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Montana Administrative Register Notice 42-2-769 No. 7   04/12/2007    
    Page No.: 478 -- 482
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BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

 

In the matter of the amendment of ARM 42.11.104, 42.11.105, 42.11.211, 42.11.243, 42.11.245, 42.11.251, 42.11.402, 42.11.405, 42.11.406, 42.11.409, 42.11.421, 42.11.422, 42.11.423, 42.11.424, and 42.11.425 and repeal of 42.11.201, 42.11.401, and 42.11.407 relating to liquor vendors, purchasing, and distribution
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NOTICE OF AMENDMENT AND REPEAL
 

 

TO: All Concerned Persons

 

1. On December 21, 2006, the department published MAR Notice No. 42-2-769 regarding the proposed amendment and repeal of the above-stated rules at page 3031 of the 2006 Montana Administrative Register, issue no. 24.

 

2. A public hearing was held on January 16, 2007, to consider the proposed amendment and repeal. Oral and written testimony was received and is summarized as follows along with the response of the department:

 

COMMENT NO. 1: Brian and Debbie Gustafson, Northside Liquor Store No. 5, Helena, Montana, presented written comments stating that there is no harm in allowing registered representatives to provide sample products to retailers regardless of purchasing brands within the last 12 months or to grant or pay anything of value in order to display a product. They stated that as small business owners their goal is to sell liquor as efficiently as possible. In turn, their sales create money for the state. They stated that the amendments inhibit their ability to do business.

They further stated that the merchandise that they did receive was given to customers to promote customer appreciation which in turn drove up their sales. The state is purposefully limiting their ability to sell products on the state's behalf. They stated that their business should not be treated as a government entity because they are a private business with a contract with the state. They stated that they disagree with limiting the incentive to sell.

 

RESPONSE NO. 1: The department believes the language as proposed in ARM 42.11.243 is necessary because it conforms to the language contained in 27 CFR, section 691 and the department does not believe stores should be given samples of products that are already stocked in that particular store. Samples are needed so that the agents and their employees know about new products that have been introduced. In a case where a store has not carried a common label in the past, such as "Black Velvet" samples of this product would be allowed. The language in this rule is similar to the language contained in 27 CFR, section 6.91, regarding samples provided to retailers by industry representatives.

 

COMMENT NO. 2: Chris Byrd, President of the Liquor Store Owner's Association submitted written comments stating that most of the agency store owners agree with the comments he is presenting. Mr. Byrd questioned whether the amendment to ARM 42.11.243(5) means that the liquor representatives are not allowed to give samples to the owners, managers, or employees.

Mr. Byrd stated that they are not asking for, nor do they want, liquor sampling by the public in their stores. But if a bar owner and the owner's employees can sample a new product from a liquor representative it is only right and fair that the agency store owners, managers, and employees be able to do the same. He stated that it is difficult to order and sell a new product to the public if they don't know what it is like. If they know what the product tastes like and they know the tastes of some of their customers, they would know whether to recommend the product to those customers. He stated that they believe this to be a help to both the liquor representative and the public they serve.

Mr. Byrd requested the department consider inserting language that would allow only owners and employees of the agency liquor stores to sample new products in their stores.

 

RESPONSE NO. 2: Section 16-2-107, MCA does not allow any alcoholic beverage container to be opened on the premises of an agency liquor store or be consumed on the premises of an agency liquor store. Samples may be consumed off premise as allowed by law.

 

COMMENT NO. 3: Del Rupert, a representative for Barton Brands, Inc., testified at the hearing, stating that the size of the samples as stated in ARM 42.11.406(3)(a) should be increased.

He also stated that the department should consider relocating the department's forms currently stored in the liquor warehouse in order to allow for more product storage space.

 

RESPONSE NO. 3: The department believes that the size stated in ARM 42.11.406(3)(a) is sufficient, and therefore will not be amending the rule.

Relocating the department's forms to another location involves many considerations, including space availability and budget restrictions. The department is not in a position at this time to consider this suggestion.

 

COMMENT NO. 4: Brett Wiensch, State Manager of Young's Market - Montana, submitted written comments.

He suggested the language contained in ARM 42.11.105(7) have language similar to that found in (11) such as: "such material includes, but is not limited to".

He questioned the amendment in ARM 42.11.243(2) that states samples may only be purchased through state agency liquor stores by a registered liquor "representative". He stated that this allows samples to be bought by a visiting or resident supplier employee.

He stated ARM 42.11.243(5) should be amended to read: "consumption of samples for the adult general public must take place at an establishment with an on premise and/or catering license."

He suggested the state may want to have the ability to carry more special order products if the retail demand accelerates rapidly. Out of stock merchandise hurts the state, liquor stores, and suppliers. He suggested amending ARM 42.11.405(1)(c) to read: "Supply will be maintained in the warehouse but will only be available at the discretion of the Department of Revenue and on an order-by-order basis, and depending on supplier requirements and availability of a product, orders may take six weeks or more to be filled."

He asked what the "equivalent number" referenced in ARM 42.11.406(1)(a) stood for, and questioned whether that number would change, and if so, who would change it? He also asked what the time frame for the change would be and would the representatives be advised of the change.

He suggested amending the last sentence of ARM 42.11.406(2)(c)(iv) to read: "No additional supplier promotions will be allowed until the stock is removed from the warehouse."

He asked if the reference to "brand" in ARM 42.11.406(3)(a) means Stoli as a brand in all or each label as a brand.

He asked who approves the shipment of products to the bailment warehouse and whom does the approver notify as stated in ARM 42.11.422.

 

RESPONSE NO. 4: The department concurs with Mr. Wiensch's suggested amendment to ARM 42.11.105(7) and has amended the rule as shown below.

The department believes that the language in ARM 42.11.243(2) is clear as written and does not imply that samples may be bought by a visiting or resident supplier employee.

The department concurs that the language in ARM 42.11.243(5) should include a reference to catering events and has amended the rule as shown below. The department believes ARM 42.11.405(1)(c) is clear as written.

The "equivalent number" referenced in ARM 42.11.406(1)(a) is a number that is determined by the Liquor Control Division's warehouse team and, yes this number can change. The change would occur in May and November. The liquor representatives would be notified of the change by the division staff.

The department concurs with Mr. Wiensch's suggested change for ARM 42.11.406(2)(c)(iv) and has amended the rule as shown below.

The department will amend ARM 42.11.406(3)(b) to add the word "label" after the word "brand" to help clarify that this requirement applies to each label. The shipment of products is approved by the Liquor Control Division and there is no need to notify anyone of the approval.

 

3. As a result of the comments received the department amends the following rules with the following changes, new material underlined, stricken material interlined:

 

42.11.105 DEFINITIONS As used in this subchapter, the following definitions apply:

(1) through (6) remain as proposed.

(7) "Consumer advertising specialties" are items that are designed to be carried away by the consumer, such as material includes, but is not limited to: trading stamps, nonalcoholic mixers, pouring racks, ash trays, bottle or can openers, cork screws, shopping bags, matches, printed recipes, pamphlets, cards, leaflets, blotters, post cards, pencils, shirts, caps, and visors.

(8) through (22) remain as proposed.

 

AUTH: 16-1-103, 16-1-303, MCA

IMP: 16-1-103, 16-1-104, 16-1-302, 16-1-401, 16-1-404, 16-1-411, 16-2-101, 16-2-201, 16-2-301, 16-3-107, MCA

 

42.11.243 SAMPLES (1) through (4) remain as proposed.

(5) Consumption of samples must take place at an establishment with an on-premise license or at an event conducted under a catering endorsement.

 

AUTH: 16-1-103, 16-1-303, MCA

IMP: 16-3-103, MCA

 

42.11.245 ADVERTISING SPECIALTIES (1) Registered representatives are allowed to distribute point of sale advertising materials and consumer advertising specialties to a retailer as set forth in regulation number 6.84 of the Tobacco Tax and Trade Bureau (TTB), United States Department of the Treasury as set forth in 27 CFR as revised on April 1, 2005 2006, which is incorporated by reference as fully set forth as the regulations for consumer advertising specialties and retailer advertising specialties. Copies may be obtained at the United States Treasury web site located at www.ttb.gov/Regulations.

(2) remains as proposed.

 

AUTH: 16-1-103, 16-1-303, MCA

IMP: 16-3-103, MCA

 

42.11.406 PRODUCT LISTING (1) through (2)(c)(iii) remain as proposed.

(iv) if promotional products fail to sell at the proposed level after a six month promotion period, the department will notify the vendor and make arrangements to remove the excess stock from the warehouse at the vendor’s expense. No additional supplier promotions will be allowed until the stock is removed from the warehouse.

(3) Sample products, like all regular inventory products, must be shipped to the state liquor warehouse for distribution purposes. Sample products must meet the following criteria:

(a) samples are limited to bottles containing no more than 750 milliliters; and

(b) limit of 72 bottles per brand label, per vendor, per calendar year in addition to 720 bottles of 50 milliliters or 200 milliliters.

 

AUTH: 16-1-103, 16-1-303, MCA

IMP: 16-1-103, 16-1-104, 16-1-302, MCA

 

4. The department amends ARM 42.11.105, 42.11.243, 42.11.245, and 42.11.406 with the amendments shown above and amends ARM 42.11.104, 42.11.211, 42.11.251, 42.11.402, 42.11.405, 42.11.409, 42.11.421, 42.11.422, 42.11.423, 42.11.424, 42.11.425, and repeals ARM 42.11.201, 42.11.401, and 42.11.407 as proposed.

 

5. An electronic copy of this Adoption Notice is available through the department's site on the World Wide Web at www.mt.gov/revenue, under "for your reference"; "DOR administrative rules"; and "upcoming events and proposed rule changes." The department strives to make the electronic copy of this Adoption Notice conform to the official version of the Notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the Notice and the electronic version of the Notice, only the official printed text will be considered. In addition, although the department strives to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems.

 

/s/ Cleo Anderson                                                 /s/ Dan R. Bucks

CLEO ANDERSON                                             DAN R. BUCKS

Rule Reviewer                                                       Director of Revenue

 

Certified to Secretary of State April 2, 2007

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