Florida | Read Time: 4 minutes

What is a “Tied House” and Why is it Evil?

How a Florida law designed to prevent the “evil” of vertical integration in the alcoholic beverage industry limits the ability of suppliers to help you buy their products. Tied Houses, Evil and Otherwise The term “Tied House Evil” appears in the heading to Florida Statutes Section 561.42. Although the term is nowhere defined in the Florida Statutes, it is rooted in Prohibition in the United States and the re-legalization of alcoholic beverages when Prohibition was repealed in 1933. A “tied house” is a contractual relationship between an alcoholic beverage vendor and a supplier, in which the vendor is required to by part or all of its supply from one or a handful of suppliers. In many cases, the supplier provided essential financial backing–such as a loan or lease–without which the vendor (called the “managed house”) might not exist. The practice of tied houses still exists in the United Kingdom and other countries, but in the United States it was generally abolished by “tied house evil” statutes passed after the appeal of Prohibition. In 1971, the Supreme Court of California described “tied house evil” statutes as follows: By enacting prohibitions against “tied-house” arrangements, state legislatures aimed to prevent two particular dangers: the ability and potentiality of large firms to dominate local markets through vertical and horizontal integration . . . and the excessive sales of alcoholic beverages produced by the overly aggressive marketing techniques of larger alcoholic beverage concerns.  California Beer Wholesalers Ass’n v. Alcoholic Beverage Control App. Bd., 5 Cal. 3d 402, 407–408 (1971). Statutory Limits on Help for Florida Vendors Florida’s Tied House Evil Statute, Florida Statutes Section 561.42, generally prohibits alcoholic beverage suppliers from (1) having a direct or indirect financial interest in a Florida vendor, and (2) providing gifts, loans of money or property, or rebates to a Florida vendor. Florida vendors are also prohibited from accepting support from suppliers. The suppliers that are limited by the Tied House Evil Statute include manufacturers, distributors, importers, primary American sources of supply, brand owners or registrants, brokers, sales agents, or sales persons, whether or not they are operating in Florida or outside the state. There are, of course, exceptions to the Tied House Evil prohibitions. Distributors can give vendors trade credit (that is, extend the date for payment for sale) up to the 10th day after the calendar week in which a sale is made. Distributors can also give trade discounts in the usual course of business upon wine and liquor sales (discussed more fully in Alcohol Distributors’ Discounts Under Florida Law). The prohibition against providing gifts and loans of property excludes bottles, barrels and other containers necessary for transportation of purchased beverage products and, importantly, excludes advertising materials (although, advertising materials expressly excludes outside signs). Outdoor Signs are Bad; Indoor Signs are Good The Florida Tied House Evil Statute has a lot to say about signs–printed, painted, electric or other. Suppliers are prohibited from directly or indirectly giving, lending, renting, selling or otherwise furnishing to a vendor any outside sign, and vendors are prohibited from accepting them. Suppliers can furnish vendors with indoor signs, including posters, placards, and other advertising materials. Vendors are permitted are permitted to display signs (including neon or electric) signs in their windows facing outward, but they are limited to one sign advertising the product of any one manufacturer. Beer Glassware and Other Advertising Assistance The Florida Tied House Evil Statute says a lot more about the assistance beer and malt beverage suppliers can provide to vendors, particularly concerning advertising materials. Beer coupons: Suppliers are prohibited from providing any type of malt beverage coupon which is to be redeemable by a vendor. Expendable retailer advertising specialities: Beer supplier may sell to vendor, at actual cost or higher, trays, coasters, mats, menu cards, napkins, cups, glassware, thermometers and the like. Durable retailer advertising specialities: Beer suppliers may rent, loan without charge, or sell to vendors clocks, pool table lights, and the like which bear advertising materials. Consumer advertising specialties: Beer suppliers may sell to vendor, at actual cost or higher, ashtrays, T-shirts, bottle openers, shopping bags, and the like. Cooperative advertising: Beer suppliers may not engage in cooperative advertising with vendors (more on this in You Can’t Tag This). Draft equipment and tapping accessories: Beer distributors may sell to vendor, at actual cost or higher, draft equipment and may also furnish replacement parts of nominal intrinsic value, including washers, gaskets, tail pieces, hoses, hose connections, clamps, plungers, and tap markers. Branded glassware gets detailed treatment in the Florida Tied House Evil Statute. A beer distributor may give to a vendor a limited amount of branded glassware that the distributor receives at no charge from the beer manufacturer. The glassware must hold no more than 23 ounces of liquid vollum and must bear a permanent brand name intended to prominently advertise the brand. The beer distributor can give the vendor no more than 10 cases of glassware per year per licensed premises. Both the manufacturer and distributor must keep records of glassware gifts for at least 3 years. The vendor may not sell the glassware or return it to the distributor for cash, credit or replacement. Do you have any questions about Florida’s Tied House Evil Statute or what assistance alcoholic beverage suppliers can provide to Florida vendors? Contact us at contact@brewerlong.com to schedule a consultation with a beverage attorney. Because we’re attorneys: Disclaimer.

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ABT | Read Time: 4 minutes

Alcoholic Beverage Importers and Exporters in Florida

Like alcoholic beverage manufacturers, distributors, and vendors, importers and exporters are subject to strict regulations and licensing by the federal government and the State of Florida. What Florida Importers & Exporters Can and Cannot Do In the alcoholic sales channel, importers play the role of getting products from overseas through US Customs and into the hands of distributors. Licensed Florida importers are permitted to buy alcoholic beverages from manufacturers and distributors outside Florida and sell those products to licensed Florida manufacturers and distributors. Importers are not permitted to take possession of the alcoholic beverages they buy and sell. Rather, the products that an importer purchases must be shipped directly to a manufacturer or distributor. Florida exporters serve the purpose of getting Florida-manufactured products into the hands of wholesalers and other buyers outside the United States. A Florida brewery, winery, or distillery is allowed to export its own products (rather than working through a separate exporter), but the manufacturer still must comply with Federal and state export licensing and regulatory requirements. Florida importers and exporters cannot make sales directly to vendors or retail customers, with only two exceptions. Exception #1: a Florida importer that is also licensed as a Florida distributor can sell imported products to vendors. Exception #2: a Florida exporter that is also licensed as a Florida manufacturer can sell its products to retail customers in a licensed taproom, tasting room, or gift shop. When it comes to Florida’s Three Tier System, importers and non-manufacturing exporters are generally classified in the “distributor” tier. As such, they are prohibited from having a financial or controlling interest in either a manufacturer or vendor licensed in Florida (discussed in numerous other posts). A question that is often asked: Can a Florida importer purchase beer, wine, or liquor from outside the United States and sell it directly to customers via the internet? The answer is clearly no. Federal and State Licensing Requirements Importers must hold a Basic Importer Permit issued by the federal TTB, and they must hold a Florida Importer or Broker/Sales Agent license. The federal Basic Importer Permit does not require paying a license fee or maintaining a tax bond. A Florida Importer license can be issued to a non-resident person or company, but a Florida Importer must have a Florida office address. The Florida Importer license requires payment of an annual licensing fee (currently, $500 per year) but does not require a tax bond. In addition to holding a Florida Importer or Broker/Sales Agent license, it might be necessary for an importer to apply to the Florida ABT as the “primary American source of supply” (PASS) for an importer product (See Florida Statutes Section 564.045 and Section 565.095). Importers can only purchase wine or liquor products from the PASS, unless the importer is the PASS. The PASS is the manufacturer, bottler, or legally authorized exclusive agent that is the source closest to the manufacturer in the channel of commerce from which an American distributor can obtain the product. A foreign manufacturer or bottler can register as the PASS itself, in which case it will also be the brand registrant. Where the foreign manufacturer or bottler cannot or does not register as the PASS, the importer can apply to the Florida ABT to be designated as the PASS, in which case the importer will be the brand registrant. Florida-based exporters must hold a Basic Wholesaler Permit issued by the federal TTB, and they must register as an Exporter with the Florida ABT. Florida Exporter registration involves essentially the same steps as applying for a Florida beverage license, but there is no registration fee. The federal Basic Wholesaler Permit and Florida Exporter registration are requirements even for a Florida manufacturer that wishes to export its products by selling directly to non-US buyer. Neither the federal Basic Wholesaler Permit nor the Florida Exporter registration requires paying a licensing fee or maintaining a tax bond. Responsibility for Federal and State Regulations and Taxes At the federal level, regulations for importers are mostly concerned with paying excise taxes, confirming the importer products’ country of origin, and complying with federal labeling requirements. Importers are responsible for paying federal excise taxes on imported products, which must be paid before products are allowed to clear US Customs. Wine importers are also required to comply with specific product certifications requirements. Florida regulations that apply to importers focus on enforcing importers’ position in the Three Tier System. Florida importers are required to file monthly operations reports with the Florida ABT, but importers do not generally pay Florida excise taxes. Florida excise taxes on products that are sold to a Florida distributor are paid by the distributor. In comparison, there are relatively few Federal and State of Florida regulations that apply to exported products. Under Federal regulations, exported products must be marked “Export.” Exported products are not subject to Federal or state excise taxes. Federal regulations provide specific requirements for export sales of taxpaid products and tax unpaid products. Exporters must also pay close attention to the laws and regulations of the countries to which they are exporting. The federal TTB provides some guidance about the requirements of several countries. Do you have questions about importing or exporting alcoholic beverages in Florida? Contact us at contact@brewerlong.com to schedule a 15-minute introductory call at no charge. Because we’re attorneys: This blog post is provided on an “as is” and “as available” basis as of the date of publication. We disclaim any duty to update or correct any information contained in this blog post, including errors, even if we are notified about them. To the fullest extent permitted by law, we disclaim all representations or warranties of any kind, express or implied with respect to the information contained in this blog post, including, but not limited to, warranties of merchantability, fitness for a particular purpose, title, non-infringement, accuracy, completeness, and timeliness. We will not be liable for damages of any kind arising from or in connection with your use of or reliance on […]

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Distribution | Read Time: 3 minutes

Florida Farm Wineries: Operating in All Three Tiers

Florida’s Three Tier System is a source of constant frustration for most of Florida’s alcoholic beverage and manufacturers. Brewers, distilleries, and (most) wineries are prohibited from distributing their own products to retail vendors. Florida breweries and distilleries are prohibited from selling their products to online customers. Florida distilleries can have gift shops, but they are prohibited from selling beverages to customers for consumption on premises. Unlike other alcoholic beverage industry members, Florida Farm Wineries are allowed to operate in all three tiers. Florida Farm Wineries Can Do It All Florida Farm Wineries are uniquely allowed to hold a Florida manufacturing license and a distribution license. Florida Statutes Section 561.24 generally prohibits distilleries and wineries from being licensed as a distributor in Florida. However, the statute specifically provides: “This section does not apply to any winery qualifying as a certified Florida Farm Winery under s. 599.004.” Florida Farm Wineries, like all wineries in Florida, are authorized to have up to three retail license for tasting rooms that are contiguous to the manufacturing premises. Tasting rooms can make sales of alcoholic beverages (beer, wine, and distilled spirits) for consumption on premises and/or carryout, depending on the vendor license. Whether or not it has a licensed tasting room, a Florida Farm Winery may be issued a permit allowing it to conduct tasting and sales of its wine at Florida fairs, trade shows, expositions, and festivals. Florida Farm Wineries, like all wineries in Florida, may also make online sales and ship their products to retail customers in Washington D.C. and 47 other states. See How to Build a Direct-to-Consumer Florida Beverage Company. Requirements to be a Florida Farm Winery To qualify under the Florida Farm Winery Program, a winery must meet certain requirements: Produce or sell less than 250,000 gallons of wine annually, 60% or more of which is made from state agricultural products; Maintain at least 5 acres of owned or managed land in Florida which produces the grapes or other product used in producing wine; Be open to the public for tours, tastings, and sales at least 30 hours each week; and File the annual application and pay the annual registration fee of $100. The Florida Farm Winery Program is not only available to wineries making grape wine. The program is equally available to cideries, meadaries, and makers of wine from fresh fruit, berries, or other agricultural products. In each case, however, at least 60% of the wine must come from Florida agricultural products. Florida wineries that meet the requirements of the Florida Farm Winery Program must apply for certification by the Florida Department of Agriculture and Consumer Services. Do you have questions about operating as a Florida Farm Winery? Contact us at contact@brewerlong.com to schedule a 15-minute introductory call at no charge. Because we’re attorneys: This blog post is provided on an “as is” and “as available” basis as of the date of publication. We disclaim any duty to update or correct any information contained in this blog post, including errors, even if we are notified about them. To the fullest extent permitted by law, we disclaim all representations or warranties of any kind, express or implied with respect to the information contained in this blog post, including, but not limited to, warranties of merchantability, fitness for a particular purpose, title, non-infringement, accuracy, completeness, and timeliness. We will not be liable for damages of any kind arising from or in connection with your use of or reliance on this blog post, including, but not limited to, direct, indirect, incidental, consequential, and punitive damages. You agree to use this blog post at your own risk. Regarding your particular circumstances, we recommend that you consult your own legal counsel–hopefully BrewerLong.

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ABT | Read Time: 2 minutes

Florida’s Three Tier System: Statutory Foundations

The Separation of Tiers In the aftermath of the Repeal of Prohibition, most states adopted some form of the Three Tier System. Generally, the Three Tier System is intended to regulate the alcoholic beverage industry by separating manufacturers and importers (First Tier), distributors and wholesalers (Second Tier), and retail vendors (Third Tier). Florida has a strong Three Tier System. The Florida Division of Alcoholic Beverage & Tobacco (the ABT), which is the regulatory agency charged with implementing Florida’s alcoholic beverage laws, describes the Three Tier System this way: The manufacturer must sell only to the distributor, and the distributor only to the vendor. The vendor in turn may buy only from the distributor. The manufacturer, who is normally the brand owner, may not deal directly with the vendor. The distributor stands between the vendor and the manufacturer. Florida ABT Florida’s Three Tier System Statutes In Florida, the Three Tier System is created and maintained through statutes that are part of Florida Beverage Laws (Florida Statutes Chapters 561-568). Several statutes work together to outline Florida’s Three Tier System. The most important of these statutes are identified and briefly summarized in the following table. For more analysis on Florida’s Three Tier System, check out our other posts on Three Tier System topic. Do you have questions about Florida’s Three Tier System? Contact us at contact@brewerlong.com to schedule a 15-minute introductory call at no charge. Because we’re attorneys: This blog post is provided on an “as is” and “as available” basis as of the date of publication. We disclaim any duty to update or correct any information contained in this blog post, including errors, even if we are notified about them. To the fullest extent permitted by law, we disclaim all representations or warranties of any kind, express or implied with respect to the information contained in this blog post, including, but not limited to, warranties of merchantability, fitness for a particular purpose, title, non-infringement, accuracy, completeness, and timeliness. We will not be liable for damages of any kind arising from or in connection with your use of or reliance on this blog post, including, but not limited to, direct, indirect, incidental, consequential, and punitive damages. You agree to use this blog post at your own risk. Regarding your particular circumstances, we recommend that you consult your own legal counsel–hopefully BrewerLong.

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ABT | Read Time: 5 minutes

What Burger King Tells Us About Florida’s Three Tier System

The Florida ABT’s 2012 Declaratory Statement In re BK Whopper Bar, LLC tells us how the ABT thinks about the present separation of alcoholic beverage manufacturers, distributors, and vendors. BK Whopper Bar Asked and the ABT Answered In 2011, BK Whopper Bar, LLC and Burger King Corporation asked the Florida Division of Alcoholic Beverages & Tobacco (ABT) to issue a Declaratory Statement answering this question: Did Florida’s Three Tier System prohibit BK Whopper Bar from holding an alcoholic beverage vendor license? In its Declaratory Statement, the ABT concluded that BK Whopper Bar was prohibited from holding a vendor license because BK Whopper Bar’s business structure violated the Three Tier System. In particular, the ABT’s Declaratory Statement focused on the fact that three individuals were investors and directors in a parent company of BK Whopper Bar and also in Anheuser Busch InBev, one of the largest beer manufacturing conglomerates in the world. While it has limited application outside its particular facts, the ABT’s Declaratory Statement boiled down Florida’s Three Tier System– as provided in Florida Statutes Sections 561.22 and 561.42–to three tests which are helpful in evaluating how the ABT would view other business structures under the Three Tier System. Declaratory Statements – What They Are and What They Are Not In re BK Whopper Bar, LLC is an example of declaratory statements that are issued by all Florida state agencies. Agencies are authorized by Florida’s Administrative Procedures Act to issue declaratory statements when requested by a person or company that is substantially affected by a state agency’s application of a state statute or agency rule. The petition for a declaratory statement must describe a set of facts and asks the agency to state how it would apply a statute or rule to those facts. In Florida, declaratory statements are only binding on the requesting person or company and the agency in the context of the facts provided in the petition. A declaratory statement cannot be enforced on an other parties or in any other circumstances. However, agency’s declaratory statements are valuable to everyone for two reasons. First, they provide a good indication of how an agency interprets and applies a statute or rule. Second, they can be persuasive (but not binding) authority for courts that are required to make a judicial ruling on application of the statutes or rules discussed in the declaratory statement. There are very few reported court opinions that evaluate Florida’s Three Tier System. For this reason, declaratory statements like In re BK Whopper Bar, LLC are one of few sources we have as guidance on this subject. Three Tests for Florida’s Three Tier System In In re BK Whopper Bar, LLC, the Florida ABT was asked whether BK Whopper Bar, LLC, with it’s indirect ties to AB InBev, could hold a vendor license under Florida Statutes Sections 561.22 and 561.42–two of the four statutes that largely define Florida’s Three Tier System (the other two statutes separate manufacturers and distributors). The ABT determined that a vendor license cannot be issued to a corporation or LLC in any of the following situations: Financial Interest Test: An alcoholic beverage manufacturer or distributor, operating within or outside of Florida, has a direct or indirect financial interest in the proposed Florida alcoholic beverage vendor. Florida Statutes Section 561.42(1). Affiliation Test: The proposed Florida alcoholic beverage vendor is directly or indirectly affiliated with an alcoholic beverage manufacturer or distributor, operating within or outside of Florida. Florida Statute Sections 561.22(3). Common Parent Test: The proposed Florida alcoholic beverage vendor is controlled or majority owned by a parent company which also controls or majority owns another company which is directly or indirectly engaged in alcoholic beverage manufacturing or distribution within or outside of Florida. Florida Statute Sections 561.22(3) As described in In re BK Whopper Bar, LLC, the Financial Interest Test and the Common Parent Tests are both objective tests. A direct or indirect financial interest exists or it does not; a common parent exits or it does not. The Affiliation Test, on the other hand, is described as a subjective test. The Declaration Statement does not precisely define “affiliation” but states “the scope of the term is meant to be broad and encompass those relationships in which control of an applicant [company] is derived from some other method than ownership.” The Declaratory Statement quotes one of the few Florida judicial opinions on this subject: [T] wo corporations are “affiliated with” each other only when the same individual, or a group of cooperating individuals having common interests, have the power to control formation and execution for the business policies of both corporations. Such control may be from stock ownership, voting trust, common officers, contracts, or a combination of two or more of these elements, but there must be an actual practical control or a legal power to control. Walter J. John and Southern Wine and Spirits, Inc. v. Meiklejohn, Case No. 68-196 (Fla. 2nd Cir. 1968). BK Whopper Bar, LLC failed the Affiliation Test, according to the Declaratory Statement. The Florida ABT concluded that BK Whopper Bar was affiliated with Anheuser-Busch Inc., an alcoholic beverage manufacturer, because three of the directors of AB InBev, Anheuser-Busch’s parent company, were also investors in the parent company of BK Whopper Bar, LLC (the petition also indicates that these individuals were directors of the BK Whopper Bar’s parent, but the Declaratory Statement does not mention this). The Florida ABT determined that the “common interests” of these individuals in both the Burger King companies and the AB InBev companies created a prohibited affiliation among the companies. For more information on Florida’s Three Tier System and its application to alcoholic beverage licensing, see our three-part series (Part 1, Part 2 and Part 3). Do you have questions about the BK Whopper Bar Declaratory Statement and its affect on Florida alcoholic beverage licensing. Contact us at contact@brewerlong.com to schedule a 15-minute introductory call at no charge. Because we’re attorneys: This blog post is provided on an “as is” and “as available” […]

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ABT | Read Time: 3 minutes

Qualification of Related Parties for Florida Alcoholic Beverage Licenses

This article is Part 3 of a three-part series addressing a common, thorny issue in Florida alcoholic beverage licensing: Who can have a financial or controlling interest in beverage company? Part 1 focuses on the Three Tier System and how it is enforced through the licensing process. Part 2 focuses on identifying the Interested Parties of a beverage license applicant. Part 3 focuses on the qualities of a Related Party that can disqualify the applicant from getting a Florida alcoholic beverage license.

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ABT | Read Time: 3 minutes

License Applicant’s Guide to Understanding Florida’s Three Tier System

This article is Part 1 of a three-part series addressing a common, thorny issue in Florida alcoholic beverage licensing: Who can have a financial or controlling interest in a beverage company? Part 1 focuses on the Three Tier System and how it is enforced through the licensing process. Part 2 focuses on identifying the Interested Parties of a beverage license applicant. Part 3 focuses on the qualities of a Related Party that can disqualify the applicant from getting a Florida alcoholic beverage license.

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ABT | Read Time: 4 minutes

Identifying the Interested Parties of a Florida License Applicant

This article is Part 2 of a three-part series addressing a common, thorny issue in Florida alcoholic beverage licensing: Who can have a financial or controlling interest in a beverage company? Part 1 focuses on the Three Tier System and how it is enforced through the licensing process. Part 2 focuses on identifying the Interested Parties of a beverage license applicant. Part 3 focuses on the qualities of a Related Party that can disqualify the applicant from getting a Florida alcoholic beverage license.

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