in this state except under a
             292      written agreement with a beer wholesaler licensee in this state.
             293          (b) An agreement described in Subsection (6)(a) shall:
             294          (i) create a restricted exclusive sales territory that is mutually agreed upon by the
             295      persons entering into the agreement;
             296          (ii) designate the one or more brands that may be distributed in the sales territory; and
             297          (iii) set forth the exact geographical area of the sales territory.
             298          (c) A brewery manufacturing licensee may have more than one agreement described in
             299      this Subsection (6) if each brand of the brewery manufacturing licensee is covered by one
             300      exclusive sales territory.
             301          (d) A brewery manufacturing licensee may not enter into an agreement with more than
             302      one beer wholesaler licensee to distribute the same brand of beer in the same sales territory or
             303      any portion of the sales territory.
             304          (7) A small brewer is not subject to the requirements of Subsection (6).


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