As of Jan. 1st, California’s New “Instructional Tasting License” Law

on 05/01/11 at 11:37 am

Industry

On January 1, 2011, holders of “off-sale” retail alcohol licenses (e.g. Type 20 and Type 21  holders, such as, supermarkets, large liquor stores, warehouse stores, etc.) can now apply for an “instructional tasting license,” which will allow samples of wine, beer and distilled spirits to be served by producers, wholesalers, importers and agents in the store.

Under the new law (AB 605) two new sections were added to the Business & Professions Code:

  • Section 23396.6, authorizing the off-sale licenses to apply for the new license and setting forth the powers and limitations of the license, and,
  • Section 25503.56, authorizing producers and wholesalers to participate in the tastings at the premises of holders of “instructional tasting licenses” and setting forth the rules regarding the advertising and conduct of the tasting events.

It also takes two to tango. The new license does not give the “instructional tasting license” holder or its employees the right to serve tastings, unless the emergency exception applies (see below).  An “authorized licensee” pursuant to Section 25503.56 must pour the instructional tasting.

The following license holders are “authorized licensees” under the code:

  • a winegrower (Type 02),
  • California winegrower’s agent (Type 27),
  • beer and wine importer general,
  • beer and wine wholesaler (Type 17) [note, exception below],
  • wine rectifier (Type 08),
  • distilled spirits manufacturer (Type 04),
  • distilled spirits manufacturer’s agent (Type 05),
  • distilled spirits importer general (Type 13),
  • distilled spirits general rectifier (Type 24),
  • rectifier (Type 07),
  • out-of-state distilled spirits shipper’s certificate holder (Type 28),
  • distilled spirits wholesaler (Type 18),
  • brandy manufacturer (Type 03),
  • brandy importer (Type 11),
  • California brandy wholesaler (Type 25),
  • beer manufacturer (Type 01 or 23), or
  • an out-of-state beer manufacturer certificate holder (Type 26).

Entities holding Type 17 and 20 licenses, which are commonly known as “virtual wineries” are expressly excluded from the definition of authorized licensees.  Also excluded are Wine Blenders, which hold Type 22 licenses.

Rights/Obligations of the Instructional Tasting License Holder:

Holders of the new instructional tasting license will be permitted to establish a temporary tasting area within their retail premises.  The “tasting area” must meet the following requirements:

1.      Be separated from the rest of the retail establishment by “wall, rope, cable, cord, chain, fence, or other permanent or temporary barrier.”

2.      Display signs that clearly state 21 years or older are allowed within the tasting area.

The instructional tasting license holders must also prevent tasters from leaving the tasting area with open containers (i.e. tastes stay in the tasting area).

A license holder can provide tastes only when the “authorized licensee” fails to show up at a previously advertised tasting event.  The caveat here is the event had to be previously scheduled, advertised and the license holder has to supply the beer, wine or spirits used in the tasting.

Rights/Obligations of the Authorized Licensee at a Tasting Event:

The authorized licensee (or instructional license holder under the emergency exception) has the following rights, obligations and limitations when participating in a tasting event at the premises of an instructional tasting license holder:

  1. Must serve no more than: 8 ounces of beer; or 3 ounces of wine (samples to be 1 ounce or less); or 3 ounces of distilled spirits (samples to be ¼ ounces or less).
  2. May not charge for the tasting.
  3. May not allow anybody under 21 to serve the tastings.
  4. Only use its employees, its designated representative or employees of its designated representative to serve (meaning no independent contractors).
  5. Supply the beer, wine or distilled spirits or purchase the alcohol from the license holder at invoiced costs.
  6. Remove all unused alcohol from the premises after the tasting.
  7. Limit the tasting to a single type of alcohol (i.e. beer, wine or distilled spirits)
  8. No joint participation with other authorized licensees.
  9. Advertising is restricted and can only list the name of the business where the tasting event will be held, the address, the beverages being tasting, the date, time and other pertinent information, provided that retail price of the beverage is omitted and reference to the instructional tasting license holder is limited to its name and address.  Pictures of the instructional tasting license holder’s premises and laudatory references are expressly prohibited.   Note, a license holder may also advertise the event to be held at its premises.
  10. No free gifts or other things of value can be given away to the tasters.
  11. No collusive scheme or preferential agreements between the two licensed parties.

Below is the text the statutes as of January 1, 2011.  If you have any questions or need legal advice in obtaining the new “instructional tasting license” or complying with the new law, please feel free to contact Michael W. Newcomb at the Newcomb Law Group.


AB 605

Business & Professions Code § 23396.6.

(a) The department may issue to the holder of an off-sale retail license an instructional tasting license at the premises of the off-sale retail license. An instructional tasting license shall not be issued to any of the following:

(1) Off-sale licensees at locations where motor vehicle fuel is sold, unless the licensee operates a fully enclosed off-sale retail area encompassing at least 10,000 square feet.

(2) Off-sale licensees at locations with a total of less than 5,000 square feet of interior retail space, unless the calendar quarterly gross sales of alcoholic beverages at the licensed location comprise at least 75 percent of the total gross sales of all products sold at the licensed premises. A licenseholder that is issued an instructional tasting license pursuant to this paragraph shall maintain records that separately reflect the gross sales of alcoholic beverages and the gross sales of all other products sold on the licensed premises.

(b) The provisions of Article 2 (commencing with Section 23815) of Chapter 5 and Section 23958.4 shall not apply to the issuance of an instructional tasting license, except that the department may expressly deny the issuance of an instructional tasting license for any premises located in an area of undue concentration of licenses as defined in paragraph (1) of subdivision (a) of Section 23958.4. Notwithstanding paragraph (3) of subdivision (c), the provisions of Article 2 (commencing with Section 23985) and Article 3 (commencing with Section 24011) of Chapter 6 shall apply to the issuance of an instructional tasting license.

(c) Notwithstanding subdivision (a) of Section 23386 and paragraph (3) of subdivision (c) of Section 25612.5, an instructional tasting license authorizes the licenseholder to allow an authorized licensee or the designated representative of an authorized licensee, to conduct an instructional tasting event at which tastes of alcoholic beverages may be served to consumers subject to the following limitations, and the limitations set forth in Section 25503.56:

(1)

(A) At all times during an instructional tasting event, the instructional tasting event area shall be separated from the remainder of the off-sale licensed premises by a wall, rope, cable, cord, chain, fence, or other permanent or temporary barrier. The licenseholder shall prominently display signage prohibiting persons under 21 years of age from entering the instructional tasting event area.

(B) A licenseholder that permits a person under 21 years of age to enter and remain in the instructional tasting event area during an instructional tasting event is guilty of a misdemeanor. Any person under 21 years of age who enters and remains in the instructional tasting event area during an instructional tasting event is guilty of a misdemeanor and shall be punished by a fine of not less than two hundred dollars ($200), no part of which shall be suspended.

(C) The licenseholder shall not permit any consumer to leave the instructional tasting area with an open container of alcohol.

(2) The instructional tasting license shall not authorize the licenseholder to conduct any on-sale retail sales to consumers attending the instructional tasting event.

(3) Unless otherwise restricted, an instructional tasting event may take place between the hours of 10 a.m. and 9 p.m.

(d) Unless the context otherwise requires, the definitions set forth in Section 25503.56 govern the construction of this section.

(e) An applicant for an instructional tasting license under this section shall, at the time of filing the application for the license, accompany the application with a fee of three hundred dollars ($300). The annual renewal fee for a license issued pursuant to this section shall be two hundred sixty-one dollars ($261) and shall be subject to subdivisions (c) and (d) of Section 23320. Fees collected pursuant to this section shall be deposited in the Alcohol Beverage Control Fund.

Business & Professions Code § 25503.56.

(a) An authorized licensee, or a designated representative of an authorized licensee acting as an agent of the authorized licensee, may conduct, on the area specified by paragraph (1) of subdivision (c) of Section 23396.6, an instructional tasting event for consumers on the subject of wine, beer, or distilled spirits, including, but not limited to, the history, nature, values, and characteristics of wine, beer, or distilled spirits, and the methods of presenting and serving wine, beer, or distilled spirits.

(1)

(A) Except as provided in subparagraph (B), the instructional tasting event may include the serving of alcoholic beverages to an attendee of legal drinking age. An instructional tasting event on the subject of wine or distilled spirits shall be limited to not more than three tastings per person per day. A single tasting of distilled spirits shall not exceed one-fourth of one ounce and a single tasting of wine shall not exceed one ounce. An instructional tasting event on the subject of beer shall be limited to not more than the tasting of eight ounces of beer per person per day. The wine, beer, or distilled spirits tasted shall be limited to the products that are authorized to be sold by the authorized licensee and the licenseholder under its off-sale license.

(B) A beer and wine wholesaler may conduct an instructional tasting event but shall not serve tastes of beer unless the beer and wine wholesaler also holds a beer manufacturer’s license, an out-of-state beer manufacturer’s certificate, or more than six distilled spirits wholesaler’s licenses.

(C) No charge of any sort shall be made for the tastings. Except for the purposes of Section 23985, the serving of tastings shall not be deemed a sale of products pursuant to this division.

(D) A person under 21 years of age shall not serve wine, beer, or distilled spirits at the instructional tasting event.

(E) All tastes shall be served by an employee of the authorized licensee, the designated representative of the authorized licensee, or by an employee of the designated representative of the authorized licensee.

(F) An authorized licensee, or a designated representative of an authorized licensee, shall either supply the wine or distilled spirits to be tasted during the instructional tasting event or purchase the wine or distilled spirits from the licenseholder at the original invoiced cost. An authorized licensee, or a designated representative of an authorized licensee, shall purchase beer to be tasted during the instructional tasting event from the licenseholder at the original invoiced cost.

(G) Any unused wine, beer, or distilled spirits remaining from the tasting shall be removed from the off-sale licensed premises by the authorized licensee or its designated representative.

(2) If the instructional tasting event is conducted by a designated representative of an authorized licensee, the designated representative shall not be owned, controlled, or employed directly or indirectly by the licenseholder on whose premises the instructional tasting event is held.

(3) An instructional tasting event shall be limited to a single type of alcoholic beverage. For purposes of this paragraph, “type of alcoholic beverage” means distilled spirits, wine, or beer.

(b) For purposes of this section:

(1) “Authorized licensee” means a winegrower, California winegrower’s agent, beer and wine importer general, beer and wine wholesaler, wine rectifier, distilled spirits manufacturer, distilled spirits manufacturer’s agent, distilled spirits importer general, distilled spirits rectifier, distilled spirits general rectifier, rectifier, out-of-state distilled spirits shipper’s certificate holder, distilled spirits wholesaler, brandy manufacturer, brandy importer, California brandy wholesaler, beer manufacturer, or an out-of-state beer manufacturer certificate holder. “Authorized licensee” shall not include an entity that solely holds a combination of a beer and wine wholesale license and an off-sale beer and wine retail license or holds those licenses solely in combination with any license not listed in this paragraph.

(2) “Licenseholder” means an off-sale retail licensee issued an instructional tasting license pursuant to Section 23396.6.

(3) “Location” means the total contiguous area encompassed by the off-sale and on-sale licenses.

(c) Notwithstanding subparagraph (E) of paragraph (1) of subdivision (a), a licenseholder may conduct an instructional tasting event that includes the serving of tastings only when an authorized licensee or its designated representative are unable to conduct an instructional tasting event previously advertised pursuant to this section and scheduled by the authorized licensee or its designated representative, provided the licenseholder supplies the wine, beer, or distilled spirits used in the instructional tasting event and provides or pays for a person to serve the wine, beer, or distilled spirits. Instructional tasting events conducted by a licenseholder pursuant to this subdivision are subject to the provisions of this section and Section 23396.6.

(d) No more than one authorized licensee, or its designated representative, may conduct an instructional tasting event that includes the serving of tastes of wine, beer, or distilled spirits at any one individual licensed premises of a licenseholder per day.

(e) A licenseholder that also holds an on-sale beer and wine license, an on-sale beer and wine eating place license, or an on-sale general license shall not allow an authorized licensee, or its designated representative, to conduct an instructional tasting event on the same day and at the same location as any instructional tasting event held pursuant to subdivision (b) of Section 23386, Section 25503.4, subdivision (c) of Section 25503.5, or Section 25503.55.

(f) A licenseholder shall not condition the allowance of an instructional tasting event upon the use of a particular designated representative of an authorized licensee.

(g)

(1) In addition to any point of sale advertising or other advertising items allowed under this division or under rules of the department, an authorized licensee or its designated representative, in his or her absolute discretion and with permission of the licenseholder upon whose premises the instructional tasting event will be held, may list in an advertisement to the general public the name and address of the licenseholder, the names of the alcoholic beverages being featured at the instructional tasting event, and the time, date, and location of, and other information about, the instructional tasting event, provided that both of the following apply:

(A) The advertisement does not contain the retail price of the alcoholic beverages.

(B) The listing of the licenseholder’s name and address is the only reference to the licenseholder in the advertisement.

(2) Pictures or illustrations of the licenseholder’s licensed premises and laudatory references to the licenseholder in these advertisements are not authorized. Nothing in this section shall authorize an authorized licensee or its designated representative to share in the costs, if any, of the licenseholder.

(h) A licenseholder may advertise an instructional tasting event to the general public. The costs of this advertising shall be borne solely by the licenseholder. Advertising permitted by this subdivision includes flyers, newspaper ads, Internet communications, and interior signage.

(i) Except as otherwise provided in this division or rules of the department, no premium, gift, free goods, or other thing of value shall be given away by an authorized licensee or its designated representative in connection with an instructional tasting event that includes tastings of an alcoholic beverage.

(j) The licenseholder or the authorized licensee or its designated representative are authorized to perform set up and break down of the instructional tasting event area. The authorized licensee or its designated representative may provide, free of charge to the licenseholder, the equipment, materials, and utensils as may be required for use in connection with the instructional tasting event.

(k)

(1) A licenseholder shall not require, or enter into a collusive scheme with an authorized licensee or its designated representative to conduct one or more instructional tasting events as a condition of the licenseholder carrying or continuing to carry a brand or brands of the authorized licensee or as a condition for display or other merchandising plan which is based on an agreement to provide shelf space. An authorized licensee or its designated representative shall not require any preferential treatment or benefit from, or enter into a collusive scheme with, a licenseholder as a condition of conducting one or more instructional tasting events, require a licenseholder to carry or continue to carry a brand or brands of the authorized licensee as a condition of conducting one or more instructional tasting events, or condition display or other merchandising plans that are based on agreements for the provision of shelf space on the conducting of one or more instructional tasting events. Any agreement, whether written or oral, entered into by and between a licenseholder and an authorized licensee or its designated representative that precludes the conducting of instructional tasting events on the premises of the licenseholder by any other authorized licensee is prohibited. A licenseholder or authorized licensee, or its designated representative, shall not use an instructional tasting event to circumvent any other requirements of this division.

(2) In addition to any other remedies available under this division, upon a finding by the department of a failure to comply with this subdivision, the department shall suspend the instructional tasting license of the licenseholder and the privilege of the authorized licensee to conduct instructional events for not less than six months but for no more than one year.

(l) The Legislature finds that it is necessary and proper to require a separation between manufacturing interests, wholesale interests, and retail interests in the production and distribution of alcoholic beverages in order to prevent suppliers from dominating local markets through vertical integration and to prevent excessive sales of alcoholic beverages produced by overly aggressive marketing techniques. The Legislature further finds that the exception established by this section to the general prohibition against tied interests must be limited to its express terms so as not to undermine the general prohibition, and intends that this section be construed accordingly.

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