Legislature(1995 - 1996)
03/22/1995 01:37 PM Senate JUD
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SJUD - 3/22/95
SB 87 ALCOHOLIC BEVERAGES: LOCAL OPTION & MISC.
CHAIRMAN ROBIN TAYLOR called the Judiciary Committee meeting to
order at 1:37 p.m. The first order of business was CSSB 87(CRA).
JOE AMBROSE, legislative aide to Senator Taylor, gave the following
testimony. Last year the Alcoholic Beverage Control Board (ABC
Board), prompted by concerns over a lack of clarity about how local
option elections are to be conducted, requested legislation to
simplify the process. The ABC Board also asked the same vehicle be
used to address technical amendments to Title 4. The result last
year was SB 372, which passed the Senate but died in the House
Rules Committee in the final days of the session. SB 87 is
essentially the same as last year's legislation.
MR. AMBROSE continued. CSSB 87(CRA) addresses the shortcomings in
current statute governing local option, for which no provision is
made for going from one type of option to another. Under current
law, a community must first vote to remove all restrictions on the
sale and/or importation of alcoholic beverages, then conduct a
second election on new options. This burdensome process can cause
confusion for municipalities and unincorporated villages. The
Community and Regional Affairs committee substitute addresses
specific concerns raised by local option communities. Those
amendments were supported by the ABC Board, and the chairman of the
sponsoring committee.
MR. AMBROSE discussed proposed amendments to CSSB 87(CRA) that are
supported by the Division of Elections, liquor industry and chair
of the sponsoring committee. CSSB 87 (CRA) is primarily a
housekeeping measure to clarify existing law to make local option
a more understandable process.
MR. AMBROSE explained Amendment #1 to page 22, lines 26-29. Line
27 should read, "under AS 04.11.491(a)(1) and the premises is a
nonprofit club, corporation, or association that was..." and line
29 should cite "AS 04.11.491(a)(1)."
Number 115
SENATOR GREEN asked if the nonprofit status would apply to
corporations and associations. MIKE FORD, Legislative Legal
Services, clarified the word "nonprofit" refers to "club,"
"corporation," and "association." SENATOR ADAMS noted to prevent
future problems with interpretation, the word "nonprofit" should be
inserted before all three words to clarify the intent.
SENATOR TAYLOR made a motion to amend Amendment #1 to insert the
word "nonprofit" in front of the words "club," "corporation," and
"association" and to move Amendment #1. SENATOR ADAMS objected.
MIKE FORD suggested an additional change to Amendment #1. He noted
the word "place" was used on line 27 because it also appears on
line 22. He suggested replacing the word "place" on line 22 with
the word "premise" and changing line 27 to read, "premises are
occupied by a nonprofit club...."
SENATOR GREEN asked if line 24 needed to be amended to include the
word "nonprofit." MR. FORD did not believe so.
There being to objection to adopt Amendment #1, as amended, the
motion carried.
Number 173
SENATOR GREEN moved the adoption of Amendment #2 which was labeled
"9-LS0673\F.1." SENATOR ADAMS objected.
MR. AMBROSE addressed lines 19-22 on page 1 of Amendment #2 and
line 1 on page 2. In revisions made to the Community and Regional
Affairs Committee substitute, the effective date of Section 70 of
the bill was inadvertently deleted. Section 73 would reinstate the
immediate effective date.
SENATOR ADAMS asked what Section 70 pertains to. MIKE FORD stated
Section 70 allows the ABC Board to adopt regulations.
RICK URION, Alaska Wine and Spirits Wholesale Association,
explained the remainder of Amendment #2. He stated the 21st
amendment to the U.S. Constitution allows states to control the
importation of alcoholic beverages into their borders. All but six
states have chosen to do so with a primary source law. Amendment
register their suppliers and brands of liquor with the department,
along with a statement from the manufacturer of the product that
the wholesaler is the primary source. This procedure would protect
the state and its revenue source by allowing products to be traced
and ensuring the payment of excise taxes by wholesalers. It also
protects the state, wholesalers and the jobs created within the
industry. This language would prevent gray market goods (products
manufactured in foreign countries intended for consumption or use
in a foreign country) from entering the state of Alaska.
SENATOR ADAMS questioned how Amendment #2 would affect a typical
COSTCO member and how COSTCO distributes liquor from its warehouse.
MR. URION clarified retailers would not be affected at all, unless
they bought gray market goods. The bill is directed to
wholesalers. He noted the industry will be self-policing.
PATRICK SHARROCK, Director of the ABC Board, commented Amendment #2
does not address Senator Adams' question; Section 10 on page 5
does. Section 10 restricts purchases of alcoholic beverages for
resale.
SENATOR ADAMS asked what the ABC Board's position is on Amendment
either amendment. He added the intent of the measure is to
solidify, in law, what has been implied or perceived for many
years.
Number 265
SENATOR ELLIS asked Mr. Sharrock's personal opinion of the proposed
amendment. MR. SHARROCK answered it solidifies a 3 tiered system
of the distribution of alcoholic beverages throughout the country,
which is probably beneficial.
SENATOR ELLIS asked how the fees that would be established in
statute compare to other states. MR. URION replied CSSB 87(CRA)
differs from other state laws so it is difficult to compare. He
developed the fee structure by determining the cost to the
department to cover filing costs. SENATOR ELLIS asked if other
states have a similar fee structure. MR. URION explained other
states have fees but they are calculated in many different ways.
SENATOR ELLIS questioned whether the fees in Amendment #2 are
comparable in any way. MR. URION stated the industry believes the
fees to be reasonable. SENATOR ELLIS requested, on behalf of the
committee, that Mr. Urion and the ABC Board provide the committee
with statistics on similar fees charged in other states.
Number 300
SENATOR TAYLOR asked if the bill would generate new revenue. MR.
URION replied affirmatively.
SENATOR ADAMS asked for the ABC Board's position on Section 10,
specifically in regard to a COSTCO member. MR. SHARROCK commented
it would prohibit a licensed retailer from purchasing alcohol at
that location for resale.
SENATOR TAYLOR asked if liquor stores in the state were allowed to
sell products at wholesale cost. MR. SHARROCK replied negatively,
and explained a wholesale licensee cannot have an interest in a
liquor store. SENATOR TAYLOR commented COSTCO has a retail
license, but a COSTCO member could buy a large quantity of liquor
at a discount price without paying sales tax.
MR.SHARROCK noted that could be perceived as a wholesale purchase
if the quantity was very large. SENATOR TAYLOR commented if the
member bought the liquor for resale, he/she would be violating the
law. MR. SHARROCK stated the problem lies in the fact that COSTCO
is not required to ask the customer whether the purchase is for
resale. SENATOR TAYLOR stated a retailer is prohibited from
selling at wholesale prices. MR. SHARROCK added the sales tax has
already been paid in the form of an excise tax.
SENATOR MILLER asked where COSTCO purchases the liquor. MR. URION
replied from a licensed wholesaler which must be Alaska based.
SENATOR MILLER asked where the concern lies. MR. URION explained
the bill does not change the way anything is currently done, and
that there is not a problem with gray market goods; the bill merely
closes up a loophole that exists. He reiterated a retailer cannot
be a wholesaler, therefore the COSTCO situation is not a problem.
SENATOR MILLER questioned the need for additional restrictions. He
compared the situation to other retail businesses who resell
products purchased from retailers. MR. URION clarified excise tax
must be paid on alcoholic beverages and is paid by wholesalers. He
explained the excise tax is only paid once, and not by retailers
like COSTCO.
SENATOR TAYLOR noted the non-Alaskan distributor who ships liquor
into the state without paying the excise tax cannot be policed.
The retailer who purchases that liquor will do so at a much cheaper
price because the cost of the tax does not have to be taken into
consideration.
Number 390
SENATOR ADAMS suggested the deletion of Section 10 on page 5.
Number 400
SENATOR GREEN asked for clarification of how gray market goods
create market problems in other states. MR. URION replied in the
contiguous states a wholesaler can transport goods from state to
state easily. The problem is not as prevalent in Alaska, however
there have been times when gray market goods have been transported
into the state. He discussed quality control problems with such
goods and the inability to remove those products from circulation
when they are unsafe. SENATOR GREEN asked how CSSB 87(CRA) would
prevent those problems. MR. URION explained it requires primary
source distributors to register the names of the producers of
goods.
SENATOR TAYLOR commented the Washington State ABC Board determines
which brands can be sold in the state, and the liquor stores are
controlled by the state.
SENATOR ADAMS questioned the fee structure in Amendment #2. MR.
URION answered he determined the fee structure. SENATOR TAYLOR
responded the committee had requested comparable fee calculations
from other states.
SENATOR ELLIS commented he supports the effective date change in
Amendment #2 but preferred to wait for the fee structure
information before taking action on that portion of the amendment.
MR. SHARROCK noted Mr. Urion calculated the fee amounts to cover
minimum administrative costs.
SENATOR ELLIS stated he would like the fee comparisons to determine
whether the fees are justifiable recompensation to the state. He
asked that the comparisons include the total administrative costs
to the ABC Board.
SENATOR TAYLOR announced he would table Amendment #2. There being
no objection, Amendment #2 was tabled.
The committee discussed Amendment #3 (9-LS0673\F.2). SENATOR GREEN
moved the adoption of Amendment #3. For purposes of discussion,
SENATOR ELLIS objected.
MR. AMBROSE noted Amendment #3 was submitted at the request of the
Division of Elections.
Number 478
MR. FORD discussed the intent of Amendment #3. It clarifies that
local option language on a ballot contains a summary of the
authority in question. This would define what option is being
voted on. SENATOR TAYLOR asked if it clarifies the election
process. MR. FORD responded it clarifies the ballot itself.
SENATOR ELLIS removed his objection. SENATOR ADAMS objected for
the purpose of discussion. He asked what happens when there are
two competing petitions, one to impose a restriction, and the
second to repeal that petition. MR. FORD stated CSSB 87(CRA)
specifies that the first petition filed that is certified as
meeting statutory requirements takes precedence (page 21, lines 11-
14). That petition must be voted on before a second petition can
be filed.
Number 515
SENATOR TAYLOR asked who the entity would be that determines
certification. MR. FORD replied it would depend; if the election
was municipal, it would be certified by the municipal clerk.
SENATOR ADAMS questioned how a "dry" community would go "damp." He
asked if a community would have to go from "dry" to "wet" before
going "damp." MR. FORD explained it would be a one-step process.
SENATOR ADAMS asked how often a petition can be filed. MR. FORD
noted page 21 (subsection f) contains language which addresses time
limitations.
SENATOR ADAMS removed his objection, but stated he will look at
subsection (f) on page 21 for possible amendment. There being no
objection to the adoption of Amendment #3, the motion carried.
Number 532
SENATOR ADAMS announced he was given a list of proposed amendments
from the Department of Public Safety that he would present to the
committee on Monday.
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