Administrative Rules of the State of Montana

BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

In the matter of the adoption of New Rule I and the amendment of ARM 42.12.106 and 42.12.128 pertaining to industry trade shows, catering endorsements, and catered events

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NOTICE OF PUBLIC HEARING ON PROPOSED ADOPTION AND AMENDMENT

TO: All Concerned Persons

1. On June 28, 2019, at 10:00 a.m., the Department of Revenue will hold a public hearing in the Third Floor Reception Area Conference Room of the Sam W. Mitchell Building, located at 125 North Roberts, Helena, Montana, to consider the proposed adoption and amendment of the above-stated rules. The conference room is most readily accessed by entering through the east doors of the building.

2. The Department of Revenue will make reasonable accommodations for persons with disabilities who wish to participate in this public hearing or need an alternative accessible format of this notice. If you require an accommodation, please advise the department of the nature of the accommodation needed, no later than 5 p.m. on June 14, 2019. Please contact Todd Olson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-7905; fax (406) 444-3696; or todd.olson@mt.gov.

3. The rule as proposed to be adopted provides as follows:

NEW RULE I ALCOHOLIC BEVERAGE INDUSTRY TRADE SHOWS

(1) An all-beverage licensee may host an industry trade show at the licensee's licensed premises or may cater an industry trade show pursuant to ARM 42.12.128.

(2) For the purpose of this rule, an industry trade show means an event sponsored by a nonprofit association representing an alcoholic beverage industry, and where alcoholic beverages are provided to attendees for promotional purposes. An industry trade show shall not be open to the public. A nonprofit association may not sponsor more than one industry trade show per year.

(3) All attendees of an industry trade show must be admitted by the event sponsor and have an affiliation to the alcoholic beverage industry or a related industry or are a family member or partner of such persons and may include public office holders and candidates for public office.

(4) A vendor, as defined in ARM 42.11.105, with a current vendor permit, as provided in ARM 42.11.213, may request a trade show case from the department for use at an industry trade show. A trade show case means a case of liquor product used by a registered vendor representative for promoting a vendor's liquor products to attendees of an industry trade show. A liquor product that has not been approved by the department may not be included in a trade show case.

(a) Except as provided in 16-4-311, MCA, the vendor must ship the trade show case to the state liquor warehouse at no charge to the department.

(b) In order for an industry trade show case to be removed from bailment at the state liquor warehouse, a vendor must submit a request electronically on a form provided by the department at least seven days prior to the requested ship date to the agency liquor store.

(c) A trade show case must be purchased by a registered vendor representative, as defined in ARM 42.11.211, from an agency liquor store at a cost of $12.00 per case.

(d) A vendor is limited to providing a maximum of nine liters of each liquor product per calendar year.

(5) An alcoholic beverage manufacturer who intends to provide beer or table wine at an industry trade show must purchase the beer or table wine from the licensee hosting the trade show for no more than the ordinary retail price.

(6) At the conclusion of an industry trade show, any remaining alcoholic beverages may be retained by the alcoholic beverage manufacturer or vendor, the alcoholic beverage manufacturer or vendor's employees, or registered vendor representatives for a future industry trade show; used for sampling purposes; or given to attendees of the industry trade show at the discretion of the alcoholic beverage manufacturer or vendor, the alcoholic beverage manufacturer or vendor's employees or registered vendor representatives.

(7) A licensee who hosts an industry trade show is ultimately responsible for ensuring compliance with all alcoholic beverage laws and regulations, violations of which may subject the licensee to administrative action.

AUTH: 16-1-303, MCA

IMP: 16-3-107, 16-4-201, 16-4-204, 16-4-311, MCA

REASONABLE NECESSITY: Alcoholic beverage industry trade shows have been conducted in the state of Montana for several years. It has come to the department's attention, based on vendor and industry association feedback, that carrying out a successful and lawful trade show event has been logistically difficult under current administrative rules.

The department proposes to adopt New Rule I to provide an initial framework of administrative rules which outline permissible activities and assign responsibilities regarding the operation of alcoholic beverage industry trade shows to ensure that licensees are in full compliance with Montana's alcoholic beverage laws and regulations.

New Rule I contains seven sections to provide the following:

Section (1) proposes only all-beverage licensees may host or cater industry trade shows. This initial selection is necessary because only all-beverage licensees sell liquor, beer, and wine, and industry trade shows typically showcase all alcoholic beverage types. Other retail alcoholic beverage license types, such as retail on-premises consumption beer licenses or restaurant beer and wine licenses, are not allowed to provide liquor on their premises. In the event the trade show sponsor's venue does not have alcoholic beverage service available to it, then the proposed rule would permit an all-beverage licensee with a catering endorsement to cater the industry trade show event pursuant to Montana law.

Section (2) defines an industry trade show, which is necessary since the term is new and the alcoholic beverage industry needs an understanding of the term. The department proposes to limit industry trade show sponsorship to nonprofit alcoholic beverages associations which are designed to educate and inform licensees and others in the industry about alcoholic beverage products that are available in the state. Given this function of an association, the department believes it is necessary to require trade shows to be closed to the public. The department further proposes to place a sponsor limitation of one industry trade show event per year to prevent overuse of industry trade shows.

Section (3) provides which industry-affiliated individuals can attend an industry trade show. The proposal to limit attendance is intended to maintain the purpose of an industry trade show; and since industry associations are influenced by, or develop their own policy agendas, the inclusion of public office candidates or incumbents was deemed necessary as public officials are often invited to speak on policy matters that affect association memberships.

Section (4) proposes to create a new trade show case for a vendor's liquor products and provide a procedure as to how liquor product is routed from the vendor to the industry trade show. The department proposes to define a trade show case, which is necessary since the term is new and the alcoholic beverage industry needs an understanding of the term. The ability to request a trade show case, the fee to the department, and the regulation of who can purchase a trade show case along with the $12.00 cost are necessary and mirror current rules for liquor sample products. The department proposes that a vendor with a current permit submit the request and a registered vendor representative purchase the product at an agency liquor store to ensure compliance with 16-3-107, MCA. The proposed $12.00 cost offsets the processing of the request by the department. The department also proposes a maximum allowance of trade show case product that can be provided by a vendor in (4)(d). This restriction is necessary to ensure large quantities of liquor products are not circumventing the normal distribution process.

Section (5) provides the method for an alcoholic beverage manufacturer to provide beer or table wine at an industry trade show. The department proposes that the alcoholic beverage manufacturer be charged no more than ordinary retail price for the beer or table wine to ensure the host licensee does not overcharge the manufacturer for participating in an industry trade show. This provision is necessary to maintain compliance with state law as to how alcoholic beverages are distributed, purchased, and obtained by the alcoholic beverage manufacturer since it is the all-beverage licensee who is the host or caterer of the industry trade show.

Section (6) specifies the disposition of any remaining alcoholic beverage products at the end of an industry trade show. Since the alcoholic beverage manufacturer or vendor purchased the product for their use at an industry trade show, the department proposes to allow the alcoholic beverage manufacturer or vendor to dispose of the product as they choose. This procedure is reasonably necessary and follows current manufacturer protocols for other alcoholic beverage samples.

Section (7) provides that the all-beverage licensee is ultimately responsible for ensuring compliance with all alcoholic beverage laws and regulations during an industry trade show. This is necessary because it is the licensee who is hosting or catering the industry trade show, and this is an application of existing law where a licensee cannot delegate ultimate responsibility for the service of alcoholic beverages to any other person.

4. The rules as proposed to be amended provide as follows, new matter underlined, deleted matter interlined:

42.12.106 DEFINITIONS The following definitions apply to this chapter:

(1) through (7) remain the same.

(8) "Catering" means the act of providing, pursuant to a written contract between a licensee with a valid catering endorsement and an unlicensed individual or entity, alcoholic beverages at an event hosted by the unlicensed individual or entity.

(8) "Catered event" means a special event for which there is an outcome, conclusion, or result, and where the sale and service of alcoholic beverages is conducted by a licensee who has obtained a catering endorsement.

(9) through (14) remain the same.

(15) "Event barrier" means a barrier enclosing the perimeter of a catered event. The construction, installation, and use criteria of an event barrier is provided in ARM 42.12.128.

(15) through (31) remain the same but are renumbered (16) through (32).

(33) "Registered vendor representative" means the same as provided in ARM 42.11.105.

(32) through (37) remain the same but are renumbered (34) through (39).

~~(38)~~ (40) "Special event," as it relates to special permits and ~~catering,~~ catered events, means a short, infrequent, out-of-the-ordinary occurrence such as a picnic, fair, festival, reception, seasonal event, or sporting event for which there is an outcome, conclusion, or result.

(39) through (43) remain the same but are renumbered (41) through (45).

AUTH: 16-1-303, MCA

IMP: 16-1-302, MCA

REASONABLE NECESSITY: The department proposes to strike the definition for "catering" and replace it with "catered event" in (8) because the contents of the catering definition are contained within the language of ARM 42.12.128 and the amendment minimizes unnecessary redundancy.

The department proposes to add a definition of "event barrier" in proposed (15), which is necessary since the term is new in the context of its application to catered events and the alcoholic beverage industry needs to base an understanding of the term. The definition will be utilized with proposed amendments to ARM 42.12.128 to provide additional guidance to licensees' use of a catered event area enclosure, which is a primary requirement in the licensee's obligation to the public and law enforcement - to indicate where the sale and consumption of catered alcoholic beverages is allowed.

The department proposes to adopt into proposed (33) the definition of "registered vendor representative," which is already provided in ARM 42.11.105, and relates to the representative's role in industry trade shows in New Rule I.

The department proposes to amend the definition for "special event" in proposed (40) to conform to the new definition of "catered event."

42.12.128 CATERING ENDORSEMENT; CATERED EVENTS; EVENT BARRIERS (1) Any licensee having obtained a catering endorsement under the provisions of 16-4-111 or 16-4-204, MCA, is authorized to sell alcoholic beverages authorized under the license to persons attending a ~~special~~ catered event sponsored by someone other than the licensee and at a locations not otherwise licensed or operating under a special permit. ~~Only the licensee or the licensee's employees are authorized to sell and serve alcoholic beverages at the special event.~~

(2) The holder of a catering endorsement may sell and serve alcoholic beverages at retail only at a booth, stand, or other fixed place of business within the exhibition enclosure, confined to specified premises or designated areas described in the notice given to the local law enforcement agency that has jurisdiction over the premises where the event is to be catered. Such a licensee, or the licensee's agents or employees may also sell and serve beer, in the case of an all-beverages licensee, or beer and wine, in the case of a beer/wine licensee, in the grandstand or bleacher.

(3) A catered event may only last for a maximum of three days, except that each licensee may have one special event per year that lasts up to seven days for a fair. A fair is defined in ARM 42.12.106.

~~(4) Licensees granted approval to cater such special events are subject to the provisions of 16-3-306, 16-4-111, and 16-4-204, MCA, and ARM 42.13.101.~~

(5) Every licensee holding a catering endorsement shall report, on or before the 15th day of each month, those events the licensee catered in the previous month. The report shall include the date, time, the sponsor of the event, and place of the catered event. This report can be provided to the department in letter format.

(2) Prior to selling or serving alcoholic beverages at the catered event, the licensee shall:

(a) have an executed written agreement with the event's sponsor;

(b) notify the local law enforcement agency that has jurisdiction over the area where the catered event will be held using a form provided by the department;

(d) ensure compliance with the alcoholic beverages sales restrictions provided in 16-3-306, MCA.

(3) A catered event may have more than one licensee cater the event. Licensees shall prevent the consumption of alcoholic beverages that were not sold or provided at the catered event.

(4) A catered event may last for a maximum of three days, except a licensee may have one catered event per year that lasts up to seven days for a fair, as defined in ARM 42.12.106. For catered events lasting more than one day, the storage of alcoholic beverages may occur at the catered event until the conclusion of the catered event if the alcoholic beverages are in a secured location that prevents service by anyone other than the licensee or licensee's employees.

(5) Alcoholic beverages may be sold and served at the catered event from a booth, stand, or other fixed place of business as designated and described in the notice given to the local law enforcement agency and may include grandstands or bleachers, as provided for in 16-4-111 and 16-4-204, MCA.

(6) When a licensee conducts a catered event outdoors, when the indoor venue is an open floorplan where the licensee has no control or limited control of patron access in the venue, or when two or more licensees are catering the same event, an event barrier shall be required to clearly mark where the service and consumption of each licensee's alcoholic beverages are allowed. The event barrier:

(a) shall be constructed in a manner that directs or impedes ordinary foot traffic and clearly defines the boundary of the event area;

(b) shall be at least three feet in height at all points;

(d) may be shared with an adjoining licensee to define their respective catered event service areas; and

(e) may have a portion consisting of an existing natural or artificial barrier.

(7) When a licensee caters an event that is within 15 feet of its licensed premises, patrons may take alcoholic beverages between the licensed premises and the area authorized for the catered event if the licensee:

(a) notifies the department at least ten days prior to the start of the catered event;

(b) incorporates into the event barrier, a clearly marked path or paths from the public entry of the licensed premises to the public entry of the catered event;

(c) posts signs along the path or paths informing patrons as to where the consumption of alcoholic beverages is allowed and not allowed; and

(d) obtains approval from local government officials for the use of the path or paths.

(8) The sale and service of alcoholic beverages at the catered event may be conducted by:

(a) the licensee or licensee's employees;

(b) volunteers of the licensee; or

(i) the licensee gives their explicit consent;

(ii) the alcoholic beverage manufacturer or vendor holds a current alcoholic beverage license, registration, or permit from the department; and

(iii) each person listed in (c) serving alcoholic beverages is current with the Responsible Alcohol Sales and Service Act, provided in 16-4-1005, MCA, prior to the commencement of the catered event.

(9) On or before the 15th day of each month, the licensee shall electronically report, on a form provided by the department, those events the licensee catered in the previous month and shall include a copy of the notification form signed by local law enforcement and a copy of the executed written agreement between the licensee and event sponsor for each catered event.

(10) The licensee who catered the event is ultimately responsible for ensuring compliance with all alcoholic beverage laws and regulations, violations of which may subject the licensee to administrative action.

AUTH: 16-1-303, MCA

IMP: 16-3-103, 16-4-111, 16-4-204, MCA

REASONABLE NECESSITY: In addition to the proposed amendments of ARM 42.12.106, the department also deems it reasonably necessary to propose several amendments to ARM 42.12.128. The department believes that the proposed relocation and restatement of rule content provides better organization of purpose and greater clarity about procedural requirements licensees must address prior to catering an event. The department contends the proposed amendments are necessary to provide additional information regarding catering requirements due to licensee misapplication of catered event requirements.

The department first proposes to amend the catchphrase or title of the rule to include catered events and event barriers. This is necessary for better clarity and referencing of the rule's subject matter and meets the requirements of ARM 1.2.214.

Section (1) proposes to clarify that a catered event cannot be self-sponsored by the licensee or occur concurrently at a location where a special permit to sell beer and table wine has been issued. The department proposes to prohibit conducting a catered event at a location operating under a special permit to prevent the consumption of alcoholic beverages that were not acquired from the licensee and to ensure law enforcement and the public are aware of which entity is responsible for the consumption of alcoholic beverages. The department also proposes striking the last sentence regarding persons authorized to sell and serve alcoholic beverages and proposes a revised version in proposed (8).

Sections (2) through (5) are proposed to be stricken and replaced with restated versions in proposed (2) through (6).

Proposed (2)(a) transfers a requirement found in the current definition of "catering" in ARM 42.12.106(8) that catered events are performed pursuant to the terms of a written agreement between a licensee and its customer. Proposed (2)(b) through (d) relocate and specify the requirements listed in current (4) instead of merely citing to the legal authority; this is necessary for increased clarity. The department also proposes in (2)(b) to require licensees to use a form provided by the department for notifying local law enforcement to ensure this statutory requirement has been conducted.

Section (3) is proposed in order to codify current department practice by explaining that a catered event may be catered by more than one licensee provided that each licensee prevents the consumption of alcoholic beverages at that licensee's catered event space that were not purchased from that licensee. The second proposed requirement would clarify that existing operational conditions at a licensee's premises regarding overconsumption, consumption by underage persons, and preventing consumption of alcoholic beverages that were not purchased from the licensee, apply to catered events.

Section (4) proposes to transfer language from current (3) and adds related catered event requirements for the storage of alcoholic beverages. The department believes the storage requirements are necessary to address the storage and security of the licensee's alcoholic beverages in a uniform manner.

Section (5) is transferred content from current (2), minus the reference to who it is that may serve alcoholic beverages on behalf of the licensee. The provisions are still pertinent and remain necessary.

Section (6) proposes the requirement that a licensee have an event barrier in place to define the area where the consumption of alcoholic beverages is permissible for the public and law enforcement. The event barrier requirements are much like the requirements for a perimeter barrier that encloses a patio or deck for a licensee's licensed premises as defined in ARM 42.12.106. The department believes this distinct event barrier requirement is necessary as catered events are temporary, and yet they are used in the same context as a licensee's premises - providing a licensee-controlled area to consume alcoholic beverages and preventing overconsumption, consumption by underage persons, and consumption of alcoholic beverages that were not purchased from the licensee.

Section (7) describes an exception for events catered by a licensee within 15 feet of the same licensee's premises. The department understands that in these situations it is common for attendees to want to go back and forth between the catered area and the licensed premises. The department proposes to allow alcoholic beverages to be brought back and forth as the alcoholic beverages were obtained by the licensee in both situations. The department proposes additional requirements, such as clearly marked paths and signage, to ensure law enforcement and the public are aware of the permissible areas to consume alcoholic beverages. The department further proposes advance notice to the department in instances where licensees utilize the exception in (7). The department believes the advance notice requirement is necessary to ensure the department and its investigators and law enforcement are aware of patrons taking alcoholic beverages between the licensed premises and the area authorized for the catered event.

Section (8) proposes to relocate and restate existing language in current (2), together with the requirements of current licensure and registration in (8)(c)(ii) and Responsible Alcohol Sales and Service Act training in (8)(c)(iii). This expanded list of authorized servers is necessary to reflect the alcohol service interactions contemplated at industry trade shows, as provided in the department's proposed New Rule I.

Section (9) proposes to modify existing language in current (5) to require electronic submission of catered event reports together with a copy of the written agreement between the licensee and event sponsor and the signed local law enforcement notification form to verify that catered events are conducted in accordance with Montana law. The department believes the proposed amendment is necessary because of licensee noncompliance with the timeliness and content of catering reports under the current requirements. The move towards online reporting is also consistent with many other department efforts to institute the electronic submission of tax reports and required disclosures. The department maintains a safe, secure online program that allows licensees to submit information and electronic filing will increase efficiency in department processing and review of these reports.

Section (10) provides that the all-beverage licensee is ultimately responsible for ensuring compliance with all alcoholic beverage laws and regulations during a catered event. This is necessary because it is the licensee who is catering alcoholic beverages at events and this is an application of existing law where a licensee cannot delegate ultimate responsibility in the service of alcoholic beverages to any other person.

5. Concerned persons may submit their data, views, or arguments, either orally or in writing, at the hearing. Written data, views, or arguments may also be submitted to: Todd Olson, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-7905; fax (406) 444-3696; or e-mail todd.olson@mt.gov and must be received no later than 5:00 p.m., July 5, 2019.

6. Todd Olson, Department of Revenue, Director's Office, has been designated to preside over and conduct the hearing.

7. The Department of Revenue maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request, which includes the name and e-mail or mailing address of the person to receive notices and specifies that the person wishes to receive notice regarding particular subject matter or matters. Notices will be sent by e-mail unless a mailing preference is noted in the request. A written request may be mailed or delivered to the person in 5 above or faxed to the office at (406) 444-3696 or may be made by completing a request form at any rules hearing held by the Department of Revenue.

8. An electronic copy of this notice is available on the department's web site at www.revenue.mt.gov, or through the Secretary of State's web site at sosmt.gov/ARM/register.

9. The bill sponsor contact requirements of 2-4-302, MCA, do not apply.

10. With regard to the requirements of 2-4-111, MCA, the department has determined that the adoption and amendment of the above-referenced rules will not significantly and directly impact small businesses.

/s/ Todd Olson /s/ Gene Walborn

Todd Olson Gene Walborn

Rule Reviewer Director of Revenue

Certified to the Secretary of State May 28, 2019.