Regular Session 2017-2018 House Bill 0991 P.N. 1152

PRINTER'S NO. 1152

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

991

Session of

2017

INTRODUCED BY A. HARRIS, IRVIN, GREINER, ORTITAY, REED, MILLARD

AND JAMES, MARCH 28, 2017

REFERRED TO COMMITTEE ON LIQUOR CONTROL, MARCH 28, 2017

AN ACT

Amending the act of April 12, 1951 (P.L.90, No.21), entitled, as

reenacted, "An act relating to alcoholic liquors, alcohol and

malt and brewed beverages; amending, revising, consolidating

and changing the laws relating thereto; regulating and

restricting the manufacture, purchase, sale, possession,

consumption, importation, transportation, furnishing, holding

in bond, holding in storage, traffic in and use of alcoholic

liquors, alcohol and malt and brewed beverages and the

persons engaged or employed therein; defining the powers and

duties of the Pennsylvania Liquor Control Board; providing

for the establishment and operation of State liquor stores,

for the payment of certain license fees to the respective

municipalities and townships, for the abatement of certain

nuisances and, in certain cases, for search and seizure

without warrant; prescribing penalties and forfeitures;

providing for local option, and repealing existing laws," in

preliminary provisions, further providing for definitions; in

Pennsylvania Liquor Control Board, further providing for

general powers of board and for specific subjects on which

board may adopt regulations; in Pennsylvania Liquor Stores,

further providing for sales by Pennsylvania Liquor Stores;

and providing for Pennsylvania retail franchise stores.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. Section 102 of the act of April 12, 1951 (P.L.90,

No.21), known as the Liquor Code, is amended by adding

definitions to read:

Section 102. Definitions.--The following words or phrases,

unless the context clearly indicates otherwise, shall have the

meanings ascribed to them in this section:

* * *

"Product identification number" shall mean the stock keeping

unit (SKU) or a successor method of identifying specific

products.

* * *

"Retail outlet" shall mean an establishment at which consumer

products are sold, supplied or offered for sale directly to

consumers which has an area under one roof of greater than five

thousand square feet.

"Retailer" shall mean a person who sells, supplies or offers

consumer products for sale directly to consumers.

* * *

"Spirits" shall mean any beverage which contains alcohol

obtained by distillation, mixed with water or other substance in

solution, and includes brandy, rum, whiskey, gin or other

spirituous liquors and such liquors when rectified, blended or

otherwise mixed with alcohol or other substances.

* * *

Section 2. Section 207(b) of the act, amended June 8, 2016

(P.L.273, No.39), is amended and the section is amended by

adding a subsection to read:

Section 207. General Powers of Board.--Under this act, the

board shall have the power and its duty shall be:

* * *

(b) The following shall apply:

(1) To control the manufacture, possession, sale,

consumption, importation, use, storage, transportation and

delivery of liquor, alcohol and malt or brewed beverages in

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accordance with the provisions of this act, [and] to fix the

wholesale [and] prices at which liquors and alcohol shall be

sold to licensees under this act and to fix the retail prices at

which liquors and alcohol shall be sold at Pennsylvania Liquor

Stores.

[(2) Except as provided in paragraphs (3) and (4), prices

shall be proportional with prices paid by the board to its

suppliers and may include a handling fee. This proportional

pricing provision shall not apply to special liquor orders

authorized under section 305(a).

(3) The board may price its best-selling items and limited

purchase items in a manner that maximizes the return on the sale

of those items.

(4) The board may discount the price of discontinued items.]

(2.1) The following shall apply to wholesale prices set by

the board:

(i) Any liquor or alcohol sold to a permit holder under

section 415 or to a franchisee under Article XI shall be sold at

the price from which the liquor or alcohol was acquired by the

board.

(ii) Liquor sold to a franchisee under Article XI shall not

include the tax under Article II of the act of March 4, 1971

(P.L.6, No.2), known as the "Tax Reform Code of 1971," or the

emergency State tax imposed under the act of June 9, 1936 (1st

Sp.Sess., P.L.13, No.4), entitled "An act imposing an emergency

State tax on liquor, as herein defined, sold by the Pennsylvania

Liquor Control Board; providing for the collection and payment

of such tax; and imposing duties upon the Department of Revenue

and the Pennsylvania Liquor Control Board."

(5) All prices of a particular product identification number

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for sale at Pennsylvania Liquor Stores shall be uniform

throughout the Commonwealth. The board may establish a

preferential price structure for wines produced within this

Commonwealth for the promotion of such wines, as long as the

price structure is uniform within each class of wine purchased

by the board.

(6) On a [quarterly] monthly basis the board shall publish a

listing of [the wholesale and] Pennsylvania Liquor Store retail

prices on its publicly accessible Internet website.

(6.1) The board shall maintain a master list of the price

liquors or alcohol was acquired by the board. This list shall be

made available to any licensee upon request.

(7) No later than April 1st of each year the board shall

submit an annual written report to the Law and Justice Committee

of the Senate and the Liquor Control Committee of the House of

Representatives. The report shall contain information related to

the method and rationale for pricing products.

(8) No later than June 1st of each year, the board shall

appear before the Law and Justice Committee of the Senate and

the Liquor Control Committee of the House of Representatives to

provide testimony in relation to its annual written report under

paragraph (7).

(9) The board shall require each Pennsylvania manufacturer

and each nonresident manufacturer of liquors, other than wine,

selling such liquors to the board, which are not manufactured in

this Commonwealth, to make application for and be granted a

permit by the board before such liquors not manufactured in this

Commonwealth shall be purchased from such manufacturer. Each

such manufacturer shall pay for such permit a fee which, in the

case of a manufacturer of this Commonwealth, shall be equal to

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that required to be paid, if any, by a manufacturer or

wholesaler of the state, territory or country of origin of the

liquors, for selling liquors manufactured in Pennsylvania, and

in the case of a nonresident manufacturer, shall be equal to

that required to be paid, if any, in such state, territory or

country by Pennsylvania manufacturers doing business in such

state, territory or country. In the event that any such

manufacturer shall, in the opinion of the board, sell or attempt

to sell liquors to the board through another person for the

purpose of evading this provision relating to permits, the board

shall require such person, before purchasing liquors from him or

it, to take out a permit and pay the same fee as hereinbefore

required to be paid by such manufacturer. All permit fees so

collected shall be paid into the State Stores Fund. The board

shall not purchase any alcohol or liquor fermented, distilled,

rectified, compounded or bottled in any state, territory or

country, the laws of which result in prohibiting the importation

therein of alcohol or liquor, fermented, distilled, rectified,

compounded or bottled in Pennsylvania. The board may not sell

private label products. A Pennsylvania Liquor Store may continue

to sell private label products within its inventory after the

effective date of this section until the private label products

within its current inventory are depleted.

[(10) The proportional pricing under paragraph (2) shall not

apply to special liquor orders authorized under section 305(a).

(11) As used in this subsection, the following words and

phrases shall have the meanings given to them in this paragraph:

"Best-selling items" shall mean the one hundred fifty (150)

most sold product identification numbers of wine and the one

hundred fifty (150) most sold product identification numbers of

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liquor as measured by the total number of units sold on a six-

month basis calculated every January 1 and July 1.

"Discontinued items" shall mean those product identification

numbers that the board has voted to delist at a public meeting.

"Limited purchase items" shall mean those product

identification numbers that the board purchases on either a one-

time or nonrecurring basis due to the product's limited

availability or finite allocation.

"Product identification number" shall mean the stock keeping

unit (SKU) or a successor method of identifying specific

products.]

* * *

(o) To provide for and regulate the licensing of franchise

stores under Article XI.

Section 3. Section 208 of the act is amended by adding a

clause to read:

Section 208. Specific Subjects on Which Board May Adopt

Regulations.--Subject to the provisions of this act and without

limiting the general power conferred by the preceding section,

the board may make regulations regarding:

* * *

(k) The licensing, location and operation of franchise

stores under Article XI.

Section 4. Section 305(a) and (b) of the act, amended June

8, 2016 (P.L.273, No.39) and November 15, 2016 (P.L.1286,

No.166), are amended to read:

Section 305. Sales by Pennsylvania Liquor Stores.--(a) The

board shall in its discretion determine where and what classes,

varieties and brands of liquor and alcohol it shall make

available to the public and where such liquor and alcohol will

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be sold. Every Pennsylvania Liquor Store shall be authorized to

sell combination packages. If a person desires to purchase a

class, variety or brand of liquor or alcohol not currently

available from the board, he or she may place a special order

for such item. A supplier of a special order may not refuse an

order from a customer placing an order for one bottle of the

item and may assess a surcharge on the order if the supplier

otherwise requires a minimum quantity purchase. The board may

require a reasonable deposit from the purchaser as a condition

for accepting the order. The customer shall be notified

immediately upon the arrival of the goods.

In computing the retail price of such special orders for

liquor or alcohol, the board shall not include the cost of

freight or shipping before applying a mark-up that is equal to

ten per centum of the cost of the product and taxes but shall

add the freight or shipping charges to the price after the mark-

up and taxes have been applied. In addition to the ten per

centum mark-up, the board shall impose handling fees on special

orders which come to rest at a store, in the same manner that it

imposes them on the other alcohol that it sells.

A licensed importer or a licensed vendor may place special

orders on behalf of customers and may deliver the orders to

customers. The orders do not need to come to rest at a store,

but delivery may not occur until payment for the order has been

forwarded to the board and the board has authorized the delivery

of the order. A handling fee may not be assessed by the board on

an order delivered directly to a customer. Liability for special

orders that do not come to rest at a store, shall, until the

order is delivered to the customer, remain with the licensed

importer or licensed vendor that placed the order on behalf of

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the customer. The board shall, by [January 1,] December 31,

2017, implement a procedure for processing special orders which

do not come to rest at a store. The board may continue to accept

special orders at its stores even after the procedure is

implemented.

Unless the customer pays for and accepts delivery of any such

special order within ten days after notice of arrival, the store

may place it in stock for general sale and the customer's

deposit shall be forfeited.

* * *

(b) Every Pennsylvania Liquor Store shall sell liquors at

wholesale to hotels, restaurants, clubs, and railroad, franchise

stores, pullman and steamship companies licensed under this act;

and, under the regulations of the board, to pharmacists duly

licensed and registered under the laws of the Commonwealth, and

to manufacturing pharmacists, and to reputable hospitals

approved by the board, or chemists. Sales to licensees other

than franchisees licensed under Article XI or wine expanded

permit holders licensed under section 415 shall be made at a

price that includes a discount of ten per centum from the retail

price; except that special order sales to licensees authorized

in subsection (a) shall not be subject to the ten per centum

discount. The board may sell to registered pharmacists only such

liquors as conform to the Pharmacopoeia of the United States,

the National Formulary, or the American Homeopathic

Pharmacopoeia. The board may sell at special prices under the

regulations of the board, to United States Armed Forces

facilities which are located on United States Armed Forces

installations and are conducted pursuant to the authority and

regulations of the United States Armed Forces. All other sales

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by such stores shall be at retail, except that incentives, such

as coupons or discounts on certain products, may be offered to

unlicensed customers of the board as provided under sections

207(m) and 493(24)(ii)(B). A person entitled to purchase liquor

at wholesale prices may purchase the liquor at any Pennsylvania

Liquor Store upon tendering cash, check or credit card for the

full amount of the purchase. For this purpose, the board shall

issue a discount card to each licensee identifying such licensee

as a person authorized to purchase liquor at wholesale prices.

Such discount card shall be retained by the licensee. The board

may contract through the Commonwealth bidding process for

delivery to wholesale licensees at the expense of the licensee

receiving the delivery.

* * *

Section 5. The act is amended by adding an article to read:

ARTICLE XI

PENNSYLVANIA RETAIL FRANCHISE STORES

Section 1101. Authority to issue licenses to retailers.

(a) General rule.--Subject to the provisions of this act and

regulations promulgated under this act, the board shall have the

authority to issue a license to a retailer operating a retail

outlet. The licensees will be known as franchise stores and a

holder of a license shall be known as a franchisee.

(b) Issuance.--Licenses may be issued at a ratio of one per

every 6,000 residents within a county, with a minimum of 15

licenses granted to a county.

Section 1102. Qualifications.

The proposed premises shall:

(1) provide adequate linear shelving to display the

amount of product required in section 1103(d);

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(2) have the ability to provide storage space for

additional liquor inventory;

(3) operate and maintain an updated computer system; and

(4) operate and maintain an updated system for recording

daily sales and tax collection.

Section 1103. Operation.

(a) Purchase and storage.--Franchisees licensed under this

section shall be permitted to purchase liquor from the board,

licensed wineries under section 505 and licensed distilleries

under section 505.4. All liquor shall be kept on the premises or

in a noncontiguous storage area approved by the board. Subject

to the provisions of this act and the regulations made

thereunder, franchisees may sell liquor for consumption off the

premises.

(b) Sale hours for off-premises consumption.--Franchise

stores may sell liquor for off-premise consumption between the

hours of 9 a.m. and 11 p.m. on any day except Sunday, to a

person that is not licensed under this act.

this section, upon purchasing a permit from the board at an

annual fee of $5,000, a franchise store may sell liquor on

Sunday between the hours of 9 a.m. and 9 p.m.

(d) Product identification numbers.--Franchise stores shall

be required to maintain a minimum amount of product

identification numbers in inventory at all times as follows:

(1) In counties of the first class, second class, third

class and fourth class, 200 product identification numbers of

wine and 200 product identification numbers of spirits.

(2) In counties of the fifth, sixth class, seventh class

and eighth class, 100 product identification numbers of wine

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and 100 product identification numbers of spirits.

(e) Sale price.--Franchise stores shall not sell a liquor

product at a price less than the liquor products' underlying

cost.

(f) Other licenses.--Notwithstanding any other provision of

law, nothing in this act shall prohibit a franchisee from

holding:

(1) a distributor license under section 431;

(2) a restaurant liquor license or a retail dispenser

license; or

(3) an importing distributor license under section 431.

Section 1104. Conditions of operation.

(a) General rule.--Franchise stores are subject to the

following conditions, obligations and requirements:

(1) Collect the tax required under Article II of the act

of March 4, 1971 (P.L. 6, No.2), known as the Tax Reform Code

of 1971, and the emergency State tax imposed under the act of

June 9, 1936 (1st Sp.Sess., P.L.13, No.4), entitled "An act

imposing an emergency State tax on liquor, as herein defined,

sold by the Pennsylvania Liquor Control Board; providing for

the collection and payment of such tax; and imposing duties

upon the Department of Revenue and the Pennsylvania Liquor

Control Board," and remit those taxes to the Department of

Revenue. The emergency State tax shall be included in the

retail price of liquor offered for sale. The tax shall not be

assessed at the point of sale to consumers.

(2) Under section 493, shall not sell or distribute

liquor to an individual under 21 years of age or to an

individual who is visibly intoxicated.

(3) The retail outlet and facilities involved in retail

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operations, including a change to the facilities during the

term of license, are subject to inspection and investigation

by the board and enforcement bureau as well as approval of

the board and enforcement bureau.

(4) Adequate security must be maintained to protect the

franchisee's inventory from unauthorized sale or diversion

and prevent unauthorized distribution.

(5) Notify the board within 15 days of a change in

persons holding an interest in the license.

(6) Notify the board within 15 days of becoming aware of

an arrest, criminal indictment or conviction by the

following:

(i) if the franchisee is an individual, the

franchisee;

(ii) if the franchisee is a partnership, a partner;

(iii) if the franchisee is an association, a member

of the association;

(iv) if the franchisee is a corporation, an officer,

director or shareholder of the corporation; and

(v) an affiliate of the franchisee.

(7) Notify the board within 15 days of becoming aware of

a violation of this article by an individual listed under

paragraph (5).

(8) The premises shall be configured in a manner and

with adequate safeguards to ensure that all liquor products

are secure and that liquor products may not be accessed

during prohibited hours of sale.

(9) An individual younger than 18 years of age may not

be employed to work at a register from which the sale of

liquor takes place nor be employed to handle any liquor

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products contained within the franchise store.

(10) The presence of at least one register designated by

signage where the sale of liquor products will occur which

shall be staffed by an individual at least 18 years of age.

(11) Comply with the responsible alcohol management

program training under section 471.1;

(12) All managers and employees who will engage in the

sale of liquor must attend responsible alcohol management

training within one month of commencing employment.

(13) A transaction scan device shall be utilized to

verify the age of an individual who appears to be under 35

years of age before making a sale of liquor.

(b) Violations.--A violation of a condition under this

article, a violation of this act or the board's regulations for

governing activity occurring under the authority of the license

granted to a franchise store may be the basis for any of the

following:

(1) a fine, suspension or license revocation;

(2) nonrenewal of a license;

(3) revocation of operating authority; or

(4) a penalty authorized under section 471.

Section 1105. Applications.

(a) General rule.--An applicant for a franchise store shall

file a written application with the board in the form and

containing the information as the board shall prescribe from

time to time, which must be accompanied by a filing fee, license

fee as prescribed under section 1108 and other fees provided for

in this act. An application must contain:

(1) pictures of the retail outlet, including the

interior and exterior;

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(2) a description of the proposed part or parts of the

retail outlet in which liquor will be displayed for purchase;

(3) a description of alterations proposed to be made to

the retail outlet or additional construction plans to be

undertaken after the approval by the board of the application

for a license;

(4) a description of the location at which liquor sales

will take place and how many registers will be solely

dedicated to the sale of liquor; and

(5) proposed storage locations for liquor inventory.

(b) Citizenship and residency.--If the applicant is a

natural person, the applicant's application must show that the

applicant is a citizen of the United States and has been a

resident of this Commonwealth for at least two years immediately

preceding the application.

the application must show that:

(1) the corporation was created under the laws of

Pennsylvania or holds a certificate of authority to transact

business in this Commonwealth;

(2) all officers, directors and stockholders are

citizens of the United States; and

(3) the manager of the hotel, restaurant or club is a

citizen of the United States.

(d) Verified signature required.--Each application shall be

signed and verified by oath or affirmation by one of the

following:

(1) the owner, if a natural person;

(2) if an association, by a member or partner of the

association;

20170HB0991PN1152 - 14 -

(3) if a corporation, by an executive officer of the

corporation or a person specifically authorized by the

corporation to sign the application, to which shall be

attached written evidence of the person's authority.

(e) Posting notice of application.--Every applicant for a

license shall post, for a period of at least 30 days beginning

with the day on which the application is filed with the board,

in a conspicuous place on the outside of the premises or at the

proposed new location for which the license is applied, a notice

of the application. The notice shall be in a form, be of the

size, and contain any provisions as the board may require by

regulation. Proof of the posting of the notice shall be filed

with the board.

(f) False statements.--If any false statement is

intentionally made in any part of the application, the affiant

shall be deemed guilty of a misdemeanor and, upon conviction,

shall be subject to the penalties provided by this act.

(g) Municipality notified.--Upon receipt of an application

for a new franchise store, the board shall immediately notify,

in writing, the municipality in which the premises proposed to

be licensed are located.

Section 1106. Licensing decisions.

(a) Investigation.--The board shall investigate:

(1) if the applicant and officers, directors and

principals, if any, are of good repute, responsible and

suitable candidates for operating a franchise store;

(2) whether the applicant possesses adequate legitimate

and verifiable financial resources to:

(i) operate a franchise store;

(ii) purchase and maintain the required amount of

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inventory under section 1103(d);

(iii) meet and maintain all financial obligations to

continually operate a franchise store;

(3) whether the applicant proposes an acceptable retail

outlet and location for the sale of liquor; and

(4) whether the planned operation of the applicant

complies with this article and all applicable sections of the

act.

(b) Location.--The board shall conduct an investigation to

determine the feasibility of the location and type of retail

outlet that applicant is currently operating. The board shall

take into account:

(1) proximity of the proposed location to an existing

Pennsylvania State Liquor Store or proposed or existing

franchise store;

(2) whether the proposed location would impact the

public health, welfare, peace and morals;

(3) whether the existence of a franchise store in the

proposed location could create law enforcement issues;

(4) whether the interior and exterior premises of the

retail outlet are clean, orderly and are in full compliance

with all State and local zoning and building code ordinances;

(5) that the proposed location within the community is

suitable to the local governing body.

the proposed location is:

(1) within 300 feet of a preschool, elementary or

secondary school, a church, hospital, charitable institution

or public playground without approval of the board or

municipality;

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(2) in a municipality that voted to preclude the

establishment of a Pennsylvania Liquor Store;

(3) within the same shopping center as a Pennsylvania

Liquor Store or franchise store;

(4) within 1,200 yards of a Pennsylvania Liquor Store or

franchise store in an urbanized area, or within two miles of

a Pennsylvania Liquor Store or franchise store in a rural

area. For the purposes of this paragraph, the term "rural

area" shall mean an area outside urbanized areas as defined

by the United States Bureau of Census. Distances shall be

measured from the main entrance of a Pennsylvania Liquor

Store or franchise store, to the proposed location by the

most reasonable direct route of travel;

(5) in an area that would adversely impact the public

health, peace, welfare or morals; or

(6) in an area that could create law enforcement issues.

Section 1107. Hearings.

(a) General rule.--The board may hold hearings on

applications for franchise store licenses and license renewals,

as it deems necessary, at a time the board shall fix for the

purpose of hearing testimony for and against applications for

new franchise store licenses and license renewals. The board

shall hold a hearing on a new application or the transfer of a

franchise store license under the limitations of section

1110(c), upon the request of any person with standing to testify

under subsection (b) if the request is filed with the board

within the first 15 days of posting of the notice of application

under section 1105(g).

(b) Resident testimony.--Where a hearing is held in the case

of a new application, the board shall permit residents residing

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within a radius of 500 feet of the premises to testify at the

hearing. The board and a hearing examiner of the board shall

give appropriate evidentiary weight to any testimony of a

resident given at the hearing.

Section 1108. Initial license fees.

(a) General rule.--License fees shall be graduated according

to the total square footage of the retail outlet as follows:

(1) One hundred thousand dollars for a retail outlet

with square footage greater than 5,000 square feet but less

than 10,000 square feet.

(2) Two hundred thousand dollars for a retail outlet

with square footage greater than 10,000 square feet but less

than 25,000 square feet.

(3) Three hundred thousand dollars for a retail outlet

with square footage greater than 25,000 square feet but less

than 50,000 square feet.

(4) Four hundred thousand dollars for a retail outlet

with square footage greater than 50,000 square feet but less

than 75,000 square feet.

(5) Five hundred thousand dollars for a retail outlet

with square footage greater than 75,000 square feet.

(b) Extension of premises.--A franchisee that seeks to

extend the premises of a retail outlet beyond the initial square

footage noted on the application and approved by the board for a

license under this section shall pay a fee of $100 per each

square foot requested for approval of an extension of premises.

The fee shall be due at the time of application for the

extension of premises.

this section shall be collected by the board and shall be

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transferred from the State Stores Fund to the General Fund on a

quarterly basis.

Section 1109. Renewal of license.

(a) Annual renewal.--A franchise store shall be renewed on

an annual basis.

(b) Fee.--A renewal fee equal to 5% of the total gross

receipts shall be due at the time the renewal application is

filed. For purposes of this subsection, gross receipts shall be

determined as the total of all sales of liquor made to consumers

for off-premise consumption in the previous 12 months inclusive

of taxes. Renewal fees shall be collected by the board and shall

be transferred from the State Stores Fund to the General Fund on

a quarterly basis.

renewal, the board shall consider:

(1) the licensee's inventory of liquor;

(2) whether the franchisee can establish continued

financial viability of the franchise store under section

1106(a)(2);

(3) any changes in the interior selling location of the

premises or proposed renovations;

(4) any complaints lodged; and

(5) any violations charged against the licensee.

Section 1110. Terms of licensure.

(a) General rule.--A franchise store license is in effect

unless the board:

(1) revokes, suspends or fails to renew the license; or

(2) revokes the operating authority of the licensee

under the license requirements of this article.

(b) Suspension or revocation.--The board may suspend or

20170HB0991PN1152 - 19 -

revoke a franchise store license issued under this section if

the board finds that the franchisee or any of the franchisee's

affiliates, executive officers, directors or general or limited

partners or persons holding a controlling interest in the

licensee:

(1) is in violation of any provision of this act;

(2) has furnished the board with false or misleading

information;

(3) is unable to establish continued financial viability

of the franchise store under section 1106(a)(2); or

(4) is no longer reputable or suitable for licensure.

not be transferred, except that nothing in this subsection shall

preclude a transfer of ownership to another eligible person as

franchisee of the franchise store nor shall it preclude

relocation of the franchise store to another location subject to

the restrictions of this act and board regulations.

Section 6. This act shall take effect in 60 days.

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