Alcoholic Beverage Law in California

This link will take you to the Alcohol and Tobacco Tax and Trade Bureau (TTB) website page describing the changes you can make to wine labels without getting a new Certificate of Label Approval (COLA)

http://www.ttb.gov/labeling/allowable_revisions.shtml#allowable

Photo by uberculture, Flickr Creative Commons

In the legal profession, we refer to two types of permitting processes: Discretionary and Ministerial.  Planners, architects, and builders are also familiar with these terms.  Ministerial permits are also often referred to as “over the counter” permits.  In other words, the law defines whether or not, and under what circumstances, you qualify for the permit.  There is no subjective decision to be made as to whether or not you qualify for the permit, i.e., there is no discretion.  You either get it or you don’t, subject only to paying a fee, and perhaps some other inflexible conditions.   In contrast to ministerial permits, there are “discretionary permits.”  Often these involve uses that might be controversial in certain neighborhoods.  The “discretion” refers to a decision that must be made by either a hearing officer or a commission of some sort.  Its not just the discretion of a government employee made at the time of application.  Rather, its typically a formal decision, made after public notice and a hearing, with right of appeal to a higher body.   Additionally, its not usually a yes or no decision, but also often involves the imposition of custom tailored conditions or restrictions, into which “the public,” i.e. whoever shows up to the hearing, has input.

In many cities in California, the discretionary permit process has become burdensome and r

edundant.  Some of this appears to result from poor inter-agency coordination or inter-agency jealousy.  Each agency covets its own discretionary process, which may be  redundant with another agency’s process, and regardless of whether the first agency had input into the original process.  In the City of San Diego’s downtown, for example, a convenience store selling alcoholic beverages or a nightclub must first obtain a conditional use permit (CUP) from the planing agency (CCDC).  Such permits concern themselves, with among other things, law enforcement and nuisance issues.  Residents and the Police Dept. are notified of the hearing and requested to give input, which is normally given great weight by the hearing officer.   Despite this process, in 2000, the Police Department lobbied and obtained their own similar discretionary permit process in the form of the Entertainment permit for nightclubs and in the form of the Public Convenience or Necessity Finding process for convenience stores.   These processes/permits are essentially redundant with the CUP process in one or more respects.  Then on top of those processes, the State Department of Alcoholic Beverage Control has  for nearly a century had essentially the same discretionary permit process resulting in approval, denial and a permit with custom tailored restrictions.

Obviously, these multiple discretionary processes add greatly to the expense and time it takes to get a business open.  Strangely, these agencies all communicated and worked closely together when there was only the State ABC license.  They still do.  However, the process has become so complex that often the agencies do not understand their own laws.  For example, in downtown San Diego, the Police Department has been routinely imposing conditions that are far more restrictive than the conditional use permits, despite an ordinance that requires the entertainment permit to mirror the CUP.  This ordinance was adopted expressly for the purpose of avoiding such onerous redundancy and potentially conflicting permits.   Unknowing applicants have failed to bring this fact to their attention.   Thus, it pays not to assume the local agency is familiar with their own procedure.

When is an Alcoholic Beverage License needed in California? What triggers a license requirement? In a nutshell, if alcohol is sold (even indirectly) or it is served at an event where a member of the public can attend, a license is required. Moreover, even if it is a private party and it is being given without charge to the guests of the party, if it occurs at a retail business, the Department of Alcoholic Beverage Control (“ABC”) will assume it’s a violation if they learn about it. For example, while it is common for art galleries to serve wine at receptions or openings of new exhibits, they are typically in violation of California law because members of the public can enter the gallery. The fact that it is done in connection with the promotion of a commercial activity, while in of itself not a violation, undercuts any argument that it is a private party. While it is equally true that art galleries rarely are cited, keep in mind that a violation is a criminal misdemeanor. The ABC will often survey advertisements for potential violations, whereupon they will send an ABC investigator to the event or alert the local Police Department so they can do so. Thus advertising the service of alcohol at such events or regularly hosting such events substantially increases the potential for a citation or arrest. If in doubt, the best option is to use a caterer or obtain a special event permit (from the ABC).

Quoted below are provisions from the ABC’s Trade Enforcement Manual.

ALCOHOL AT UNLICENSED PREMISES

Giving, selling, or furnishing free alcoholic beverages at an unlicensed salon, clothing store, jewelry store, art gallery, etc. is not legal (California Business & Professions Code Section 23300). Businesses like these will be considered illegal bottle clubs if alcohol is provided to, or consumed by, customers (Cal. Bus. & Prof. Code Sec. 25604)”

…

“PRIVATE PARTIES

Section 23399.1 of the California Business & Professions Code explains the circumstances when an alcoholic beverage license is not required:

1. That there is no sale of an alcoholic beverage.

2. That the premises are not open to the general public during the time alcoholic beverages are served, consumed or otherwise disposed of.

3. That the premises are not maintained for the purpose of keeping, serving, consuming or otherwise disposing of alcoholic beverages.

All three of the above elements must exist. If a proposed event meets the statutory definition of a “private party,” then no ABC license is required.

Note: Any event occurring on a licensed premises is not a “private party” under this provision. Events or activities on a licensed premises are subject to all rules and regulations applying to the licensee. Be aware that the definition of “sale” includes indirect transactions other than merely paying for a glass of wine or other drink containing alcohol. For instance, if an admission fee is charged or there is a charge for food and the alcohol is included, but not separately charged, an ABC license is required.

Note: No provision of the ABC Act may be violated even though the event itself does not require a license. If a license is required, or you have a question about a particular event, you should contact the ABC district office closest to where the event will occur. “

The laws concerning alcoholic beverage licensing in California have their roots in the prohibition era. As such, they can seem old fashioned and counter-intuitive. In my practice as an attorney with 25 years of experience advising restaurants, hotels, grocers, and convenience stores about alcoholic beverage licensing, conditional use permits, and other regulatory land use entitlements, the following three points of confusion are the most commonly misunderstood concepts:
1. California Alcoholic Beverage Licenses Are Owned By People But The License Rights Belong To The Land (Location):
People opening businesses involving the sale of alcoholic beverages in California often believe that once they are approved for a license they can simply move their license to another location and have all the rights they had at their old location – Wrong.  It is true that an ABC license belongs to the person (including business entities) and, unlike a conditional use permit (“CUP”), not the land. (CUPs are municipal permits; Alcoholic beverage – “ABC” – licenses come from the state) However, whether the license owner will be allowed to sell alcoholic beverages, and if so how,  is based on the specific location. For example, even if the license is allowed at a particular location, it may be restricted in many ways such as hours of service, whether live entertainment or dancing will be allowed, and many other common restrictions. Once issued and conditioned at a particular location, the license entitlements apply only at that location. In fact, if the license owner closes its business at that location, a new license owner may bring in a different license of the same type within 90 days, and acquire all the rights of the previous license. The application for the new license receives an expedited process, which is largely clerical and non-discretionary. In contrast, the previous licensee, upon attempting to relocate his license, will have to go through the same difficult discretionary process as when he or she first applied for the license.  Thus, ownership of an alcoholic beverage license and the right to sell alcoholic beverages (and how) are two very different things.  License ownership is just a first step.
2. Full Liquor Licenses in California Cost Big Bucks; Beer and Wine Licenses are Free:
California alcoholic beverage licenses allowing for the retail sale of “spirits” are limited in number by statute. Retail beer and wine licenses are not. Therefore, full liquor licenses have a market value based on supply and demand. While the purchase price of such licenses can vary widely, they are usually in the tens of thousands of dollars (significantly more if tied to a location with valuable entitlements). The ABC conducts an annual drawing (commonly referred to as a license “lottery”) for a limited number of new full liquor licenses. However, the terms “drawing” and “lottery” are misleading because they are not free. Rather, these licenses require purchase prices that, although typically lower than actual market value, are nevertheless supposed to be based on prevailing market values. In contrast, beer and wine licenses have no separate market value. Thus, an applicant for beer and wine need only pay the license application fees ($650), and any professional fees he or she wishes to incur.
3. New Applicants for California Alcoholic Beverage Licenses Do Not Have a Right To Be Treated Equally Compared To Prior Applicants:
In my California law practice, one of the most common mistakes people make is assuming that one license in an area justifies another, i.e., that it serves as a precedent. They apply their notions of fairness and equal treatment. However, alcoholic beverage laws are concerned with the welfare of the community rather than the individual license applicant. These laws start with the premise that a concentration of licenses is bad for the surrounding community. Accordingly, if a community already has a night club, it is less likely to need another – at least in the eyes of the Department of Alcoholic Beverage Control (aka “the ABC”) and local law enforcement and planning agencies. Typically, the earlier license applicants have an easier application process than do later applicants. State law uses a formula based on population and crime rate per census tract to determine how many license are justified in an area. Typically, this number is low relative to modern urbanized standards. After this number is met, an applicant for a new license must prove a need for the license based on “public convenience or necessity.” Often, this burden of proof can be met. However, if the area has a particularly high crime rate or number of retail licenses, there may be an actual or de facto moratorium on new license applications.

Applying for a license  can be a time consuming and expensive process. Without realistic expectations, funding, and expertise, it can doom a venture to failure. An experienced alcoholic beverage license application consultant or attorney can be very helpful in the process.