Washington State Liquor Control Board Adopts Illogical and Inequitable Treatment of Distributors
Interpretation conflicts with I-1183 language and plain English
WASHINGTON, D.C.—The Washington State Liquor Control Board (LCB) has worked diligently in an effort to fairly implement a fundamentally flawed Initiative 1183 (I-1183). But a recently proposed rule appears to use an illogical interpretation of plain English, and could give preferential treatment to one group of firms while inequitably taxing another—even though their work functions are identical. That was the message of Wine & Spirits Wholesalers of America (WSWA) regulatory comments filed Wednesday.
WSWA President and CEO Craig Wolf said, “While it may have been the desire of I-1183’s drafters to insulate certain suppliers from these fees in order to obtain an unfair competitive advantage, this result is not consistent with the language they actually employed in the Initiative. Nor is it logically consistent with the revenue generating purpose of the Initiative, and the LCB should not ratify that twisted and illogical interpretation.”
I-1183 required that spirits distributors pay to the state a “spirits distributor license issuance fee” of 10% of their gross revenue from spirits sales during the first two years of licensure by March 31, 2013. If the aggregate fees paid by that date are less than $150 million, distributors are required to pay the difference, known as a “shortfall,” by May 31.
When applying the fee to Washington businesses, the LCB correctly interpreted the phrase “spirits distributor licensee” to include anyone who acts as a distributor, including distillers who sell directly to retailers.
Unfortunately, when determining the amount of the shortfall and who will pay it, the LCB erroneously interpreted the nearly identical phrase “persons holding spirits distributor licenses” more narrowly, thereby excluding direct shipping distillers, the association noted.
These incongruous interpretations will result in the LCB collecting fees from direct to retail distillers but not counting those payments toward the $150 million distributors are required to pay. Moreover, the LCB does not require those direct to retail firms to pay any portion of the shortfall despite the fact it has acknowledged that they are acting in a manner identical to traditional distributors.
WSWA’s filing noted that the intent of the relevant code section is to collect fees and deposit them into a fund for use by state and local government to offset decreased revenue resulting from the privatization of state retail liquor outlets. The LCB has determined that these fees are to be collected from both distributors and those acting as distributors.
WSWA’s comments said that the explicit language of the state code sections compels the conclusion that fees paid by direct to retail distillers must be included in determining the amount of the shortfall and that direct shipping distillers must participate in the shortfall in proportion to their sales to retailers. Both sections require those acting as distributors to comply with the applicable laws and rules relating to distributors.
Back to news releases