NATIONAL ALCOHOL BEVERAGE CONTROL ASSOCIATION
NABCA General Counsel Communiqué
April 9, 2020
Given the unprecedented nature of this pandemic, many jurisdictions have taken extraordinary measures to protect both the safety of their workforce and the security of their worker’s livelihoods. To that end, many states have temporarily suspended or relaxed the enforcement of certain regulations and amended the scope of others. Nationally, the most common trends involve the following:
- automatically granting off-premise privileges to on-premise licensees;
- permitting craft suppliers to ship directly to consumers;
- suspending signature requirements to facilitate curbside and contactless deliveries;
- deprioritizing or suspending enforcement of trade practice restrictions which prohibit certain types of charitable giving.
While these measures are properly aimed at providing private industry critical liquidity in a time of crisis, it is important to note TTB has not mirrored state action on all fronts. Listed below is COVID-19-related guidance from TTB which may be implicated by emergency measures taken in your state—and issues to consider when addressing the topic(s).
TTB Communique 3/18/2020—Returns of Alcohol Beverage Products Purchased for Events Cancelled Due to COVID-19 Emergency:
“Given the unexpected and widespread nature of the concerns involving COVID-19, TTB will not consider returns of alcohol beverage products purchased to sell during such cancelled events to violate Federal consignment sales rules provided the products were not initially purchased or sold with the privilege of return. Even though such returns are lawful, a producer or wholesaler is not required to accept returns of such products.”
Issues State Agencies Should Consider: maximum permissible quantities (single transactions and/or aggregate); duration of suspension (tied to emergency period and/or certain number of days); mandatory versus discretionary acceptance of returns by wholesalers; impact of accepted returns on wholesaler-supplier credit and inventory agreements.
TTB Communique 3/31/2020—Tax Payment and Other Filing Due Dates Postponed for Industry Members Affected by COVID-19:
“we are postponing several filing and payment due dates for 90-days where the original due date falls on or after March 1, 2020, through July 1, 2020.
Specifically, we are:
- Postponing tax payment due dates for wine, beer, distilled spirits, tobacco products, cigarette papers and tubes, firearms, and ammunition excise taxes.
- Postponing filing due dates for excise tax returns.
- Postponing filing due dates for submission of operational reports.
- Postponing filing due dates for claims for credit or refund by producers.
- Postponing filing due dates for claims by manufacturers of nonbeverage products.
- Postponing due dates for submission of export documentation.
- Considering emergency variations from regulatory requirements for affected businesses on a case-by-case basis.
- Reviewing requests for relief from penalties based on reasonable cause.”
Issues State Agencies Should Consider: state deadlines contingent upon federal permits and/or filings; similar postponements for state equivalents; impact of postponements on next year’s filings; and, tax ramifications predicated upon timing of filings.
While this emergency guidance has enabled states and private industry to adjust to the fluid nature of this crisis, it has not removed the need for, nor application of, other federal trade practice prohibitions. For instance, while the aforementioned emergency guidance on returned product is a marked departure from the general prohibition against consignment sales, it does not authorize the extension of credit terms which would otherwise be prohibited under 27 U.S.C. 205(d). Nor does it require wholesalers to accept such returns, or command states to pass analogous regulations.
Similarly, TTB’s emergency measures do not provide additional guidance on prohibited versus permissible charitable giving. 27 U.S.C. 205(c) expressly prohibits “offering or giving any bonus, premium, compensation, or other thing of value to any officer, or employee, or representative of the trade buyer.” Thus, a donation to a bona fide charity may be permissible—but certain activities could still be prohibited e.g. purchasing meals, trips, or giving gift cards to retail employees.
State agencies should consider the following:
- Permissible platforms. 501(c)3s are permissible recipients in many jurisdictions. But what about GoFundMe pages or other, non-registered charitable activities or fundraisers?
- Organizational affiliation rules. Industry-wide donations are permissible in many jurisdictions, but gifts to specific licensees are generally prohibited. How might this impact donations to efforts by major conglomerates such as restaurant groups?
- Cause Marketing Promotions. Many jurisdictions permit a portion of sales to be donated to a charitable cause; but impose restrictions on how these efforts can be marketed. How might these restrictions be tailored in order to ensure donations aren’t being leveraged for improper purposes?
Finally, state agencies should consider sharing the “Use of Social Media in the Advertising of Alcohol Beverages” (TTB Circular 2013-01) with licensees as a reminder of their federal compliance obligations when leveraging social media for any advertising—charitable or not.
Wishing you and your families continued health and safety in these trying times.
J. Neal Insley
Senior Vice President/General Counsel
National Alcohol Beverage Control Association