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: June 29, 2016.

Effective Date: July 15, 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: Section 4.1-103 of the Code of Virginia authorizes the Alcoholic Beverage Control Board to promulgate regulations in accordance with the Administrative Process Act (§ 2.2-4000 et seq. of the Code of Virginia) and § 4.1-111 of the Code of Virginia. Section 4.1-111 also provides the board with broad authority to promulgate reasonable regulations necessary to carry out the provisions of Title 4.1 of the Code of Virginia.

Purpose: The purpose of this proposal is to amend 3VAC5-70-100 to conform to the language found in §§ 4.1-325 A 14 and 4.1-325.2 A of the Code of Virginia, which authorizes representatives of manufacturers and wholesalers to provide samples to retail licensees. Currently, 3VAC5-70-100 authorizes wholesale licensees as the only entities that can provide samples to retail licensees. The amendments enhance public safety by placing limitations on the outlined practices in order to prevent overconsumption by consumers.

Rationale for Using Fast-Track Rulemaking Process: This proposal is expected to be noncontroversial as both the wholesale and manufacturing segments of the alcoholic beverage industry are in support of the amendment.

Substance: The proposed amendment provides that representatives of manufacturers and importers of wine and beer products will be permitted to provide samples of wine and beer to retail licensees in addition to wholesale licensees.

Issues: The primary advantage for the agency and regulated community is to amend the current language of 3VAC5-70-100 to bring it into compliance with §§ 4.1-325 A 14 and 4.1-325.2 A of the Code of Virginia. In addition the agency is proactively being responsive to segments of the regulated community that are supportive of this amendment. 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. The Alcoholic Beverage Control Board (Board) proposes to allow representatives of wineries, farm wineries, breweries and beer and wine importers to give away samples of wine or beer to retail licensees that do not currently sell the products sampled. The proposed regulation will allow such sample gifts so long as the samples are obtained from wholesalers or retail licensees located in the Commonwealth.

Result of Analysis. Benefits likely outweigh costs for this proposed regulatory change.

Estimated Economic Impact. Current regulation allows licensed wholesalers to give samples of their wine or beer to retail licensees so long as 1) the retail licensee does not already carry the product being sampled, 2) the product is in a container that does not exceed 52 fluid oz., or 1.5 liters, in volume, 3) the retail licensee does not sell the sample, 4) the sample "bears the word 'Sample' in letters of a reasonable size," and 5) the sample comes from the wholesaler's own stock (to assure that all excise tax has been paid). The Board now proposes to also allow representatives of wineries, farm wineries, breweries and beer and wine importers to also give samples to retail licensees so long as they follow all the same rules as wholesalers with one change; because representatives would not have stocks of wine and beer for which excise taxes have already been paid, the Board proposes to allow samples given to retail licensees by these entities to be obtained either from licensed wholesalers or from retail licensees in the Commonwealth.

This change will benefit wineries, farm wineries, breweries and wine and beer importers as it will allow them to directly market their products to retail licensees. The change will also likely benefit retail licensees as a greater number of businesses will be authorized to give them samples.

Businesses and Entities Affected. This proposed regulatory change will affect all manufacturers, wholesalers and retailers of beer and wine. Board staff reports that there are more than 1,000 entities that will be affected and that all of those entities are small businesses.

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

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

Effects on the Use and Value of Private Property. To the extent that this proposed change allows wineries, farm wineries, breweries and beer and wine importers to more effectively market their products and increase their revenues, the value of these businesses may increase.

Real Estate Development Costs. This proposed regulatory change is unlikely to affect real estate development costs in the Commonwealth.

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. Small businesses are unlikely to incur any costs on account of this proposed regulatory change.

Alternative Method that Minimizes Adverse Impact. Small businesses are unlikely to incur any costs on account of this proposed regulatory change.

Adverse Impacts:

Businesses. Businesses are unlikely to incur any costs on account of this proposed regulatory change.

Localities. Localities in the Commonwealth are unlikely to see any adverse impacts on account of this proposed regulatory change.

Other Entities. No other entities are likely to be adversely affected by this proposed change.

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

Summary:

The amendments allow representatives of wineries, farm wineries, breweries, beer importers, and wine importers to give away samples of wine or beer to retail licensees that do not currently sell the products sampled. The amendments permit such sample gifts provided that the samples are obtained from wholesalers or retail licensees located in the Commonwealth.

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 representative of a wholesaler, winery, brewery, or importer 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, if (i) the licensee is licensed to sell such product, 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 (ii) 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. Samples must be obtained from licensed wholesalers or purchased from retail licensees in the Commmonwealth.

3. 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. 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. Conditions. Exceptions authorized by subdivisions 3 b and 4 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.