News & Insights
April 11, 2018
The Sunday sale of wine and liquor is now legal in stores across Tennessee.
With this new law, however, there are some new restrictions imposed on retail stores. We will break down the details for you.
Beginning April 22, retail liquor stores are allowed to start selling wine on Sundays at 10 a.m.
However, grocery stores cannot start selling wine until 10 a.m. on January 6, 2019. The legislation gives a decided advantage to retail liquor stores by giving liquor stores a head start on Sunday sales.
In addition to Sunday sales of wine, retail liquor stores will be able to sell spirits, beer and any other item allowed to be sold by a retail liquor store. On Sundays.
Sunday sales brings to mind Joan Osborne’s classic One of Us:
What if God was one of us?
Just a slob like one of us
Just a stranger on the bus
Tryin’ to make his way home?
The scriptures tell us that God can make wine out of water, so we know at least one person — or deity in this case — that was not waiting for the new law to pass to buy wine on Sunday.
We see Sunday sales of spirits and the ability to immediately sell wine on Sundays as part of the compromise offered by grocery stores for selling wine on Sundays. Folks that followed the initial passage of the wine in grocery store law, which we affectionately call WIGS, remember that the final bill was an ugly compromise, where all parties sacrificed.
The legislation also changes days when wine and spirits cannot be sold at liquor stores and eliminates holidays for grocery stores. Prohibiting sales on holidays has been particularly confusing to consumers and grocers. The bill ends the confusion by allowing wine to be sold by grocery stores on every holiday, including Christmas. Three years ago when WIGS passed, who would have imagined Tennesseans Krogering for wine on Christmas Day, 2018.
You can now buy beer, wine and spirits on Labor Day, New Year’s Day and the Fourth of July at your favorite liquor store. You still cannot buy beer, wine or spirits at liquor stores on Thanksgiving and Christmas. The legislation adds Easter to the list of holidays when liquor stores must be closed.
Since we posted this story, the legislature was apparently shocked that it authorized the sale of wine on Easter, Thanksgiving and Christmas at grocery stores. A second law prohibits holiday sales at both liquor and grocery stores on Easter, Thanksgiving and Christmas.
Minimum Markup on Spirits
The Sunday sales legislation also introduces a 10 percent minimum markup on the price of spirits. With the exception of the amount, the minimum markup on spirits mirrors the existing WIGS law imposing a 20 percent minimum markup on wine, including the amounts of fines, criminal penalties and injunctive relief.
We see the minimum markup on spirits as laying the foundation for legalizing the sale of spirits in grocery stores, too. Imposing a minimum markup was critical to the original WIGS deal.
Moratorium on New Liquor Stores
The Sunday sales compromise also imposes a moratorium on the issuance of new licenses to retail liquor stores. There is an exception that allows new licenses to be issued for jurisdictions that approve of retail liquor stores by local option, or for any applicant with a pending application as of April 20, 2018.
The legislation sets up a process for transferring existing licenses. We wonder if imposing a moratorium on new licenses and setting up a process for transferring licenses will create value in a retail liquor license. In many states, limiting the number of licenses creates a market for purchasing liquor licenses. Licenses are worth hundreds of thousands of dollars, or more, depending on the limitations and demands for licenses in a particular city or state.
The bill also imposes a distance restriction for transferring an existing license to a new location. You cannot open a new liquor store or move an existing store within 1,500 feet of an existing liquor store.
Industry members generally agree that WIGS significantly reduced the value of retail liquor stores. Many owners have seen a dramatic drop in the valuation of their businesses. Given the decrease in valuation, will the moratorium on new licenses create any additional value in existing licenses?
The moratorium on new licenses and the transfer process expires on January 1, 2021. At that time, new licenses can be issued and the ordinary transfer process kicks back in.
The legislation also provides some relief to retail liquor stores that close their doors. Under current law, a retail liquor store can only sell its inventory back to wholesalers. Wholesalers are required to repurchase “saleable” inventory and can impose restocking fees. In practice, retail liquor store owners that close can be forced to accept devastating losses, particularly since wine inventory is often deemed not saleable by wholesalers.
The new law allows a closing store to hold a 30-day going out of business sale. The store can price inventory as low as 10 percent below wholesale cost. The law specifically authorizes a licensee to keep any product that is not sold, for personal consumption. This has been the practice for years, although it has not been specifically authorized by any law.
BACKGROUND: P.C. PC 783 Sunday Holiday Sales Legislation.pdf
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