Title of Regulation: 3VAC5-50. Retail Operations (amending 3VAC5-50-60).

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 19, 2013.

Agency Contact: W. Curtis Coleburn III, Chief Operating Officer, Department of Alcoholic Beverage Control, 2901 Hermitage Road, Richmond, VA 23220, telephone (804) 213-4409, FAX (804) 213-4411, TTY (804) 213-4687, or email curtis.coleburn@abc.virginia.gov.

Basis: Section 4.1-111 of the Code of Virginia was amended by Chapter 481 of the 2010 Acts of Assembly by adding subdivision B 11, which requires the board to promulgate regulations that prescribe the terms and conditions under which mixed beverage licensees may infuse, store, and sell flavored distilled spirits.

Purpose: The proposed regulatory action is essential to protect the health, safety, or welfare of citizens by ensuring that licensees that infuse distilled spirits with flavoring agents comply with food safety regulations and encouraging temperance by maintaining the food-to-beverage sale ratio required of mixed beverage licensees.

Substance: A new subdivision F will be added to 3VAC5-50-60 allowing mixed beverage restaurants to infuse spirits either in the original container or in another container of up to two liters. The mixed beverage stamp must remain affixed to spirits infused in the original container, and those placed in another container must be appropriately labeled. Accurate records must be maintained of all spirits used in infusions. Restaurants creating infusions must comply with food safety regulations.

Issues: The primary advantage of this action is to allow mixed beverage restaurants the flexibility to produce their own flavor-infused distilled spirits for the production of cocktails. It poses no disadvantages to the public or the Commonwealth.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Alcoholic Beverage Control Board (ABC) proposes to amend its regulations so mixed beverage restaurants that are licensed by ABC may infuse, store and sell flavored distilled spirits.

Result of Analysis. Benefits likely outweigh costs for implementing these proposed changes.

Estimated Economic Impact. Currently, ABC does not allow restaurants that serve mixed alcoholic beverages to infuse flavor into spirits on premises. ABC now proposes to allow restaurants to infuse, store and sell flavored distilled spirits so long as the flavored spirits are either infused in the original spirits container (the mixed beverage stamp must remain affixed to the bottle in this case) or infused in a container not larger than two liters in volume. If the spirits are infused in a container other than the original spirits container, the container must be labeled with the date of the infusion and the brand and amount of spirits used. Restaurants that infuse spirits will have to comply with all applicable state and federal food safety regulations.

Because this regulation does not require restaurants to do anything new, no affected entity is likely to incur any costs on account of this proposed regulatory action. Affected businesses will benefit from being able to infuse their own spirits should they choose to do so.

Businesses and Entities Affected. ABC reports that 4,789 businesses would be potentially affected by this proposed regulatory change; 90% of these entities would meet the Commonwealth's definition of small business.

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

Projected Impact on Employment. This proposed regulatory action is unlikely to have any effect on employment in the Commonwealth.

Effects on the Use and Value of Private Property. These proposed regulatory changes are unlikely to affect the use or value of private property in the Commonwealth.

Small Businesses: Costs and Other Effects. No small business is likely to incur any costs on account of this regulatory action.

Small Businesses: Alternative Method that Minimizes Adverse Impact. No small business is likely 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 14 (10). 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 Economic Impact Analysis: The Alcoholic Beverage Control Board concurs with the economic impact analysis of the Department of Planning and Budget.

Summary:

This proposed regulatory action amends the general procedures for mixed beverage restaurants by (i) prescribing the labeling, container size, and recordkeeping requirements for infusing, storing, and selling flavored distilled spirits and (ii) requiring compliance with all applicable state and federal food safety requirements.

3VAC5-50-60. Procedures for mixed beverage licensees generally; mixed beverage restaurant licensees; sales of spirits in closed containers.

A. No mixed beverage restaurant or carrier licensee shall:

1. Prepare, other than in frozen drink dispensers of types approved by the board, or sell any mixed beverage except pursuant to a patron's order and immediately preceding delivery to him.

2. Serve as one drink the entire contents of a container of spirits in its original container for on-premises consumption except as provided by subsections C, D, and E.

3. Sell any mixed beverage to which alcohol has been added.

B. No mixed beverage restaurant licensee shall:

1. Allow to be kept upon the licensed premises any container of alcoholic beverages of a type authorized to be purchased under his license that does not bear the required mixed beverage stamp imprinted with his license number and purchase report number.

2. Use in the preparation of a mixed beverage any alcoholic beverage not purchased from the board or a wholesale wine licensee.

3. Fail to obliterate the mixed beverage stamp immediately when any container of spirits is emptied.

4. Allow any patron to possess more than two drinks of mixed beverages at any one time.

C. If a restaurant for which a mixed beverage restaurant license has been issued under § 4.1-210 of the Code of Virginia is located on the premises of a hotel or motel, whether the hotel or motel be under the same or different ownership, sales of mixed beverages, including sales of spirits packaged in original closed containers purchased from the board, as well as other alcoholic beverages, for consumption in bedrooms and private rooms of such hotel or motel, may be made by the licensee subject to the following conditions in addition to other applicable laws:

1. Spirits sold by the drink as mixed beverages or in original closed containers must have been purchased under the mixed beverage restaurant license upon purchase forms provided by the board;

2. Delivery of sales of mixed beverages and spirits in original closed containers shall be made only in the bedroom of the registered guest or to the sponsoring group in the private room of a scheduled function. This section shall not be construed to prohibit a licensee catering a scheduled private function from delivering mixed beverage drinks to guests in attendance at such function;

3. Receipts from the sale of mixed beverages and spirits sold in original closed containers, as well as other alcoholic beverages, shall be included in the gross receipts from sales of all such merchandise made by the licensee; and

4. Complete and accurate records of sales of mixed beverages and sales of spirits in original closed containers to registered guests in bedrooms and to sponsors of scheduled private functions in private rooms shall be kept separate and apart from records of all mixed beverage sales.

D. Carrier licensees may serve miniatures not in excess of two fluid ounces or 50 milliliters, in their original containers, for on-premises consumption.

E. A mixed beverage restaurant may serve as one drink the entire contents of a container of soju in its original container for on-premises consumption under the following conditions:

1. The container may be no larger than 375 milliliters.

2. Each container of soju served must be served for consumption by at least two patrons legally eligible to consume alcoholic beverages.

F. A mixed beverage restaurant licensee may infuse, store, and sell flavored distilled spirits under the following circumstances:

1. If infused in the original spirits container, the mixed beverage stamp must remain affixed to the bottle.

2. If infused in a container other than the original spirits container, the substitute container, which shall not exceed two liters in volume, will be labeled with the following information:

a. Date of infusion;

b. Brand of spirits; and

c. Amount of spirits used.

3. Accurate records must be kept by the mixed beverage licensee as to the spirits used in any spirits infusion process.

4. Licensees infusing distilled spirits shall comply with all applicable state and federal food safety regulations.