Title of Regulation: 3VAC5-70. Other Provisions (amending 3VAC5-70-100).

Statutory Authority: §§ 4.1-103 and 4.1-111 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: July 13, 2016.

Effective Date: July 28, 2016.

Agency Contact: Shawn Walker, Director of Law Enforcement, Department of Alcoholic Beverage Control, 2901 Hermitage Road, Richmond, VA 23220, telephone (804) 213-4569, FAX (804) 213-4411, or email shawn.walker@abc.virginia.gov.

Basis: Subdivision B 16 of § 4.1-111 of the Code of Virginia requires that the Alcoholic Beverage Control Board promulgate a regulation that prescribes the terms and conditions under which retail on-premises licensees may provide a gift of an alcoholic beverage to a patron or a bottle of wine to two or more patrons and the frequency of such gifts.

Purpose: This amendment is intended to meet specific statutory requirements that a retail on-premises licensee may provide a gift of one alcoholic beverage to a patron or a bottle of wine to two or more patrons. The regulation safeguards the public safety by limiting the amount and frequency of such gifts.

Rationale for Using Fast-Track Rulemaking Process: The rulemaking process is expected to be noncontroversial because the proposal closely follows the statutory mandate. The agency has minimal discretion.

Substance: The amendment allows a retail on-premises licensee the authority to give one alcoholic beverage to a patron or a bottle of wine to a group of two or more patrons. Currently the regulation prohibits any such gift.

Issues: The primary advantage of this proposal to the public and the agency is that it meets the legislative mandate to promulgate a regulation that permits a retail on-premises licensee to give alcoholic beverages to a patron or patrons on a limited basis. There are no disadvantages to the public or the Commonwealth.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. Pursuant to Chapter 404 of the 2015 Acts of Assembly, the Board of Alcoholic Beverage Control proposes to allow certain alcoholic beverage licensees to give alcoholic beverages as gifts subject to limitations for on-premises consumption.

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. Chapter 404 of the 2015 Acts of Assembly amended Virginia Code section 4.1-111(B)(16) to permit retail on-premises licensees to provide a gift of one alcoholic beverage to a patron, or one bottle of wine to a group of two or more patrons, to whom such alcoholic beverages may be sold. No subsequent gift shall be provided to the same patrons within 24 hours. Thus, the proposed regulation will allow in general more flexibility to the licensees in the promotion of their businesses. The proposed regulation is identical in substance to the statute, and therefore no significant effect is expected upon promulgation of these changes as the affected licensees are already allowed to give such gifts to their customers under the statute. Thus, while more flexibility in promoting their businesses could be reasonably expected to benefit the affected licensees, no significant economic impact is likely for them or on public consumption upon promulgation of this regulation, other than improving clarity through consistency between the regulation and the Code of Virginia.

Businesses and Entities Affected. The proposed regulation applies to approximately 5,000 retail licensees authorized to sell for on-premises consumption.

Localities Particularly Affected. The proposed changes apply statewide.

Projected Impact on Employment. The proposed amendments could be expected to slightly increase consumption of alcoholic beverages and slightly increase the demand for labor employed to meet the increase in consumption. However, the statute has been in effect and any such impact is probably already realized. Thus, no significant impact on employment is expected upon promulgation of this regulation.

Effects on the Use and Value of Private Property. Allowing the licensees to give alcoholic beverages as gifts to their customers is unlikely to have an impact on the use and value of private property. To the extent such gifts promote sales and increase revenues, a small positive impact on their asset values may be expected.

Real Estate Development Costs. No impact on real estate development costs is expected.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. The majority of the 5,000 affected retail licensees are estimated to be small businesses. The proposed regulation does not impose costs on them. The proposed regulation simply conforms to the statute which may have had a positive impact on sales.

Alternative Method that Minimizes Adverse Impact. No adverse impact on small businesses is expected.

Adverse Impacts:

Businesses. The proposed regulation does not have an adverse impact on non-small businesses.

Localities. The proposed regulation will not adversely affect localities.

Other Entities. The proposed regulation simply conforms to the statute allowing retailers to give their consumers alcoholic beverages as gifts for on-premises consumption.

Agency's Response to Economic Impact Analysis: The Department of Alcoholic Beverage Control concurs.

Summary:

Pursuant to Chapter 404 of the 2015 Acts of Assembly, the amendment permits a retail on-premises licensee to give one alcoholic beverage to a patron, or a bottle of wine to two or more patrons, with limitations on the frequency of such gifts.

3VAC5-70-100. Gifts of alcoholic beverages generally; exceptions; wine and beer tastings; taxes and records.

A. Gifts of alcoholic beverages by a licensee to any other person are prohibited except as otherwise provided in this section or as provided in §§ 4.1-119 G, 4.1-201, 4.1-201.1, 4.1-205, 4.1-209, 4.1-325, and 4.1-325.2 of the Code of Virginia.

B. Gifts of alcoholic beverages may be made by licensees as follows:

1. Personal friends. Gifts may be made to personal friends as a matter of normal social intercourse when in no wise a shift or device to evade the provisions of this section.

2. Samples. A wholesaler may give a retail licensee a sample serving or a container not then sold by such licensee of wine or beer, which such wholesaler otherwise may sell to such retail licensee, provided that in the case of containers, the container does not exceed 52 fluid ounces in size (1.5 liters if in a metric-sized container) and the label bears the word "Sample" in lettering of reasonable size. Such samples may not be sold. For good cause shown the board may authorize a larger sample container.

3. Gifts by retail licensees. An on-premises retail licensee may give a gift of one alcoholic beverage to a patron or one bottle of wine to a group of two or more patrons provided that such gifts are made to patrons to whom such alcoholic beverages may be sold. No subsequent gift shall be provided to the same patrons within 24 hours.

4. Hospitality rooms; conventions. The following activities are permitted:

a. A brewer or vintner may give samples of his products to visitors to his winery or brewery for consumption on premises only in a hospitality room approved by the board, provided the donees are persons to whom such products may be lawfully sold; and

b. A manufacturer, importer, bottler, broker, or wholesaler may host an event at conventions of national, regional or interstate associations or foundations organized and operated exclusively for religious, charitable, scientific, literary, civil affairs, educational or national purposes upon the premises occupied by such licensee, or upon property of the licensee contiguous to such premises, or in a development contiguous to such premises, owned and operated by the licensee or a wholly owned subsidiary.

4. 5. Conventions; educational programs, including alcoholic beverage tastings; research; licensee associations. Manufacturers, importers, bottlers, brokers, and wholesalers may donate alcoholic beverages to:

a. A convention, trade association or similar gathering, composed of licensees and their guests, when the alcoholic beverages donated are intended for consumption during the convention;

b. Retail licensees attending a bona fide educational program relating to the alcoholic beverages being given away;

c. Research departments of educational institutions, or alcoholic research centers, for the purpose of scientific research on alcoholism; and

d. Official associations of alcoholic beverage industry members when conducting a bona fide educational program concerning alcoholic beverages, with no promotion of a particular brand, for members and guests of particular groups, associations, or organizations.

5. 6. Conditions. Exceptions authorized by subdivisions 3 4 b and 4 5 of this subsection are conditioned upon the following:

a. That prior written notice of the activity be submitted to the board describing it and giving the date, time and place of such activity; and

b. That the activity be conducted in a room or rooms set aside for that purpose and be adequately supervised.

C. Wine and beer wholesalers may participate in a wine or beer tasting sponsored by a gourmet shop licensee for its customers and may provide educational material, oral or written, pertaining thereto, as well as participate in the pouring of such wine or beer.

D. Any gift authorized by this section shall be subject to the taxes imposed on sales by Title 4.1 of the Code of Virginia, and complete and accurate records shall be maintained.