ALM C.S.H.B. 2011 75(R)BILL ANALYSIS AGRICULTURE & LIVESTOCK C.S.H.B. 2011 By: Patterson, L.P. (Pete), et al. 4-9-97 Committee Report (Substituted) BACKGROUND Texas is the fifth largest wine producing state after California, New York, Washington, and Oregon. In 1995, Texas had 26 wineries and produced one million gallons of wine. Texas has 155 commercial vineyards and about 3,100 acres of grapes. The industry had an economic impact of $101.9 million and employed 2,189 people in 1995. Twelve wineries produce less than 5,000 gallons a year, 3 produce 5,000 to 10,000 gallons, 5 produce 10,000 to 50,000 gallons, and 4 produce more than 50,000 gallons. The four largest wineries produce 80% of the wine in Texas and sell most of their wine through wholesale distributors. Most of the smaller wineries do not market through distributors. Wineries in dry areas may have tasting rooms, but may not sell wine at the winery. Some of the small wineries in dry areas sell the majority of their wine at the Grapefest wine festival in Grapevine, Texas. This yearly festival draws 95,000 people and has a $4.5 million economic impact on the local economy. Wineries in wet areas may have tasting rooms and may sell up to 25,000 gallons of wine directly to consumers for off-premise consumption, but sale of wine for on-premise consumption is not allowed. In 1996, Speaker Pete Laney charged the Agriculture and Livestock Committee to review opportunities to develop the wine industry. The Committee reported that Texas should seek viable means to expand the Texas wine industry; simplify permits, reports, bonds and regulations; cure inequities in taxation; and examine methods of funding wine promotion and research. PURPOSE This legislation: creates a farm winery permit, allows a farm winery and winery permit holder to sell and dispense wine at a wine festival, simplifies bonding requirements, creates a tax on all wine sold wholesale in Texas to be used for the promotion and marketing of wine, and provides for a local option election for sale of wine at the winery. RULEMAKING AUTHORITY It is the committee's opinion that this bill expressly grants additional rulemaking authority in SECTION 28[Section 207.09(c)] to the Texas Alcoholic Beverage Commission. SECTION BY SECTION ANALYSIS SECTION 1. CONSOLIDATED APPLICATION. Amends Section 11.34(a), Alcoholic Beverage Code, by adding "farm winery". Updates gender language. SECTION 2. APPLICANT TO PUBLISH NOTICE. Amends Section 11.39(a), Alcoholic Beverage Code, by adding "farm winery". Updates gender language. Standardizes other language. SECTION 3. WINERY PERMIT. AUTHORIZED ACTIVITIES. Amends Section 16.01(a), Alcoholic Beverage Code, by adding "farm winery". Updates gender language. Substitutes "purchase" for "import" regarding grape brandy. SECTION 4. WINE FESTIVALS. Adds Section 16.07, Alcoholic Beverage Code. Allows the holder of a winery permit to participate in an event that is approved by the commission and organized to celebrate and promote the wine industry, by allowing the permit holder to: _sell wine to consumers for consumption on or off the winery premises and dispense free wine for consumption on or off the winery premises, if an event is held on the winery premises; and _deliver and dispense wine at an event if no charge is made for the delivery, wine or attendance. _sell wine to the holder of a temporary permit for use at an event. SECTION 5. FARM WINERY PERMIT. Adds Chapter 17, Alcoholic Beverage Code, that establishes a farm winery permit. Adds Sections 17.01-17.06 that allow the holder of a farm winery permit to conduct all the authorized activities of a winery permit holder and a wine bottler's permit holder. Additionally, it allows the permit holder to sell wine manufactured and bottled on the premises or at another one of the holder's wineries, to consumers for on premise consumption. Sets the annual state fee for a farm winery permit at $300, which is equal to the sum of the fees for a winery permit and a wine bottler's permit. Adds Section 17.07 regarding Wine Festivals. Allows the holder of a farm winery permit to participate in an event that is approved by the commission and organized to celebrate and promote the wine industry, by allowing the permit holder to: _sell wine to consumers for consumption on or off the winery premises and dispense free wine for consumption on or off the winery premises, if an event is held on the winery premises; and _deliver and dispense wine at an event if no charge is made for the delivery, wine or attendance. _sell wine to the holder of a temporary permit for use at an event. SECTION 6. WINE BOTTLER'S PERMIT. AUTHORIZED ACTIVITIES. Amends Section 18.01, Alcoholic Beverage Code, by adding "farm winery". SECTION 7. WHOLESALER'S PERMIT. AUTHORIZED ACTIVITIES. Amends Section 19.01, Alcoholic Beverage Code, by adding "farm wineries". SECTION 8. GENERAL CLASS B WHOLESALER'S PERMIT. AUTHORIZED ACTIVITIES. Amends Section 20.01, Alcoholic Beverage Code, by adding "farm wineries". SECTION 9. LOCAL CLASS B WHOLESALER'S PERMIT. AUTHORIZED ACTIVITIES. Amends Section 21.01, Alcoholic Beverage Code, by adding "farm wineries". Updates gender language. SECTION 10. PACKAGE STORE PERMIT. AUTHORIZED ACTIVITIES. Amends Section 22.01, Alcoholic Beverage Code, by adding "farm wineries". Updates gender language. Standardizes other language. SECTION 11. WINE ONLY PACKAGE STORE PERMIT. AUTHORIZED ACTIVITIES. Amends Section 24.01, Alcoholic Beverage Code, by adding "farm winery". SECTION 12. CARRIER PERMIT. TRANSPORTATION OF WINE OUT OF STATE. Amends Section 41.05, Alcoholic Beverage Code, by adding "farm winery". SECTION 13. PRIVATE CARRIER PERMIT. AUTHORIZED ACTIVITIES. Amends Section 42.01(a), Alcoholic Beverage Code, by adding "farm winery". Updates gender language. SECTION 14. PRIVATE CARRIER PERMIT. VEHICLES USED FOR TRANSPORTING LIQUOR. Amends Section 42.04(d), Alcoholic Beverage Code, by adding "farm winery". SECTION 15. STORAGE PERMIT. ELIGIBILITY FOR PERMIT; RESTRICTION; EXCEPTIONS. Amends Section 45.03(a), Alcoholic Beverage Code, by adding "farm winery". SECTION 16. STORAGE PERMIT. WINERY STORAGE PERMIT. Amends Section 45.04, Alcoholic Beverage Code, by adding "farm winery". SECTION 17. BONDED WAREHOUSE PERMIT. QUALIFICATIONS FOR PERMIT. Amends Section 46.03(b), Alcoholic Beverage Code, by adding "farm winery". SECTION 18. PERSONS BARRED FROM INTEREST IN PREMISES OF RETAIL LIQUOR OUTLET. Amends Section 102.03(a), Alcoholic Beverage Code, by adding "farm winery". SECTION 19. PROHIBITED DEALING WITH RETAILER OR CONSUMER. Amends Section 102.04(a), Alcoholic Beverage Code, by adding "farm winery". SECTION 20. PROHIBITED DEALINGS WITH RETAILER OR CONSUMER. Amends Sections 102.07(a), (d) and (f), Alcoholic Beverage Code, by adding "farm winery". SECTION 21. UNLAWFUL AGREEMENTS. Amends Section 102.16(a), Alcoholic Beverage Code, by adding "farm winery". Updates gender language. SECTION 22. CONTRACT FOR SALE OF LIQUOR. Amends Section 102.17, Alcoholic Beverage Code, by adding "farm winery". SECTION 23. PROMOTIONAL GIFT WINE. Amends Section 102.19, Alcoholic Beverage Code, by adding "farm winery". SECTION 24. SALE OF LIQUOR: CREDIT RESTRICTIONS. Amends Section 102.32(a)(1), Alcoholic Beverage Code, by adding "farm winery". SECTION 25. SALES NEAR SCHOOL, CHURCH, OR HOSPITAL. Amends Section 109.33(f), Alcoholic Beverage Code, by adding "farm winery". SECTION 26. BONDS REQUIRED. Amends Sections 204.01(d), (f), and (i), Alcoholic Beverage Code, by adding "winery, farm winery or wine bottler's permit" to the list of permittees which are exempt from excise tax bonding requirements if all taxes and fees have been duly paid for the preceding 36 months. SECTION 27. COMPREHENSIVE WINERY BOND. Amends Section 204.06, Alcoholic Beverage Code, to allow the holder of two or more of these permits (farm winery, winery or bottler) to execute a single excise tax bond instead of multiple bonds. SECTION 28. WINE TAX. Adds Chapter 207, Alcoholic Beverage Code, regarding tax on wine. The holder of a permit who is authorized to sell wine for resale shall pay a tax of five cents for each gallon of wine sold for resale in this state. The tax is due to the Texas Alcoholic Beverage Commission (TABC) on the 15th day of the month after the month the wine is sold. The TABC shall deposit the revenue to the wine tax account in the general revenue fund. The TABC may require sales information to enable collection of the full amount of wine tax due. If a permit holder refuses to submit the information, the TABC may stop sale of the holder's wine. In a suit brought to enforce tax collection, a certificate by the TABC showing the delinquency is prima facie (sufficient) evidence of the levy or delinquency of the tax and penalty and compliance by the TABC regarding the tax. The conditions by which the TABC may suspend, without hearing, the permit of a holder who is delinquent on a report or tax payment are set forth. The revenue collected from the taxes may be used only by the Texas Department of Agriculture (TDA). Unless the advisory council advises otherwise, 70% of the revenue shall be used for research and 30% for marketing of wines from wherever produced. The commissioner of the TDA shall appoint an advisory council representing various segments of the industry and public. SECTION 29. LOCAL OPTION ELECTIONS. ISSUES. Amends Sections 251.14(b) and (e), Alcoholic Beverage Code, to provide for local option elections in areas where any type or classification of alcoholic beverages is prohibited and in areas where the sale of beverages containing alcohol not in excess of 14 percent by volume has been legalized. An election could allow a holder of a winery permit or farm winery permit to legally sell wine on the premises. SECTION 30. Effective date: September 1, 1997. SECTION 31. Allows the holder of a winery permit and wine bottler's permit to automatically convert to a farm winery permit if the holder notifies TABC before the expiration of the holder's current permits. SECTION 32. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE The wine tax section of the substitute differs from the original bill such as follows: _directs TABC instead of TDA to collect the wine tax _requires wholesalers instead of retailers to pay the tax _changes the tax to 5 cents per gallon of wine instead of 1 cent per bottle of wine _sets up a special wine tax account _expands the advisory council membership _requires TDA to spend 70% of the tax revenue on research and 30% on marketing unless otherwise directed by the advisory council The authorized activities of a farm winery permit are expanded in the substitute such as follows: _allows the permit holder to sell wine manufactured and bottled on the winery premises or at another one of the holder's wineries, to consumers for consumption on the winery premises _allows a winery in a dry area to bottle, rebottle, label, package, and sell wine as is allowed by the holder of a wine bottler's permit Portions of the original bill are deleted such as follows: _language that allows the TABC to enter into an agreement with other state agencies to allow a single bond to be executed for different activities including the payment of sales taxes _language that requires the premises of the winery premise to be bonded in the same manner as required by federal law _language in Section 8 of the original bill that deleted an exception regarding wine sales and free samples in a city of certain specifications _language in Section 2 [Section 17.05(b)(3)] of the original bill that included an exception in the farm winery permit regarding a wine festival of certain specifications The substitute differs from the original by allowing holders of winery and wine bottler's permits to automatically convert to a farm winery permit. The substitute differs from the original by granting rulemaking authority to the TABC to define "small wineries" and "large wineries". The substitute contains technical changes such as changing the name "vintner's permit" to "farm winery permit" throughout the bill, adding the farm winery permit to all sections of the Alcoholic Beverage Code as necessary and substituting the word "purchase" for the word "import" regarding the purchase of grape brandy.