NYSLA Adopts Reforms Following the 2015 New York Beer, Wine, Spirits and Cider Summit

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On October 7th, Governor Cuomo, the New York State Liquor Authority (“NYSLA”), grape growers, winemakers, and other alcoholic beverage industry stakeholders gathered in Albany for the third annual New York Beer, Wine, Spirits and Cider Summit. Organized by the Hudson Valley Economic Development Network and the Hudson Valley Food & Beverage Alliance, the Summit is a highly focused forum in which industry participants can identify and address legislative and regulatory issues affecting the craft beverage business.

The week after the Summit, Governor Cuomo announced a series of reforms adopted by NYSLA to ease burdens on producers and retailers and spur further growth in the sector. These reforms, which took effect October 15th, are intended to eliminate certain barriers to the promotion and sale of craft alcoholic beverages.[1] In all, there are twelve policy changes, each set forth in an NYSLA advisory.[2] Four pertain exclusively or primarily to beer. With respect to wine, the new policies:

  • Allow salespeople to represent multiple craft beverage manufacturers;
  • Allow multiple craft manufacturer branch offices at the same location;
  • Authorize home wine making centers;
  • Update the requirements for marketing permits;
  • Authorize tastings at wine schools and other alcoholic beverage education classes and seminars;
  • Create a craft beverage tasting permit for non-profits;
  • Lower fees for seasonal additional bars;
  • Clarify rules for conducting raffles and games of chance conducted by retailers; and
  • Clarify rules for nonprofit club licensees.

Details of these wine-related reforms follow.

Salespeople: Serving Multiple Masters

NYSLA has abandoned its longstanding practice of allowing each salesperson (“solicitors”)  to provide sales services for only one producer. The advisory on this practice explains:

Section 93 of the Alcoholic Beverage Control Law provides for the issuance of a “solicitor’s” permit. These permits are issued to individuals to allow them, on behalf of a licensed manufacturer or wholesaler, to offer for sale, and/or solicit orders for the sale of, alcoholic beverages from other licensees, typically retailers and permittees. Subdivision 2 of Section 93 requires that the name of the licensee being represented by the solicitor appear on the permit certificate. Based on its interpretation of the language of subdivision 2, the Authority has maintained a long standing practice of prohibiting an individual from working for more than one licensed manufacturer or wholesaler.

Notwithstanding that prohibition, the Authority has in recent years allowed an individual to work as a solicitor for a different business owned by the same licensed entity

The abandonment of this practice reflects a reality in which many craft beverage producers cannot afford to retain full-time salespeople. As NYSLA notes in its advisory, ”sharing such staff with other manufacturers is cost effective.”

Co-location of Manufacturer Branch Offices

Under current law, a farm brewery, farm cidery, farm distillery, or farm winery is allowed to operate a branch office. A branch office is essentially a location that is physically separate from the main facility. The statutory provisions that authorize branch offices provide: “Such branch offices shall not be located within, share a common entrance and exit with, or have any interior access to any other business, including premises licensed to sell alcoholic beverages at retail.” NYSLA has interpreted this language to prohibit a branch office from being located in the same space as another branch office and to require that every branch office have its own entrance from a public thoroughfare. This interpretation has made most malls, transit hubs, and office buildings, for example, terra prohibita for branch offices. The October 15th advisory on branch offices relaxes this restriction somewhat, allowing a branch office to be located in the same space as another branch office.

Home Wine Making Centers

Many wine lovers have thought about making their own wine at some point. If they're like me, though, they don’t have the equipment or space to produce, bottle, or store a wine worth drinking. One of the October 15th advisories authorizes permits for licensed wineries and farm wineries to operate “home wine making centers.” A home wine making center is a place where individuals can, for a fee, use ingredients and equipment provided by a winery to produce wine for personal household or family use. A home wine making center must be located within or adjacent to the licensed winery or farm winery.

Supplier/Wholesaler Marketing Permits

With Advisory #2015-17, NYSLA has made minor changes to the marketing permit requirements. Advisory #2015-17 supersedes Advisory #2015-7, setting forth the terms and conditions of the marketing permit. The changes made in Advisory #2015-17 are:

  • Section 2(e): For an event not listed in the advisory, an market permit applicant must notify NYSLA of the event at least 15 days before it occurs. Advisory #2015-17 requires that notice be provided via email to Wholesale.Bureau@sla.ny.gov.
  • Section 5(d): Advisory #2015-17 makes a technical correction to the previous advisory
  • Section 5(f): Advisory #2015-17 addresses beer, which was not addressed in this part of the previous advisory. Specifically, the new advisory allows  a permit holder who is a brewer to purchase the alcoholic beverages used for tastings at a licensed retail premises from that retailer. Other kinds of permit holders are not allowed to do so.

Educational Tastings

Educating wine professionals and consumers about wine can help drive sales. Knowledgeable professionals can properly handle wine and help consumers make better choices, while knowledgeable consumers can approach wine without trepidation or frustration and select bottles, boxes, or cases that they find enjoyable. Accordingly, NYSLA is now offering a permit for individuals “conducting a class or seminar designed to increase class or seminar participants’ knowledge and appreciation of wine and/or other alcoholic beverages” that would allow participants to taste the beverages. The tastings must be in compliance with existing law, of course. Importantly, the advisory requires that all educational tasting permit holders purchase beverages for their classes or seminars from licensed manufacturers, licensed wholesalers or private collections. It also prohibits the Licensing Board from issuing a tasting permit to a person who holds a license under the Alcoholic Beverage Control Law. Educational tasting permits are valid for either one day or one year.

Nonprofit Tastings

In addition to the educational tasting permit category described above, NYSLA has created a new category for a small class of events organized by nonprofit organizations. Many nonprofit organizations hold events at which alcohol is sold. State and county fairs, awards galas, fashion shows, dinners, and other events are a fun way to raise money for their programs. Of course, the availability of alcohol at these events can increase their popularity—especially when food is involved. Under NYSLA’s new guidance, a nonprofit organization must obtain a permit to sell alcohol at an event only if it will charge an admission fee for the event.

Prior to this month’s reforms, NYSLA issued temporary permits to nonprofit organizations, but these permits are limited to the sampling and sale of wine, beer, and cider. They do not allow sampling or sale of liquor. With the new guidance, NYSLA has established “craft beverage tasting event” permits for nonprofit organizations. The craft beverage tasting event permit allows a nonprofit organization “to conduct events where manufacturers and/or wholesalers will be offering samples of and/or selling any alcoholic beverage for consumption away from the event.” While this permit allows the sampling and sale of liquor in addition to wine, beer, and cider, it does not allow consumption at the event. It is ideal for industry tastings run by nonprofit organizations.

Seasonal Additional Bars

With respect to licenses, NYSLA has also lowered the fee for a license to operate a seasonal additional bar. An on-premises retail license includes the right to operate one “stand-up” bar, and NYSLA may, upon application, permit an on-premises licensee to operate up to two additional stand-up bars for a fee. In the past, NYSLA granted licenses for the operation of additional stand-up bars on a seasonal basis but charged the same fee for this short-term license as for an annual license. As part of its reform package, NYSLA will now allow the issuance of additional stand-up bar licenses on a seasonal basis with a prorated fee.

Raffles and Other Games of Chance

Section 106(6) of the Alcoholic Beverage Control Law prohibits “gambling” in a retail licensed premises. State law does allow some types of gaming activity, however, such as the lottery, bingo and other games of chance, racing, and wagering. In one of its recent advisories, NYSLA announces its view that “gaming activities conducted by a not-for-profit organization in accordance with applicable state laws and regulations is [sic] not ‘gambling’ within the meaning of section 106(6).”

Clarification for Nonprofit Club Licensees

The Alcoholic Beverage Control Law allows the issuance of an on-premises license to a “club.” Section 3(9) of the law defines a “club” as a nonprofit organization or benevolent order that “does not traffic in alcoholic beverages for profit and is operated solely for a recreational, social, patriotic, political, benevolent or athletic purpose but not for pecuniary gain...” Veterans’ clubs and cultural associations are examples of “clubs” within the meaning of section 3(9). Pursuant to section 106(8), a club licensee may sell alcoholic beverages only to members of the club and their guests accompanying them on the premises.

NYSLA has now taken the position that a club may serve alcohol to a "bona fide member" of a national association or a chapter or lodge of a Fraternal Beneficiary Society organized under section 501(c)(8) or section 501(c)(10) of the Internal Revenue Code). Furthermore, the agency has provided guidance as to guests accompanying members: “the Authority interprets the phrase “guest accompanying” to mean that the person is invited by and: (a) physically goes with (enters) the club’s licensed premises with the member; or (b) meets the members at the club’s licensed premises.” It specifies, “the invitation must take place in advance of the non-member entering the club’s licensed premises.” In addition to addressing questions regarding members and guests, NYSLA’s advisory sets for the limited circumstances in which a club may obtain a caterer’s permit.

Notes

It is important to recognize that the reforms outlined above are not legislative or regulatory changes, but rather, changes in the interpretation of existing law. These shifts demonstrate the flexibility with which NYSLA operates, as well as the effectiveness of the Summit as an advocacy vehicle for the industry. They might also signal a new direction for the agency under its new leadership. As you may recall, Vincent Bradley became Chairman of NYSLA this past June, succeeding Dennis Rosen. Finally, conspicuously absent is any mention of out-of-state shipping, which has been a source of controversy since the agency instituted revocation proceedings against Empire Wine. This issue is the subject of legislation that now awaits the Governor's signature.

 

[1] A "craft beverage" is one that comes from a winery producing less than 150,000 gallons of wine a year, a farm winery, a brewery producing less than 60,000 barrels of beer per year, a cider producer, or a farm cidery.

[2] For a summary of all the reforms, see the Governor's press release. All of the advisories are available here.

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Tracie Robinson