As we look forward to 2022, we have summarized key alcoholic beverage legal changes in California from the past year that may affect your business.
The below list of alcoholic beverage laws either went into effect immediately late in 2021 or went into effect on January 1, 2022. The legal changes span from extending pandemic relief to permitting licensed wineries to open an additional off-site tasting room, to legalization of to-go cocktails, to eased restrictions on charitable giving, among many others. If your business involves the manufacture or sale of alcoholic beverages, odds are good these changes affect you. As always if you have any questions regarding these new laws or the potential effect of these changes to your business, facility, or products, please contact our California alcoholic beverage attorneys.
Assembly Bill 61 – Business Pandemic Relief
Bus. & Prof. Code § 25750.5: On October 8, 2021, effective immediately, and for up to 365 days from the date the COVID-19 pandemic state of emergency proclaimed by the Governor is lifted, the Department of Alcoholic Beverage Control (ABC) may permit licensees to exercise license privileges in an expanded licensed area.
Previously, it was unlawful for a licensee of the ABC to sell or serve alcoholic beverages outside of the licensed establishment’s approved footprint, with few exceptions. The ABC, pursuant to emergency orders of the Governor relating to COVID-19, has established temporary relief measures to suspend certain legal restrictions relating to expansion of licensed footprint, sales of to-go alcoholic beverages, and delivery privileges. A.B. 61 specifically authorizes the ABC to permit licensees to exercise their license privileges in an expanded area for up to 365 days after the end of the state of emergency proclaimed by the Governor. This expanded area includes on-sale consumption of alcohol on property controlled by the licensee adjacent to licensed premises.
Gov. Code § 65907: Effective January 1, 2022, A.B. 61 requires local jurisdictions to reduce the number of required parking spaces for existing uses by the number of spaces that are needed to accommodate an expanded outdoor dining area.
Pre-existing law authorized local legislative bodies to adopt ordinances that regulate zoning within their jurisdiction, including the number of required parking spots. A.B. 61 now requires local jurisdictions to reduce the number of required parking spaces for existing uses based on the spaces that are needed to accommodate an expanded outdoor dining area.
Health & Safety Code § 114067: Effective on October 8, 2021, and operative for one year after the state of emergency is lifted, permitted food facilities may operate satellite food service without obtaining a separate satellite food service permit or submitting written operating procedures. A.B. 61 also provides that reimbursement is no longer required under this section.
Previously, satellite food services of permitted food facilities were subject to more stringent regulations, including requiring servicers to submit written operating standards to the enforcement agency. Moreover, the California Constitution required the state to reimburse local agencies and school districts for certain costs mandated by the state. A.B. 61 removed both of these requirements. However, the change relating to satellite food services still requires these satellites to maintain their procedures onsite for review.
Takeaway: the ABC may now permit licensees to exercise their privileges in an expanded area for up to 365 days after the COVID-19 state of emergency is lifted. Effective January 1, 2022, A.B. 61 also requires local jurisdictions to reduce the number of required parking spaces for existing uses based on the spaces needed to accommodate an expanded outdoor dining area. Finally, satellite food services associated with permitted food facilities may operate without submitting written operating procedures to an enforcement agency, and the state is not required to reimburse costs under Health and Safety Code section 114067. These changes will sunset July 1, 2024.
Senate Bill 94 and Assembly Bill 83 – Alcohol Beverage Control: License Renewal Fees: Waiver
Business and Professions Code section 23320.3 was added and amended to include and expand eligibility of license renewal fee waivers. A.B. 83 has also appropriated $3 million to backfill revenues related to these waivers.
Pre-existing law required the ABC to regulate licenses, including charging licensing renewal fees. S.B. 94 allowed the ABC to waive license renewal fees for certain types of licenses. A.B. 83 did not change the timing guidelines but has expanded the types of licenses that are eligible for a license renewal fee waiver. A.B. 83 also appropriates $3 million to backfill revenues related to these waivers, which may be increased by the Department of Finance. The appropriation shall be made available for encumbrance until June 30, 2023. Finally, no reimbursement is required by this act.
Takeaway: the ABC may now waive licensing renewal fees, and it is backfilling these waivers with $3 million, which may increase upon order of the Department of Finance.
Assembly Bill 1149 – Expansion of Authorized Services for Off-Site Retailers
On September 23, 2021, effective immediately, Business and Professions Code section 25503.2 was amended to expand permissible services at off-site retailer locations for distilled spirits and wine in single-serve containers. This change effectively expanded tied-house restriction exceptions. “Tied-house” laws generally prohibit brewers, distillers, winegrowers, and alcohol beverage suppliers from providing anything of value to or exerting influence over alcohol beverage retailers.
Pre-existing California law provided certain exceptions to tied-house restrictions and authorized alcohol beverage manufacturers, wholesalers, and/or agents of licensees to perform certain services for off-sale retail licensees, including stacking or arranging cases of alcoholic beverages in the storeroom or warehouse where the off-sale retail licensee stores their brands and taking inventory of an off-sale retailer’s stock of their brands of alcoholic beverages at the off-site retailer’s stockroom or warehouse.
Two tied-house exceptions previously only applied to beer but now under A.B. 1149 also include distilled spirits in single-serve containers and wine in single-serve containers:
- Authorized Service: Rotating the brand(s) owned or sold by the licensee and rearranging bottles and packages horizontally or vertically from shelf to shelf in the space and shelves allotted to the brand or brands.
- Change: The authorized service previously did not permit the removal of any brands of any alcoholic beverages from the storeroom or other off-site retailer space for the purpose of replacing or restocking alcoholic beverages on shelves or refrigerated boxes, unless it was beer. Now, brands of distilled spirits and wine that are sold in single-serve containers may also be removed by the licensee performing the service.
- Authorized Service: Rotating the brands of wine or distilled spirits on permanent shelves, permanent fixtures, refrigerated boxes, or floor or other display; stocking the brands onto the floor or other display pieces; and stocking the brands onto permanent shelves, permanent fixtures, or refrigerated boxes for the sole purpose of introducing new products, resetting or rearranging existing products, or setting or arranging new stores.
- Change: The authorized service previously did not permit the stocking of permanent shelves, permanent fixtures, or refrigerated boxes for regular inventory replenishment, except for beer. Now, suppliers of brands of distilled spirits in single-serve containers and wine in single-serve containers may also stock permanent shelves/fixtures or refrigerated boxes for regular inventory replenishment.
The Business and Professions Code defines “single-serve containers” for purposes of section 25503.2 as containers that: (1) have a standard fill between 50 milliliters and 355 milliliters that is authorized for distilled spirits or between 187 milliliters and 355 milliliters that is authorized for wine under the Code of Federal Regulations, either individually or in multiple container packaging; and (2) are intended for consumption without mixing with any other substance.
Takeaway: California is relaxing the restrictions on services permitted at off-sale retail license locations for spirits in single-serve containers and wine in single-serve containers. This change evidences a shift and equalization in the law between beer and single-serve containers of wine and spirits, at least for purposes of permissible off-site authorized services.
Assembly Bill 239 – Wineries May Sell Wine to Consumers at Off-Site Tasting Locations in Consumer-Provided Containers
On January 1, 2022, California Business and Professions Code section 23390 was amended to remove the restriction on licensed winegrowers or brandy manufacturers from selling or delivering wine to consumers in containers supplied, furnished, or sold by the consumer, thereby allowing winegrowers and brandy manufacturers to sell or deliver wine to consumers in consumers’ own containers.
Pre-existing law provided licensed winegrowers and brandy manufacturers the right to exercise some license privileges at or from branch offices or warehouses, or U.S.-bonded wine cellars located away from the place of production or manufacture, but did not permit the exercise of the following three privileges: (1) production or manufacture; (2) selling wine or brandy to consumers for consumption on the premises in a bona fide eating place; and (3) selling or delivering wine to consumers in containers supplied, furnished, or sold by the consumer. A.B. 239 deletes the third restriction.
Takeaway: A.B. 239 now permits wineries and brandy manufacturers to sell and/or refill wine bottles at off-site tasting rooms, which previously was only permitted at a winery’s production facility. This change should reduce waste and costs for wineries by allowing customers to supply their own glass, metal, or ceramic containers for wine, just as consumers may bring growlers to breweries to be filled.
Senate Bill 19 – Wineries May Open Two Off-Site Tasting Locations
On September 23, 2021, effective immediately, Business and Professions Code sections 23320 and 23390.5 were amended by S.B. 19 to permit winegrowers and brandy manufacturers to sell wine or brandy to consumers at up to two licensed branch premises.
Previously, the law prohibited winegrowers and brandy manufacturers from operating more than one tasting room away from their licensed Type 02 premises where the wine is crushed and fermented. Now, a winery or brandy manufacturer may apply for a duplicate license and operate up to two tasting rooms.
Takeaway: Wineries may now apply for a duplicate winegrower’s license application, pay a $440 fee, and operate a second off-site tasting room. This will allow wineries to expand consumer-facing locations and sales at off-site tasting rooms.
Assembly Bill 1267 – Alcoholic Beverages: Advertising or Promoting Donation to a Nonprofit Charitable Organization
On January 1, 2022, California Business and Professions Code section 25600 was amended to expressly permit wineries, breweries, and distilleries (among other specified licensees) to donate a portion of the purchase price of an alcoholic beverage to a nonprofit charitable organization under certain limitations.
The ABC previously interpreted pre-existing law as preventing certain licensees from giving a portion of their proceeds from sales of alcoholic beverages to charities. A.B. 1267 expressly allows donations to be tied to the sale or distribution of alcoholic beverages in manufacturer-sealed containers so long as the licensee does not (1) promote or advertise the donation to directly encourage or reference the consumption of alcoholic beverages, (2) benefit a retail licensee or a nonprofit established for the specific purpose of benefiting the employees of retail licensees, and (3) directly or indirectly advertise, promote, or reference any retail licensee. The donating licensee must also still comply with California’s “Supervision of Trustees and Fundraisers” for a Charitable Purposes Act (CPA). The CPA defines an entity representing to the public that the purchase or use of its goods or services will benefit a charitable organization as a “commercial coventurer” and requires such entities to register and file periodic reports with the Attorney General, unless certain exemptions apply.
Takeaway: A.B. 1267 now permits charitable giving tied directly to the sale of manufacturer-sealed containers of alcoholic beverages. If you intend to do so, you still need to comply with the CPA. You will also need to vet the charity you are giving to and avoid promoting the charitable giving in such a way as to encourage alcohol consumption, a line that may prove difficult to tread.
Assembly Bill 1589 – Alcoholic Beverages: Tied-House Restrictions
On January 1, 2022, California Business and Professions Code sections 23081, 23088, and 25503.24 were amended to clarify that distilled spirits wholesaler licensees cannot obligate retailers to purchase alcoholic beverages of the licensee in connection with market research data purchased from retailers. The amendments also permit electronic filing and delivery of appeals to and orders by the Alcoholic Beverage Control Appeals Board (the Appeals Board), as well as clarify certain appellate procedures.
Pre-existing law provided that appeals to and orders by the Appeals Board had to be personally served or sent by mail. A.B. 1589 adds a third option: electronic delivery. Further pre-existing law required a location for requested oral argument, whereas after A.B. 1589, the Appeals Board need only provide a time and date, clearing the way for remote appearances. Finally, pre-existing law prevented a range of licensees from requiring retailers participating in the licensees’ market research from requiring those participating retailers to purchase or sell the licensees’ alcoholic beverages. Distilled spirits wholesalers were previously curiously omitted from this list. A.B. 1589 eliminates that apparent exemption.
Takeaway: A.B. 1589 moves the Appeals Board into the future by allowing electronic filings and tidies up an unintended loophole in tied-house market research restrictions.
Senate Bill 386 – Tied-House Restrictions: Advertising: Mixed-Use District
On January 1, 2022, California Business and Professions Code section 25503.61 was created to allow the kind of advertising currently exempted from tied-house restrictions for specified sports stadiums and public projects to include the new “ocV!BE” multi-use district being built up around the existing Honda Center in Anaheim, California.
Senate Bill 314 – Expanded Outdoor Seating
S.B. 314 grants businesses that have expanded outdoor seating and service areas due to the pandemic a grace period to apply for a permanent expansion. S.B. 314 also helps create more flexibility in how businesses can serve alcohol, including where they can serve and how they can share spaces with other businesses.
Specifically, S.B. 314 makes the following changes to the alcohol rules governing restaurants and bars: (1) it allows current licensees with outdoor dining-expanded premises under ABC’s emergency relief order a grace period of one year after the emergency order is lifted to apply for a permanent expansion, allowing significantly expanded outdoor restaurant/bar seating with alcohol service, for example, on streets, parking lots, alleys, or sidewalks, (2) it allows multiple licensed retailers to share commercial space with manufacturers, thus allowing businesses to reduce their rent costs and increase their revenue, and (3) it modifies California’s alcohol license process by allowing businesses to use a catering license at one location 36 times, increasing the currently allowable limit from 24.
Takeaway: The outdoor dining expansions that became popular during the pandemic as a way for restaurants to serve food while complying with COVID-19 restrictions have the ability to become permanent expansions.
Senate Bill 389 – Alcoholic Beverages: Retail On-Sale License – Off-Sale Privileges
California began allowing the purchase of to-go drinks during the pandemic in an effort to keep businesses open and customers safe. An announcement by Governor Newsom in June allowed businesses to continue offering to-go drinks through the end of 2021. The passing of S.B. 389 extends this deadline, allowing California restaurants to serve to-go alcoholic beverages alongside takeout orders until December 31, 2026.
Under S.B. 389, to-go alcohol can be sold only alongside a meal, with a limit of two drinks per meal. The bill also places restrictions on what containers alcohol may be sold in and the concentration of alcohol in mixed drinks.
Specifically, this bill authorizes alcohol licensees whose licenses permit on sale distilled spirits consumption to sell distilled spirits for off-sale consumption if the beverages are in manufacturer-prepackaged containers and are ordered and picked up by the consumer. Additionally, the bill authorizes alcohol licensees to sell alcoholic beverages, except beer, for off-sale consumption for which their license permits on-sale consumption when the beverages are not in manufacturer-prepackaged containers if the following requirements are met: (1) the beverages must be packaged in a container with a secure lid or cap sealed in a manner designed to prevent consumption without removal of the lid or cap by breaking the seal, (2) the container must be clearly labeled as containing an alcoholic beverage, (3) mixed drinks and cocktails sold for off-sale consumption shall not exceed four and one-half ounces of distilled spirits, (4) alcoholic beverages must be sold in conjunction with a meal with a limit of two drinks per meal, and (5) each establishment must post a warning sign notifying consumers of restrictions regarding open container laws.
Takeaway: All alcoholic beverages sold to-go are required to be sold with an actual meal. If a bar or other establishment does not serve food, it cannot participate in selling alcoholic beverages to-go. This off-sale privilege is also limited to pick-up orders only. Delivery is not allowed. Lastly, if to-go alcoholic beverages are not being sold in manufacturer-prepackaged containers, the above requirements must be met.
Assembly Bill 1275 – Alcoholic Beverages – Minors and Licensee Hearings
Prior to the passing of A.B. 1275, the ABC was required to produce an alleged minor for examination in a hearing charging a licensee with violating any of the three specified provisions: (1) providing alcoholic beverages to a minor, (2) employing a minor to prepare or serve alcoholic beverages, or (3) permitting a minor to enter and remain in the licensed premises.
A.B. 1275 removes the requirement for the ABC to produce the alleged minor in a hearing relating to two of the provisions listed above and instead requires the department to produce the alleged minor decoy only in a hearing on an accusation charging a licensee with providing alcoholic beverages to a minor. However, the ABC does not have to produce the minor if: (1) the minor decoy is unavailable as a witness because the minor decoy is deceased, (2) the minor decoy is unable to attend the hearing because of a then-existing physical or mental illness or infirmity, or (3) the licensee has waived, in writing, the appearance of the minor decoy.
Takeaway: Nothing in A.B. 1275 prevents the ABC from taking testimony of the minor decoy for various violations. It simply limits when the department is required to produce a minor decoy for examination.