Carlin Edwards Brown PLLC
Attorneys & Counselors at Law
 
MICHIGAN HOSPITALITY LAW UPDATE
 Major Revisions to Michigan Liquor Code Proposed
 February 22, 2013

Senate Bill 216 follows Office of Regulatory Reinvention

Advisory Rules Committee Proposals

  

Senate Bill 216 was introduced yesterday, February 21, 2013, by Senator Howard Walker (R-Traverse City) and three other Republican co-sponsors. The "omnibus" bill is 147 pages in length, and amends 33 different sections of the Michigan Liquor Control Code ("Code"). New Section 415 also authorizes alcohol sales and wine tastings at approved farmer's markets in Michigan. Lastly, Senate Bill 216 "modernizes" and repeals various sections of the current Code.

       

 In an effort to give our clients early notice of these important changes to Michigan's Liquor Code, we have summarized the key aspects of the bill below. Senate Bill 216 has been referred to the Committee on Regulatory Reform, however, hearings on the bill have yet to be scheduled. Because we were extensively involved in drafting many of the proposals discussed at the ORR Advisory Rules Committee meetings, and many of those proposals are now encompassed in Senate Bill 216, we anticipate being involved in the legislative discussions surrounding these proposals. We believe much of that discussion will center on the following new Code provisions:

  • Allows for a "conditional license" for a period of up to one year when transferring ownership of an existing license at the same location. The conditional license shall be issued by the MLCC within 20 business days after receipt of a completed conditional license request form.
  • Class C licenses may transfer from one contiguous county to another one time within a five-year period upon payment of a $10,000 transfer fee.
  • Off-premise retail locations with gas pumps on or adjacent to the licensed premises would only need to maintain minimum inventory on the premises of not less than $50,000, instead of the current $250,000 inventory requirement. The 50-foot space limitation from the gas pump is also eliminated.
  • A new category of state-wide on-premise resort licenses is authorized for businesses investing in excess of $500,000. Up to 40 such licenses may be issued state-wide annually.
  • Redevelopment District licenses may be issued for downtown areas of any municipality, defined to now include a city, village, or township - not just cities.
  • Several potential violations under Section 707 and Section 901 of the Code would require the licensee or its clerk, servant, agent, or employee to have "knowingly" allowed the violation to occur on the licensed premises before a complaint could issue for that conduct.
  • On-premise licensees may now purchase an unlimited quantity of spirits directly from a SDD license-holder each month, eliminating the prior 9 liters per month maximum.
  • Application fees charged by a local unit of government may not exceed the annual license fee charged by the MLCC.
  • Licensees may extend credit to customers, effectively allowing them to "run a tab" on more than a daily basis.
  • On-premise licenses may be approved by a City or Township Clerk without the need for a local hearing if the local legislative body delegates that power to the Clerk.
  • The fees charged by an Authorized Distribution Agent for delivering spirits to retailers shall be adjusted annually for inflation using the Consumer Price Index starting January 1, 2014.
  • Receivers or trustees appointed by a Court, or a secured party foreclosing on its security interest in a liquor license, may be approved by the Michigan Liquor Control Commission ("MLCC") to operate the licensed business.
  • A retail licensee's clerk, agent, or employee who sells alcohol to a minor during a "sting" operation commits a state civil infraction and can be fined up to $200 for the first offense, and up to $400 for a second offense.

We would be happy to discuss any of the above proposed provisions with our clients. If you have questions about the background of these proposals, or wish to give your input prior to the legislative hearings on these proposals, please contact John or Scott in our Troy office, or Mike or Rick in our Lansing office. We will provide additional updates as this legislation moves forward.

 

 

                                                                                                                           

Senate Bill 216 Manufacturing Implications

 

One of the goals of the Liquor Control Advisory Rules Committee's comprehensive review of Michigan's liquor control system was to enhance the opportunities for Michigan's growing beverage alcohol manufacturing industry, recognizing its positive impact on Michigan's economy. The resulting Senate Bill 216 greatly expands opportunities for Michigan's rapidly expanding micro manufacturing industry by opening up many more opportunities for Small Wine Makers, Small Brewers, Brandy Manufacturers and Small Distilleries. The fact that the primary sponsor of SB 216 is Senator Howard Walker, Republican from Traverse City, whose area is home to many of Michigan's wineries, breweries and small distillers, also reflects the importance agritourism plays in Michigan's economic development.

 

Highlights of SB 216 amendments to the Liquor Control Code that directly impacts Michigan's wineries, breweries and distilleries include:

 

Beer, Wine, or Spirit Festival

  •  Allows Special License to be issued for Beer, Wine or Spirits Festivals where the production of beer, wine, or spirits is showcased.
  • Wine Makers, Small Wine Makers, Small Brewers, Brandy Manufacturers, and Small Distillers are allowed to sell directly to a Special Licensee hosting a Beer, Wine or Spirit Festival.

 Farmer's Market Permit

  • Allows Small Wine Maker, or similar out-of-state licensee, to obtain permit to sample and sell wines at a bona-fide Farmer's Market. This will open up additional marketing opportunities to Small Wine Makers.

 Small Brewer

  • Creates new Small Brewer license and eliminates Micro Brewer and Brewpub licenses.
  • There is no limit on the number of Small Brewer licenses held by any person but total production for all locations of a Small Brewer is limited to 30,000 barrels per year.
  • Allowed to hold Class C or other on-premises license.
  • Allowed to sell directly to consumers for consumption on or off the premises, to retail licensees and to wholesalers. Direct sales to retailers are a new and dramatic option available.
  • If enacted, the creation of the Small Brewer license and its allowances would be a significant step for the growth of the micro brewing industry and contrasts dramatically with long standing liquor code restrictions.

 Small Distiller or Brandy Manufacturer

  • May now charge for samples at both the manufacturing premises and at off-site licensed tasting rooms.
  • May sell brandy and spirits in a restaurant on the manufacturing premises.
  • May sell beer or wine not produced by the Small Distiller or Brandy Manufacturer in a restaurant at the manufacturing premises if the beer and wine is purchased from a wholesaler.

 Wine Maker or Small Wine Maker

  • May sell beer or wine not produced by the Wine Maker of Small Wine Maker in a restaurant at the winery if the beer and wine is purchased from a wholesaler. This provision if enacted would be a significant modification of the Liquor Control Code by expanding restaurant opportunities for small wineries.  
  • Small Wine Maker may have a leasehold interest in a retailer.

 Direct Shipper

  • Expands Direct Shipper Permit availability to Small Brewer for sales and shipments to consumers.

 Franchise Act/Beer & Wine Territory Agreements

  • Excludes Small Wine Makers and Small Brewers from franchise act and territory agreement requirements if their sales account for less than 3% of a wholesaler's total annual sales.
  • This provision, if enacted, would have a dramatic impact on opening up market access for most, if not all, small Michigan wineries and breweries, that as small producers have traditionally been hindered by the strict three-tier distribution system heavily influenced by large suppliers.

 Catering Permit

  • Wine Makers, Small Wine Makers, Brandy Manufacturers, Small Distillers, or Small Brewers would be eligible to obtain Catering Permit.

 If you have any further questions of any of these matters or desire further clarification, please contact Rick Perkins at [email protected] or by phone at (517) 321-4623.

 

 

Carlin Edwards Brown PLLC

 

John B. Carlin, Jr. (248) 816-3210

Scott D. Edwards (248) 816-3205

Michael J. Brown (517) 321-4616

Rick Perkins (517) 321-4623

 

 

 

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This newsletter provides general information and does not constitute legal advice in any way.