HBA-TYH H.B. 124 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 124
By: Keel
Licensing & Administrative Procedures
2/9/1999
Introduced



BACKGROUND AND PURPOSE 

In 1995, the Texas wine industry, consisting of 26 wineries, produced one
million gallons of wine and $101.9 million.  The largest producers in that
group typically sell most of their wine through wholesale distributors,
while 15 of the smaller wineries who each produce less than 10,000 gallons
per year usually do not market through wholesalers.  A large portion of
their wine is sold at the Grapefest wine festival in Grapevine, Texas.   

Currently, wineries in dry areas may have tasting rooms, but may not sell
their product to consumers. Wineries in wet areas may have tasting rooms
and may sell their product directly to consumers for off-premise
consumption; however, the sale of wine for on-premise consumption is
prohibited. 

H.B.  124 creates a new category of winery called a farm winery.  It allows
wineries and farm wineries to hold wine festivals and sell and dispense
wine at a wine festival.  It allows a winery, farm winery, or wine bottler
to furnish certificates of deposit or letters of credit in lieu of all or
part of the bond requirement, and sets forth the language to be used in any
local option election held to determine whether or not it will be legal to
sell wine on the premises of a farm winery.  It creates a tax on wine sold
for resale, a system to collect the tax, and requires that the revenue
generated by the tax be used for research and promotion of the wine
industry. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that rulemaking
authority is expressly delegated to the Texas Department of Agriculture in
SECTION 28 (Section 207.09, Alcoholic Beverage Code) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 11.34(a), Alcoholic Beverage Code, to authorize a
farm winery permit applicant to consolidate into a single application all
the permits for which the person is eligible under this section.  Makes
conforming and nonsubstantive changes. 

SECTION 2. Amends Section 11.39(a), Alcoholic Beverage Code, to make
conforming and nonsubstantive changes. 

SECTION 3. Amends Section 16.01(a), Alcoholic Beverage Code, to authorize a
winery permit holder to manufacture and purchase, rather than import, grape
brandy for fortifying purposes only and to be used on the holder's licensed
premises.  Makes conforming and nonsubstantive changes. 

SECTION 4. Amends Chapter 16, Alcoholic Beverage Code, by adding Section
16.08, as follows: 

Sec. 16.08.  WINE FESTIVALS.  Authorizes a winery permit holder, if the
event is held on the winery premises, to sell wine to consumers for
consumption on or off the holder's premises and to dispense wine without
charge for consumption on or off the holder's premises.  Authorizes a
winery permit holder, if the event is held at a location other than the
winery premises, to deliver and dispense wine to individuals attending the
event if no charge of any kind is made for the wine, for the delivery of
the wine dispensed, or for attendance at the event.  Authorizes a winery
permit holder to sell wine to appropriate temporary permit holders. 
 
SECTION 5. Amends Subtitle A, Title 3, Alcoholic Beverage Code, by adding
Chapter 17, as follows: 

CHAPTER 17.  FARM WINERY PERMIT

Sec. 17.01. AUTHORIZED ACTIVITIES.  (a) Authorizes a farm winery permit
holder to manufacture, bottle, label, and package wine containing not more
than 24 percent alcohol by volume; manufacture and purchase grape brandy
for fortifying purposes only on the permit holder's premises; purchase and
import wine only from nonresident sellers holding proper permits or their
agents; purchase wine in this state from holders of wholesaler's, winery,
farm winery, or wine bottler's permits; bottle, rebottle, label, package,
and sell wine to permit holders in this state; sell wine in this state to
wholesaler's, winery, farm winery, and wine bottler's permit holders; sell
25,000 gallons of wine annually, at most,  to ultimate consumers in
unbroken packages for off-premises consumption; sell wine outside this
state to qualified persons; blend wines; dispense free wine for consumption
on winery premises; sell wine manufactured and bottled on premises for
consumer consumption on premises; and sell wine manufactured and bottled
under a permit held by the holder for another premises for consumer
consumption on the winery premises. 

(b)  Authorizes the farm winery permit holder to manufacture and label a
maximum of 50 gallons  of wine annually for an adult's personal use.
Provides that this amount is included in the annual total amount sold by
the holder under Subsection (a) and that the adult for whom wine is
manufactured and labeled under this section is not required to hold a
license or permit. 

(c)  Authorizes the farm winery permit holder to conduct wine samplings at
a retailer's premises.  Authorizes an employee of the permit holder to
open, touch, or pour wine, make a presentation, or answer questions at a
wine sampling.  Prohibits holding a wine sampling at a location otherwise
prohibited by law. 

(d)  Authorizes the farm winery permit holder to dispense wine for
consumption on winery premises under Section 17.07. 

 Sec. 17.02. FEE.  Establishes a $300 annual state fee for a farm winery
permit. 

Sec. 17.03.  IMPORTATION FOR BLENDING.  Authorizes the farm winery permit
holder to import grape brandy or wines, for blending purposes only, from
holders of nonresident seller's permits.  Provides that the state tax on
wines imported for blending purposes does not accrue until the wine has
been used for blending purposes and the resultant product is ready for
sale. 

Sec. 17.04.  FEDERAL PERMIT REQUIRED. Authorizes the granting of a farm
winery permit only upon presentation of a winemaker's and blender's basic
permit of the federal alcohol tax unit. 

Sec. 17.05. LOCATION OF PREMISES.  Authorizes a farm winery permit to be
issued in a dry area.  Prohibits the sale of wine in a dry area, except
that the permit holder may sell up to 25,000 gallons of wine in Texas
annually to permit holders authorized to sell wine to the consumer for
off-premises consumption.  Authorizes the permit holder to sell wine in
Texas to holders of wholesaler's permits, winery permits, and wine
bottler's permits.  Authorizes the permit holder to bottle, rebottle,
label, package and sell wine in Texas to authorized wine retailers. 

Sec. 17.06.  ORGANIZED WINE TASTING COMPETITION.  Authorizes a farm winery
permit holder to deliver wine manufactured by the holder to a wine tasting,
evaluation, competition, or literary review at unlicensed locations for
evaluation by unlicensed persons or wine reviewers attending the event,
provided that no charge is made for the wine, delivery, or attendance at
the event and if the commission consents in writing to the delivery.
Authorizes the permit holder to dispense wine to individuals attending such
events and discuss  with them the manufacture and characteristics of the
wine 

Sec. 17.07.  WINE SAMPLING.  (a)  Authorizes a farm winery permit holder to
conduct and charge for wine samplings on the winery premises.   

(b)  Prohibits the advertising of sampling events except through on-site
communication or by direct mail.   

(c)  Prohibits persons other than the permit holder or the holder's agent
or employee from participating in the dispensing of wine.   

(d)  Authorizes serving more than one sample to a person.  Prohibits
serving a sample to a minor or to an obviously intoxicated person.   

(e)  Prohibits the recipient of a wine sample from removing the sample from
the permitted premises.  

(f)  Provides that a permit holder is not considered to be authorized to
sell alcohol for consumption on the premises and is not considered to have
received revenue from alcohol sales on the premises during the wine
sampling. 

Sec. 17.08.  WINE FESTIVALS.  Authorizes a farm winery permit holder, if
the event is held on the winery premises, to sell wine to consumers for
consumption on or off the holder's premises and to dispense wine without
charge for consumption on or off the holder's premises.  Authorizes a farm
winery permit holder, if the event is held at a location other than the
winery premises, to deliver and dispense wine to individuals attending the
event if no charge of any kind is made for the wine, for the delivery of
the wine dispensed, or for attendance at the event. Authorizes a farm
winery permit holder to sell wine to appropriate temporary permit holders. 

SECTION 6. Amends Section 18.01(2), Alcoholic Beverage Code, to make a
conforming change. 

SECTION 7. Amends Section 19.01(1), Alcoholic Beverage Code, to make a
conforming change. 

SECTION 8. Amends Section 20.01(1), Alcoholic Beverage Code, to make a
conforming change. 

SECTION 9. Amends Sections 21.01(1) and (3), Alcoholic Beverage Code, to
make conforming and nonsubstantive changes. 

SECTION 10. Amends Sections 22.01(1) and (2), Alcoholic Beverage Code, to
make conforming and nonsubstantive changes. 

SECTION 11. Amends Section 24.01(1), Alcoholic Beverage Code, to make a
conforming change. 

SECTION 12. Amends Section 41.05, Alcoholic Beverage Code, to make
conforming changes. 

SECTION 13. Amends Section 42.01(a), Alcoholic Beverage Code, to make
conforming and nonsubstantive changes. 

SECTION 14. Amends Section 42.04(d), Alcoholic Beverage Code, to make a
conforming change. 

SECTION 15. Amends Section 45.03(a), Alcoholic Beverage Code, to make a
conforming change. 

SECTION 16. Amends Section 45.04, Alcoholic Beverage Code, to make
conforming changes. 

SECTION 17. Amends Section 46.03(b), Alcoholic Beverage Code, to make a
conforming change. 

SECTION 18. Amends Section 102.03(a), Alcoholic Beverage Code, to make a
conforming change. 

SECTION 19. Amends Section 102.04(a), Alcoholic Beverage Code, to make a
conforming change. 
 
SECTION 20. Amends Sections 102.07(a), (d), and (f), Alcoholic Beverage
Code, to make conforming changes.  

SECTION 21. Amends Section 102.16(a), Alcoholic Beverage Code, to make
conforming  and nonsubstantive changes. 

SECTION 22. Amends Section 102.17, Alcoholic Beverage Code, to make a
conforming change. 

SECTION 23. Amends Section 102.19, Alcoholic Beverage Code, to make a
conforming change. 

SECTION 24. Amends Section 102.32(a)(1), Alcoholic Beverage Code, to make a
conforming change. 

SECTION 25. Amends Section 109.33(f), Alcoholic Beverage Code, to make a
conforming change. 

SECTION 26.  Amends Sections 204.01(d), (f), and (i), Alcoholic Beverage
Code,  to include a winery, farm winery, or wine bottler's permit holder to
the list of holders who are authorized to furnish one or more certificates
of deposit or savings or letters of credit in lieu of all or part of the
bond requirements and are not required to furnish a bond if the holder has
paid all taxes and fees required for the preceding 36 months in a timely
fashion.  Makes a conforming change.   

SECTION 27. Amends Section 204.06, Alcoholic Beverage Code, to make
conforming changes. 

SECTION 28. Amends Title 5, Alcoholic Beverage Code, by adding Chapter 207,
as follows: 

CHAPTER 207.  WINE TAX

Sec. 207.01. TAX ON WINE.  Imposes a tax of five cents on each gallon of
wine sold for resale in Texas. 

Sec. 207.02. DUTY TO PAY TAX; DUE DATE.  Requires a permit holder who is
authorized to sell wine for resale to pay the wine tax on the 15th day of
the month following the month the wine is sold. 

Sec. 207.03. COMMISSION TO COLLECT TAX.  Requires the commission to collect
and deposit the wine tax in a separate account in the general revenue fund. 

Sec. 207.04. STATEMENTS.  Authorizes the commission to require information
as to sales. Authorizes the commission to seize or withhold from sale the
permit holder's wine for failure or refusal to supply the information or to
allow the commission to conduct an investigation. 

Sec. 207.05. PAYMENT OF TAXES.  Requires that the tax be paid by remittance
payable to the state. 

Sec. 207.06. EVIDENCE IN SUIT.  Establishes that in the event of a suit to
enforce the collection of taxes due, a certificate by the commission
showing the delinquency is prima facie evidence of the levy or delinquency
of the tax and of compliance by the commission with the provisions of this
chapter. 

Sec. 207.07. SUMMARY SUSPENSION.  Authorizes the commission to suspend,
without a hearing, the permit of a holder who fails to file a report or
return or fails to make a tax payment.  Establishes that Chapter 2001,
Government Code, does not apply to the commission in the enforcement and
administration of this section.  Establishes an effective date of
suspension.  Specifies conditions for the termination of a suspension. 

Sec. 207.08. USE OF REVENUE.  Requires that the revenue collected from
taxes imposed be appropriated only to  the Department of Agriculture.
Requires that 70 percent of the tax revenue be spent for viticulture and
enology research and 30 percent of the tax revenue be  spent for marketing
and promotion, unless the advisory council appointed under Section 207.09
advises otherwise. 

Sec. 207.09. ADVISORY COUNCIL.  Requires the commissioner of the Department
of Agriculture to appoint an advisory council consisting of members and
nonvoting members representing various groups.  Requires the commission, by
rule, to define the terms "small wineries" and "large wineries." 

SECTION 29. Amends Sections 251.14(b) and (e), Alcoholic Beverage Code, to
include the legal sale of wine on the premises of a holder of a winery or
farm winery permit among the issues required on the ballot in a local
option election. 

SECTION 30. Effective date:  September 1, 1999.

SECTION 31.  Authorizes a holder of a winery permit and a wine bottler's
permit to convert those permits to a farm winery permit subject to Chapter
17, Alcoholic Beverage Code, as added by this Act, if notification of
intent to operate under Chapter 17, Alcoholic Beverage Code, is provided to
the commission prior to the expiration of the holder's permit.  Requires
the commission to treat an application for an original or renewal winery
permit and wine bottler's permit from the same applicant pending on
September 1, 1999, as an original or renewal application for a farm winery
permit.  Makes application of this Act prospective. 

SECTION 32. Emergency clause.