Title of Regulation: 3VAC5-70. Other Provisions (adding 3VAC5-70-225).

Statutory Authority: §§ 4.1-103, 4.1-111 and 4.1-212.1 of the Code of Virginia.

Public Hearing Information:

March 18, 2009 - 10 a.m. - Department of Alcoholic Beverage Control, 2901 Hermitage Road, Richmond, VA

Public Comments: Public comments may be submitted until 5 p.m. on April 17, 2009.

Agency Contact: Jeffrey L. Painter, Legislative and Regulatory Coordinator, Department of Alcoholic Beverage Control, P.O. Box 27491, Richmond, VA 23261, telephone (804) 213-4621, FAX (804) 213-4411, TTY (804) 213-4687, or email jeffrey.painter@abc.virginia.gov.

Basis: Title 4.1 of the Code of Virginia gives the Alcoholic Beverage Control Board general authority to regulate the manufacture, distribution and sale of alcoholic beverages within the Commonwealth, including the authority to promulgate regulations that it deems necessary to carry out the provisions of Title 4.1 of the Code of Virginia, in accordance with the Administrative Process Act. Section 4.1-212.1, which creates the delivery permit, provides that the board may adopt such regulations as it reasonably deems necessary to implement the provisions of this section. Such regulations shall include provisions that require (i) the recipient to demonstrate, upon delivery, that he is at least 21 years of age; and (ii) the recipient to sign an electronic or paper form or other acknowledgement of receipt as approved by the board.

Purpose: By statute, delivery permittees are required to require recipients to demonstrate that they are at least 21 years of age, maintain records of their deliveries, report deliveries monthly to the board, collect wine or beer taxes and state sales taxes on each sale, and forward collected taxes to the appropriate state agency. The goal of the regulation is to provide the administrative framework for carrying out the legislation’s requirements. The proposed regulatory action is essential to ensure that alcoholic beverages are only delivered to adults of legal drinking age, and that the appropriate taxes are collected on all such beverages sold in the Commonwealth.

Substance: This action creates a new section, setting forth regulations applicable to holders of permits authorizing the delivery of wine or beer, pursuant to § 4.1-212.1 of the Code of Virginia. The new regulation specifies the application process, recordkeeping, and reporting requirements for permit holders.

Issues: The primary advantages of the proposed regulatory action to the public, the agency, and the Commonwealth are the collection of appropriate taxes on alcoholic beverages and the prevention of the delivery of alcoholic beverages to those under the legal age. The primary disadvantage of the proposed regulatory action will be minimal recordkeeping and reporting requirements for delivery permit holders. There are no other disadvantages to the public or the Commonwealth.

The Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. Pursuant to Chapters 99 and 799 of the 2007 Acts of the General Assembly, the Alcoholic Beverage Control Board (ABC) proposes to promulgate a new regulation for a new, statute-created, delivery permit.

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

Estimated Economic Impact. In 2007, the General Assembly passed legislation that allowed wineries, farm wineries and breweries, as well as wine and beer retailers, to apply for delivery permits. These permits normally allow delivery of up to four cases of wine and/or beer to a customer at one time; the statute allows delivery of more than four cases of beer and/or wine so long as the permittee notifies ABC in writing at least one day before the delivery is made. By statute, permittees must verify that anyone accepting delivery of wine or beer is at least 21 years old. Permittees must also collect state wine or beer and sales taxes and forward tax monies to the appropriate state agency, maintain delivery records and report deliveries to ABC on a monthly basis.

Earlier this year, ABC promulgated an emergency regulation to implement these statutory changes. This proposed regulation, once promulgated, will replace the emergency regulation that is set to expire on January 2, 2009.

This proposed regulation does not vary in any substantive way from its originating statute except that it lists the information that permittees must include in their monthly reports to ABC. These reports must include:

• The number of containers delivered,

• Volume of each container delivered,

• Brand of each container delivered,

• Names and addresses of recipients of each delivery,

• Signature of any recipients and

• The price charged for the wine or beer delivered.

All of the information that ABC is asking permittees to include is likely necessary to verify that permittees are in compliance with the Code of Virginia; having the number of containers listed in reports, for instance, will allow ABC to verify that permittees are not delivering more than four cases of wine and/or beer at a time to anyone person without notifying ABC in writing before delivery. Consequently, regulated entities are unlikely to incur any additional costs on account of this proposed regulation. Regulated entities are likely to benefit from knowing exactly what they are expected to report to ABC as this will reduce the chances of them accidentally failing to comply with their lawful obligations.

Businesses and Entities Affected. ABC reports that over 7,000 businesses in Virginia are eligible to apply for delivery permits but only 241 businesses have applied for and received such permits.

Localities Particularly Affected. No locality will be particularly affected by this proposed regulatory action.

Projected Impact on Employment. This regulatory action will likely have no impact on employment in the Commonwealth.

Effects on the Use and Value of Private Property. This regulatory action will likely have no effect on the use or value of private property in the Commonwealth.

Small Businesses: Costs and Other Effects. Small businesses in the Commonwealth are unlikely to incur any costs on account of this regulatory action.

Small Businesses: Alternative Method that Minimizes Adverse Impact. Small businesses in the Commonwealth are unlikely to incur any costs on account of this regulatory action.

Real Estate Development Costs. This regulatory action will likely have no effect on real estate development costs in the Commonwealth.

Legal Mandate. 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 Administrative Process Act and Executive Order Number 36 (06). Section 2.2-4007.04 requires that such economic impact analyses include, but need not be limited to, the projected number of businesses or other entities to whom the regulation would apply, the identity of any localities and types of businesses or other entities particularly affected, the projected number of persons and employment positions to be affected, the projected costs to affected businesses or entities to implement or comply with the regulation, and the impact on the use and value of private property. Further, if the proposed regulation has adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include (i) an identification and estimate of the number of small businesses subject to the regulation; (ii) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the regulation, including the type of professional skills necessary for preparing required reports and other documents; (iii) a statement of the probable effect of the regulation on affected small businesses; and (iv) a description of any less intrusive or less costly alternative methods of achieving the purpose of the regulation. The analysis presented above represents DPB’s best estimate of these economic impacts.

Agency's Response to the Department of Planning and Budget's Economic Impact Analysis: The Alcoholic Beverage Control Board concurs with the economic impact analysis of the Department of Planning and Budget.

Summary:

Chapters 99 and 799 of the 2007 Acts of the General Assembly are identical enactments, creating a new delivery permit that may be issued by the Department of Alcoholic Beverage Control to certain alcoholic beverage manufacturers or retailers. The proposed regulation details the application, recordkeeping, and reporting requirements for delivery permittees.

3VAC5-70-225. Delivery permits; application process; records and reports.

A. Any person or entity qualified for a delivery permit pursuant to § 4.1-212.1 of the Code of Virginia must apply for such permit by submitting Form 805-52, Retail License Application. The applicant shall attach (i) a photocopy of its current license as a winery, farm winery, brewery, or alcoholic beverage retailer that is authorized to sell wine or beer at retail for off-premises consumption, issued by the appropriate authority for the location from which deliveries will be made and (ii) evidence of the applicant's registration with the Virginia Department of Taxation for the collection of Virginia retail sales tax.

B. Delivery permittees shall maintain for two years complete and accurate records of all deliveries made under the privileges of such permits, including for each delivery:

1. Number of containers delivered;

2. Volume of each container delivered;

3. Brand of each container delivered;

4. Names and addresses of recipients;

5. Signature of recipient; and

6. Price charged for the wine or beer delivered.

The records required by this subsection shall be made available for inspection and copying by any member of the board or its special agents upon request.

C. On or before the 15th day of each month, each delivery permittee shall file with the Supervisor, Tax Management Section, a report of activity for the previous calendar month, if any deliveries were made during the month. Such report shall include the following information for each delivery:

1. Number of containers delivered;

2. Volume of each container delivered;

3. Brand of each container delivered;

4. Names and addresses of recipients; and

5. Price charged for the wine or beer delivered.

Unless previously paid, payment of the appropriate beer or wine tax imposed by § 4.1-234 or 4.1-236 of the Code of Virginia shall accompany each report. If no wine or beer was sold and delivered in any month, the permittee shall not be required to submit a report for that month; however, every permittee must submit a report no less frequently than once every 12 months even if no sales or deliveries have been made in the preceding 12 months.

D. All deliveries by holders of delivery permits shall be performed by the owner or any agent, officer, director, shareholder, or employee of the permittee.

E. No more than four cases of wine nor more than four cases of beer may be delivered at one time to any person, except that a permittee may deliver more than four cases of wine or more than four cases of beer if he notifies the Supervisor, Tax Management Section, in writing at least one business day in advance of such delivery. Any notice given pursuant to this section shall include the number of containers to be delivered, the volume of each container to be delivered, the brand of each container to be delivered, and the name and address of the intended recipient.

F. When attempting to deliver wine or beer pursuant to a delivery permit, an owner, agent, officer, director, shareholder or employee of the permittee shall require:

1. The recipient to demonstrate, upon delivery, that he is at least 21 years of age; and

2. The recipient to sign an electronic or paper form or other acknowledgment of receipt that allows the maintenance of the records required by this section.

The owner, agent, officer, director, shareholder or employee of the permittee shall refuse delivery when the proposed recipient appears to be under the age of 21 years and refuses to present valid identifications. All permittees delivering wine or beer pursuant to this section shall affix a conspicuous notice in 16-point type or larger to the outside of each package of wine or beer delivered in the Commonwealth, in a conspicuous location stating: "CONTAINS ALCOHOLIC BEVERAGES; SIGNATURE OF PERSON AGED 21 YEARS OR OLDER REQUIRED FOR DELIVERY." Such notice shall also contain the delivery permit number of the delivering permittee.

FORMS (3VAC5-70)

Order and Permit for Transportation of Alcohol, #703-69 (eff. 11/87).

Order and Permit for Transportation of Alcoholic Beverages, #703-73.

Mixed Beverage Annual Review-Instructions for Completion, #805-44 (rev. 11/06).

Application for Off Premises Keg Permit, #805-45 (eff. 1/93).

Retail License Application, #805-52 (rev. 7/08).

Application for Grain Alcohol Permit, #805-75.

Special Event License Application Addendum-Notice to Special Event Licenses Applicants, Form SE-1 (rev.08/02).

Statement of Income & Expenses for Special Event Licenses (with instructions), Form SE-2 (rev.08/02).