West Virginia legislative wish list

A roundtable discussion on the recent WV Beer Roads podcast suggested several changes that could be made to improve the state’s beverage alcohol laws. Roundtable participants seemed to be most interested in eliminating over-regulation that only serves to restrict manufacturing growth, reduce market competition, and make life hard for families that want to build a new industry in the state.

Following is a summary of some key points.

Retailers

Give beer retailers and festivals a very simple and inexpensive option to obtain and sell normally unavailable beers for their special events. Provide a mechanism for a one-day or two-day permit, which allows them to bring in and sell beer from out-of-state brewers who otherwise are not registered in the state, but who are duly licensed by the federal government as breweries. All state taxes would have to be paid on the beer imported. It would be simplest to just add this ability to the standard festival permit. This mechanism is common in other states and is the bread and butter of many beer festivals and beer retailers who hold periodic special events at their businesses.

Give off-premise beer and wine retailers (grocery and liquor stores) the right to conduct samplings in their stores. Samplings could be limited to small servings of a few different products at any one time. Retail licensees would have to keep records of these sampling events, but would not need prior approval of the state before conducting them.

Eliminate residency requirements for obtaining an on-premise retail license for private clubs and taverns. Why can’t an out-of-state resident own and operate a private club in WV. Would seem to make sense to allow this.

Breweries • Distilleries • Wineries

Eliminate residency requirement on manufacturer licenses. This would apply to breweries, wineries, distilleries seeking to establish a manufacturing facility in WV. Currently, residency restrictions on the ownership of alcohol beverage manufacturers are causing unnecessary difficulties and hardships on businesses and their investors who would like to establish facilities in the state. Other types of manufacturers do not have similar restrictions, and alcohol manufacturers do not need them either.

Eliminate the language that says a brewer can operate in only one capacity (so it may not also be a wholesaler and/or a retailer). Confusing language exists in the statutes leftover from the past. Today, small breweries in West Virginia are also retailers and are allowed limited rights to be wholesalers (self-distribution). Those are very positive things for growing our brewing industry. Let’s encourage growth of our small breweries by allowing increased flexibility.

Allow a brewer to own and operate more than one brewing facility in the state. Current law seems to limit a brewery to only one brewing location. That’s just silly. If a brewer wants to own two facilities in different parts of the state, that would be great for the local economy. Why would we want to limit them?

Give breweries, wineries, and distilleries that operate manufacturing facilities within the state the right to have additional off-site tasting rooms or taprooms. The off-site brewery taproom would operate as an extension of the brewer’s brewpub license. These off-site tasting rooms would also be authorized to obtain tavern, private wine restaurant, and/or private club licenses if the owners so choose. Small manufacturers are good for the economy but they need ready outlets to market their goods. Encouraging the growth of these factory outlets would help these small manufacturers grow.

Allow distilleries to also be able to hold a private club license for a tasting room at their manufacturing facility or at an off-site tasting room. This would allow a small, start-up distillery the best shot at bringing in sufficient revenue in the early years to get its brand moving and build a sustainable business.

Allow WV distilleries under a certain size the option to direct sell their bottled product to private clubs in their local areas, without the private club having to purchase the spirits through a liquor store. Wineries and breweries currently have a direct sell option. The vast majority of the brands made by West Virginia distilleries are not stocked or sold by the vast majority of WV liquor stores. Liquor stores don’t carry them because they don’t have room for items with such small sales potential. But with the current law requiring private clubs to purchase all their distilled spirits from a liquor store, this effectively keeps a small distillery’s products out of restaurants and bars where people could sample it.

Greatly simplify the license application forms and processes for getting a brewery, winery, or distillery licensed in the state. The current license application process and requirements are onerous for small start-up businesses of the kind who establish new alcohol manufacturing facilities. These are small, often little family businesses and every effort should be made not to over regulate and complicate their entry into the state.

Greatly reduce and simplify paperwork required of WV breweries. The label approval process, the price posting requirements, and the promotion approval requirements should all be greatly reduced or simply be eliminated for small brewers. Those requirements restrict the growth of local small business without providing measurable public benefits. All filing requirements that would remain after the reform, should be able to be completed on-line.

Reduce the requirements, paperwork, and fees for out-of-state brewers to bring their beers to West Virginia. With us being such a small market, our overall costly, complicated and restrictive regulations make it cost prohibitive for small brewers in surrounding states to bring their beer into the WV market.

Give small brewers an exemption from having to sign franchise agreements with beer distributors. A small brewery and a wholesaler could still agree to work together, but a franchise agreement would not be required for their business relationship. If and when a small brewery grew to a large size, then it would fall under the franchise agreement mandate. Franchise agreements were clearly designed to protect local beer wholesalers from the immense market power of large national breweries. Back when this law was written, no one ever thought about their negative affect on tiny local breweries because there really weren’t any local small breweries left. Franchise agreements may provide a good balance between a distributor and a large brewery, but distributors do not need protected from a small brewery that makes up only a tiny fraction of the distributors business.

Remove the requirement for mini-distilleries to actually grow a portion of their distilling ingredients. We could just limit mini-distilleries to a certain maximum size or let them purchase a portion of their ingredients from WV farmers.

Set a new, lower state tax rate for ciders that have lower alcohol content. Since lower alcohol ciders compete more directly with beer than with wine, having them taxed as wine puts them at a competitive pricing disadvantage. WV cideries have great potential to use lots of WV apples and other fruit, so helping give this industry a kick-start could help boost the rural economy.

Remove the market zone payments that small WV distillers are required to pay to support liquor stores. A small fee is added to the price of each bottle of locally produced whiskey that is sold by the distillers at their in-house stores. This fee is meant to support the liquor stores that purchased the exclusive retail licenses to sell liquor in that area. The fee is actually intended to inhibit distiller’s little tasting room stores from competing with local liquor stores. In most cases, our tiny distillers are making payments to support retail liquor stores who don’t and won’t sell their products anyway. These payments could be removed prior to bidding out the liquor store licenses.

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The Roundtable crew included Rob Absten, Erin McCoy, Charles Bockway, and special guest Chuck Johnson.

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One last thought on regulation

State regulation and its enforcement and tax agencies have a role to play, but should focus on public safety, public health, and on maintaining a fair system of taxation that produces revenue that grows with the success of the local craft beverage industry. Hopefully, the state would put its alcohol industry emphasis on public health and safety education and enforcement activities around things such as the minimum age for alcohol purchases, the prohibition on over serving a customer, DUI laws, and the prevention and treatment of alcohol abuse. On the other hand, the manufacturers of beverage alcohol should be treated more in line with other manufacturers and not made to jump through special hoops that provide no measurable public safety, public health, or public revenue benefits.