North Carolina Distillery and ABC Modernization Bill Signed into Law

On July 29, 2019, Governor Cooper signed SB290 into law.  The bill makes major changes to North Carolina alcohol laws, including allowing distilleries to sell unlimited bottles directly from the distillery and to sell mixed drinks at the distillery.  The majority of the provisions of the bill are effective September 1, 2019.  A summary of the major provisions is below:

Distilleries Can Sell Beer, Wine and Mixed Beverages – A distillery can obtain ABC permits to sell malt beverages, unfortified wine, and fortified wine at the distillery.  A distillery can sell mixed drinks made with liquor produced at the distillery without having to obtain any new ABC permit, in areas where the sale of mixed drinks is legal.   A distillery can obtain a mixed beverage permit to sell mixed drinks made with liquor produced from other distilleries (and can do so without having to qualify as a “restaurant” or “private club” under ABC laws).  Distilleries that obtain on or off premises malt beverages and unfortified wine permits have all rights applicable under those permits.  For example, they can sell closed containers of beer and wine for delivery, as do other retail permittees, such as restaurants and grocery stores.  The bill clarifies that distilleries are not subject to “tied house” and “cooperative advertising” prohibitions for transactions with the retail business allowed on its premises.

Special Orders of Distillery Products – Consumers can now purchase individual bottles of special order products from ABC stores, through rules to be established by the NC ABC Commission.  Local ABC boards shall fill regular code product orders made by mixed beverage permittees, or notify the ABC Commission if they cannot fill them within the requested time period.  The local ABC board can request authorization for direct shipment by the distillery to the local ABC board.  This process applies to eligible distilleries (distilleries selling less than 10,000 proof gallons).  These changes become effective September 1, 2019, and the NC ABC Commission will create regulations to govern these processes.  The bill also mandates the NC ABC Commission to develop an online system to facilitate the sale and purchase of regular and special order items by and among local ABC boards, in order to sell remainders of special item cases, increase consumer access to products, and allow local ABC boards to better manage inventory.

Distillery May Sell Unlimited Bottles of its Own Products on Premises – Effective September 1, 2019, the “5 bottle per year” limitation for customers purchasing liquor bottles from a distillery is removed. Distilleries will be able to sell unlimited bottles of their own products to customers for consumption off the premises.  Distilleries will no longer have to keep detailed electronic records of customer sales data or specially label the bottles with commemorative tour stickers, as they did previously. 

Distilleries Can Issue Purchase-Transportation Permits – Effective September 1, 2019, distilleries can issue purchase-transportation permits to customers to allow customers to purchase additional quantities of alcohol.

Tastings at ABC stores Allowed – Distilleries holding distillery special event permits may give free 0.25 ounce tastings of their products at ABC stores.  Any one customer may not have more than 0.5 ounce of samples in a calendar day.  The liquor used at the tasting must be purchased from the ABC store.  The local ABC board may limit days and times of tastings as provided in the statute.  The local ABC board may post notice of the tasting at ABC stores and notify mixed beverage permittees of the tasting, but the tasting may not otherwise be advertised by the local ABC board or distillery.  Point of sale advertising may be provided at the tasting, but the distillery may  not sell merchandise.  The distillery must give notice to the ABC Commission at least 48 hours before the tasting.  Employees of ABC stores may not participate in the tastings.   The ABC Commission will develop rules to govern this section.

Beer Private Label Brands Authorized – The revised statute clarifies that beer private labels are allowed (as they are for wine).  Breweries may create private label brands for retailers, which can be labeled with the retailer’s name and sold exclusively to the retailer. 

Contract Brewing Law Clarified – Effective September 1, 2019 the brewery, rather than the contract brewery, shall be responsible for registering the contracted product with the Commission, submitting required reports, and remitting appropriate taxes.

Malt Beverage Tastings Allowed at Farmers Markets – Breweries holding malt beverage special event permits may provide samples or sell product at farmers markets.

Transfers of Malt Beverages Between Permittees Allowed – Retail permittees under common ownership or control can transfer malt beverages up to four times per calendar year.  A brand may be transferred only if the transferor and transferee are located within the territory designated by the brewery and wholesaler at the Commission.  Prior to the transfer, the permittee must notify the wholesaler in writing of the names of the stores, the quantities, and the products.

Increase on Allowed Discounts for Beer and Wine – The law requires the Commission to revise its discount rules by September 1, 2019 to provide that coupons, rebates, and loyalty card discounts combined may provide up to 35% discount off the advertised retail price of a malt beverage or wine.  The previous allowed discount from coupons, rebates, and loyalty cards was 25%.

Clarification of Definition of Premises – The definition of “premises” was revised to clarify that premises means a “fixed permanent establishment.”

Number of Drinks Sold to Customers – Effective September 1, 2019, the law clarifies that on-premise permittees may sell to any one customer up to two beers or wines at one time, but only one mixed drink or drink containing spirituous liquor.  However, only one alcoholic drink of any kind may be sold to a single patron if the drinks are sold in a stadium, athletic facility or arena on the campus or property of a public college or university, or during a sports event sponsored by a public college or university.

Sale and Consumption of Alcohol at Bingo Games – Effective September 1, 2019, the sale and consumption of alcohol is allowed on a premises where bingo games are being conducted.

Breweries Not Subject to Certain Food Sanitation Regulations – Breweries not engaged in the preparation of food on the premises are not subject to certain food sanitation regulations.  For example, breweries not preparing food on premises can allow dogs on the premises.

Restriction on Creation of New ABC Systems – Effective September 1, 2019, the bill provides restrictions on the creation of new ABC systems, such as limitations on the creation of new ABC boards.

Electronic Payment Accepted for Liquor Purchases by Retail Permittees – Effective October 1, 2019, a local ABC board may accept electronic payments (debit card or electronic funds transfer) for the purchase of liquor by mixed beverage permittees and may not charge a fee for doing so.  Electronic payment does not include payment by credit card or charge card.

Electronic Submission of Forms and Payments to NC ABC Commission – Effective September 1, 2019, the Commission shall include all permit forms on its website for electronic submission and also accept electronic payments.  Electronic payments for purposes of this section includes credit cards and debit cards.  The Commission may charge a fee of up to $5.00 for electronic submissions.

New Common Area Entertainment Permit – There is a new ABC permit option for multi-tenant establishments, such as food halls.  A common area entertainment permit may be issued to the owner or property owners association of a multi-tenant establishment that has at least two tenants that hold alcohol permits.  The common area entertainment permit serves as an “umbrella permit” to allow customers to congregate in common areas with open containers of alcoholic beverages (including mixed beverages) and move about freely between the common areas and various tenants.  Containers of alcoholic beverages in common areas should be labeled with the permittee’s name or identifying information and should not exceed 16 ounces.  Signs should be posted notifying customers of the location of common areas.  Customers cannot exit the common areas with open containers except to enter the licensed premises of another establishment that allows the customer to enter with the open container.  The new common area entertainment permit should benefit food halls and other similar establishments.

New Delivery Services Permit – There is a new ABC permit for third party delivery service businesses that deliver beer and wine from retail permittees to consumers.  The delivery service permit holder has to submit an application to the ABC Commission and take a training class.  Delivery service permit holders must ensure they are delivering alcoholic beverages to a person who is at least 21 and there are penalties for deliveries on college campuses to persons under age 21.  Delivery service permits are not required for common carriers or for technology companies that merely facilitate deliveries on behalf of retailers. 

Brewery Sales Authorization – Breweries may sell beer for on or off premises consumption, regardless of the results of a local election on malt beverage sales.

Sports and Entertainment Venues May Obtain Fortified Wine Permits and Special Occasion Permits – Sports and entertainment venues may obtain on-premise fortified wine permits and special occasion permits for parties.

Mixed Beverage Permittees Exempt from Purchase Transportation Permits – Effective September 1, 2019, mixed beverage permittees do not have to obtain purchase transportation permits to transport alcohol.  Employees of local boards may transport alcohol to mixed beverage permittees without obtaining a purchase transportation permit.

ABC Commission Reports on State Warehouse – The ABC Commission must submit reports on the RFP and contracting process for the state warehouse to the NC General Assembly.

Local ABC Board Delivery and Delivery Fee – A local ABC board may use its employees or contract with an independent contractor to deliver liquor from an ABC store or warehouse to a mixed beverage permittee’s premises.  The ABC board may charge a fee for doing so.

Legislative Study – The legislature shall conduct a study of violations of North Carolina alcohol laws and penalties assessed by the ABC Commission.