TITLE 3. ALCOHOLIC BEVERAGE AND CANNABIS CONTROL

VIRGINIA ALCOHOLIC BEVERAGE CONTROL AUTHORITY

Proposed Regulation

Title of Regulation: 3VAC5-60. Manufacturers and Wholesalers Operations (amending 3VAC5-60-10 through 3VAC5-60-50, 3VAC5-60-70, 3VAC5-60-100; repealing 3VAC5-60-60, 3VAC5-60-80, 3VAC5-60-90).

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

Public Hearing Information: No public hearing is currently scheduled.

Public Comment Deadline: October 11, 2024.

Agency Contact: LaTonya D. Hucks-Watkins, Senior Legal Counsel, Virginia Alcoholic Beverage Control Authority, 7450 Freight Way, Mechanicsville, VA 23116, telephone (804) 213-4698, FAX (804) 213-4574, or email latonya.hucks-watkins@virginiaabc.com.

Basis: Section 4.1-103 of the Code of Virginia provides that the Virginia Alcoholic Beverage Control Authority Board of Directors has the authority to adopt regulations and to do all acts necessary or advisable to carry out the purposes of Title 4.1 of the Code of Virginia. Section 4.1-111 of the Code of Virginia provides the board with the authority to adopt reasonable regulations that it deems necessary to carry out the provisions of Title 4.1 of the Code of Virginia and to amend or repeal such regulations.

Purpose: This regulation is essential to protect the health, safety, and welfare of citizens because the regulation provides comprehensive guidance for manufacturers and wholesalers on numerous issues, including licensing; taxes, bonds, and sureties; and solicitor salespersons.

Substance: The proposed amendments (i) rearrange requirements into the appropriate sections; (ii) remove references to "retail off-premises" wineries that now have off-premises privileges; (iii) increase the amount of indemnifying bond required of wholesale wine licensees to $10,000; (iv) add terms; and (v) repeal unnecessary requirements.

Issues: The primary advantage to the public is that provisions that were in a different chapter and difficult to locate have been moved to this regulation where it makes more sense for them to be included. The primary advantage to the Commonwealth is that the regulation was amended to more closely align with the Code of Virginia. There are no disadvantages to the public or Commonwealth.

Department of Planning and Budget's Economic Impact Analysis:

The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Code of Virginia and Executive Order 19. The analysis presented represents DPB's best estimate of the potential economic impacts as of the date of this analysis.¹

Summary of the Proposed Amendments to Regulation. The Virginia Alcoholic Beverage Control Authority Board of Directors (board) proposes amendments to the regulation to align the regulation with current industry practices, conform to the Code of Virginia, improve clarity, and remove redundant and obsolete language.

Background. In order to meet the regulatory reduction requirements of Executive Order 19 (2022), the board met six times between June and October 2022 to review all of the Virginia Alcoholic Beverage Control Authority regulations, and convened roughly 60 stakeholders, representing all categories of license holders.² As a result of that review process, and as part of a periodic review,³ the board proposes to make the following changes:·

3VAC5-60-10: References to "salesmen" would be changed to "salesperson." The existing subsection C is struck as these provisions are addressed in §§ 4.1-229, 4.1-225, and 4.1-227 of the Code of Virginia.⁴ The rest of the proposed new language in 3VAC5-60-10 is being moved from 3VAC5-60-60 and 3VAC5-60-80 of this regulation because it consolidates all related provisions into one section and would minimize confusion.

3VAC5-60-30: "Off-premises" and "retail off-premises" are struck as the 2020 license reform separated winery licenses from retail licenses.⁵

3VAC5-60-40: Wine wholesalers are currently required to pay an indemnifying bond of $2,500 to obtain a license. Virginia Alcoholic Beverage Control Authority (authority) proposes to increase this amount to $10,000, which is the maximum amount allowed in § 4.1-223 of the Code of Virginia.⁶ The purpose of the bond is to protect the board if a wholesale wine licensee fails to make timely tax payments; the board seeks to increase this amount to maximize the protection to the board in such cases. However, the Code of Virginia does allow the board to waive the bond requirement if the wholesaler has previously demonstrated financial responsibility, and this flexibility is reflected in the regulation as well. The board also proposes to insert "for good cause shown" as a requirement for wholesale wine licensees to request a waiver of the surety and the bond.

3VAC5-60-50: The term "readily calculable" would be added in the reporting requirements for wine volumes; this change is intended to allow regulants to convert the volume to liters when reporting the volume of a product that is labeled in a different unit of measurement.

3VAC5-60-60 and 3VAC5-60-80: These sections would be repealed and moved in their entirety into 3VAC5-60-10.

3VAC5-60-70: The term "legal holiday" would be replaced with "state or federal holiday."

3VAC5-60-90: This section currently prohibits wholesale deliveries of wine and beer on Sundays and would be repealed in its entirety because the stakeholder workgroup considered it to be outdated.

3VAC5-60-100: The title of this section would be changed to "Certain employees of manufacturers and wholesalers" to be more accurate.

Estimated Benefits and Costs. The proposed amendments largely serve to update the regulation to reflect current practice, conform to statute, and remove redundant or obsolete language. The proposed increase to the indemnity bond amount from $2,500 to $10,000 would increase the overall cost of obtaining a wholesale wine license. It should be noted that the increase in cost would depend on how much more the wholesaler would have to pay to obtain the bond from the surety.⁷ In addition, current licensees who have been in good financial standing with authority may request a waiver of the bond altogether, provided they show good cause. Removing the prohibition on wholesale deliveries on Sundays would benefit wholesalers and their customers for whom Sunday deliveries would be more convenient and desirable.

Businesses and Other Entities Affected. The proposed amendments primarily affect the authority's manufacturer, distiller, and wholesaler licensees; currently, there are 897 active manufacturer-type licensees, including winery, farm winery, brewery, and limited brewery, 112 active distillery or limited distillery licensees, and 524 active wholesaler-type licensees (beer and wine wholesalers).⁸

The Code of Virginia requires DPB to assess whether an adverse impact may result from the proposed regulation.⁹ An adverse impact is indicated if there is any increase in net cost or reduction in net benefit for any entity, even if the benefits exceed the costs for all entities combined.¹⁰ The proposed increase in the indemnity bond amount would marginally increase the cost of maintaining the wine wholesale license for current and future licensees. Thus, an adverse impact is indicated for wine wholesalers.

Small Businesses¹¹ Affected.¹² The proposed amendments do not appear to adversely affect small businesses. The authority does not collect information on which of their licensees qualify as small businesses; however, wine wholesalers are not likely to meet the definition of small businesses.

Localities¹³ Affected.¹⁴ The proposed amendments neither disproportionally affect any particular localities, nor affect costs for local governments.

Projected Impact on Employment. The proposed amendments do not appear to affect total employment.

Effects on the Use and Value of Private Property. The proposed increase in the required indemnity bond amount would increase the license cost of wine wholesalers, which would decrease the value of these private businesses. However, any reduction in value arising from this cost increase is likely to be negligible relative to wine wholesaler revenues. The proposed amendments do not affect real estate development costs.

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¹Section 2.2-4007.04 of the Code of Virginia requires that such economic impact analyses determine the public benefits and costs of the proposed amendments. Further the analysis should include but not be limited to: (1) the projected number of businesses or other entities to whom the proposed regulatory action would apply, (2) the identity of any localities and types of businesses or other entities particularly affected, (3) the projected number of persons and employment positions to be affected, (4) the projected costs to affected businesses or entities to implement or comply with the regulation, and (5) the impact on the use and value of private property.

² See https://townhall.virginia.gov/L/Meetings.cfm?BoardID=2&time=Past. The authority provided a list of external stakeholders; although all stakeholders may not have attended every meeting, the meetings were spent conducting a line-by-line review of the regulations, and the proposed changes reflect the board's decisions after considering stakeholder input.

³ Pursuant to the Administrative Process Act, agencies are required to review regulations every four years. See § 2.2-4007.1 of the Code of Virginia (https://law.lis.virginia.gov/vacode/title2.2/chapter40/section2.2-4007.1/) and § 2.2-4017 of the Code of Virginia (https://law.lis.virginia.gov/vacode/title2.2/chapter40/section2.2-4017/).

⁴ See https://law.lis.virginia.gov/vacode/4.1-227/, https://law.lis.virginia.gov/vacode/title4.1/ chapter2/section4.1-225/, and https://law.lis.virginia.gov/vacode/4.1-229/.

⁵ See https://lis.virginia.gov/cgi-bin/legp604.exe?201+sum+HB390.

6 See https://law.lis.virginia.gov/vacode/title4.1/chapter2/section4.1-223/.

7 The price of the bond to the wholesaler is generally less than the bond amount and reflects the surety estimation of the wholesaler risk of defaulting on taxes.

8 Data Source: Authority.

⁹ Pursuant to § 2.2-4007.04 D: In the event this economic impact analysis reveals that the proposed regulation would have an adverse economic impact on businesses or would impose a significant adverse economic impact on a locality, business, or entity particularly affected, the Department of Planning and Budget shall advise the Joint Commission on Administrative Rules, the House Committee on Appropriations, and the Senate Committee on Finance. Statute does not define "adverse impact," state whether only Virginia entities should be considered, nor indicate whether an adverse impact results from regulatory requirements mandated by legislation.

¹⁰ Statute does not define "adverse impact," state whether only Virginia entities should be considered, nor indicate whether an adverse impact results from regulatory requirements mandated by legislation. As a result, DPB has adopted a definition of adverse impact that assesses changes in net costs and benefits for each affected Virginia entity that directly results from discretionary changes to the regulation.

¹¹ Pursuant to § 2.2-4007.04, 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."

¹² If the proposed regulatory action may have an adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include: (1) an identification and estimate of the number of small businesses subject to the proposed regulation, (2) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the proposed regulation, including the type of professional skills necessary for preparing required reports and other documents, (3) a statement of the probable effect of the proposed regulation on affected small businesses, and (4) a description of any less intrusive or less costly alternative methods of achieving the purpose of the proposed regulation. Additionally, pursuant to § 2.2-4007.1 of the Code of Virginia, if there is a finding that a proposed regulation may have an adverse impact on small business, the Joint Commission on Administrative Rules shall be notified.

¹³ "Locality" can refer to either local governments or the locations in the Commonwealth where the activities relevant to the regulatory change are most likely to occur.

¹⁴ Section 2.2-4007.04 defines "particularly affected" as bearing disproportionate material impact.

Agency Response to Economic Impact Analysis: The Virginia Alcoholic Beverage Control Authority concurs with the economic impact analysis prepared by the Department of Planning and Budget.

Summary:

The proposed amendments (i) rearrange requirements into the appropriate sections; (ii) remove references to "retail off-premises" wineries that now have off-premises privileges; (iii) increase the amount of indemnifying bond required of wholesale wine licensees to $10,000; (iv) add terms; and (v) repeal unnecessary requirements.

3VAC5-60-10. Solicitor salesmen salespersons; records; employment restrictions; wine and beer importer licenses; conditions for exercise of license privileges; suspension or revocation of permits.

A. A solicitor salesman salesperson employed by any out-of-state wholesaler to solicit the sale of or sell wine or beer shall keep complete and accurate records for a period of two years, reflecting all expenses incurred by him the salesperson in connection with the solicitation of the sale of his the salesperson's employer's products and shall, upon request, furnish the board Virginia Alcoholic Beverage Control Authority (authority) with a certified copy of such records.

B. A solicitor salesman salesperson must be 18 years old of age or older to solicit the sale of wine or beer and may not be employed at the same time by an out-of-state wholesaler and by a licensee to solicit the sale of or sell wine or beer.

C. The board may suspend or revoke the permit of a solicitor salesman if it shall have reasonable cause to believe that any cause exists which would justify the board in refusing to issue such person a license, or that such person has violated any provision of this section or committed any other act that would justify the board in suspending or revoking a license.

Before suspending or revoking such permit, the board shall accord the solicitor salesman the same notice, opportunity to be heard, and follow the same administrative procedures accorded a licensee cited for a violation of Title 4.1 of the Code of Virginia.

C. The authority shall approve such forms as are necessary to facilitate compliance with § 4.1-218 of the Code of Virginia. Any document executed by or on behalf of brand owners for the purpose of designating wine or beer importer licensees as the authorized representative of such brand owner must be signed by a person authorized by the brand owner to do so. If such person is not an employee of the brand owner, then such document must be accompanied by a written power of attorney that provides that the person executing the document on behalf of the brand owner is the attorney-in-fact of the brand owner and has full power and authority from the brand owner to execute the required statements on the brand owner's behalf. The authority may approve a limited power of attorney form to effectuate the provisions of this subsection.

D. When filing the list required by § 4.1-218 of the Code of Virginia of all wholesale licensees authorized by a wine or beer importer to distribute brands of wine or beer in the Commonwealth, wine and beer importer licensees shall comply with the provisions of the Wine and Beer Franchise Acts (Chapters 4 (§ 4.1-400 et seq.) and 5 (§ 4.1-500 et seq.) of the Code of Virginia) pertaining to designations of primary areas of responsibility in the case of wholesale wine licensees and designation of sales territories in the case of wholesale beer licensees.

E. In the event that, subsequent to the filing of a brand owner's authorization for a licensed importer to import any brand of wine or beer, the importer makes arrangements to sell and deliver or ship additional brands of wine or beer into the Commonwealth, the privileges of the importer's license shall not extend to such additional brands until the licensee complies with the requirements of § 4.1-218 of the Code of Virginia and this section in relation to each such additional brand. Likewise, if a brand owner who has previously authorized a licensed importer to import one or more of its brands of wine or beer into the Commonwealth should subsequently withdraw from the importer its authority to import such brand, it shall be incumbent upon such importer to make a supplemental filing of its brand owner authorizing documents indicating the deletion of any such brands of wine or beer.

F. The provisions of subsections A through E of this section shall not impair contracts in existence or entered into prior to July 1, 1991, between a licensed importer and the licensed importer's supplier or brand owner.

G. Solicitation of a mixed beverage licensee other than by a permittee of the authority and in the manner authorized by this section shall be prohibited.

H. Permits for mixed beverage solicitor salesperson.

1. No person shall solicit a mixed beverage licensee unless such person has been issued a permit. To obtain a permit, a person shall:

a. Register with the authority by filing an application on such forms as prescribed by the authority;

b. Pay the fee in advance;

c. Submit with the application a letter of authorization from the manufacturer, brand owner, or a duly designated United States agent of each specific brand of spirits that the permittee is authorized to represent on behalf of the manufacturer or brand owner in the Commonwealth; and

d. Be at least 21 years of age.

2. Each permit shall expire yearly on June 30, unless sooner suspended or revoked by the authority.

3. A permit issued pursuant to this chapter shall authorize the permittee to solicit or promote only the brand of spirits that the permittee has been issued written authorization to represent on behalf of the manufacturer, brand owner, or a duly designated United States agent and provided that a letter of authorization from the manufacturer or brand owner to the permittee specifying the brand such permittee is authorized to represent shall be on file with the authority. Until written authorization or a letter of authorization, in a form authorized by the authority, is received and filed with the authority for a particular brand of spirits, there shall be no solicitation or promotion of such product by the permittee. Further, no amendment, withdrawal, or revocation, in whole or in part, of a letter of authorization on file with the authority shall be effective as against the authority until written notice is received and filed with the authority and, until the authority receives such notice, the permittee shall be deemed to be the authorized representative of the manufacturer or brand owner for the brand specified on the most current authorization on file with the authority.

I. Records for mixed beverage solicitor salespersons. A permittee shall keep complete and accurate records of the permittee's solicitation of any mixed beverage licensee for a period of two years, reflecting all expenses incurred by the permittee in connection with the solicitation of the sale of the permittee's employer's products and shall, upon request, furnish the authority with a copy of such records.

J. Permitted activities for mixed beverage solicitor salespersons. Solicitation by a permittee shall be limited to the permittee's authorized brand; may include contact, meetings with, or programs for the benefit of mixed beverage licensees and employees of the licensee on the licensed premises; and, in conjunction with solicitation, a permittee may:

1. Directly or indirectly distribute written educational material, up to one item per retailer and one item per employee per visit, that may not be displayed on the licensed premises; distribute novelty and specialty items bearing spirits advertising not in excess of $10 in wholesale value in quantities equal to the number of employees of the retail establishment present at the time the items are delivered; and provide film or video presentations of spirits that are essentially educational to licensees and employees only and that are not for display or viewing by customers;

2. Provide to a mixed beverage licensee sample servings from containers of spirits and furnish one unopened sample container no larger than 375 milliliters of each brand being promoted by the permittee and not sold by the licensee. Such containers and sample containers shall be purchased at a government store and bear the permittee's permit number and the word "sample" in reasonable sized lettering on the container or sample container label; further, the spirits container shall remain the property of the permittee and may not be left with the licensee, and any sample containers left with the licensee shall not be sold by the licensee;

3. Promote the permittee's authorized brands of spirits at conventions, trade association meetings, or similar gatherings of organizations, a majority of whose membership consists of mixed beverage licensees or spirits representatives for the benefit of members and guests, and shall be limited to:

a. Sample servings from containers of spirits purchased from government stores when the spirits donated are intended for consumption during the gathering;

b. Displays of spirits in closed containers bearing the word "sample" in lettering of reasonable size and informational signs, provided such merchandise is not sold or given away, except as permitted in this section;

c. Distribution of informational brochures, pamphlets, and the like, relating to spirits;

d. Distribution of novelty and specialty items bearing spirits advertising not in excess of $10 in wholesale value;

e. Film or video presentations of spirits that are essentially educational;

f. Displays at the event of the brands being promoted by the permittee;

g. Rental of display booth space if the rental fee is the same as paid by all exhibitors at the event;

h. Provision of hospitality that is independent from activities sponsored by the association or organization holding the event;

i. Purchase of tickets to functions and payment of registration fees if the payments or fees are the same as paid by all attendees, participants, or exhibitors at the event; and

j. Payment for advertisements in programs or brochures issued by the association or organization holding the event if the total payments made for all such advertisements do not exceed $300 per year for any association or organization holding the event; or

4. Provide or offer to provide point-of-sale advertising material to licensees as provided in 3VAC5-20-20 or 3VAC5-30-80.

K. Prohibited activities. A mixed beverage solicitor salesperson permittee shall not:

1. Sell spirits to any licensee, solicit or receive orders for spirits from any licensee, provide or offer to provide cash discounts or cash rebates to any licensee, or negotiate any contract or contract terms for the sale of spirits with a licensee;

2. Discount or offer to discount any merchandise or other alcoholic beverages as an inducement to sell or offer to sell spirits to licensees;

3. Provide or offer to provide gifts, entertainment, or other forms of gratuity to licensees, except that a permittee may provide a licensee "routine business entertainment," as defined in 3VAC5-30-70, subject to the same conditions and limitations that apply to wholesalers and manufacturers under 3VAC5-30-70;

4. Provide or offer to provide any equipment, furniture, fixtures, property, or other thing of value to licensees, except as permitted by this regulation;

5. Purchase or deliver spirits or other alcoholic beverages for or to licensees or provide any services as inducements to licensees, except that this provision shall not preclude the sale or delivery of wine or beer by a licensed wholesaler;

6. Be directly or indirectly employed in the manufacturing, bottling, importing, or wholesaling of spirits and simultaneously be employed by a retail licensee;

7. Solicit licensees on any premises other than on the licensee's licensed premises or at conventions, trade association meetings, or similar gatherings as permitted in subdivision D 3 of this section;

8. Solicit or promote any brand of spirits without having on file with the authority a letter from the manufacturer or brand owner authorizing the permittee to represent such brand in the Commonwealth; or

9. Engage in solicitation of spirits other than as authorized by law.

L. Refusal, suspension, or revocation of permits.

1. The authority may refuse, suspend, or revoke a permit if it has reasonable cause to believe that any cause exists that would justify the authority in refusing to issue such person a license or that such person has violated any provision of this section or committed any other act that would justify the authority in suspending or revoking a license.

2. Before refusing, suspending, or revoking such permit, the authority shall follow the same administrative procedures accorded an applicant or licensee under the Alcoholic Beverage Control Act (§ 4.1-100 et seq. of the Code of Virginia) and regulations of the authority.

3VAC5-60-20. Wines; purchase orders generally; wholesale wine licensees.

A. Purchases of wine between the board, Virginia Alcoholic Beverage Control Authority (authority) licensees or persons outside the Commonwealth shall be executed only on order forms prescribed by the board authority and provided at cost if supplied by the department authority.

B. Wholesale wine licensees shall comply with the following procedures:

1. Purchase orders. A copy of each purchase order for wine and a copy of any change in such order shall be forwarded to the board authority by the wholesale wine licensee at the time the order is placed or changed. Upon receipt of shipment, one copy of such purchase order shall be forwarded to the board authority by the licensee reflecting accurately reflecting the date received and any changes. In lieu of forwarding copies of purchase orders to the board authority, a wholesale licensee may submit a report to the board authority monthly, in a format approved by the board authority, of all purchase orders for the previous month. The report must be submitted to the board authority on or before the 15th day of the succeeding month.

2. Sales in the Commonwealth. Separate invoices shall be used for all nontaxed wine sales in the Commonwealth and a copy of each such invoice shall be furnished to the board authority upon completion of the sale. In lieu of forwarding copies of invoices to the board authority, a wholesale licensee may submit a report to the board authority monthly, in a format approved by the board authority, of all invoices for the previous month. The report must be submitted to the board authority on or before the 15th day of the succeeding month.

3. Out-of-state sales. Separate sales invoices shall be used for wine sold outside the Commonwealth and a copy of each such invoice shall be furnished to the board authority upon completion of the sale. In lieu of forwarding copies of invoices to the board authority, a wholesale licensee may submit a report to the board authority monthly, in a format approved by the board, of all invoices for the previous month. The report must be submitted to the board authority on or before the 15th day of the succeeding month.

4. Peddling. A maximum of two cases or 24 bottles of wine may be peddled to retail licensees during an invoiced delivery, provided that the wholesale wine licensee provides a revised purchase order indicating the additional wine peddled during the transaction.

5. Repossession. Repossession of wine sold to a retailer shall be accomplished on forms prescribed by the board authority and provided at cost if supplied by the board authority, and in compliance with the instructions on the forms.

6. Reports to the board authority. Each month wholesale wine licensees shall, on forms or an electronic system prescribed by the board authority and in accordance with the instructions set forth therein in this section, report to the board authority the purchases and sales made during the preceding month, and the amount of state wine tax collected from retailers pursuant to §§ 4.1-234 and 4.1-235 of the Code of Virginia. Each wholesale wine licensee shall, on forms or an electronic system prescribed by the board authority, on a quarterly basis indicate the quantity of wine on hand at the close of business on the last day of the last month of the preceding quarter based on actual physical inventory by brands. Reports shall be accompanied by remittance for the amount of taxes collected, less any refunds, replacements, or adjustments and shall be postmarked or submitted electronically no later than the 15th of the month, or if the 15th is not a business day falls on a Saturday, Sunday, or state or federal holiday, the next business day thereafter.

3VAC5-60-25. Winery, farm winery, and brewery licenses; reports.

A. On or before the 15th day of each month, each winery, and farm winery licensee, or on or before the 10th day of each month each brewery licensee shall, on forms or an electronic system prescribed by the board Virginia Alcoholic Beverage Control Authority (authority) and in accordance with the instructions set forth therein in this chapter, file a report with the board authority of sales made in the previous calendar month. Tax payment in accordance with § 4.1-234 or 4.1-236 of the Code of Virginia shall be made with the submission of this report.

B. On or before the 10th day of each month, each brewery licensee shall, on forms or an electronic system prescribed by the authority and in accordance with the instructions set forth in this chapter, file a report with the authority of sales made in the previous calendar month. Tax payment in accordance with § 4.1-234 or 4.1-236 of the Code of Virginia shall be made with the submission of this report.

3VAC5-60-30. Procedures for retail off-premises winery licenses; purchase orders; segregation, identification, and storage.

A. Wine offered for sale by a retail off-premises winery licensee shall be procured on order forms prescribed by the board Virginia Alcoholic Beverage Control Authority (authority) and provided at cost if supplied by the board authority. The order shall be accompanied by the correct amount of state wine tax levied by § 4.1-234 of the Code of Virginia, due the Commonwealth in cash, as defined in 3VAC5-30-30.

B. Wine procured for sale at retail shall be segregated from all other wine and stored only at a location on the premises approved by the board authority. The licensee shall place his the licensee's license number and the date of the order on each container of wine so stored for sale at retail. Only wine acquired, segregated, and identified as herein required per the requirements of this section may be offered for sale at retail.

3VAC5-60-40. Indemnifying bond required of wholesale wine licenses.

No wholesale wine license shall be issued unless there shall be on file with the board Virginia Alcoholic Beverage Control Authority (authority) an indemnifying bond running to the Commonwealth in the penalty of $2,500 $10,000, with the licensee as principal and some good and responsible surety company authorized to transact business in the Commonwealth as surety, conditioned upon the faithful compliance with requirements of Title 4.1 the Alcoholic Beverage Control Act (§ 4.1-100 et seq. of the Code of Virginia) and the regulations of the board authority.

A wholesale wine licensee may request in writing a waiver of the surety and the bond by the board authority for good cause shown. If the waiver is granted, the board authority may withdraw such waiver of surety and bond at any time for good cause.

3VAC5-60-50. Records required of distillers, winery licensees, and farm winery licensees; procedures for distilling for another; farm wineries.

A person holding a distiller's, winery, or a farm winery license shall comply with the following procedures:

1. Records. Complete and accurate records shall be kept at the licensee's place of business for a period of two years, which records shall be available during reasonable hours for inspection by any member of the board Virginia Alcoholic Beverage Control Authority (authority) or its special agents. Such records shall include the following information:

a. The amount in liters and alcoholic content of each type of alcoholic beverage manufactured during each calendar month;

b. The amount of alcoholic beverages on hand at the end of each calendar month;

c. Withdrawals of alcoholic beverages for sale to the board authority or licensees;

d. Withdrawals of alcoholic beverages for shipment outside of the Commonwealth, showing:

(1) Name and address of consignee;

(2) Date of shipment; and

(3) Alcoholic content, brand name, type of beverage, size of container, and quantity of shipment;

e. Purchases of cider or wine, including:

(1) Date of purchase;

(2) Name and address of vendor;

(3) Amount of purchase readily calculable in liters; and

(4) Amount of consideration paid; and

f. A distiller employed to distill any alcoholic beverage shall include in his the distiller's records the name and address of his the distiller's employer for such purpose, the amount of grain, fruit products, or other substances delivered by such employer, the type, amount in liters, and alcoholic content of alcoholic beverage distilled therefrom, the place where stored, and the date of the transaction.

2. Distillation for another. A distiller manufacturing spirits for another person shall:

a. At all times during distillation keep segregated and identifiable the grain, fruit, fruit products, or other substances furnished by the owner thereof of those items;

b. Keep the alcoholic beverages distilled for such person segregated in containers bearing the date of distillation, the name of the owner, the amount in liters, and the type and alcoholic content of each container; and

c. Release the alcoholic beverages so distilled to the custody of the owner, or otherwise, only upon a written permit issued by the board authority.

3. Farm wineries. A farm winery shall keep complete, accurate, and separate records of fresh fruits or other agricultural products grown or produced elsewhere and obtained for the purpose of manufacturing wine. Each farm winery must comply with the provisions of § 4.1-219 of the Code of Virginia for its applicable class of winery license relating to production of fresh fruits or other agricultural products. As provided in § 4.1-219, the board authority, upon petition by the Department of Agriculture and Consumer Services, may grant a waiver from the production requirements.

3VAC5-60-60. Wine or beer importer licenses; conditions for exercise of license privileges. (Repealed.)

A. In addition to complying with the requirements of § 4.1-206.1 of the Code of Virginia, pertaining to wine and beer importer licenses, holders of wine and beer importer licenses must comply with § 4.1-218 in order to exercise the privileges of such licenses. The board shall approve such forms as are necessary to facilitate compliance with § 4.1-218. Any document executed by, or on behalf of, brand owners for the purpose of designating wine or beer importer licensees as the authorized representative of such brand owner must be signed by a person authorized by the brand owner to do so. If such person is not an employee of the brand owner, then such document must be accompanied by a written power of attorney which provides that the person executing the document on behalf of the brand owner is the attorney-in-fact of the brand owner and has full power and authority from the brand owner to execute the required statements on its behalf. The board may approve a limited power of attorney form in order to effectuate the aforesaid provision.

B. When filing the list required by § 4.1-218 of the Code of Virginia of all wholesale licensees authorized by a wine or beer importer to distribute brands of wine or beer in the Commonwealth, wine and beer importer licensees shall comply with the provisions of the Wine and Beer Franchise Acts pertaining to designations of primary areas of responsibility in the case of wholesale wine licensees and designation of sales territories in the case of wholesale beer licensees.

C. In the event that, subsequent to the filing of the brand owner's authorization for a licensed importer to import any brand of wine or beer, the importer makes arrangements to sell and deliver or ship additional brands of wine or beer into this Commonwealth, the privileges of its license shall not extend to such additional brands until the licensee complies with the requirements of § 4.1-218 of the Code of Virginia and this section in relation to each such additional brand. Likewise, if the brand owner who has previously authorized a licensed importer to import one or more of its brands of wine or beer into this Commonwealth should, subsequent thereto, withdraw from the importer its authority to import such brand, it shall be incumbent upon such importer to make a supplemental filing of its brand owner authorizing documents indicating the deletion of any such brands of wine or beer.

D. The foregoing provisions of this regulation shall not impair contracts in existence or entered into prior to July 1, 1991, between the licensed importer and its supplier or brand owner.

3VAC5-60-70. Excise taxes; beer and wine coolers.

A. Indemnifying bond required of manufacturers, bottlers, or wholesalers of beer and wine coolers.

1. No license shall be issued to a manufacturer, bottler, or wholesaler of beer or wine coolers unless there shall be on file with the board Virginia Alcoholic Beverage Control Authority (authority), on a form approved or authorized by the board authority, an indemnifying bond running to the Commonwealth in the penalty of not less than $1,000 or more than $100,000, with the licensee as principal and some good and responsible surety company authorized to transact business in the Commonwealth as surety, conditioned upon the payment of the tax imposed by § 4.1-236 of the Code of Virginia and in accordance with the provisions thereof and § 4.1-239 of the Code of Virginia.

2. A manufacturer, bottler, or wholesaler of beer or wine coolers may request in writing a waiver of the surety and the bond by the board authority. The board authority may withdraw such waiver at any time for failure to comply with §§ 4.1-236 and 4.1-239 of the Code of Virginia.

B. Shipment of beer and wine coolers to installations of the armed forces.

1. Installations of the United States Armed Forces shall include, but not be limited to, all United States Army, Navy, Air Force, Marine, Coast Guard, Department of Defense, and Veteran Administration bases, forts, reservations, depots, or other facilities.

2. The direct shipment of beer and wine coolers from points outside the geographical confines of the Commonwealth to installations of the United States Armed Forces located within the geographical confines of the Commonwealth for resale on such installations shall be prohibited. Beer and wine coolers must be shipped to duly licensed Virginia wholesalers who may deliver the same to such installations, but the sale of such beer and wine coolers so delivered shall be exempt from the excise tax on beer and wine coolers only if the sale thereof meets the exemption requirements of § 4.1-236 of the Code of Virginia.

C. Filing of monthly report and payment of tax falling due on Saturday, Sunday, or legal state or federal holiday; filing or payment by mail.

1. When the last day on which a monthly report may be filed or a tax may be paid without penalty or interest falls on a Saturday, Sunday, or legal state or federal holiday, then any report required by § 4.1-239 of the Code of Virginia may be filed or such payment may be made without penalty or interest on the next succeeding business day.

2. When remittance of a monthly report or a tax payment is made by mail, receipt of such report or payment by the person with whom such report is required to be filed or to whom such payment is required to be made, in a sealed envelope bearing a postmark on or before midnight of the day such report is required to be filed or such payment made without penalty or interest, shall constitute filing and payment as if such report had been filed or such payment made before the close of business on the last day on which such report may be filed or such tax may be paid without penalty or interest.

D. Rate of interest. Unless otherwise specifically provided, interest on omitted taxes and refunds under the excise tax provisions of Title 4.1 of the Code of Virginia shall be computed in the same manner specified in § 58.1-15 of the Code of Virginia.

3VAC5-60-80. Solicitation of mixed beverage licensees by representatives of manufacturers, etc., of spirits. (Repealed.)

A. Generally. This section applies to the solicitation, directly or indirectly, of a mixed beverage licensee to sell or offer for sale spirits. Solicitation of a mixed beverage licensee for such purpose other than by a permittee of the board and in the manner authorized by this section shall be prohibited.

B. Permits.

1. No person shall solicit a mixed beverage licensee unless he has been issued a permit. To obtain a permit, a person shall:

a. Register with the board by filing an application on such forms as prescribed by the board;

b. Pay in advance the fee;

c. Submit with the application a letter of authorization from the manufacturer, brand owner or its duly designated United States agent, of each specific brand or brands of spirits which the permittee is authorized to represent on behalf of the manufacturer or brand owner in the Commonwealth; and

d. Be an individual at least 21 years of age.

2. Each permit shall expire yearly on June 30, unless sooner suspended or revoked by the board.

3. A permit hereunder shall authorize the permittee to solicit or promote only the brand or brands of spirits for which the permittee has been issued written authorization to represent on behalf of the manufacturer, brand owner, or its duly designated United States agent and provided that a letter of authorization from the manufacturer or brand owner to the permittee specifying the brand or brands he is authorized to represent shall be on file with the board. Until written authorization or a letter of authorization, in a form authorized by the board, is received and filed with the board for a particular brand or brands of spirits, there shall be no solicitation or promotion of such product by the permittee. Further, no amendment, withdrawal or revocation, in whole or in part, of a letter of authorization on file with the board shall be effective as against the board until written notice is received and filed with the board, and, until the board receives such notice, the permittee shall be deemed to be the authorized representative of the manufacturer or brand owner for the brand or brands specified on the most current authorization on file with the board.

C. Records. A permittee shall keep complete and accurate records of his solicitation of any mixed beverage licensee for a period of two years, reflecting all expenses incurred by him in connection with the solicitation of the sale of his employer's products and shall, upon request, furnish the board with a copy of such records.

D. Permitted activities. Solicitation by a permittee shall be limited to his authorized brand or brands, may include contact, meetings with, or programs for the benefit of mixed beverage licensees and employees thereof on the licensed premises, and in conjunction with solicitation, a permittee may:

1. Distribute directly or indirectly written educational material (one item per retailer and one item per employee, per visit) which may not be displayed on the licensed premises; distribute novelty and specialty items bearing spirits advertising not in excess of $10 in wholesale value (in quantities equal to the number of employees of the retail establishment present at the time the items are delivered); and provide film or video presentations of spirits which are essentially educational to licensees and their employees only and are not for display or viewing by customers;

2. Provide to a mixed beverage licensee sample servings from containers of spirits and furnish one, unopened, sample container no larger than 375 milliliters of each brand being promoted by the permittee and not sold by the licensee; such containers and sample containers shall be purchased at a government store and bear the permittee's permit number and the word "sample" in reasonable sized lettering on the container or sample container label; further, the spirits container shall remain the property of the permittee and may not be left with the licensee, and any sample containers left with the licensee shall not be sold by the licensee;

3. Promote his authorized brands of spirits at conventions, trade association meetings, or similar gatherings of organizations, a majority of whose membership consists of mixed beverage licensees or spirits representatives for the benefit of their members and guests, and shall be limited as follows:

a. To sample servings from containers of spirits purchased from government stores when the spirits donated are intended for consumption during the gathering;

b. To displays of spirits in closed containers bearing the word "sample" in lettering of reasonable size and informational signs provided such merchandise is not sold or given away except as permitted in this section;

c. To distribution of informational brochures, pamphlets and the like, relating to spirits;

d. To distribution of novelty and specialty items bearing spirits advertising not in excess of $10 in wholesale value;

e. To film or video presentations of spirits which are essentially educational;

f. To display at the event the brands being promoted by the permittee;

g. To rent display booth space if the rental fee is the same as paid by all exhibitors at the event;

h. To provide its own hospitality, which is independent from activities sponsored by the association or organization holding the event;

i. To purchase tickets to functions and pay registration fees if the payments or fees are the same as paid by all attendees, participants, or exhibitors at the event; and

j. To make payments for advertisements in programs or brochures issued by the association or organization holding the event if the total payments made for all such advertisements do not exceed $300 per year for any association or organization holding the event; or

4. Provide or offer to provide point-of-sale advertising material to licensees as provided in 3VAC5-20-20 or 3VAC5-30-80.

E. Prohibited activities. A permittee shall not:

1. Sell spirits to any licensee, solicit or receive orders for spirits from any licensee, provide or offer to provide cash discounts or cash rebates to any licensee, or to negotiate any contract or contract terms for the sale of spirits with a licensee;

2. Discount or offer to discount any merchandise or other alcoholic beverages as an inducement to sell or offer to sell spirits to licensees;

3. Provide or offer to provide gifts, entertainment or other forms of gratuity to licensees except that a permittee may provide a licensee "routine business entertainment," as defined in 3VAC5-30-70, subject to the same conditions and limitations that apply to wholesalers and manufacturers under that section;

4. Provide or offer to provide any equipment, furniture, fixtures, property or other thing of value to licensees except as permitted by this regulation;

5. Purchase or deliver spirits or other alcoholic beverages for or to licensees or provide any services as inducements to licensees, except that this provision shall not preclude the sale or delivery of wine or beer by a licensed wholesaler;

6. Be employed directly or indirectly in the manufacturing, bottling, importing or wholesaling of spirits and simultaneously be employed by a retail licensee;

7. Solicit licensees on any premises other than on their licensed premises or at conventions, trade association meetings or similar gatherings as permitted in subdivision D 3 of this section;

8. Solicit or promote any brand or brands of spirits without having on file with the board a letter from the manufacturer or brand owner authorizing the permittee to represent such brand or brands in the Commonwealth; or

9. Engage in solicitation of spirits other than as authorized by law.

F. Refusal, suspension or revocation of permits.

1. The board may refuse, suspend, or revoke a permit if it shall have reasonable cause to believe that any cause exists that would justify the board in refusing to issue such person a license, or that such person has violated any provision of this section or committed any other act that would justify the board in suspending or revoking a license.

2. Before refusing, suspending, or revoking such permit, the board shall follow the same administrative procedures accorded an applicant or licensee under Title 4.1 of the Code of Virginia and regulations of the board.

3VAC5-60-90. Sunday deliveries by wholesalers prohibited; exceptions. (Repealed.)

Persons licensed to sell alcoholic beverages at wholesale shall make no delivery to retail purchasers on Sunday, except to boats sailing for a port of call outside of the Commonwealth, or to banquet licensees.

3VAC5-60-100. Employees Certain employees of manufacturers and wholesalers; approval by the Virginia Alcoholic Beverage Control Authority.

If a person licensed as a manufacturer, importer, or wholesaler of alcoholic beverages wishes to employ a person who has committed an act that would justify the board Virginia Alcoholic Beverage Control Authority (authority) in suspending or revoking a license under subdivision 1 i h of § 4.1-225 of the Code of Virginia, the licensee may apply to the board authority for approval of such employment. The board will cause the Bureau of Law Enforcement Operations to conduct an investigation into the suitability of the person for employment and recommend approval or disapproval. Before disapproving the employment of a person, the board authority shall accord him the person the same notice and opportunity to be heard and follow the same administrative procedures accorded a licensee cited for a violation of Title 4.1 of the Code of Virginia.