Title of Regulation: 3VAC5-50. Retail Operations (adding 3VAC5-50-250).

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: March 20, 2020.

Agency Contact: LaTonya D. Hucks-Watkins, Legal Liaison, Virginia Alcoholic Beverage Control Authority, 2901 Hermitage Road, Richmond, VA 23220, telephone (804) 213-4698, or email latonya.hucks-watkins@abc.virginia.gov.

Basis: Section 4.1-101 of the Code of Virginia establishes the Virginia Alcoholic Beverage Control Authority, and § 4.1-101.01 of the Code of Virginia establishes the Board of Directors of the Authority. Section 4.1-103 of the Code of Virginia enumerates the powers of the board, which include the authority to adopt regulations and to do all acts necessary or advisable to carry out the purposes of The Alcoholic Beverage Control Act (§ 4.1-100 et seq. of the Code of Virginia). Subdivision 7 of § 4.1-103 of the Code of Virginia states that the board may delegate or assign any duty or task to be performed by the authority to any officer or employee of the authority. Subdivision 24 of § 4.1-103 permits the 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, which provides the board with the authority to adopt regulations that it deems reasonable to carry out the provisions of the Alcoholic Beverage Control Act and to amend or repeal such regulations.

Purpose: The purpose of the regulation is to provide a definition of "confectionery" and to provide clarification as to the restrictions regarding the alcohol content, prohibition of sales to those younger than 21 years of age, and labeling requirements for confections containing alcohol.

Substance: The emergency regulation currently effective until June 29, 2020, reads:

3VAC5-50-250. Confectionery; definition; restrictions; labeling.

A. "Confectionery" means a general class of sweet foods and edibles, including baked goods and candies, having an alcohol content not more than 5.0% by volume.

B. Any alcohol contained in such confectionery shall not be in liquid form at the time such confectionery is sold. Such alcohol shall be fully integrated or blended into the confectionery product.

C. Any such confectionery shall only be sold to those individuals who can lawfully consume alcohol.

D. Any establishment licensed to sell confectioneries for off-premises consumption shall properly label the product with such label including:

1. Notice that the product contains alcohol;

2. Notice that the product can only be consumed off premises; and

3. Warning that the product should not be consumed by anyone under the age of 21.

The only difference between the emergency regulation and the proposed regulation is removal of the phrase "a general class of sweet foods and edibles including" in the definition of "confectionery." In the proposed regulation, "confectionery" is defined as "baked goods and candies having an alcohol content not more than 5.0% by volume."

Issues: The primary advantage to the public, the agency, and the Commonwealth is that the emergency regulation will be replaced with a permanent regulation. The permanent regulation is not confusing; the provisions are straightforward. The agency does not see any disadvantages to the public or the agency based on the proposed change.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. Pursuant to 2018 legislation, the Virginia Alcoholic Beverage Control Board of Directors (Board) proposes to establish a definition for "confectionery" and labeling requirements for such confectionery. This proposed permanent regulation replaces an emergency regulation that became effective on July 1, 2018 and expires on December 30, 2019.

Background. Chapters 173² and 334³ of the 2018 Acts of Assembly created a confectionery license, which authorizes the licensee to prepare and sell on the licensed premises (for off-premises consumption) confectionery that contains five percent or less alcohol by volume. The Acts also stated that any alcohol contained in such confectionery shall not be in liquid form at the time such confectionery is sold.

An enactment clause in the legislation specified that the Board promulgate regulations to implement the provisions of the act, to include a definition of the term "confectionery" and labeling requirements for such confectionery. The Board proposes to define "confectionery" as "baked goods and candies, having an alcohol content not more than 5.0% by volume." Further, the Board proposes to require that the confectionaries be labeled with: 1) notice that the product contains alcohol, 2) notice that the product can only be consumed off premises, and 3) a warning that the product should not be consumed by anyone under the age of 21.

Estimated Benefits and Costs. Prior to the legislation and emergency regulation, it was illegal to sell confectioneries in the Commonwealth. Pursuant to Code of Virginia § 4.1-302⁴ and § 4.1-100,⁵ it would have been a Class 1 misdemeanor. Allowing the sale of confectionaries through licensure is beneficial in that consumers gain access to products that they may enjoy, and businesses gain the opportunity to sell potentially profitable additional products. The proposal to require that the labeling specify that the products contain alcohol is beneficial in that it greatly reduces the likelihood that people who would prefer to not consume alcohol-containing foods, or should not consume, would consume these products by mistake.

The legislation specified that the Board include labeling requirements. Given that labeling is required, the Board's proposed labeling requirements do not substantively add costs.

Businesses and Other Entities Affected. The proposal affects firms who may wish to produce and/or sell confectionaries, as well as consumers. Since the emergency regulation has been in effect (July 1, 2018), five firms have obtained confectionery licensure.

Localities⁶ Affected.⁷ The legislation and proposed regulation allow confectioneries to be prepared and sold with a license throughout the Commonwealth. Thus far, through the emergency regulation, there are five licensees. They are located in the Cities of Martinsville and Richmond (2), and the Counties of Henrico and York. The proposal does not produce costs for local governments.

Projected Impact on Employment. Allowing the sale of confectioneries through licensure may have a small positive impact on employment because more workers may be needed for the production and sale of the newly legal products.

Effects on the Use and Value of Private Property. Allowing the sale of confectioneries through licensure enables firms to gain the opportunity to sell potentially profitable additional products. This would likely increase the value of some such firms. The proposal does not appear to directly affect real estate development costs.

Adverse Effect on Small Businesses:⁸ The proposed regulation does not appear to adversely affect small businesses.

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²See http://leg1.state.va.us/cgi-bin/legp504.exe?181+ful+CHAP0173

³See http://leg1.state.va.us/cgi-bin/legp504.exe?181+ful+CHAP0334

⁴See https://law.lis.virginia.gov/vacode/title4.1/chapter3/section4.1-302/

⁵Definition of "Alcoholic beverages" includes solids containing one-half of one percent or more of alcohol by volume. See https://law.lis.virginia.gov/vacode/title4.1/chapter1/section4.1-100/

⁶"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.

⁷§ 2.2-4007.04 defines "particularly affected" as bearing disproportionate material impact.

⁸Pursuant 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."

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

Summary:

The proposed action implements the confectionery license created by Chapters 173 and 334 of the 2018 Acts of Assembly, which authorizes the licensee to prepare and sell confectionery on the licensed premises for off-premises consumption. The proposed provisions require that the confectionery contain 5.0% or less alcohol by volume and that any alcohol contained in such confectionery shall not be in liquid form at the time such confectionery is sold. The regulation defines the term "confectionery" and includes labeling requirements for such confectionery.

3VAC5-50-250. Confectionery; definition; restrictions; labeling.

A. "Confectionery" means baked goods and candies having an alcohol content not more than 5.0% by volume.

B. Any alcohol contained in such confectionery shall not be in liquid form at the time such confectionery is sold. Such alcohol shall be fully integrated or blended into the confectionery product.

C. Any such confectionery shall only be sold to those individuals who can lawfully consume alcohol.

D. Any establishment licensed to sell confectioneries for off-premises consumption shall properly label the product with such label including:

1. Notice that the product contains alcohol;

2. Notice that the product can only be consumed off premises; and

3. Warning that the product should not be consumed by anyone younger than 21 years of age.