HomeMy WebLinkAbout20190920.tiff'COLORADO
Department of Revenue
Enforcement D visor. - Liquor b Tobacco
Physical Address:
1881 Pierce Street
Lakewood, CO 80214
(303) 205-2300
BULLETIN 18-08
Mailing Address:
P.O. Box 173350
Denver, CO 80217-3350
REFERENCE: Senate Bill 16-197 — Questions Regarding Transition to Full Strength Beer
DATE: September 10, 2018
Colorado Liquor Enforcement Division
In response to multiple industry inquiries regarding the transition to "full strength" beer that goes into
effect January 1, 2019 under Senate Bill 16-197 ("SB 197"), the Liquor Enforcement Division ("LED") is
issuing this Bulletin regarding three issues:
1. Whether fermented malt beverages ("FMB") manufacturers may make full strength beer
and sell it to FMB wholesalers, so that the FMB wholesalers can pre -stage it in their
warehouses and delivery vehicles prior to the January 1, 2019, date on which retailers
licensed to sell FMB can begin to sell full strength beer under SB 197.
2. Whether the Beer and/or Liquor Codes prohibit the delivery of full strength beer to the
licensed premises of retailers licensed to sell FMB in advance of the January 1, 2019, the
effective date of the relevant provisions of SB 197, to facilitate the beginning of sales of
full strength beer on January 1, 2019.
3. Whether FMB and malt liquors may be commingled at wholesaler warehouses and during
transport by wholesalers before or after SB 197 takes effect.
1. Accommodations concerning full strength beer for FMB manufacturers and wholesalers
prior to January 1, 2019.
SB 197 made a number of changes to Article 46 of Title 12 (the "Beer Code") and Article 47 of
Title 12 (the "Liquor Code"). One such change was to make the definitions of FMB and malt
liquors virtually the same beginning January 1, 2019. See §§ 12-46-103(1) and 12-47-103(19),
C.R.S. (effective January 1, 2019). SB 197's change to the definition of FMB allows FMB
licensees to manufacture, distribute and sell so-called "full strength" beer beginning January 1,
2019.
Prior to January 1, 2019, however, these privileges are not in place. See, e.g., § 12-46-103(1),
C.R.S. (effective until January 1, 2019). An FMB manufacturer is only permitted to make FMB
(not malt liquor). Because under the statutes in effect for the duration of 2018 FMB is defined as
beer containing not more than 3.2% alcohol by weight, an FMB manufacturer's license privileges
do not include the privilege manufacturing full strength beer during 2018. Until January 1, 2019,
only a
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Bulletin 18-08
Senate Bill 16-197 — Questions Regarding Transition to Full Strength Beer
2
licensed malt liquor manufacturer has within its license privileges the manufacturing of full
strength beer.
On the other hand, retailers licensed to sell FMB are permitted to begin selling full strength beer
beginning on January 1, 2019. Doing so would be impossible if FMB manufacturers have not yet
made full strength beer, and if that full strength beer has not yet been sold to FMB wholesalers,
who would on or after January 1, 2019 be authorized to sell it to retailers licensed to sell FMB.
For the purpose of appropriately effectuating SB 197 and facilitating a smooth transition to the
sale of full strength beer products to consumers beginning on January 1, 2019, by retailers
licensed to sell FMB, as allowed under SB 197, some temporary accommodation is appropriate
for FMB manufacturers and wholesalers. Accordingly, the Division will not consider the
following activities to be an enforcement priority:
(a) The manufacturing of full strength beer by licensed FMB manufacturers beginning on or
after November 1, 2018, so long as such full strength beer is not intended for sale to
consumers by FMB retailers prior to January 1, 2019 and so long as such full strength beer
is not received by retailers licensed to sell FMB prior to January 1, 2019;
(b) The sale of such full strength beer by licensed FMB manufacturers to licensed FMB
wholesalers, between November 1, 2018 and January 1, 2019, so long as such full strength
beer is not intended for sale to consumers by FMB retailers prior to January 1, 2019 and so
long as such full strength beer is not received by retailers licensed to sell FMB prior to
January 1, 2019; and
c) The pre -staging of such full strength beer in licensed FMB wholesalers' warehouses and
delivery vehicles prior to January 1, 2019, for delivery to retailers licensed to sell FMB on
or after January 1, 2019, so long as such full strength beer is not intended for sale to
consumers by FMB retailers prior to January 1, 2019 and so long as such full strength beer
is not received by retailers licensed to sell FMB prior to January 1, 2019.
2. Delivering or pre -staging FMB at the licensed premises of a retailer licensed to sell FMB
prior to January 1, 2019 is prohibited.
Subsections 12-47-901(8)(a) and (b), C.R.S., provide as follows (emphasis added):
(8)(a) It is unlawful for any manufacturer or wholesaler licensed pursuant to
article 46 of this title to sell, deliver, or cause to be delivered to any person
licensed pursuant to section 12-47-407 or 12-47-408 any beverage containing
alcohol in excess of three and two -tenths percent by weight or four percent by
volume, or for any fermented malt beverage retailer licensed pursuant to article 46
of this title to sell, possess, or permit the consumption on the premises of any of
the beverages containing alcohol in excess of three and two -tenths percent by
weight or four percent by volume, or for any fermented malt beverage retail
licensee licensed pursuant to article 46 of this title to hold or operate under any
license for the sale of any beverages containing alcohol in excess of three and
Bulletin 18-08
Senate Bill 16-197 — Questions Regarding Transition to Full Strength Beer
Page I3
two -tenths percent by weight or four percent by volume for the same premises.
Any violation of this subsection (8) by any fermented malt beverage licensee
licensed pursuant to article 46 of this title immediately invalidates the license
granted under article 46 of this title.
(b) This subsection (8) is repealed, effective January 1, 2019.
These statutory provisions expressly prohibit FMB wholesalers from engaging in pre -staging of
full strength beer at retailer licensed premises prior to January 1, 2019, because neither FMB
manufacturers nor wholesalers can lawfully "sell, deliver, or cause to be delivered" any full
strength beer to a retailer, and a retailer cannot lawfully "possess" such full strength beer before
that date. And a violation of these provisions immediately and by operation of law invalidates the
license. As such, an accommodation regarding this requirement is not appropriate.
3. Segregation of FMB and malt liquors continues to be required by the Beer and Liquor
Codes after SB 197.
Some have argued that after the SB 197 changes go into effect on January 1, 2019, the segregation
between FMB and malt liquors will no longer be required by law. For the reasons that follow, the
Division disagrees, and believes that even after these changes go into effect, FMB and malt
liquors must continue to follow separate channels. Although the definitions of FMB and malt
liquors will become essentially identical beginning on January 1, 2019, the General Assembly
made clear in the legislative declaration for SB 197 that even after January 1, 2019, FMB remains
subject to a "separate and distinct regulatory framework." § 12-46-102(2), C.R.S. (effective
January 1, 2019). Section 12-46-102, C.R.S., provides:
(1) The general assembly hereby declares that it is in the public interest that
fermented malt beverages shall be manufactured, imported, and sold only by
persons licensed as provided in this article and article 47 of this title. The general
assembly further declares that it is lawful to manufacture and sell fermented malt
beverages subject to this article and applicable provisions of articles 47 and 48 of
this title.
(2) The general assembly further recognizes that fermented malt beverages and
malt liquors are separate and distinct from, and have a unique regulatory history
in relation to, vinous and spirituous liquors, and as such require the retention of a
separate and distinct regulatory framework under this article. To aid
administrative efficiency, however, article 47 of this title applies to the regulation
of fermented malt beverages, except when otherwise expressly provided for in
this article.
The General Assembly could have eliminated the separate and distinct regulatory structures,
license privileges, and channels for manufacturing, distributing and selling FMB and malt liquors,
but chose not to do so. In fact, the idea of making the statutory changes that would be required to
Bulletin 18-08
Senate Bill 16-197 — Questions Regarding Transition to Full Strength Beer
Page 14
eliminate the separate and distinct regulatory structures in SB 197 for FMB and malt liquors was
considered by the SB 197 Statutory Working Group, and addressed in its December 29, 2017
Report to the General Assembly. See the discussion of Recommendation 5, beginning on p. 55 of
the Report. Although the vast majority of the Working Group members voted in favor of
recommending statutory changes that would be required to eliminate the separate licensing
schemes for FMB and malt liquor manufacturers, wholesalers and importers, the General
Assembly did not make such changes during the 2018 legislative session.
Furthermore, a fundamental premise under the Beer and Liquor Codes is that "[e]ach license
issued under this article 47 and article 46 of this title 12 is separate and distinct" and it is
"unlawful for any person to exercise any of the privileges granted under any license other than
that which the person holds...." § 12-47-301(3)(a), C.R.S. Pursuant to this provision, an FMB
licensee may not exercise the privileges of a licensee authorized to manufacture, distribute or sell
malt liquors, and vice versa.
Interpreting SB 197 to allow commingling, or the virtual rather than physical separation, of FMB
and malt liquors would render the different treatment of FMB and malt liquors in the Beer and
Liquor Codes going forward meaningless. Such a construction would both violate the cannon of
statutory construction that an interpretation that would render part of the statute meaningless
should not be adopted. It would also be contrary to the express legislative declaration that
"retention of a separate and distinct regulatory framework" for FMB under the Beer Code is
required. § 12-46-102(2), C.R.S. In other words, while both licensed FMB manufacturers and
malt liquor manufacturers will be authorized to make full strength beer beginning on January 1,
2019, the General Assembly decided to keep in place the separate channels for the manufacture,
distribution and sale of each going forward.
Beginning January 1, 2019, while an FMB manufacturer is authorized to make full strength beer,
the products it manufacturers are still considered FMB, not malt liquors. An FMB manufacturer
cannot sell FMB to a malt liquors wholesaler licensee; rather, it must only sell FMB to an FMB
wholesaler licensee. § 12-47-104, C.R.S. Similarly, an FMB wholesaler's licensed privileges only
permit it to sell FMB to a retail licensee that is authorized to purchase and sell FMB. Id. In other
words, both before and after January 1, 2019, a person licensed as an FMB manufacturer cannot
sell FMB to a malt liquor wholesaler, and a malt liquor manufacturer cannot sell malt liquors to
an FMB wholesaler, because doing so is not within their respective license privileges. Rather, SB
197 maintains the separate and distinct licensed privileges that pertain to each type of license that
previously existed, and carries forward the requirement to keep them separate, and in their
respective channels of distribution. For example, the licensed privileges of a person holding a
malt liquor wholesale license under section 12-47-406(b), C.R.S., permit only the storage,
distribution and sale of malt liquors, not FMB.
Similarly, an FMB wholesaler's licensed privileges do not permit storing, distributing or selling
malt liquors, under section 12-46-104(b), C.R.S. To avoid exercising the privileges of a license a
person does not hold, persons holding both an FMB wholesale license and a malt liquor wholesale
license are required to keep FMB and malt liquors in separate physical locations while in storage
and during transport. Furthermore, pursuant to section 12-47-301(3)(a), C.R.S., "[a] separate
Bulletin 18-08
Senate Bill 16-197 — Questions Regarding Transition to Full Strength Beer
Page I5
license must be issued for each specific business or business entity and each geographic
location..." (emphasis added). In addition, under section 12-47-103 (24), "`[p]remises' means a
distinct and definite location, which may include a building, a part of a building, a room, or any
other definite contiguous area." Under these provisions, each licensee must have its own separate
and distinct licensed premises, which means that its licensed premises may not overlap with that
of another licensee. Therefore, even if a person holds both an FMB wholesaler license and a malt
liquor wholesaler license, that person is required to maintain physical, not merely virtual,
separation of malt liquors and FMB at that wholesaler's warehouse.
The different treatment of FMB and malt liquors also remains in place for retailers licensed for
off -premises consumption under the Liquor Code (i.e., retail liquor stores and liquor -licensed drug
stores), and for retailers licensed for either on or off -premises consumption under the Beer Code.
For example, a grocery or convenience store holding an FMB license pursuant to section 12-46-
104(1)(c), C.R.S., is only permitted to sell FMB, and SB 197 does not change the law on January
1, 2019, to allow it to sell malt liquors. In contrast, both before and after January 1, 2019, a person
holding a liquor -licensed drugstore license pursuant to section 12-47-408, C.R.S., is authorized
only to sell "malt, vinous, and spirituous liquors," but is not permitted to sell FMB. See § 12-47-
408(1)(a)(I), C.R.S. Similarly, both before and after January 1, 2018, the licensed privileges of a
person holding a retail liquor store license under section 12-47-407, C.R.S., permits the sale of
"only malt, vinous, and spirituous liquors," and does not include FMB. See § 12-47-407(1)(a)(I),
C.R.S.'
The Division stands ready to work with the liquor industry to draft legislation in advance of the start of
legislative session to address outstanding issues from SB 197.
If you have any questions about this bulletin, please contact the LED at 303-205-2306.
' Furthermore, pursuant to section 12-47-901(5)(e), C.R.S., it is unlawful, with a limited exception not applicable
here, for any person licensed to sell at retail "to have in possession or upon the licensed premises any alcohol
beverage, the sale of which is not permitted by said license." See also Regulation 47-914, 1 CCR 203-2 ("No
licensee shall possess, maintain, or permit the possession, on the licensed premises, of any alcohol beverage which
it is not licensed to sell or possess for sale").
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