Indicates Matter Stricken

Indicates New Matter

 

Committee Report

May 3, 2023

S. 566

 

Introduced by Senators Bennett, K. Johnson, M. Johnson, Hutto, Adams, Kimpson, Fanning, Kimbrell, Climer, Cromer, McElveen, Talley, Davis, Malloy and Grooms

 

S. Printed 05/03/23--H.

Read the first time April 05, 2023

 

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The committee on house judiciary

To who was referred a Bill (S.566) to amend the South Carolina Code of Laws by enacting the "South Carolina Craft Beer Economic Development Act"; by amending Section 61-4-1515, relating to the sale, etc., respectfully

Report:

That they have duly and carefully considered the same, and recommend that the same do pass:

 

WESTON NEWTON for Committee.

 

statement of estimated fiscal impact

Explanation of Fiscal Impact

State Expenditure

This bill enacts the South Carolina Craft Beer Economic Development Act. The bill permits breweries to sell up to 2,000 barrels of beer each year brewed on one or more of the brewery's premises at retail, wholesale, or both, and deliver or ship the beer to licensed retailers in the state. The bill also removes the requirement that sales by breweries to consumers must be held in conjunction with a tour of the premises, as well as the requirement that that the maximum amount of beer that may be sold to a consumer for off-premises consumption is 288 ounces. The bill further allows breweries to apply for a special permit from the DOR to sell beer at fairs and special functions. However, gross income from the beer sold at events for which a special permit has been issued may not exceed 10 percent of the brewery's gross income each year from beer sales and must come from sales at events that are promotional in nature. Additionally, the bill allows breweries permitted in the state to transfer beer produced on one or more of the brewery's permitted premises to other facilities within the state owned, leased, or rented by the brewery including, but not limited to, production facilities, storage facilities, and permitted premises. This transfer is not subject to the distribution and wholesale provisions of Title 61 or any state or local taxation provisions.

 

Department of Revenue. The bill will not impact expenditures for DOR. DOR will implement the changes required by the bill with existing staff and resources.

State Law Enforcement Division. This bill allows breweries to apply for a special permit from DOR to sell beer at fairs and special functions. An applicant for a special permit must obtain a criminal records check conducted by SLED within ninety days prior to submitting the application. This may increase the number of background checks that SLED will be required to perform. However, the agency indicates that any increase in inspections and enforcement duties as a result of this bill can be managed by existing agents within the normal course of business. Therefore, this bill will have no expenditure impact on SLED.

State Revenue

This bill permits breweries to sell up to 2,000 barrels of beer each year brewed on the premises at retail, wholesale, or both, and deliver or ship the beer to licensed retailers in the state. The bill also removes certain restrictions on sales to consumers for off-premises consumption and permits breweries to sell beer at events for which a special permit has been issued, with certain restrictions.

RFA anticipates that this portion of the bill will have a minimal impact on beer sales and resulting sales and alcohol tax revenues. Although we anticipate the provisions of the bill may cause a shift in the way consumers purchase beer, the provisions of the bill are not expected to result in a material expansion of beer purchases. Further, based on information reported by DOR, the bill may result in a minor reduction in fees from wholesalers due to the changes to allow breweries to sell up to 2,000 barrels of beer each year brewed on one or more of the brewery's premises at retail, wholesale, or both, and deliver or ship the beer to licensed retailers in the state. While the exact change is undetermined, DOR anticipates that the impact will be minimal.

This bill also allows breweries to apply for a special permit from DOR to sell beer at fairs and special functions. DOR may issue special permits for a period not exceeding fifteen days for a fee of $10 per day. It is unclear how many new permits will be issued pursuant to this bill, and therefore the revenue impact to the General Fund is undetermined, contingent upon the number of permits issued.

An applicant for a special permit must obtain a criminal records check conducted by SLED within ninety days prior to submitting the application. RFA anticipates that this may increase the number of background checks that SLED will be required to perform. SLED previously indicated that the total cost for a criminal records search is $51.75, of which $25 is retained by SLED. The vendor, Identogo, receives $13.50, and the remainder of the fee, $13.25, is remitted to the FBI. Pursuant to Section 23-3-115(A), revenue generated by criminal records checks performed by SLED up to an amount of $4,461,000 must be deposited in the General Fund. Any revenue over that amount is retained by SLED. Based upon a three-year historical average, SLED was able to retain an average of $10,375,000 from background checks for its $25 portion of the fee. Assuming a similar pattern in future years and since this amount is over the $4,461,000 amount that is allocated to the General Fund pursuant to proviso, we anticipate that Other Funds of SLED will increase by an undetermined amount in FY 2023-24 as a result of the potential increase in background checks. There will be no increase to the General Fund for this portion of the bill.

 

Frank A. Rainwater, Executive Director

Revenue and Fiscal Affairs Office

 

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A bill

 

TO AMEND THE SOUTH CAROLINA CODE OF LAWS BY ENACTING THE "SOUTH CAROLINA CRAFT BEER ECONOMIC DEVELOPMENT ACT"; BY AMENDING SECTION 61-4-1515, RELATING TO THE SALE OF BEER BY BREWERIES, SO AS TO PROVIDE THAT A BREWERY IS AUTHORIZED TO SELL UP TO TWO THOUSAND BARRELS OF BEER EACH YEAR BREWED ON ONE OR MORE OF THE BREWERY'S PERMITTED PREMISES AT RETAIL, WHOLESALE, OR BOTH, AND DELIVER OR SHIP THE BEER TO LICENSED RETAILERS IN THIS STATE, TO DELETE THE CONDITION THAT SALES TO CONSUMERS MUST BE HELD IN CONJUNCTION WITH A TOUR, TO DELETE THE CONDITION THAT THE MAXIMUM AMOUNT OF BEER THAT MAY BE SOLD TO A CONSUMER FOR OFF-PREMISES CONSUMPTION SHALL BE EQUIVALENT TO TWO HUNDRED EIGHTY-EIGHT OUNCES, AND TO PROVIDE THAT A BREWERY IS ELIGIBLE FOR A SPECIAL PERMIT PURSUANT TO SECTION 61-4-550; AND BY ADDING SECTION 61-4-1550 SO AS TO PROVIDE THAT A BREWERY IS AUTHORIZED TO TRANSFER BEER PRODUCED ON ONE OR MORE OF THE BREWERY'S PERMITTED PREMISES TO OTHER FACILITIES WITHIN THIS STATE OWNED, LEASED, OR RENTED BY THE BREWERY WITHOUT BEING SUBJECT TO THE DISTRIBUTION AND WHOLESALE PROVISIONS OF TITLE 61 AND ANY TAXATION PROVISIONS OF THIS STATE, INCLUDING LOCAL GOVERNMENTS.

 

Be it enacted by the General Assembly of the State of South Carolina:

 

SECTION 1.  This act may be cited as the "South Carolina Craft Beer Economic Development Act".

 

SECTION 2.  Section 61-4-1515 of the S.C. Code is amended to read:

 

    Section 61-4-1515. (A) A brewery permitted in this State is authorized to sell beer to consumers on its permitted premises, provided that the beer is brewed on the permitted premises with an alcoholic content of twelve percent by weight, or less, subject to the following conditions:

       (1) sales to consumers must be held in conjunction with a tour by the consumer of the permitted premises and the entire brewing process utilized at the permitted premises; beer sold for on-premises consumption must be produced by the brewery on its permitted premises or transferred to the brewery, subject to the following conditions: (a) the transferring and receiving breweries operate under one hundred percent identical ownership, and (b) the annual volume of beer received by a brewery does not exceed the annual volume of beer produced by such brewery on its permitted premises;

       (2) sales to consumers must be held in conjunction with a tour by the consumer of the permitted premises and the entire brewing process utilized at the permitted premises;

       (2)(3) sales shall not be offered or made to, or allowed to be offered, made to, or consumed by an intoxicated person or a person who is under the age of twenty-one;

       (3)(4)(a) no more than a total of forty-eight ounces of beer brewed at or transferred to the permitted premises shall be sold to a consumer for on-premises consumption within a twenty-four hour period; and

           (b) of that forty-eight ounces of beer available to be sold to a consumer within a twenty-four hour period, no more than sixteen ounces of beer with an alcoholic weight of above eight percent, including any samples offered and consumed with or without cost, shall be sold to a consumer for on-premises consumption within a twenty-four hour period;

       (4)(5) a brewery must develop and use a system report in a manner required by the department to monitor the amounts, and types, and brewing locations of beer sampled or sold to a consumer for on-premises consumption;

       (5)(6) a brewery must sell the beer at the permitted premises at a price approximating retail prices generally charged for identical beverages in the county where the permitted premises are located;

       (6)(7) a brewery must remit appropriate taxes to the Department of Revenue for beer sales in an amount equal to and in a manner required for excise taxes assessed by the department. A brewery also must remit appropriate sales and use taxes and local hospitality taxes;

       (7)(8) a brewery must post information that states the alcoholic content by weight of the various types of beer available in the brewery and the penalties for convictions for:

           (a) driving under the influence;

           (b) unlawful transport of an alcoholic container; and

           (c) unlawful transfer of alcohol to minors.

    And, the information shall be in signage that must be posted at each entrance, each exit, and in places in a brewery seen during a tour;

       (8)(9) a brewery must provide department or DAODAS approved alcohol enforcement training for the employees who serve beer on the permitted premises to consumers for on-premises consumption, so as to prevent and prohibit unlawful sales, transfer, transport, or consumption of beer by persons who are under the age of twenty-one or who are intoxicated; and

       (9)(10) a brewery must maintain a liquor liability insurance policy or a general liability insurance policy with a liquor liability endorsement in the amount of at least one million dollars for the biennial period for which it is permitted. Within ten days of receiving its biennial permit, a brewery must send proof of this insurance to the State Law Enforcement Division and to the Department of Revenue, where the proof of insurance information shall be retained with the department's alcohol beverage licensing section.

    (B)(1) In addition to the sales provisions set forth in subsection (A) and subject to this subsection (B), a brewery permitted in this State is authorized to sell beer produced on its permitted premises to consumers on site for on-premises consumption within an area of its permitted and licensed premises approved by the rules and regulations of the Department of Health and Environmental Control governing eating and drinking establishments and other food service establishments. These establishments also may apply for a retail on-premises consumption permit for the sale of beer and wine not produced on the licensed premises that has been purchased from a wholesaler through the three-tier distribution chain set forth in Section 61-4-735 and Section 61-4-940.

       (2) In addition to a retail on-premises consumption permit for the sale of beer and wine as authorized in this subsection, a brewery that has a Department of Health and Environmental Control approved and licensed food establishment on its premises as provided in subsection (B)(1) may apply for a license to sell alcoholic liquor by the drink for on-premises consumption within a specified area of its licensed or permitted premises physically partitioned from the brewing operation and designated for the purpose of engaging substantially and primarily in the preparation and serving of meals. The brewery must:

           (a) maintain compliance with all provisions of Section 61-6-1610 and all other provisions of Chapter 6 regulating the purchase and sale by food establishments of alcoholic liquor by the drink for on-premises consumption not inconsistent with other provisions of this section;

           (b) not sell or allow the consumption of alcoholic liquor by the drink on that part of the brewery's premises designated and permitted for the brewing operation;

           (c) maintain the books, records, and bank accounts of the restaurant operation separately from the books, records, and bank accounts of the brewing operation, and allocate expenses common to both operations in a manner the brewery considers reasonable, when applicable; and

           (d) maintain a physical partition between the brewing and food establishment operations. The physical partition may be a permanent wall or a divider permanently affixed to the premises in a manner that the general public may not freely enter the brewing operation, and may contain a door or doors which remain locked during hours when the brewery is not in operation.

    (C) The department shall terminate and a brewery shall surrender each permit and license issued to the brewery pursuant to subsection (B) immediately following inspection, determination, and report by the division to the department that brewing operations have ceased on the brewery's permitted premises. This includes the food establishment permits and licenses. Following reinstitution of brewing operations on the formerly permitted premises, a brewery may re-apply for the applicable permits and licenses authorized by subsection (B).

    (D) The sale of beer that is brewed on one or more of the licensed premises for on-premises consumption pursuant to subsection (B) must comply with the following provisions:

       (1) all provisions of subsection (A) shall apply to sales under subsection (B) and this subsection, except subsection (A)(1), (2) (3), and (4) (5);

       (2) the brewery must comply with all state and local laws concerning hours of operation applicable to eating and drinking establishments and other food service establishments holding permits to sell beer and wine for on-premises consumption;

       (3) the brewery must comply with the discount pricing provisions of Section 61-4-160, applicable to persons holding permits to sell beer and wine for on-premises consumption;

       (4) the brewery must sell the beer at a price approximating retail prices generally charged for identical beverages by on-premises retailers in the county where the licensed premises are located; and

       (5) a wholesaler must not provide and a brewery must not accept services, equipment, fixtures, or free beer prohibited by Section 61-4-940(B), except those items authorized by Section 61-4-940(C). Changes to the brewery laws pursuant to subsection (B) and this subsection do not alter or amend the structure of the three-tier laws of this State, and the wholesalers and the breweries must not discriminate in pricing at the producer or wholesaler levels.

    (E) A brewery located in this State is authorized to sell beer to consumers on its permitted premises for off-premises consumption, provided that the sealed beer was brewed on the brewery's permitted premises or received pursuant to subsection (A) with an alcohol content of fourteen percent by weight or less, subject to the following conditions:

       (1) the maximum amount of beer that may be sold to an individual per day for off-premises consumption shall be equivalent to two hundred eighty-eight hundred sixty-four eight ounces in total;

       (2) the beer only shall be sold in conjunction with a tour by the consumer of the permitted premises and the entire brewing process utilized at the permitted premises;

       (3) the beer sold is for personal use only and must not be resold;

       (4) the beer must not be sold to anyone holding a retail beer and wine license for the purpose of resale in their establishment;

        (5) the brewery must sell the beer at the permitted premises at a price approximating retail prices generally charged for identical beverages in the county where the permitted premises are located; and

        (6) the brewery must remit taxes to the Department of Revenue for beer sales in an amount equal to and in a manner required for taxes assessed by Section 12-21-1020 and Section 12-21-1030. The brewery also must remit appropriate sales and use taxes and local hospitality taxes; and

       (7) beer sold in kegs must comply with the requirements of Article 19, entitled "Keg Registration".

    (F) A brewery must report monthly in a manner required by the department the amounts and brands of beer present on its licensed premises at the month's beginning, brewed on its licensed premises, transferred to and received from a separate licensed brewery under identical ownership, sold to wholesalers for resale, sold to consumers for off-premises consumption, sold to consumers for on-premises consumption, lost to spillage and spoilage, removed for owner consumption, and present on its licensed premises at the month's end.

    (G) A brewpub permitted pursuant to Article 17, which is a retailer for purposes of Sections 61-4-735(D) and 61-4-940(D), may make application to the department for a brewery permit and the permits and licenses authorized pursuant to subsection (B) for the brewpub's existing permitted premises. For these applications, the department shall waive newspaper notice and sign posting requirements, except the requirements shall not be waived for an alcoholic liquor by the drink application if the brewpub does not possess this license at the time of application. Excluding operations authorized pursuant to subsection (B), the department must not approve an application if the applicant or any principal or person acting directly or indirectly on behalf of the applicant would have ownership or financial interest in a wholesale or retail beer, wine, or alcoholic liquor operation following the issuance of the brewery permit. Contemporaneous with obtaining the brewery and applicable permits or licenses authorized pursuant to subsection (B), the applicant shall surrender the brewpub permit and the alcoholic liquor by the drink license previously issued for the premises.

    (G)(H) In addition to other applicable fines or penalties, a person permitted as a brewery in this State who violates the provisions of this section must be assessed a fine of five hundred dollars for a first violation. For a second violation that occurs within three years of the first violation, a person must be assessed an additional five hundred dollars. For subsequent violations within a three-year period, the department must suspend the brewery permit for a period of not less than thirty days. The revenue from the fines established in this section must be directed to the State Law Enforcement Division for supplementing funds required for the regulation and enforcement of this section.

 

SECTION 3.  This act takes effect upon approval by the Governor.

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