BILL ANALYSIS Ó AB 573 Page 1 Date of Hearing: April 13, 2011 ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION Isadore Hall, Chair AB 573 (Chesbro) - As Amended: March 31, 2011 SUBJECT : Alcoholic beverages: wine exports and returns. SUMMARY : Allows a holder of a beer and wine wholesalers license and an off-sale retail license, who only sell wine to return wine they have exported from the state. Specifically, this bill : 1) Provides for the return of wine exported out of state, to be returned in the same manner by a holder of a beer and wine wholesaler's license and an off-sale retail license that sells only wine, as specified. 2) Makes technical, non-substantive changes to the Alcoholic Beverage Control Act (Act). EXISTING LAW 1) Establishes the Department of Alcoholic Beverage Control (ABC) and grants it exclusive authority to administer the provisions of the Act in accordance with laws enacted by the Legislature. 2) Permits a licensed winegrower, who in the course of business exports wine from California to another state, to subsequently return to his or her licensed premises all or any portion of that wine in private vehicles owned or under the control of the winegrower, subject to certain tax provisions. 3) Establishes a beer and wine wholesaler license. Authorizes a beer and wine wholesaler licensee to obtain an off-sale beer and wine license, but limits sales to those accepted via mail, telephone, or computer and prohibits operations conducted from a retail store open to the public. 4) Provides that a licensed winegrower, who obtains a wine direct shipper permit, as described, may sell and ship wine directly to a California resident, for personal use, under specific conditions. Knowing violation of these provisions would be a misdemeanor. AB 573 Page 2 5) Existing law, known as the "tied-house" law, separates the alcoholic beverage industry into three component parts of manufacturer, wholesaler, and retailer. The original policy rationale for this body of law was to prohibit the vertical integration of the alcohol industry and to protect the public from predatory marketing practices. Generally, other than exemptions granted by the Legislature, the holder of one type of license is not permitted to do business as another type of licensee within the "three-tier" system. FISCAL EFFECT : Unknown COMMENTS : Purpose of the bill : According to the sponsor of this bill, the Family Winemakers of California, current law allows a licensed winegrower, who in the course of business exports wine from California to another state, to subsequently return to his or her licensed premises all or any portion of that wine in his/her private vehicle. Over the past several years, hundreds of virtual wineries holding a combined Type 17 and Type 20 license have sold wine for use out of state. AB 573 fixes a technical problem within the ABC Act, so this specific license can bring their wine back into the state under the same provisions as a winegrower. Section 32175 of the Revenue and Taxation Code will still apply to any wine returned. Background : Presently, ABC issues two licenses to facilitate Internet retail sales: a beer and wine wholesaler/Type 17 together with an off-sale beer and wine/Type 20. Current law requires the holder of a wholesale license to operate as bona fide wholesaler "in good faith". This means that they must sell to retailers other than themselves. Related legislation : AB 623 (Williams) of 2011, creates a new limited off-sale retail wine license to sell wine via the Internet, direct mail, or the telephone. (Pending in Assembly Appropriations Committee) Prior legislation : SB 118 (Chesbro), Chapter 157, Statutes of 2005. Provides that a licensed winegrower, who obtains a wine AB 573 Page 3 direct shipper permit, as described, may sell wine and ship wine directly to a California resident, for personal use, as specified. Also, eliminated the requirement that an unlicensed adult apply and be issued a permit to receive a shipment of wine, as described. AB 611 (Cortese), Chapter 394, Statutes of 1994. Encourages the adoption of reciprocal wine shipping privileges in other states to improve fairness and equality for small, family vintners and winegrowers of California by authorizing this formula for the direct shipment of wine to an individual in this state. REGISTERED SUPPORT / OPPOSITION : Support Family Winemakers of California Opposition None on file Analysis Prepared by : Eric Johnson / G. O. / (916) 319-2531