Date of Hearing: April 24, 2019

ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION

Adam Gray, Chair

ABPCA Bill Id:AB 475 (

Author:Kiley) – As Amended Ver:March 13, 2019

SUBJECT: Alcoholic beverage licenses: on-sale beer and wine paint and sip license

SUMMARY: Would authorize the Department of Alcoholic Beverage Control (ABC) to issue a newly created on-sale beer and wine paint and sip license to a person that has premises for the primary purpose of art classes that are scheduled in a bona fide manner for a fee, subject to specified conditions. Specifically, this bill:

1) Allows ABC to issue an on-sale beer and wine paint and sip license to a person that has premises for the primary purpose of art classes that are scheduled in a bona fide manner for a fee. The on-sale beer and wine paint and sip license authorizes the licensee to sell and serve alcoholic beverages to consumers on the licensed premises when persons under 21 years of age are not present.

2) Persons under 21 years of age are allowed on the licensed premises during periods in which alcoholic beverages are not being sold, served, or consumed.

3) States the on-sale beer and wine paint and sip license does not require food service by the licensee for the sale, service, or consumption of beer or wine.

4) Provides the on-sale beer and wine paint and sip license does not authorize off-sale beer and wine transactions.

5) Provides beer and wine may only be sold and served to, and consumed by, participants during a previously scheduled art class, and for no more than one hour before and one hour following the class.

6) Provides the original and annual fees shall be the same as those imposed upon an on-sale beer and wine license.  All moneys collected as fees shall be deposited in the Alcohol Beverage Control Fund, as specified.

EXISTING LAW:

1) The enactment of the 21st Amendment to the United States (U.S.) Constitution in 1933 repealed the 18th Amendment and ended the era of Prohibition. Accordingly, states were granted the authority to establish alcoholic beverage laws and administrative structures to regulate the sale and distribution of alcoholic beverages.

2) Establishes ABC and grants it exclusive authority to administer the provisions of the Alcoholic Beverage Control Act (Act) in accordance with laws enacted by the Legislature. This involves licensing individuals and businesses associated with the manufacture, importation and sale of alcoholic beverages in this state and the collection of license fees for this purpose.

3) Provides that no license or permit shall be required for the serving of alcoholic beverages in a "limousine" or as part of a "hot air balloon ride" service, provided there is no extra charge or fee for the alcoholic beverages.

4) Specifies that an ABC license or permit is not required for the serving of beer or wine as part of a beauty salon service or barber shop service provided the following requirements are met: a) There is no extra charge or fee for the beer or wine; b) The license of the establishment providing the beauty salon service or barber shop service is in good standing with the State Board of Barbering and Cosmetology; c) No more than 12 ounces of beer or six ounces of wine by the glass are offered to a client; and, d) The beer or wine is provided only during business hours and in no case later than 10 p.m. This provision shall not preempt the authority of a city or city and county to restrict or limit the consumption of alcoholic beverages within its jurisdiction.

5) Provides that ABC must deny an application for a license if issuance would create a law enforcement problem, or if issuance would result in, or add to, an undue concentration of licenses in the area where the license is desired. For liquor stores and other specified retail license, however, the ABC is authorized to issue a license if the respective local government determines that public convenience or necessity would be served by granting the license.

6) Caps the number of new on and off-sale general licenses issued by the ABC at one for every 2,500 inhabitants of the county where the establishment is located (2,000:1 for on sale licenses). If no licenses are available from the state due to the population restrictions, those people interested in obtaining a liquor license may purchase one from an existing licensee, for whatever price the market bears. In 1994, the Legislature approved a three-year moratorium on the issuance of new off-sale beer and wine licenses, which at the time was not bound by any population to license restriction. In 1997, this moratorium was made permanent.

7) Provides for various annual fees for the issuance of alcoholic beverage licenses, depending upon the type of license issued.

FISCAL EFFECT: Unknown

COMMENTS:

Background. In October of 1985, the Attorney General issued opinion No. 85-701 which held that the operator of a commercial enterprise who offers and provides complimentary alcoholic beverages to guests, customers, or passengers while charging for the services rendered is deemed to have “sold” the alcoholic beverage, thereby necessitating an alcoholic beverage license. At the time, this opinion affected a large number of California businesses (e.g., limousine and bus services, and bed-and-breakfast inns) which had made a practice of offering complimentary champagne and other alcoholic beverages to passengers and guests as part of their service. The Legislature has responded to a number of concerns raised by various business entities over the years relative to this matter by enacting narrowly crafted legislation to address the problem. (See prior/related legislation listed below.)

Existing law grants ABC the authority to issue numerous types of licenses but none are authorized specifically for art classes that are scheduled in a bona fide manner for a fee. Currently, it is unlawful for any corporation, club, or organization to sell, give, serve, dispense, keep, or allow to be consumed on its premises any alcoholic beverage unless licensed or permitted by law. This prohibition includes the serving of free alcohol with the purchase of another good or service. It is also unlawful for any person to keep or consume an alcoholic beverage on any premises open to the public other than as specifically permitted by law.

Purpose of the bill. According to the author’s office, since the mid-2000s, “paint and sip” businesses have popped up all across the country, and even in other parts of the world such as Hong Kong and London. In California alone, there are close to 100 of these establishments. Paint and sips revolve around the concept of people signing up for a painting class, and enjoying a glass of wine or beverage of their choice while they paint. Classes generally last about two hours, and patrons can sign up and pay their fee ahead of time.

While there are more than 80 different licenses regulated by ABC, no specific license is aimed at regulating paint and sips. Since businesses that sell or serve alcoholic beverages must hold an ABC license, the majority of current paint and sip establishments possess a ABC Type 42 license that authorizes the sale of beer and wine for consumption on or off the premises where sold. No distilled spirits may be on the premises. Food service is not required. Minors are not allowed to enter and remain. This means that all of the restrictions that apply to bars would also apply to paint and sip establishments, including the prohibition on the presence of minors. A Type 42 license is generally used in beer and wine bar establishments.

The author maintains that unlike consuming beer and wine for the enjoyment of the beverage, painting is an activity that can be enjoyed by individuals of all ages. By allowing paint and sip establishments to host children, these small business would be able to expand the markets they serve, and families would have more activities available to them.

The author declares that by creating a new license that better meets the needs of local paint and sip businesses, AB 475 will grant these businesses the flexibility to better respond to the interests of their communities. Art activities should be enjoyed by people of all ages. However, current law limits these businesses to only hosting adults, regardless of whether alcohol is present at the time of the event. The author points out, this bill would now allow classes to be hosted for children when alcohol is being served or sold.

In opposition. In opposition to this measure, Alcohol Justice writes, expanding the number of locations where licenses may be issued, no matter how minimal, will increase availability and therefore negatively impact public health.

Policy considerations. To be consistent with current Tied-house laws and previous exceptions (beauty salons, barber shops, limousine or hot air balloon) that have been granted by the Legislature, the committee may wish to consider the following policy considerations and/or possible amendments:

1. The privilege to provide alcoholic beverages in a retail establishment is a highly coveted and sought after authorization many businesses desire. Should the bill be amended to simply allow for the serving of alcoholic beverages to customers at no extra charge or fee but not the actual privilege to sell? This would be consistent with past exceptions.
2. The beer or wine shall only be provided during business hours and in no case later than 10 p.m. This is consistent with legislation chaptered in 2016 that granted an exception for beauty salons and barber shops.
3. Limit the amount of beer or wine by the glass that may be consumed by an art class participant, during a scheduled session.
4. Clarify that nothing in this bill shall be construed to limit the authority of a city or city and county to restrict or limit the consumption of alcoholic beverages, as defined in current law (B & P Section 23791).
5. It is unclear in the bill what the term "primary purpose of art classes that are scheduled in a bona fide manner for a fee" would mean from a licensing and enforcement standpoint. Should the bill be amended to provide that at least 75% of the businesses annual gross proceeds shall be from providing art class services?
6. Add a five-year Sunset date to review the intent of the bill, relating to enforcement, compliance, and community impacts.

Prior legislation. AB 1322 (Daly and Wilk), Chapter 741, Statutes of 2016. Allowed beauty salons and barber shops to serve their clients limited quantities of beer or wine at no extra charge without obtaining a license or permit from ABC, if specified requirements are satisfied.

SB 346 (Harman, 2011). Would have authorized the serving of alcoholic beverages without a license or permit as part of a "gondola ride" (boat) service. (Died in Assembly Appropriations Committee)

AB 2416 (Governmental Organization Committee), Chapter 639, Statutes of 1998. Provided that a license or permit is not required for the serving of alcoholic beverages as part of a hot air balloon ride service, provided there is no extra charge or fee for the alcoholic beverages.

SB 1546 (Beverly, Chapter 1354, Statutes of 1986). Provided that a license or permit is not required for the serving of alcoholic beverages in a limousine provided there is no extra charge or fee for the alcoholic beverages.

AB 1252 (N. Waters), Chapter 753, Statutes of 1977. Permits the Director of ABC to authorize the conversion of any on-sale general license for "seasonal business" to an on-sale general license, as specified.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file

Opposition

Alcohol Justice

Analysis Prepared by: Eric Johnson / G.O. / (916) 319-2531