BEFORE THE DEPARTMENT OF REVENUE

OF THE STATE OF MONTANA

 

In the matter of the amendment of ARM 42.11.104, 42.11.105, 42.11.211, 42.11.213, 42.11.243, 42.11.245, 42.11.251, 42.11.402, 42.11.405, 42.11.406, 42.11.421, 42.11.422, 42.11.423, 42.11.424, and 42.11.425 pertaining to liquor prices, vendor product representatives and permits, samples, advertising, unlawful acts, inventory policy (powdered/crystalline liquor products), product availability, product listing, bailment, and state liquor warehouse management

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NOTICE OF PUBLIC HEARING ON PROPOSED AMENDMENT

 

TO: All Concerned Persons

 

1. On September 21, 2015, at 1:30 p.m., the Department of Revenue will hold a public hearing in the Third Floor Reception Area Conference Room of the Sam W. Mitchell Building, located at 125 North Roberts, Helena, Montana, to consider the proposed amendment of the above-stated rules. The conference room is most readily accessed by entering through the east doors of the building facing Sanders Street.

 

2. The Department of Revenue will make reasonable accommodations for persons with disabilities who wish to participate in this public hearing or need an alternative accessible format of this notice. If you require an accommodation, advise the department of the nature of the accommodation needed, no later than 5 p.m. on September 11, 2015. Please contact Laurie Logan, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-7905; fax (406) 444-3696; or e-mail [email protected].

 

3. The rules as proposed to be amended provide as follows, new matter underlined, deleted matter interlined:

 

42.11.104 CALCULATION OF POSTED Price (1) and (2) remain the same.

(3) Unless a vendor qualifies for a reduced state markup under ARM 42.11.106, the state markup is as follows:

(a) 40 40.5 percent on any liquor other than fortified or sacramental wine;

(b) through (4) remain the same.

 

AUTH: 16-1-303, MCA

IMP: 16-1-302, 16-1-404, MCA

 

REASON: The department proposes amending ARM 42.11.104 due to the passage of Senate Bill 193, L. 2015, which sets the state's markup rate for liquor products at 40.5 percent, effective November 1, 2015. Amending the rule is necessary to create continuity with the statute. The department further proposes adding 16-1-404, MCA, as an implementing statute because it sets forth the 40.5 percent markup rate used in this rule.

 

42.11.105 DEFINITIONS The following definitions apply to subchapters 1, 2, and 4:

(1) "Adult" means a person 21 years of age or older.

(2)(1) "Bailment" means the product at the department's Helena state liquor warehouse that is owned by the vendor. All product shipped into the Helena warehouse will be received as bailment and will remain until depleted or redelivered to the vendor.

(3) "Bailment warehouse" means the designated building in Helena where product is received, stored, and shipped from.

(4) "Beyond vendor's control" means that a vendor has considered all mitigated measures.

(5) "Broker" means a person, partnership, association, or corporation under contract to a vendor to arrange for the employment and registration of the vendor's representatives as provided by these rules and/or to supervise those representatives.

(6)(2) "Consumer advertising specialties" are items that are designed to be carried away by the consumer, such material includes, but is not limited to: including trading stamps, nonalcoholic mixers, pouring racks, ash trays ashtrays, bottle or can openers, cork screws, shopping bags, matches, printed recipes, pamphlets, cards, leaflets, blotters, post cards, pencils, shirts, caps, and visors.

(7) remains the same but is renumbered (3).

(8) "Erratic sales" means sales having no fixed or regular course; lacking consistency, regularity, or uniformity.

(9) "Employ" means to engage the services of a person either through direct supervision and control of the person or through a contract for services with the person.

(10) "List" means to establish a product's availability according to one of the classifications in ARM 42.11.405.

(11)(4) "Point of sale Point-of-sale advertising materials" are items designed to be used within a retail establishment to attract consumer attention to the product. Such materials include, but are not limited to:, including posters, placards, designs, inside signs (electric, mechanical, or otherwise), window decorations, trays, coasters, mats, menu cards, meal checks, paper napkins, foam scrapers, back bar mats, thermometers, clocks, calendars, and alcoholic beverage lists or menus.

(12)(5) "Primary packaging" means the container that directly holds the alcoholic beverage. Examples of primary packaging include, but are not limited to, including aluminum cans, glass bottles, and a box containing a plastic bladder or other soft flexible container.

(13) remains the same, but is renumbered (6).

(14)(7) "Promote" means to: undertake efforts with the intention of increasing sales or public awareness of a product or distiller, including soliciting product orders from agency liquor store agents and retail licensees, disseminating product information or promotional materials, and distributing product samples.

(a) solicit product sales at state agency liquor stores, licensees, special events, and/or the general public;

(b) contribute to the growth of products through the state agency liquor stores, licensees, special events, and/or the general public;

(c) disseminate product information to state agency liquor stores, licensees, special events, and/or the general public; and

(d) distribute product samples in accordance with ARM 42.11.243.

(8) "Registered vendor representative" means an individual registered, as provided by these rules, to promote a vendor's product in Montana.

(15)(9) "Regular product" means a product that: has sold 50 or more cases

(a) is among the highest-selling 1,300 products in the state based on case sales in the 12-month period leading up prior to the department's biannual review if: where sales are not erratic or based upon closeout or overstock;

(a) product sales are not a result of closeout, overstock, or erratic sales;

(b) product is available year-round; and

(c) product has been in the state for at least six months prior to the review.

(16) "Representative" means a person employed and registered, as provided by these rules, by a vendor to promote the sale of the vendor's product in Montana.

(17) "Sample" means a liquor product furnished by a liquor vendor to registered brokers and representatives for the purpose of promoting the product to licensed all-beverage retailers or agency liquor store agents.

(18)(10) "Seasonal product" means a product that is only available by the manufacturer during certain times of the year.

(19) remains the same, but is renumbered (11).

(12) "State liquor warehouse" means the designated building in Helena where product is received and stored and from which product is shipped to agency liquor stores.

(20)(13) "Vendor" means a person, partnership, association, corporation, or other business entity selling liquor party that sells product to the department and to whom which the department makes payment for liquor product depleted from the vendor's bailment inventory held at the state liquor warehouse.

(21)(14) "Vendor's Vendor permit" means a permit issued to a vendor entitling the vendor to promote the sale of its products in Montana through registered vendor representatives registered in accordance with these rules.

 

AUTH: 16-1-303, MCA

IMP: 16-1-302, MCA

 

REASON: The department proposes amending ARM 42.11.105 to edit and add definitions of terms that are used in ARM Title 42, chapter 11, subchapters 1, 2, and 4, and to remove definitions of terms that are no longer used in the rules or those deemed unnecessary to define.

The department proposes removing definitions for adult, bailment warehouse, beyond the vendor's control, broker, erratic sales, employ, list, and sample. These are commonly understood terms that do not require definition by rule.

The department also proposes making minimal amendments to the definitions for bailment, consumer advertising specialties, point-of-sale advertising materials, primary packaging, promote, seasonal product, vendor, and vendor permit, to improve readability and to ensure consistent use of defined terms.

The department further proposes changing the term representative to registered vendor representative and the term bailment warehouse to state liquor warehouse to provide consistency in the rules on this subject matter.

The department proposes to amend the definition of the term regular product by limiting the number of regular products to the highest-selling 1,300. There are currently 1,234 regular products offered by the department. The number of regular products has increased each time the department conducts its biannual review. The proposed amendment will enable the department to manage space at the liquor warehouse more efficiently by capping the total number of regular products.

 

42.11.211 VENDOR REPRESENTATIVES (1) A vendor who desires seeking to promote the sale of its liquor in Montana shall register at least one representative with the department product must do so through registered vendor representatives. A vendor may register a maximum of three representatives is not required to register individuals who only promote product at the distiller's licensed premises. The vendor must also obtain a vendor permit pursuant to ARM 42.11.213.

(2) Liquor may only be promoted by the vendor's registered representative or a party accompanied by the vendor's registered representative, except as provided in (8).

(3)(2) An electronic application and the registration fee must be submitted for each applicant seeking to represent a vendor must submit an application and the vendor representative registration fee.

(4)(3) The department shall approve an application upon determining that the applicant:

(a) possesses no ownership interest in any Montana alcoholic beverage retail license or a state an agency liquor store;

(b) is 18 21 years of age or older; and

(c) is a resident of Montana.

(5)(4) A representative's registration is effective upon the department's approval of the application. All registrations expire on September 30 of each year.

(6)(5) A representative seeking registration renewal shall submit a an electronic renewal application and the vendor representative registration fee, postmarked by on or before September 1 of each year.

(7) remains the same, but is renumbered (6).

(8) A vendor shall fill the one required representative position within 60 days of a vacancy. To promote its liquor during this 60-day period, the vendor must provide the department with advance written notice identifying the unregistered representative.

(9)(7) The annual registration fee for each vendor representative applicant is $50. This fee must be paid when the applicant first seeks approval to represent a vendor and upon each renewal of the registration thereafter.

 

AUTH: 16-1-303, MCA

IMP: 16-3-103, 16-3-107, MCA

 

REASON: The department proposes amending ARM 42.11.211 to create continuity with statute due to the passage of House Bill (HB) 350, L. 2015, which revises liquor vendor representative requirements.

The department proposes striking language from (1) because the number of allowed representatives is set forth in statute. The department also proposes striking the language in (2) because statute does not allow vendors to have unregistered representatives promote their product in Montana.

The department proposes inserting language to clarify that promotion can only occur through registered vendor representatives and that individuals performing services at the distillery's sample room may promote product on-site without being registered. As set forth by rule, any party seeking to promote product outside of the distillery's sample room must be registered. Further, the vendor is also required to obtain a vendor's permit.

The department further proposes updating the minimum age requirement for serving as a vendor representative in newly numbered (3) based upon the passage of HB 350. The department also proposes striking the language in (8) because the requirement for a vendor to fill any vacancies of representation within 60 days was removed with the passage of HB 350.

Additionally, the department proposes amending the rule language to make it clear that vendors need to apply for and renew their vendor registrations electronically in newly numbered (2) and (5). This is consistent with current practices. The department further proposes adding language in newly numbered (4) and (5) that make it clear that the vendor registration is valid for one year and must be renewed annually thereafter.

 

42.11.213 VENDOR PERMIT (1) A vendor who desires seeking to promote the sale of its liquor in Montana shall obtain a vendor permit from the department and employ at least one representative pursuant to ARM 42.11.211.

(2) An applicant for a vendor permit must submit an electronic application and the vendor permit fee.

(3) remains the same.

(4) A vendor permit is effective upon the department's approval of the application. All vendor permits expire on September 30 of each year.

(5) A vendor seeking renewal of its vendor permit shall submit a an electronic renewal application and the vendor permit fee, postmarked by on or before September 1 of each year.

(6) remains the same.

 

AUTH: 16-1-303, MCA

IMP: 16-3-103, MCA

 

REASON: The department proposes amending ARM 42.11.213 to make it clear that in order to promote products a vendor must have a vendor permit and also employ a registered vendor representative, pursuant to ARM 42.11.211.

Additionally, the department proposes amending (1) and (5) to make it clear that vendors need to apply for and renew vendor permits electronically. This is consistent with current practices. The department also proposes adding language in (4) and (5) to make it clear that the permit is valid for one year and must be renewed annually thereafter to continue product promotion.

 

42.11.243 SAMPLES (1) Sample products must be shipped The distribution of samples in Montana may only be conducted as follows:

(a) the vendor must hold a current vendor permit as required under ARM 42.11.213;

(b) the vendor representative must be registered as required under ARM 42.11.211;

(c) except as provided for in 16-4-311, MCA, the vendor must ship the samples to the state liquor warehouse for distribution purposes at no charge to the state. department;

(2) A sample of liquor

(d) an agency liquor store may only be purchased through state agency liquor stores by sell samples to a registered liquor vendor representative and the cost shall be.

(3) The posted price for a sample liquor case is $12.00 per case for shipping and handling; and

(e) only registered vendor representatives may provide samples.

(4) Sample products, which must be in their original containers, may only be given to licensed all-beverage retailers or agency liquor store agents.

(5) Samples may not be given to a licensed all-beverage retailer or an agency liquor store agent who has purchased the brand within the last 12 months.

(6) A registered representative may not give more than three liters of a distilled spirit or a fortified wine as samples to an all-beverage retailer or agency liquor store agent within the last 12 months.

(7) On-premise consumption of samples must take place at a licensed all-beverage establishment or at a special event conducted under a catering endorsement.

(8) In addition to the consumption allowed under (7), all-beverage retailers and agency liquor store agents are allowed to consume samples, given to them at their establishment by a registered representative, on private property not otherwise licensed by this code.

(9) Sample products must meet the following criteria:

(2) Each vendor is subject to an annual sample limitation of 200 liters per product.

(a) samples Samples are limited to primary packaging containing no more than 750 milliliters. ; and

(b) limit of 72 bottles per brand label, per vendor, per calendar year plus 720 bottles of 50 milliliters or 200 milliliters; or

(c) if If a vendor does not produce a product in a size of 750 milliliters or less, then the next largest size may be substituted for the 750 milliliter.

(10)(3) For samples cases to be removed from bailed inventory bailment, the vendor must submit a request on a form provided by the department. A vendor must submit the form at least seven days prior to the requested ship date.

(11)(4) In order to distribute samples, the vendor's representatives must be registered as required under ARM 42.11.211, and the vendor must hold a current vendor permit as required under ARM 42.11.213 A registered vendor representative may only provide samples as follows:

(a) samples may only be provided to licensed all-beverage retailers or agency liquor store agents;

(b) samples may not be provided to an all-beverage retailer or agency liquor store that purchased the product within the previous 12 months; and

(c) no more than three liters of a product may be provided to a retailer or agency liquor store.

(5) Samples may not be consumed on the premises of an agency liquor store.

 

AUTH: 16-1-303, MCA

IMP: 16-3-103, 16-3-107, MCA

 

REASON: The department proposes amending ARM 42.11.243 primarily to improve clarity and readability by condensing and reordering the language and reducing the overall length of the rule. The general language content from all but two sections of the rule is proposed to be retained, but in a revised and easier to follow format.

The department proposes adding language in (1)(c) that provides a qualifying distillery, under 16-4-311, MCA, the ability to deliver sample cases of liquor directly to agency liquor stores. This ability is based on the passage of House Bill 506 during the 2015 legislative session, which allows microdistilleries to deliver products directly to agency liquor stores. The department intends to apply the amendments to ARM 42.11.243, upon adoption, except for (1)(c) which will become effective on January 1, 2016, when the legislative changes to 16-4-311, MCA, become effective.

The department proposes striking the language in (7) and (8) because information pertaining to where liquor can legally be consumed is clearly addressed in statute and was determined to be unnecessary detail to include in this rule. Alternatively, the department is proposing to include a short statement in new (5) regarding the prohibition of alcohol consumption in agency liquor stores. While a statutorily driven prohibition, the department thinks it is important to clarify this in the rule covering samples.

The department also proposes amending the volume limit formally set forth in newly numbered (2)(b) to state a combined annual volume limitation. The department proposes an annual volume limitation to afford vendors more flexibility in how sample cases can be shipped in sizes of 750 milliliters or less.

The department further proposes adding 16-3-107, MCA, as an implementing statute because it addresses the need to have a registered vendor representative to promote product in Montana as referred to in the rule.

 

42.11.245 ADVERTISING SPECIALTIES (1) Registered vendor representatives are allowed to may distribute point of sale point-of-sale advertising materials and consumer advertising specialties to a retailer as set forth in Title 27 of the Code of Federal Regulations, regulation number 6.84, in effect on April 1, 2012. Copies may be obtained at the United States Treasury web site located at www.ttb.gov.

(2) Registered vendor representatives may not directly or indirectly pay or credit the retailer for using these materials.

 

AUTH: 16-1-303, MCA

IMP: 16-3-103, MCA

 

REASON: The department proposes amending ARM 42.11.245 to create a consistent use of terms defined and used in ARM Title 42, chapter 11, and to improve the clarity and readability of the rule by making grammatical and punctuation changes and removing unnecessary language.

 

42.11.251 UNLAWFUL ACTS (1) Sections 16-1-304, 16-2-105, 16-3-101, 16-3-103, 16-6-104, and 16-6-301, MCA, of the Montana Alcoholic Beverage Code, provide that certain practices in connection with the sale of alcoholic beverages shall be unlawful. All vendors and their brokers and registered vendor representatives shall be familiar with and abide by these statutes.

(2) Although not limiting the scope of the statutory provisions, and with the exception of the consumer advertising specialties stated in ARM 42.11.245, the following practices violate one or more of the statutes cited in (1) are prohibited:

(a) and (b) remain the same.

(c) to purchase drinks "for the house" to induce the purchase of particular brands a product;

(d) to induce department personnel to promote the sale of particular brands a product. This prohibition does not apply to discussions between vendors or registered vendor representatives and department employees with regard to the department's purchase of liquor;

(e) to grant, allow, or pay money or anything of substantial value to licensees or their agents or employees in order to induce the sale of particular brands a product;

(f) to represent, expressly or by implication, that a vendor, broker, or registered vendor representative is affiliated with or has any influence over any department of the state government; or

(g) to repurchase, replace, or exchange any liquors product purchased by licensees or other persons from state agency liquor stores.

 

AUTH: 16-1-103, 16-1-303, MCA

IMP: 16-1-304, 16-2-105, 16-3-101, 16-3-103, 16-6-104, 16-6-301, MCA

 

REASON: The department proposes amending ARM 42.11.251 to create a consistent use of terms defined and used in ARM Title 42, chapter 11, and to improve the clarity and readability of the rule by rewording and/or removing unnecessary language.

 

42.11.402 INVENTORY POLICY (1) remains the same.

(2) Each product a vendor desires seeks to sell in the state of Montana must be approved by the department. In order to consider the product for approval, the department must receive a picture copy of the product's primary packaging.

(3) Liquor products are a mature product category, restricted by law to only consumers age 21 or older and who are not intoxicated, and therefore should be marketed in a responsible and appropriate manner. The department, in its discretion and on a case-by-case basis, will not approve a liquor product that:

(a) through (c)(iii) remain the same.

(d) requires specialized handling requirements such as frozen or refrigerated products; or

(e) is in powdered or crystalline form.

(4) remains the same.

 

AUTH: 16-1-303, MCA

IMP: 16-1-104, 16-1-302, MCA

 

REASON: The department proposes amending ARM 42.11.402 to change a word and remove unnecessary language in (2), and to protect the health, welfare, and safety of the citizens of Montana by prohibiting the sale of alcohol products in powdered or crystalline form in the state with the addition of new (e) in (3).

Several states across the country have current legislation or are actively pursuing legislation to prevent the sale of liquor in powdered or crystalline form in their states based on concerns raised regarding the potential negative social impact and problems identified with making those products available.

As set forth in Montana statute, the department is charged with ensuring the health, welfare, and safety of Montana's citizens in all matters regarding the regulation of alcohol sales in Montana. The department takes this responsibility seriously and does not believe that allowing Montana to be a test market in determining whether the social impact concerns related to these products are valid would be in the best interest of the health, welfare, and safety of Montana's citizens.

 

42.11.405 PRODUCT AVAILABILITY (1) Liquor products will be made available for sale in the following classifications:

(a) Regular products will be designated in the department's quarterly price list, book and have sufficient supply maintained in the bailment state liquor warehouse in accordance with ARM 42.11.421. An agent shall give an all-beverage licensee an a reduction of 8 percent discount on a full off the posted price for purchasing regular products in unbroken case lot of a regular product lots.

(b) Special order products that have sold at least one case in the prior 12 months will be published in the department's quarterly price list book. An agent shall not give an all-beverage licensee an 8 percent discount on a full for purchasing special order products in unbroken case lot of a special order product lots.

(i) Inventories will be maintained in the bailment state liquor warehouse in accordance with ARM 42.11.421 if the item has sold more than 24 cases on the highest-selling 350 special order products based on case sales in the 12-month period leading up prior to the department's biannual review.

(ii) Inventories will not be maintained in the bailment state liquor warehouse for all other special order products if the item has sold 24 or less cases in the 12-month period leading up to the department's biannual review. These items products will be available on an order-by-order basis and, depending on supplier vendor requirements and availability, the order may take six weeks or more to be filled.

(A) A vendor with a current Montana vendor permit who has and at least one registered vendor representative may ship these products in to the state liquor warehouse on a promotional contract if approved by the department on a predetermined form. To seek approval for the shipment, the vendor must submit the request on a form prescribed by the department. The department shall notify the vendor upon approval. The promotional contract should state:

(I) state that the product will be maintained in the bailment state liquor warehouse;

(II) list the test market locations proposed for the product and the expected initial order amount;

(III) describe the promotional strategy that the vendor and the vendor's registered representative will undertake during the six-month promotion period; and

(IV) specify a return address for excess product at the end of the promotional period.

(B) No additional supplier vendor promotions will be allowed until excess product is removed from the state liquor warehouse. If arrangements have not been made to ship excess product back within 30 days of notification, product will be destroyed at the vendor's expense.

(c) Seasonal products are not published in the department's quarterly price list book. Seasonal products are only available from the manufacturer during certain times of the year. The department will notify store agents agency liquor stores when seasonal products become available. An agent shall not give an all-beverage licensee an 8 percent discount on a full for purchasing seasonal products in unbroken case lot of a seasonal product lots.

(d) Discontinued products are not published in the department's quarterly price list book. Discontinued products are available until all inventories have been depleted. An agent is not required to give an all-beverage licensee an 8 percent discount on a full for purchasing discontinued products in unbroken case lot of discontinued product lots; however, the agent may sell the product below its last known posted price.

 

AUTH: 16-1-103, 16-1-303, MCA

IMP: 16-1-103, 16-1-104, 16-1-302, 16-2-201, MCA

 

REASON: The department proposes amending ARM 42.11.405 to create a consistent use of terms defined and used in this chapter of rules and proposes improving the clarity and readability of the rule by rewording and/or removing unnecessary language. The department also proposes striking an unnecessary implementing statute.

The department further proposes amending the rule to require the department to maintain inventories of only the highest-selling 350 special order products. Currently, the department maintains inventories on 344 special order products. The number of special order products continues to grow each time the department conducts its biannual review. The proposed amendment will enable the department to manage space at the liquor warehouse more efficiently by capping the total number of special products.

 

42.11.406 PRODUCT LISTING (1) A product listing will be determined by the total number of cases the product sold in the 12-month period leading up to the department's biannual review. The listings will be reviewed in January and July of each year. The results of the January review are effective May 1. The results of the July review are effective November 1. The listings will be categorized as regular product and special order product, as defined in ARM 42.11.105.

(1) Each January and July, the department shall classify all products based on the criteria set forth in ARM 42.11.405. The classifications from the January review are effective May 1. The classifications from the July review are effective November 1.

 

AUTH: 16-1-103, 16-1-303, MCA

IMP: 16-1-103, 16-1-104, 16-1-302, MCA

 

REASON: The department proposes amending ARM 42.11.406 to condense and improve the clarity of the rule by rewording and/or removing unnecessary language. The department further proposes striking an unnecessary implementing statute.

 

42.11.421 BAILMENT LIMITS (1) Regular Vendors shall supply the state liquor warehouse with regular products must be maintained in the bailment warehouse and maintained special order products in an amount above the minimum level and below the maximum level as set forth in (2) and (3).

(2) The minimum bailment level is a historical three-week case demand. The historical three-week case demand is calculated by taking the products past 12-months sales product's sales from the previous 12 months and dividing by 12 52 to obtain a monthly weekly demand. This figure is divided by four to obtain a weekly demand and then multiplied by three to obtain a three-week demand.

(3) The maximum level is a historical twelve-week case demand. The historical twelve-week case demand is calculated by taking the products past product's sales from the previous 12 months sales and dividing by 12 52 to obtain a monthly weekly demand. This figure is divided by four to obtain a weekly demand and then multiplied by 12 to obtain a twelve-week demand. The maximum level may be exceeded from time to time if a vendor demonstrates to the department's satisfaction that a larger amount is needed to meet a sales forecast or to obtain an economical shipment and the department agrees.

(4) remains the same.

(5) Vendors will also be charged the costs incurred by the department when there is insufficient product to fill orders during sales periods shall honor a product's sale price for agency liquor store orders that were not filled during a sale month due to insufficient inventory.

(6) Fees and charges credits will be offset against department payments the department's payment for products.

 

AUTH: 16-1-103, 16-1-303, MCA

IMP: 16-1-103, 16-1-104, 16-1-302, MCA

 

REASON: The department proposes amending ARM 42.11.421(1) to make it clear that vendors are required to maintain an appropriate level of special and regular product inventory at the state liquor warehouse.

The department also proposes changing the explanation of the calculation formula in (2) and (3) to match the method currently used in the warehouse management computer system, which divides the sales in a 12-month period by weeks rather than by months to compute the historical demand of a product.

The department further proposes amending (5) to clarify the vendor's obligation to honor sales prices for product that is out of stock when ordered by an agency liquor store during the sale period.

The department also proposes amending the rule to create a consistent use of terms defined and used in this chapter of rules and proposes improving the clarity and readability of the rule by rewording and/or removing unnecessary language and striking an unnecessary implementing statute.

 

42.11.422 BAILMENT RECEIVINGS (1) Vendors may ship products to the bailment warehouse upon approval and in accordance with ARM 42.11.406.

(2)(1) Vendors must shall provide the department a bill-of-lading bill of lading for each shipment to the bailment state liquor warehouse by fax, or e-mail, or mail post marked ten days in advance of the expected date of arrival. The bill-of-lading bill of lading must include the quantity, the National Alcoholic Beverage Control Association control state code, and a description of each item product shipped.

(3)(2) The department will shall send vendors an acknowledgement of receipt within 24 hours of receipt. Any variance with the bill-of-lading, and the number of undamaged cases received, will be noted on the acknowledgement receipt noting any variance from the bill of lading.

(4)(3) The number of cases received per product will be credited to the vendor's bailment warehouse inventory.

(5)(4) Damaged cases will be adjusted to from the vendor's bailment warehouse inventory.

 

AUTH: 16-1-103, 16-1-303, MCA

IMP: 16-1-103, 16-1-104, 16-1-302, MCA

 

REASON: The department proposes amending ARM 42.11.422 to create a consistent use of terms defined and used in this chapter of rules and proposes improving the clarity and readability of the rule by rewording and/or removing unnecessary language. The department proposes striking the language in (1) because it covers the shipping of product and is unnecessary in this rule that covers the receiving of product.

The department also proposes to strike from rule the ability for a vendor to submit a bill of lading via standard mail. Currently, bills of lading are received by fax or e-mail. 

The proposed amendment is consistent with current practices.

The department further proposes striking an unnecessary implementing statute.

 

42.11.423 BAILMENT DEPLETIONS (1) The department may deplete products from the vendor's bailment warehouse inventory if the department is purchasing a the product from a vendor.

(2) Payment for a purchase less any fees or changes will be made The department shall pay the vendor for products purchased within 15 days from the close of the month that the department depletes the product from the bailment warehouse as follows:

(a) for regular products, the department shall pay the vendor the price stated on the standard price quotation form submitted for publication in the most recent quarterly price book;

(b) for special order, seasonal, and discontinued products, the department shall pay the price currently on file with the department; and

(c) all prices in (a) and (b) shall be freight on board to the state liquor warehouse.

(3) Payment amount for a purchase will be a vendor's price per case FOB Helena, Montana, that was quoted to the department For regular products, vendors shall submit the standard price quotation form not less than 60 75 days prior to the publication of the department's price list publication date except special order, seasonal, and discontinued products quarterly price book.

(4) The number of cases depleted per product will be debited to from the vendor's bailment warehouse inventory., and

(5) Upon upon request, a vendor may shall be notified weekly of the amount and date a vendor's the products were depleted from the bailment warehouse.

 

AUTH: 16-1-103, 16-1-303, MCA

IMP: 16-1-103, 16-1-104, 16-1-302, MCA

 

REASON: The department proposes amending ARM 42.11.423 to make it clear that the price the department will pay for any product it is purchasing from a vendor will be the most current price on record and that the price must already include any vendor freight charges.

The department proposes increasing the number of days from 60 to 75 by which a standard price quotation form for a regular list product must be submitted to the department. This proposal is consistent with current practices and will ensure all forms submitted by vendors will be processed prior to issuance of the quarterly price book.

The department also proposes amending the rule to create a consistent use of terms defined and used in this chapter of rules and proposes improving the clarity and readability of the rule by rewording and/or removing unnecessary language.

The department further proposes striking an unnecessary implementing statute.

 

42.11.424 BAILMENT ADJUSTMENTS (1) The vendor's bailment warehouse inventory will be adjusted for vendor product withdrawals, purchases, receivings deliveries, defective merchandise, and errors.

(2) Vendors may withdraw their products from the bailment state liquor warehouse by sending a written request to the department to carry out their instructions.

(3) Vendors will be charged The department shall charge vendors the direct and indirect costs the department incurs for carrying out vendor withdrawal instructions.

(4) Products in excess of a six month supply will be destroyed The department shall destroy, at the vendor's expense, product held in the state liquor warehouse in excess of the maximum level established by ARM 42.11.421 after ten days 30 days' notice to the vendor.

(5) A vendor may be notified Upon request, the department shall notify a vendor weekly of the number of cases credited to the vendor's bailment warehouse inventory that were found to be deficient or defective, (i.e. e.g., hidden breakage, packed short, or have bottles with no fill or low fill) during the week. Vendors will be given the opportunity to have the deficient cases redelivered at their cost or destroyed. A vendor may ask the department to return or destroy defective cases at the vendor's cost.

(6) A vendor may be notified Upon request, the department shall notify a vendor weekly of the number of cases credited or debited to the vendor's bailment warehouse inventory in error during the week and an explanation of the errors that were found.

 

AUTH: 16-1-103, 16-1-303, MCA

IMP: 16-1-103, 16-1-104, 16-1-302, MCA

 

REASON: The department proposes amending ARM 42.11.424 to add language in (4) to clarify the circumstances under which the department will destroy excess product held in the state liquor warehouse and to increase the department's advance notification of the pending destruction to the vendor from 10 to 30 days.

The department also proposes amending the rule to create a consistent use of terms defined and used in this chapter of rules and proposes improving the clarity and readability of the rule by rewording and/or removing unnecessary language.

The department further proposes striking an unnecessary implementing statute.

 

42.11.425 STATE LIQUOR BAILMENT WAREHOUSE MANAGEMENT 

(1) Only department personnel are authorized to move or handle products in the bailment state liquor warehouse.

(2) Vendors may arrange with the department for the temporary transfer of selected cases of product to a work area within the bailment state liquor warehouse. Vendors or vendors' registered vendor representatives may inspect or modify cases of their product in the work area. The department must approve any modifications that may affect documentation of balances in the vendor's bailment warehouse inventory. Vendors will be charged the direct and indirect costs the department incurs for transferring cases to and from the work area.

(3) Vendors and vendors' registered vendor representatives may make a request to the department to observe the operation of the bailment state liquor warehouse at any time during regular working hours by arranging an appointment.

(4) While on a visit to the bailment state liquor warehouse, vendors and vendors' registered vendor representatives must observe Montana state liquor warehouse all safety rules.

(5) The department will take physical inventory in the bailment state liquor warehouse four times a year and reconcile the count with the vendor's bailment warehouse inventory.

 

AUTH: 16-1-103, 16-1-303, MCA

IMP: 16-1-103, 16-1-104, 16-1-302, MCA

 

REASON: The department proposes amending ARM 42.11.425 to create a consistent use of terms defined and used in this chapter of rules and proposes improving the clarity and readability of the rule by rewording and/or removing unnecessary language.

The department further proposes striking an unnecessary implementing statute and amending the rule title to reflect the rule content as amended.

 

4. The department intends to apply the amendments to ARM 42.11.243, upon adoption, except for (1)(c) which will become effective on January 1, 2016, when the legislative changes to 16-4-311, MCA, become effective.

 

5. Concerned persons may submit their data, views, or arguments, either orally or in writing, at the hearing. Written data, views, or arguments may also be submitted to: Laurie Logan, Department of Revenue, Director's Office, P.O. Box 7701, Helena, Montana 59604-7701; telephone (406) 444-7905; fax (406) 444-3696; or e-mail [email protected] and must be received no later than October 5, 2015.

 

6. Laurie Logan, Department of Revenue, Director's Office, has been designated to preside over and conduct this hearing.

 

7. The Department of Revenue maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request that includes the name and e-mail or mailing address of the person to receive notices and specifies that the person wishes to receive notice regarding a particular subject matter or matters. Notices will be sent by e-mail unless a mailing preference is noted in the request. A written request may be mailed or delivered to the person in 5 above or faxed to the office at (406) 444-3696, or may be made by completing a request form at any rules hearing held by the Department of Revenue.

 

8. An electronic copy of this notice is available on the department's web site at revenue.mt.gov/rules. The department strives to make the electronic copy of this notice conform to the official version of the notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the notice and the electronic version of the notice, only the official printed text will be considered. While the department also strives to keep its web site accessible at all times, in some instances it may be temporarily unavailable due to system maintenance or technical problems.

 

9. The bill sponsor contact requirements of 2-4-302, MCA, apply and have been fulfilled. The primary sponsors of House Bill 350, House Bill 506, and Senate Bill 193, Representative Ray Shaw, Representative David Moore, and Senator Bruce Tutvedt, respectively, were contacted by regular mail on May 19, 2015, and subsequently notified on July 13, 2015.

 

10. With regard to the requirements of 2-4-111, MCA, the department has determined that the amendment of the above-referenced rules will not significantly and directly impact small businesses. Documentation of the department's determination is available online at revenue.mt.gov/rules, or upon request from the person in 5.

 

 

/s/ Laurie Logan                          /s/ Mike Kadas

Laurie Logan                               Mike Kadas

Rule Reviewer                             Director of Revenue

         

 

Certified to the Secretary of State August 17, 2015