Delivery to consumers will be the biggest change to the alcoholic beverage industry in Maryland during 2018.

A tipping point is now being reached among retail license holders offering delivery to consumers. Despite that it was a change in state law in 2015 that enables delivery, it has taken some time for what is a new rapid and dramatic evolution in operations, widely adopting by the broader retail industry.

The package good store that is not delivering in 2018 has missed the moment of critical mass. Shopping behaviors have changed and while one of the most disruptive Amazon effects is the consumer expecting delivery, Amazon does not delivery alcoholic beverages in Maryland. But as Millennials move into their prime food and beverage spending years, they want everything delivered, not just their prepared food, but also their beverages.

We are not predicting delivery by drones in 2018, but the entire retail alcoholic beverage industry is being reshaped with more modest delivery vehicles.

There are other concomitant trends that both attract Millennials, and also simplify delivery for retailers, like mobile pay. Retailers maximizing delivery opportunities do not limit themselves by only accepting old fashioned credit cards, but also accept Apple Pay, Android Pay, Masterpass, and Visa Checkout. And a retailer can link a PayPal account to Android Pay, or pull from Venmo.

But an alcoholic beverage retailer in Maryland must comply with specific state and local laws to be authorized to deliver.

In Maryland retail delivery to a purchaser of alcoholic beverages is prohibited unless a retail license holder obtains a letter of authorization from the local licensing board to make deliveries. Additionally, and why brick and mortar liquor stores will continue to flourish is that the delivery must be made,

from the licensed premises by the retail license holder or an employee of the retail license holder.

Local licensing boards across the state have different requirements for approving deliveries by a license holder and issuing the required letter of authorization. Fairly typical is the Baltimore County Rule 9 that establishes a fairly rigorous procedure, both for approval and operation. Written application must be made to the Board and the licensee must appear at a public hearing. The rule further provides,

At the time of application for a permit under this rule, a retail licensee shall submit to the Board information concerning the training of its drivers in verifying the age of recipients of alcohol deliveries.

Once approved, the Board requires that for each delivery of alcoholic beverages, “the person delivering the alcoholic beverages and the person receiving the alcoholic beverages shall complete and sign a form provided by the Board.” The retail licensee must retain the form for not less than a month after the delivery.

The rules goes on to make clear, that the person making the delivery “shall refuse to deliver alcoholic beverages” when the intended recipient is under 21 years of age or when “the intended recipient refuses to sign the form required under this rule, or refuses to provide the person making the delivery with a valid driver’s license or other valid government-issued proof of identity with proof of age.”

Completing the form is the price of doing business by delivery and purchasers have come to accept that mild inconvenience for the greater benefit of having that cold craft beer delivered to their door.

Make no mistake, whether or not a particular retail store is delivering, delivery is here and about to explode. Including there are already national phone apps and websites, enabling ordering with a tap or a click, that have partnered with local liquor stores. Other industries, including a local florist is now approved to deliver alcoholic beverages with flowers and gift baskets. Delivery is going to upend existing retailers who do innovate.

There are those who deliver illegally, including those out of state businesses that ship into Maryland (.. that by some estimates may be up to 5% of all retail sales) and expanding legal delivery outlets will no doubt take a bite out of the scofflaws.

Taking advantage of this huge market shift is very much about how well a retailer adapts. The future of alcoholic beverages involves delivery. All existing licensees should make application to the local licensing board today. If we can assist you with your application of structuring a delivery operation, do not hesitate to give us a call.

It is not surprising that in Maryland the determination as to whether the liquor license is owned by the individual applicants, or by a corporation that operates the business, depends on the circumstances of the particular case.

That said, Maryland law has been and continues to be that liquor licenses issued to individuals for the use of a corporation, which is the most common situation, are owned by the corporation.

The Baltimore County alcoholic beverage license that was the subject of the court challenge in 2001, in the widely discussed case of Rosedale Plaza Limited Partnership v. Lefta, Inc., et al., over who owned the license read, in pertinent part:

THIS IS TO CERTIFY, that Andreas Pitsos, Maria Papadimitriou, Irene A. Pitsos, Lefta, Inc., t/a Hillbrook Station Raw Bar & Grill/Chesaco Liquors, 1703–09–11 Chesaco Avenue, Baltimore, MD 21237 is licensed by the State of Maryland to keep for sale, and to sell all alcoholic beverages at retail at the place herein described, for consumption on the premises or elsewhere.

In that case and despite a statute (.. that no longer exists), then Article 2B Section 9-101(a), which provided in pertinent part:

License issued to individuals; application for partnership.—A license may not be issued to a partnership, to a corporation, or to a limited liability company, but only to individuals authorized to act for a partnership, corporation, or limited liability company who shall assume all responsibilities as individuals, and be subject to all of the penalties, conditions and restrictions imposed upon licensees ..

The appellate court found that liquor license was owned by the corporation. And that has been Maryland law.

Note, Maryland is a minority jurisdiction in this regard and most other states hold to the contrary. But at least 38 states have a Dram Shop Act (but not Maryland) which raises the stakes on who is strictly liable to anyone injured by a drunken patron.

Consistent with the decision is Lefta, in another instance, the Court of Appeals held that a state tax lien of a corporation could be enforced by a writ of execution upon a liquor license issued for the benefit of that corporation. Similarly, in another case, the Court of Appeals accepted that a writ of execution that had been entered against the liquor license to satisfy a personal debt of the licensee arising from his divorce would be improper if the license was owned by a corporation.

Subsequent to all of that and if it were not already clear how Maryland courts will addresses this issue, there are now new sections Maryland Alcoholic Beverages Article of the Annotated Code (the recodified Article 2B), specifically entitled,

Section 4-103 Application on Behalf of Partnership

Section 4-104 Application on Behalf of Corporation or Club

Section 4-105 Application on Behalf of Limited Liability Company

While the current codes expressly provides, “[T]his section is new language derived without substantive change from the second sentence of former Art. 2B, § 9-101(a)(1) and the second sentence of (b)(2), as it related to partnerships,“ .. it is a substantive change in the statute to be consistent with the accepted interpretation.

None of this precludes an individual from doing business in his own name, as a sole proprietorship, and having the liquor license is his name.

There is now no question in Maryland liquor licenses issued to individuals for the use of a partnership, a corporation or an LLC, are owned by the that legal entity and, absent some express agreement to the contrary, the persons named on the liquor license as a licensees have no individual ownership interest in the liquor license.

The Board of Liquor License Commissioners for Baltimore County has issued new Rules and Regulations.

Liquor board Rules are of great import and govern the issuance of an alcoholic beverage license as well as the day to day operations of a business selling alcoholic beverages. While hyper technical in nature, Board Rules have the force of law and a violation of a Rule can result in civil penalties and ultimately suspension or revocation of an alcoholic beverage license.

Maryland Annotated Code, Alcoholic Beverages Article, Section 13-207 provides, the Baltimore County Board may adopt Rules to carry out the State law, including rules regarding:

  1. the presence on a licensed premises of an individual who is not a consumer; and
  2. the issuance of a license when the actual use of the license is to be deferred until the completion of construction or alterations on the premises.

There are substantially the same enabling laws across the state and those code sections require public notice and a public hearing before adoption the Rules.

In March of this year, our blog post Baltimore County to Adopt New Liquor Licensee Rules described the drafting and public hearing for the now final Rules. There are significant changes from the earlier draft. Deleted from the final Rules is the proposal that licensed premises have a video camera system.

Added to that draft is the now new Rule 39 implementing the new State law that authorizes the sale of draft beer in non-refillable growlers. This is a significant new opportunity for licensees, and it particular restaurants that otherwise do not have an ability to sell beer (.. including taking advantage of the growth in craft beers) for off premises consumption.

The new Rules are a great clean up of the last version promulgated in 2014, including ‘keeping pace with the times’ by expressly authorizing notice of certain hearings to be posted on the Board’s website. But there are still vestiges of the past in this new document, including a fun regulation that a “licensee may not use or permit to be used or dispensed on the licensed premises any violent emetics or purgatives” (.. you will have to Google that).

And there are a host of substantive changes that create more and additional economic opportunity arising from the sale of alcoholic beverages in the County. There are changes to Rule 19, including the all important “exception licenses” (i.e., exceptions to the limitations on the number of licenses by population with an election district). For example, the new provisions requires,

Office buildings having a minimum of sixty thousand (60,000) square feet of leased commercial office space provided that each such building shall be limited to one (1) Class B (On Sale) beer, wine and liquor license.

.. a more generous provision than the prior Rule that required a 75,000 square feet office building. And there are other similar more economic opportunity friendly changes like reducing the minimum size of a shopping center from 500,000 square feet to 400,000 square feet for an exception Class A off premises sales license.

The new Rules will advance the alcoholic beverage industrial complex in Baltimore County. All licensees should read the June 2017 Rules.

Enacted unanimously by the Maryland Senate and House of Delegates and approved by the Governor, a new state law establishes a nonrefillable container permit for draft beer that will create a new revenue stream for restaurants, bars and others across Maryland.

The permit authorizes the sale of draft beer for off-premises consumption by packaging the beer in a nonrefillable container that meets specific standards. The permit may be issued by a local board of license commissioners in 19 counties, Baltimore City, and the City of Annapolis; these are the same jurisdictions that may currently authorize the sale of draft beer in larger refillable containers.

The new law takes effect July 1, 2017.

The law will have a meaningful positive impact for a small business that will realize increased sales through this new category. For example restaurants that have an alcoholic beverage license authorizing on premises sales only will now, after obtaining the permit authorized by the law, be able to sell draft beer for off premises consumption. This will especially be an advantage for the exploding craft beer industry.

There is a great deal of excitement for this “Growlette” or smaller nonrefillable version than the existing authorized refillable Growler.

House Bill 292, cross filed with Senate Bill 491, establishes specific requirements for the nonrefillable container permit for draft beer. The term and hours of sale for a nonrefillable container permit are the same as those of the underlying license. An applicant who holds an underlying license without an off-sale privilege must meet the same advertising, posting of notice, and public hearing requirements as those for the underlying license.

To be used as a nonrefillable container for draft beer, a container must:

be made out of aluminum;

be sealable;

have a capacity of 32 ounces;

be branded with the identifying marks of the seller of the container; and

bear the federal health warning statement required for refillable containers.

Positively, applicants in specified jurisdictions may not be charged a fee for the nonrefillable container permit if they already have a refillable container permit.

The current law although little used, dating to 2014, already standardized the requirements for alcoholic beverage refillable containers used in the sale of draft beer or wine for off premises consumption. The holder of a refillable container permit may sell, fill, or refill any container that meets certain standards.

The 2014 law already authorizes a refillable container that: for beer, have a capacity of not less than 32 ounces and not more than 128 ounces; for wine, have a capacity of not less than 17 ounces and not more than 34 ounces; be sealable; be branded with an identifying mark of the seller of the container; bear the federal health warning statement; display instructions for cleaning the container; and bear a label stating that cleaning the container is the responsibility of the consumer, and that the contents of the container are perishable and should be refrigerated immediately and consumed within 48 hours after purchase

Many businesses have advised that there is great interest in nonrefillable containers for draft beer, especially in the expanding craft beer industry.

There will be costs of the supplies, storage needs, and possible recycling issues involved with nonrefillable containers, but because the establishments already sell draft beer, this is a win win.

We assist the alcoholic beverage industry in positively leveraging constraints and finding advantages in matters involving the sale of licensed beverages, often including new approaches and possibilities in this emergent area. If we can assist you with sound business advice and legal counsel in matters of the sale if draft beer or otherwise in the broader licensed beverage industry do not hesitate to give Nancy Hudes or Stuart Kaplow a call.

It is difficult to comprehend what new liquor licensing laws could possibly be required in Maryland in 2017 after the legislature passed the largest bill in Maryland history last year, some 3,180 pages long, codifying alcoholic beverage laws.

But as the just concluded 437th session of the Maryland General Assembly, began in the City of Annapolis on the eleventh day of January 2017, and ending on the tenth day of April 2017, more than 2,881 bills were introduced of which more than 361 bills were enacted, including more than a few that will provide business opportunities for those engaging in the sale of alcoholic beverages. This post is a compilation of those bills.

For the past several years, craft brewers in the State have backed legislation to increase the amount of beer they may sell for on-premises consumption in their taprooms. They have been opposed by beer wholesalers and retailers, who have feared that their businesses would suffer as a result. Of the several bills on these issues, the sides reached agreement on House Bill 1283 (passed) that applies to all Class 5 breweries, which include both small craft breweries and a large Guinness brewery scheduled to open in Baltimore County. Note, the bill does not apply to pub-breweries, micro-breweries, or farm breweries.

The bill increases, from 500 barrels to 2,000 barrels, the amount of beer a Class 5 brewery may sell for on-premises consumption each year. The brewer may apply for permission to sell an additional 1,000 barrels per year, provided any beer sold in excess of the 2,000 barrels is first purchased by the brewer from a licensed wholesaler. The bill also authorizes a Class 5 brewery to contract to brew and bottle beer with and on behalf of another Class 5 brewery or holder of a Class 2 rectifying license, Class 7 micro-brewery license, Class 8 farm brewery license, or nonresident dealer’s permit. Contract beer that is sold for on-premises consumption at a Class 5 brewery may not exceed the greater of 25% of the total number of barrels of beer sold annually for on-premises consumption or 1.2% of total finished production under the Class 5 brewery license. Also, the bill alters the hours during which the sales and serving privileges of an on-site consumption permit may be exercised for specified Class 5 breweries. For license holders who obtain an on-site consumption permit after April 1, 2017, the hours of sale for on-site consumption extend from 10 a.m. until 10 p.m., Monday through Sunday. Class 5 breweries, who obtained licenses before April 1, 2017, are exempt from the bill’s stated hours of sale and will continue to operate under the longer hours established in each local jurisdiction. Continue Reading New Alcoholic Beverage Laws from the 2017 Session of the Maryland Legislature

The transfer of a liquor license in Baltimore City often involves issues of life and death, and in some instances, zombies and phantoms.

A recent decision by the Maryland Court of Special Appeals is instructive as to when a liquor license is really dead.

The 25 page decision is not for the faint of heart but is important for anyone acquiring a liquor license.

The Maryland appellate court explains at the beginning of the opinion, .. a zombie is defined as “the supernatural power according to voodoo belief may enter into and reanimate a dead body.” And the opinion goes on to make the distinction that a phantom is defined as “something (as a specter) apparent to sense but with no substantial existence.” Both are used as slang terms to refer to a liquor license that has been permitted by a local liquor board to survive, for transfer purposes, beyond the statutory expiration period.

Notwithstanding the extensive procedural history of this case, the dispositive facts were not in dispute. Turner’s, an establishment in Federal Hill, closed for business on July 11, 2009. The first application to the Baltimore City Liquor Board to transfer the liquor license was filed on June 19, 2009. That application was approved by the Board on July 23, 2009. There was little is any activity for a period of time. On February 25, 2013, a second application for transfer and expansion was filed. The original intent was to transfer the license to 1100-06 South Charles Street. Later, it was planned to expand and utilize the license at the original East Cross Street premises.

The appellate court read the state law that applies to Baltimore City, Article 2B Section 10-504(d)(2)(i) providing that an alcoholic beverage license shall expire 180 days after the holder’s business has closed or ceased alcohol sales, unless: “An application for approval of a transfer to another location or an application for assignment to another person pursuant to § 10-503(d) of this subtitle has been approved or is then pending.”

(2) 180 days after the holder of any license issued under the provisions of this article has closed the business or ceased active alcoholic beverages business operation of the business for which the license is held, the license shall expire unless:

(i) An application for approval of a transfer to another location or an application for assignment to another person pursuant to § 10-503(d)[13] of this subtitle has been approved or is then pending;

(ii) An application pursuant to § 10–506[14] of this subtitle has been approved or is then pending; or

(iii) A written request for a hardship extension, as provided in this subsection, is filed within the 180–day period.

(3) The licensee or other appropriate interested parties may make a written request to the Board for an extension of the life of the license due to undue hardship, for a time period of no more than a cumulative period of 360 days after the date of closing or cessation of alcoholic beverages business operations of the business for which the license is held.

In its April 26, 2017 opinion, the appellate court held, the plain language of the statute supports the Liquor Board’s conclusion that the license had “expired.” The closing of Turner’s in July of 2009 triggered the 180 day rule (“180 days after the holder of any license . . . has closed the business or ceased active alcoholic beverages business operations . . . the license shall expire[.]” Article 2B, §10-504(d)(2)).

The protestants in the proceedings below called as a witness former Senator George Della, who had sponsored the 2000 legislation creating Article 2B § 10-504(d), which is commonly referred to as the “180 day rule.” According to Senator Della:

It basically says [a] license can remain dormant for 180 days. And then if there’s a hardship, then that licensee can come back to the [B]oard and make their case, if they’re in a hardship situation. And then the Board could then grant them another extension of 180 days. ..

Beyond that, if they don’t activate that license, that license is dead. That’s what the legislative intent is behind the 180 day rule. And the Board knew it.

Curiously, and despite that the license would have been considered dormant as of October 17, 2011, possibly in a last grasp for life, it appears that the contract purchasers filed their first and only request for a hardship extension in a letter dated August 13, 2014?

In sum, the Board correctly determined that the license had expired. And, neither the approved but uncompleted transfer nor the Board’s subsequent renewals of the license could imbue it with new life.

You can read the entire decision in Board of Liquor License Commissioners for Baltimore City v. Austin here.

There are no doubt many zombie liquor licenses in Baltimore City and throughout the State. If we can assist you with the due diligence to verify that a license is alive or otherwise in dealing in matters of alcoholic beverage law, do not hesitate to give us a call.

As of the writing of this blog post, House Bill 292 has passed the House and the cross filed bill SB 491 has passed the Senate, so it appears that the soon to be completed 2017 session of the Maryland General Assembly will establish a 32 ounce nonrefillable container permit in the State. The permit authorizes the sale of draft beer for off-premises consumption by packaging the beer in a nonrefillable container that meets specified standards.

Many suggest that there is little interest in nonrefillable containers for draft beer (.. why not simply buy a container already filled?).

But, there has been a very real push for this “Growlette” or smaller version than the existing authorized Growler.

Since authorized by the legislature in 2014, Maryland has permitted alcoholic beverages refillable containers to be used in the sale of draft beer or wine for off-premises consumption. The holder of a refillable container permit may sell, fill, or refill any container that meets the specific standards set out in the state law, including that are fillable container must:

For beer, have a capacity of not less than 32 ounces and not more than 128 ounces; and for wine, have a capacity of not less than 17 ounces and not more than 34 ounces.

But that was too large for may beer drinkers.

So, HB 292, enacted with companion bill, SB 491, amends the state law, so “to be used as a nonrefillable container” for draft beer, a container must: be made out of aluminum; be sealable; and have a capacity of 32 ounces;

The new permit may be issued by a local board of license commissioners in 19 counties, Baltimore City, and the City of Annapolis; these are the same jurisdictions that today authorize the sale of draft beer in larger refillable containers.

This does not affect the few locals that authorize the sale of refillable wine. And its impact on refillable beer is not clear.

In amendments to both the House and Senate bills, the annual permit fees were capped at $50 for an applicant whose existing license has an off-sale privilege and $500 for those who do not currently have an off-sale privilege. An applicant with a refillable permit will not be charged an additional fee.

But the bill is a winner for the alcoholic beverage industry in Maryland which now has another good option to satisfy customers, including possibly significantly those who do not currently have an off-sale privilege and will now be able to sell a nonrefillable container of draft beer.

The new law, if signed by the Governor will go into effect July 1, 2017 and as soon thereafter as local boards enact the local permits.