August 17, 2012

Liquor Board Answers the $150 Million Question

Among its many changes, Initiative 1183 established a spirit distributor license and associated fees for liquor distributors. The license requires spirit distributor licensees to pay a 10% distribution license fee on all spirits sold. I-1183 also requires spirit distributor licensees to collectively pay $150 million in spirit distributor license fees on or before March 31, 2013. If the collected payments total less than $150 million, I-1183 directs the Washington State Liquor Control Board (“Board”) to collect from spirit distributor licensees the difference between the $150 million mandate and the actual fee receipts. Just how the actual shortfall would be allocated was an open question under I-1183.

Recently, the Board proposed a rule to allocate the $150 million shortfall provision among spirit distributor licensees. Under the proposed rule, any shortfall will be allocated to the distributor licensees by total spirit sales for the 2012 calendar year. In other words, each licensee’s proportionate share of fees due will be calculated by dividing the total dollar amount of sales made by each spirit distributor licensee by the total spirit sales made by all spirit distributor licensees combined for the 2012 calendar year. By April 30, 2013, the Board will notify each licensee of the amount due, and each licensee must pay the amount due by May 31, 2013. The Board is authorized to revoke or suspend the license of any spirit distributor licensee who does not pay the additional licensee fee by this date. The proposed rule does not contain any provision authorizing the licensee to appeal the Board’s calculation during this one month window.

The proposed rule does provide a few exemptions. Under the proposed rule, the shortfall provision does not apply to any spirit distributor licensee who obtains their license in 2013 and distributes spirits before March 31, 2013. The proposed rule also exempts businesses who hold a distributor license in 2012, but who have no spirit sales during the 2012 calendar year. Finally, although not explicitly mentioned in the proposed rule, the $150 million provision does not apply to craft distiller or distiller licensees who self-distribute spirits.

The Board’s proposed rule is available in its entirety here. The Board has scheduled a public hearing for this proposed rule on September 26, 2012 at 10:00 a.m., at the Washington State Liquor Control Board – Board Room, 3000 Pacific Ave. S.E., in Olympia, Washington.

If you have any questions about the proposed rule, please contact Jeremy Eckert at 206.447.6284 or eckej@foster.com.

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