Posts from the California Category
California Sales Tax Hike Starts Tomorrow
March 31st, 2009
A Special Notice was sent out by California’s Board of Equalization early this month, alerting taxpayers that the sales and use tax rate in the state of California will increase by 1% on April 1, 2009.
The tax increase is part of voter-approved Proposition 1A, a budget package designed to increase state revenue by $16 billion throughout the next 2 – 3 years. Intended to be a temporary tax, “The 1% tax rate increase will expire on either July 1, 2011, or July 1, 2012, depending upon whether the voters approve the proposed Budget Stabilization constitutional amendment in a statewide election to be held on May 19, 2009”.
All suppliers licensed as Wine Direct Shippers in California are affected by this increase, as payment of sales and use tax is a requirement of the license. The new state tax rate will be raised from 6% to 7%, making the total of all state-wide tax rates, 8.25%. The rate of 8.25% is comprised of three separate taxes, which apply to the entire state: 7.0% “state” tax + 0.25% “county” tax + “combined state and local” tax of 1.0% = 8.25%.
In addition to the 1% state tax increase mentioned previously, there are also some district tax rate updates, which apply to the following cities and counties:
- The following cities in California have updated their local tax rates: Arcata, Arvin, Campbell, El Cajon, El Monte, Eureka, Galt, La Mesa, La Habra, Oxnard, Pico Rivera, Port Hueneme, Scotts Valley and Trinidad
- The following counties in California have updated their local tax rates: Amador, Sonoma and Marin
Attention 17/20s: 17 + 20 ≠ 02
August 15th, 2008
That’s right – when California License Type 17 (Beer and Wine Wholesaler) and License Type 20 (Beer and Wine Off-Sale Retailer) are issued in conjunction, the privileges associated with the combination license are not equivalent to those of the 02 Winegrower’s License. A Type 17 License “permits incidental sales to other supplier-type licensees” and a Type 20 License “authorizes the sale of beer and wine for consumption off the premises where sold.” The joint issuance of the two licenses is authorized by Section 23378.2 of the California Code and permits the issuance of a package off-sale beer and wine license to a licensed California wholesaler if only wine is sold from the retail premises. It is significant to note that when shipping out-of-state, a 17/20 licensee is considered a retailer resulting access to fifteen states.
A month ago at the ShipCompliant Users Conference, Matthew Botting of the California ABC revealed that many 17/20 permit holders were not fulfilling all requirements of the combination license and were instead operating more like 02 licensees because many were unaware that 17/20 permit holders must act as a bona fide wholesaler in order to comply with the provisions of the license. Please note that in order to operate as bona fide wholesaler, a 17/20 permit holder must sell to retailers, in general, at least every 45 days. Section 23779 provides, in pertinent part:
No wholesale license shall be issued to any person who does not in good faith actually carry on or intend to carry on a bona fide wholesale business by sale to retail licensees of the alcoholic beverage designated in the wholesale license, and the department may revoke any wholesale license when the licensee fails for a period of 45 days actively and in good faith to engage in the wholesale business…Sale by a wholesale licensee to himself as a retail licensee is not the transaction of a bona fide wholesale business.
For more information on 17/20 licenses or other California wine-related licenses, check out Matthew Botting’s presentation and slides from the 2008 ShipCompliant Users Conference.
Is the retail to consumer shipping battle headed to the Supreme Court?
October 15th, 2007
The issue of direct shipments by retailers to consumers has become a very hot topic of late. As of today, retailers can ship to less than half of the number of states to which producing wineries can ship. The Specialty Wine Retailers Association is fighting hard with both legislative efforts and litigation to open more states for retail to consumer shipments. The heated battle in Illinois, where out-of-state retailers recently lost the ability to ship to consumers under HB 429, raised national awareness to this issue.
The fundamental question is whether the decision in Granholm v. Heald that said states must treat in-state and out-of-state wineries evenhandedly should also apply to in-state and out-of-state retailers. R. Corbin Houchins recently made two posts (September 18th and October 5th) that do an excellent job of highlighting the legal questions that come into play when attempting to extend Granholm to retailers. In his October 5th post, Mr. Houchins indicates his disagreement with the reasoning of the recent and important Arnold’s Wines v. Boyle opinion, which upheld discrimination against out-of-state retailers in New York.
There is a very interesting recent article, with substantial background materials for lawyers who do not practice in the subject area, on FindLaw.com titled “The Fight Over State Laws Favoring In-State Alcohol Purveyors: Do Such Laws Violate the Dormant Commerce Clause?” that also examines the important ruling in Arnold’s Wines. This article is definitely worth reading.
The Court has had to examine the intersection between the dormant Commerce Clause idea and the Twenty-First Amendment a number of times. Two years ago, in the seminal case of Granholm v. Heald, the Court appeared to send a message that while the Twenty-First Amendment may indeed empower states in some ways, it does not trump the anti-discrimination, anti-balkanization norm of the Commerce Clause.
The federal district judge in the recent Arnold case in New York properly acknowledged the importance of Granholm. Nevertheless, the judge held that Granholm’s ban on state discrimination against out-of-staters applied only to state laws regulating producers of alcohol, not laws (such as the one at issue in the recent New York case) that regulated wholesalers or retailers.
The New York judge’s interpretation of Granholm is, I believe, in error.
The Arnold’s Wines case will likely impact current (Texas, California) and future (Illinois?) cases in the battle over retail to consumer shipments and could possibly end up in the Supreme Court, where a favorable decision could potentially open the legislative floodgates for retailers as Granholm did for wineries in 2005.
Virtual wineries taken to court
October 10th, 2006
Last week the California Department of Alcoholic Beverage Control took three “virtual” wineries to court stating that they violated the provisions of their licenses by pouring wine for consumers at a wine festival. So called virtual wineries typically hold two licenses in combination, a type 17 which is a wholesale license and a type 20, which is a conditional retail license allowing the licensee to sell wine directly to consumers via a wine club or internet sales. This combination of licenses allows a business owner to have a lot of the same privileges as a winery or type 02 license holder without having a bricks and mortar winery or the on-going compliance requirements that wineries have. The main prohibition of the 17/20 combo is that those licensees are not allowed to pour wine at consumer tastings and they cannot have tasting rooms. California is the only state that allows wholesalers to sell wine to consumers. The three wineries are arguing that the prohibition on public tasting is unfair to small proprietors and the charitable organizations that host the tasting events and are challenging what they claim is a “little known” law. The penalty for pouring wine at a consumer event without the correct permits is a 15 day suspension of the license or a fine. An administrative judge will give the ABC a decision within 30 days and the ABC will act on the decision within 100 days. At this point the California Assembly is not proposing a change in the law.
More on the Family Winemakers lawsuit
October 4th, 2006
Tom Wark from Fermentation posted a lengthy comment in response to Doug Caskey’s thoughts on the Family Winemakers lawsuit. This was another great response, so I wanted to post it to make sure everyone reads it.
Doug:
First, anyone accusing you of being a traitor to the wine industry simply doesn’t know you or doesn’t care for honesty.
That said, I want to comment on your elequent plea for respecting the postion Colorado and other smaller state wine industries find themselves in vis a vis the current debate over direct shipping regulations.
First, with regard to the Granholm ruling, it strikes me that the ruling did not so much “reinforce” the validity of the 3-tier system as much as it simply concurred that it was a legitimate way for a state to structure the distribution of alcohol. By this I mean, it did not endorse the excusionary charachter of system, but rather acknowledged its legitimacy. This is important.
The idea that the state is preventing direct shipping by those that produce over a certain amount because it “values small businesses that stimulate agriculture” belies the facts and machinations in the direct shipping debate. Were direct shipping to consumers open to all wineries, large and small, there is no reason to believe that a small Colorado winery would be hurt by CA wineries of any size trying to attracte consumers to wine clubs or occassional Internet sales. In fact, being closer to the Colorado consumer than a CA or WA winery, the Colorado winery should have an advantage in reaching that consumers.
The bottom line is that production limits are approved by Wholesalers becauase it keeps the vast majority of direct sales from occuring while allowing in-state wineries that they rarely deal with to go about their business without criticizing wholesalers. As a bonus for wholesalers, it puts wineries in-state into conflict with out-of-state wineries that are prevented from entering the market via direct sales.
As for monopolistic tendencies, it is indeed easy to accuse wholesalers of being monopolies. But the idea that “the same can be said of the large wineries in California” just doesn’t wash for one simple reason: The Wholesalers benefit from STATE SPONSORED monopoly status. By dictating the use of the three tier system the States guarantee that a smaller and smaller group of wholesalers take a piece of every sale in the state. Yet, there are no provisions that they represent any winery that wants to sell in that state. If in addition there are production requirements on those that can sell direct in a state that has granted a monopoly to wine wholesalers many wineries will be prevented entirely from doing business in that state.
The State of California does not impose any regulations that result in CA wineries selling the vast amount of domestic wine in the United States. This difference in who imposes a monopoly is important.
If the concern is for fairness and a desire to see Colorado wineries expand and prosper there is a simple way to accomlish this: Allow wineries to self distribute in the state as well as sell direct to consumers. No one represents a brand better than the owner. But as long as the state imposes the 3-tier system, this can never happen because under Granholm if CO wineries can self distribute then out of state wineries must be able to also. Wholesalers would just as soon see small state wine industries disappear altogether than allow this sort of situation.
And this brings us to the idea that “Under the guise of “equal protection” as spelled out in the Granholm decision, their (those bringing suits) legal actions have the impact of squelching the advantages that state governments want to give small agribusinesses like wineries.”
If government and legislators were truly interested in giving small agribusiniess a hand up, they would ignore the demands and campaign donations of wholesalers and allow unrestricted direct sales and unrestricttd self-distribution in their states. It’s clear the legislators too would rather throw CO wineries and other small state wine industries under the bus before upsetting the antiquated but very profitable apple cart known as the state sponsored wholesaler monopoly, AKA “Three Tier System”.
In the end, the restrictions that states put on who can ship to consumers don’t merely inhibit the “Big Boys”. They inhibit the very small boys too, the very boys that most distributors don’t want anything do do with. But the big problem is that as long as the three tier system is imposed by the state, small industries like that of Colorado will be hampered.
