Costas Katsigris and Chris Thomas T HE B AR AND B EVERAGE B OOK Fifth Edition © 2011 John Wiley and Sons, Inc. All Rights Reserved

C HAPTER 16 R EGULATIONS © 2011 John Wiley and Sons, Inc. All Rights Reserved

© 2011 John Wiley and Sons, Inc. All Rights Reserved Research your state and local regulations. Meet licensing, registration, and code requirements. Buy your beverages from licensed suppliers. Avoid illegal relationships with suppliers. Observe laws. Check product labels for legitimacy. Avoid illegal advertising. Train employees. T HIS C HAPTER W ILL H ELP Y OU

R EGULATIONS : A N O VERVIEW In control states, alcoholic beverages are sold through stores run by the state rather than by private business owners. In the license states, there are numerous conditions that allow individuals and corporations to obtain and/or keep their liquor licenses. © 2011 John Wiley and Sons, Inc. All Rights Reserved

T AXES AND R EVENUE Taxes and Revenue: taxes are levied on the alcohol itself, known as an excise tax. The taxes are paid to the Alcohol and Tobacco Tax and Trade Bureau (TTB). – The Homeland Security Act of 2002 split the Bureau of Alcohol, Tobacco, and Firearms (BATF) into two agencies with separate functions. The BATF is now strictly an enforcement-related agency. © 2011 John Wiley and Sons, Inc. All Rights Reserved

G ETTING R EADY T O O PEN If you own a bar or restaurant serving alcoholic beverages, you are defined in legal terms as an on-premise retail dealer. Local Option Laws: – Most states have local option laws; the state allows the people of local communities to choose whether or not they will allow the sale of alcoholic beverages, and if so, how. © 2011 John Wiley and Sons, Inc. All Rights Reserved

L ICENSING AND R EGISTRATION R EQUIREMENTS A license and a permit for on-premise retail sales are essentially the same: – A document granting permission to sell specific beverage types at a specific location by a specific business entity provided certain conditions are carried out. – Federal law requires a retail beverage alcohol dealer to register each place of business owned. In return, the government issues a special tax stamp for each place of business. © 2011 John Wiley and Sons, Inc. All Rights Reserved

O THER L OCAL R EGULATIONS The premises must meet the standards required by various other local codes. – Electrical work and plumbing. – Occupancy requirement. – Health department. © 2011 John Wiley and Sons, Inc. All Rights Reserved

W HAT, W HEN, AND T O W HOM Y OU M AY S ELL Additional Liabilities and Insurance Coverage: – General liability: – Liquor liability: Also known as dramshop liability, covers off-premise occurrences of people who have left your property. – For almost any situation that may pose some risk, most insurance companies offer specific types of coverage that can be added to a general liability policy in the form of an endorsement. © 2011 John Wiley and Sons, Inc. All Rights Reserved

C HECKING I DENTIFICATION Your future ability to do business at all is jeopardized when your managers, bouncers, or servers don’t catch fake IDs. – Effective ways of checking IDs. Biometrics. Handheld scanners. © 2011 John Wiley and Sons, Inc. All Rights Reserved

R EGULATIONS T HAT A FFECT P URCHASING Where You Can Buy – In most licensure states, the state does not control prices or markups. – Bar operators can buy only from suppliers that have the required state, local, and federal licenses and permits. The federal document is known as a wholesaler’s basic permit. Nearly all states have credit restrictions. © 2011 John Wiley and Sons, Inc. All Rights Reserved

R ELATIONSHIPS WITH S UPPLIERS No tied-house relationships – Suppliers may not Furnish equipment or fixtures, pay your debts or guarantee their payment, sell to you on consignment anything of value except specified for advertising or promotional purposes, induce you to purchase all or a certain quota of your beverage supplies from his or her enterprise. – Bribe for control of your purchases. © 2011 John Wiley and Sons, Inc. All Rights Reserved

R EGULATIONS T HAT A FFECT O PERATIONS Policing the Product – The strip stamp, the red or green stamp that used to span the top of each bottle of distilled spirits, has generally been replaced by a tamper-evident type of closure. – Federal law against marrying, combining the contents of two nearly used bottles of an identical product. © 2011 John Wiley and Sons, Inc. All Rights Reserved

L ABELS AND L ABELING L AWS The BATF has seven requirements – The brand name of the product – The type of wine – The alcohol content – The net volume – The bottler’s name and location – The phrase Contains Sulfites – The health-warning statement © 2011 John Wiley and Sons, Inc. All Rights Reserved

T HE O RGANIC W INE D EBATE A small percentage of people have allergic reactions to sulfites. – These antibacterial and antioxidant agents are routinely added to many wines to stabilize them during the winemaking process. – Organic wine must not contain added sulfites, but it can contain a minimal amount of natural sulfites from the grapes themselves. © 2011 John Wiley and Sons, Inc. All Rights Reserved

R ECORDS, I NSPECTIONS, AND A UDITS The federal government requires you to keep records of all spirits, wines, and beers received. – Your place of business, stock of liquors, records, special tax stamp, and receipt are subject to inspection at any time by BATF officers. – You will be required to make sales-tax reports and payments at regular intervals, and your records will be subject to a revenue audit. © 2011 John Wiley and Sons, Inc. All Rights Reserved

R ECORDS, I NSPECTIONS, AND A UDITS The auditor will ask to see your invoices and determine the taxes and fees that you owe. – Shrinkage is a combination of overpouring, spillage, and theft. – Most state auditors allow up to 8 percent shrinkage. – After this you will be assessed taxes and/or penalties on drinks for which you received no revenue. © 2011 John Wiley and Sons, Inc. All Rights Reserved

C REDIT R ESTRICTIONS Another frequent provision of state beverage codes concerns the credit that you may extend to customers. – A few states forbid the practice entirely, requiring that all drinks be paid for in cash. – Other states permit customers to charge drinks to their hotel bills or club-membership accounts or to pay by credit card. – Still others have no credit restrictions. © 2011 John Wiley and Sons, Inc. All Rights Reserved

M USIC L ICENSING Public businesses, from bars and restaurants to retail stores and office buildings, must pay annual licensing fees in order to play almost any type of music, whether it is performed live or on a sound system. © 2011 John Wiley and Sons, Inc. All Rights Reserved

A DVERTISING R EQUIREMENTS Nearly all codes set limits on advertising involving alcoholic beverages. The federal government has stringent regulations designed to prevent false, misleading, or offensive product advertising. © 2011 John Wiley and Sons, Inc. All Rights Reserved

S UMMING U P – The sale of alcoholic beverages is highly regulated and heavily taxed. – On-premise means that people consume the alcohol on your premises; off-premise means people buy the liquor then consume it elsewhere. – The observance of existing laws and all of the paperwork that you must keep current. – Rules about deals you can accept from wholesale distributors. © 2011 John Wiley and Sons, Inc. All Rights Reserved