GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 2005

S                                                                                                                                                     4

SENATE BILL 828

Commerce Committee Substitute Adopted 5/25/05

Third Edition Engrossed 5/26/05

 House Committee Substitute Favorable 7/19/06

Short Title:     2006 Viticulture/Enology Act.	(Public)
Sponsors:
Referred to:

March 23, 2005

A BILL TO BE ENTITLED

AN ACT to change the law concerning the North Carolina Grape Growers Council, to amend the revenue laws related to wine production, to provide for the designation of a primary source for the importation of wine into the state, to amend Chapter 18B of the general statutes concerning wineshops and to restrict the use of promotional advertising for wine and malt beverages.

The General Assembly of North Carolina enacts:

SECTION 1.  The title of Part 2J of Article 10 of Chapter 143B of the General Statutes reads as rewritten:

"Part 2J. North Carolina Wine and Grape Growers Council."

SECTION 2.  G.S. 143B‑437.90 reads as rewritten:

"§ 143B‑437.90.  North Carolina Wine and Grape Growers Council – Creation; powers and duties.

There is created the North Carolina Wine and Grape Growers Council of the Department of Commerce. The North Carolina Wine and Grape Growers Council shall have the following powers and duties:

(1)       To identify and implement methods for improving North Carolina's rank as a wine‑producing State;State.

(2)       To assure orderly growth and development of North Carolina's grape and wine industry;industry.

(3)       To achieve public awareness of the quality of North Carolina grapes and wine;wine.

(4)       To coordinate the interaction of North Carolina's grape and wine industry with other segments of the State's economy such as tourism, retail trade, and horticulture;horticulture.

(5)       To conduct methods of quality assurance of North Carolina's grape and wine industry to create a sound foundation for further growth;growth.

(6)       To assist in the coordination of the activities of the various State agencies and other organizations contributing to the development of the grape and wine industry;industry.

(7)       To receive and disburse funds;funds.

(8)       To enter into contracts for the purpose of developing new or improved markets or marketing methods for wine and grape products;products.

(9)       To contract for research services to improve viticultural and enological practices in North Carolina;Carolina.

(10)     To enter into agreements with any local, state, or national organizations or agency engaged in education for the purpose of disseminating information on wine or other viticultural projects;projects.

(11)     To enter into contracts with commercial entities for the purpose of developing marketing, advertising, and other promotional programs designed to promote the orderly growth of the North Carolina grape and wine industry;industry.

(12)     To acquire any licenses or permits necessary for performance of the duties of the Council; andCouncil.

(13)     To develop a State Viticulture Plan that identifies problems and constraints of the viticultural industry, proposes solutions to those problems and delineates planning mechanisms for the orderly growth of the industry."

SECTION 3.  G.S. 143B‑437.91 reads as rewritten:

"§ 143B‑437.91.  North Carolina Wine and Grape Growers Council – Composition; terms; reimbursement.

(a)       The North Carolina Wine and Grape Growers Council shall consist of 11 members appointed by the Secretary of Commerce in the following manner: seven commercial grape growers; three winery operators; and one retailer of North Carolina grape products. For purposes of this Article, a commercial grape grower is one who has at least three acres of grapes or sells ten thousand dollars ($10,000) worth of grapes annually. The Secretary shall appoint members for staggered four‑year terms. Members shall serve until their successors are appointed and qualified. Any member of the Council may be reappointed for additional terms. Any appointment to fill a vacancy on the Council shall be for the balance of the unexpired term. Any member of the Council may be removed by the Secretary for misfeasance, malfeasance, or nonfeasance.

(b)       Members of the Council shall receive per diem and necessary travel and subsistence expenses in accordance with G.S. 138‑5 from funds appropriated for the operation of the Council.

(c)       All clerical and other services required by the Council may be provided by the Department of Commerce.

(d)       The Secretary of Commerce shall appoint a chair who shall serve at the pleasure of the Secretary.

(e)       The Council may select a secretary who need not be a member of the Council.

(f)        The Council shall meet when necessary as determined by the chair or upon written request of a majority of the members.

(g)       A majority of the Council shall constitute a quorum for the transaction of business."

SECTION 4.(a)  G.S. 105‑113.81A reads as rewritten:

"§ 105‑113.81A.  Distribution of part of wine taxes attributable to North Carolina wine.

The Secretary shall on a quarterlyan annual basis at the beginning of the fiscal year credit to the Department of Commerce five hundred thousand dollars ($500,000) from the net proceeds of the excise tax collected on unfortified wine bottled in North Carolina during the previous quarter and the net proceeds of the excise tax collected on fortified wine bottled in North Carolina during the previous quarter, except that the amount credited to the Department of Commerce under this section shall not exceed five hundred thousand dollars ($500,000) per fiscal year.wine. The Department of Commerce shall allocate the funds received under this section to the North Carolina Wine and Grape Growers Council to be used to promote the North Carolina grape and wine industry and to contract for research and development services to improve viticultural and enological practices in North Carolina. Any funds credited to the Department of Commerce under this section that are not expended by June 30 of any fiscal year may do not revert to the General Fund, but shall remain available to the Department for the uses set forth in this section."

SECTION 4.(b) This section becomes effective July 1, 2006.  Notwithstanding the provisions of G.S. 105‑113.81A, as amended by this section, for the 2006‑2007 fiscal year, the distribution required by that section shall be made by October 1, 2006.

SECTION 5.  G.S. 18B‑203(a) reads as rewritten:

"(a)      Powers. – The Commission shall have authority to:

…

(19) Recognize the holder of a wine importer permit or nonresident wine vendor permit as a primary American source of supply for the wine of a winery. To be considered a primary American source of supply, a wine importer must establish that it has lawfully purchased the wine from the winery, or from an agent of the winery, and by written contract or otherwise has been authorized by the winery to distribute the wine to wholesalers in the United States."

SECTION 6.  G.S. 18B‑1106 reads as rewritten:

"§ 18B‑1106.  Authorization of wine importer permit.

(a)       Authorization. – The holder of a wine importer permit may:

(1)       Import fortified and unfortified wines from outside the United States in closed containers;

(2)       Store those wines;

(3)       Sell those wines to wine wholesalers for purposes of resale.

(b)       Distribution Agreements. – Wine distribution agreements are governed by Article 12 of this Chapter.

(c) The holder of a wine importer permit may import and sell to wholesalers only wine for which it is a primary American source of supply. To be considered a primary American source of supply, a wine importer must establish that it has lawfully purchased the wine from the winery, or from an agent of the winery, and by written contract or otherwise has been authorized by the winery to distribute the wine to wholesalers in the United States."

SECTION 7.  G.S. 18B‑1107 reads as rewritten:

"§ 18B‑1107.  Authorization of wine wholesaler permit.

(a)       Authorization. – The holder of a wine wholesaler permit may:

(1)       Receive, possess and transport shipments of fortified and unfortified wine;wine. The wine must be received from one of the following:

a. A primary American source of supply for that wine as recognized by the Commission or as verified by the wholesaler.

b. A licensed North Carolina wholesaler who received the wine from a primary American source of supply and with whom the second wholesaler has a subcontracting agreement for distribution of the wine.

c. Another wholesaler from whom the purchasing wholesaler is purchasing the wholesaler's business or from whom the wholesaler is purchasing the brand or distribution rights for the wine being received.

d. Another wholesaler who also has distribution rights for the wine being received and from whom the wholesaler is acquiring the wine in order to address a temporary inventory shortage.

(2)       Sell, deliver and ship wine in closed containers for purposes of resale to wholesalers or retailers licensed under this Chapter as authorized by the ABC laws;laws.

(3)       Furnish and sell wine to its employees, subject to the rules of the Commission and the Department of Revenue;Revenue.

(4)       In locations where the sale is legal, furnish wine to guests and any other person who does not hold an ABC permit, for promotional purposes, subject to rules of the Commission;Commission.

(5)       Sell out‑of‑date unfortified and fortified wines to holders of cider and vinegar manufacturer permits, provided that each bottle is marked "out‑of‑date" by the wholesaler.

(b)       Distribution Agreements. – Wine distribution agreements are governed by Article 12 of this Chapter."

SECTION 8.  G.S. 18B‑1114 reads as rewritten:

"§ 18B‑1114.  Authorization of nonresident wine vendor permit.

The holder of a nonresident wine vendor permit may sell, deliver, and ship unfortified and fortified wine in this State only to wholesalers, importers, and bottlers licensed under this Chapter, as authorized by the ABC laws. The unfortified and fortified wine must come to rest at the licensed premises of a wine wholesaler in this State before being resold to a retailer. A nonresident wine vendor permit may be issued to a winery, a wholesaler, an importer, or a bottler outside North Carolina who desires to sell, deliver, and ship unfortified and fortified wine into this State. The holder of a nonresident wine vendor permit may sell, deliver, and ship into this State only wine for which it is a primary American source of supply. To be considered a primary American source of supply, a nonresident wine vendor must establish that it has lawfully purchased the wine from the winery, or from an agent of the winery, and by written contract or otherwise has been authorized by the winery to distribute the wine to wholesalers in the United States."

SECTION 9.  G.S. 18B‑105(a) reads as rewritten:

"(a)      General Rule. – No person shall offer or advertise alcoholic beverages in this State except in compliance with this Article and the rules of the Commission."

SECTION 10.  Article 10 of Chapter 18B of the General Statutes is amended by adding a new section to read:

"§ 18B‑105.1. Use of discounts in advertising.

(a) Authorization. – Advertising for an alcoholic beverage may not include a coupon offering a free alcoholic beverage. No person shall advertise by means of a coupon or rebate offering a discount off the purchase of a malt beverage or wine, except as provided in this section. A permittee who holds an on‑premises or off‑premises malt beverage or wine permit under G.S. 18B‑1001(1) through (6) or a wine shop permit under G.S. 18B‑1001(16) may promote by means of a coupon, a membership card, a discount card, or a retailer's loyalty card in the following circumstances:

(1) The permittee may provide a discount coupon for use by a customer when purchasing a malt beverage or wine sold at the permittee's retail location for off‑premises consumption.

(2) The permittee may require a customer to use the permittee's membership card, discount card, or loyalty card in order for the customer to receive a discounted price when purchasing a malt beverage or wine sold at the permittee's retail location for off‑premises consumption.

(b) Scope. – This section shall not authorize cooperation between a retailer and an industry member in violation of G.S. 18B‑1116."

SECTION 11.  G.S. 18B‑1001(16) reads as rewritten:

"§ 18B‑1001.  Kinds of ABC permits; places eligible.

When the issuance of the permit is lawful in the jurisdiction in which the premises are located, the Commission may issue the following kinds of permits:

…

(16)     Wine Shop Permit. – A wine shop permit authorizes the retail sale of malt beverages, unfortified wine, and fortified wine in the manufacturer's original container for consumption off the premises, and authorizes wine tastings on the premises conducted and supervised by the permittee in accordance with subdivision (15) of this section. It also authorizes the holder of the permit to ship malt beverages, unfortified wine, and fortified wine in closed containers to individual purchasers inside and outside the State. The permit may be issued for retail businesses whose primary purpose is selling malt beverages and wine for consumption off the premises and regularly and customarily educating consumers through tastings, classes, and seminars about the selection, serving, and storing of wine. The holder of the permit is authorized to sell unfortified wine for consumption on the premises, provided that the sale of wine for consumption on the premises does not exceed forty percent (40%) of the establishment's total sales for any 30‑day period. The sale of wine for consumption on the premises shall be limited to those amounts that remain in opened bottles upon the conclusion of an authorized wine tasting, and individual servings shall not exceed four ounces per glass.The holder of a wine‑tasting permit not engaged in the preparation or sale of food on the premises is not subject to Part 6 of Article 8 of Chapter 130A of the General Statutes."

SECTION 12.  Effective July 1, 2007, G.S. 105‑164.13(39) reads as rewritten:

"§ 105‑164.13.  Retail sales and use tax.

The sale at retail and the use, storage, or consumption in this State of the following tangible personal property and services are specifically exempted from the tax imposed by this Article:

…

(39)     Sales of paper, ink, and other tangible personal property to commercial printers and commercial publishers for use as ingredients or component parts of free distribution periodicals and sales by printers of free distribution periodicals to the publishers of these periodicals. As used in this subdivision, the term "free distribution periodical" means a publication that is continuously published on a periodic basis monthly quarterly or more frequently, is provided without charge to the recipient, and is distributed in any manner other than by mail."

SECTION 13.  Except as otherwise provided herein, this act is effective when it becomes law.