Fiscal Note & Local Impact Statement
127 th General Assembly of Ohio
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BILL: |
DATE: |
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STATUS: |
SPONSOR: |
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LOCAL IMPACT
STATEMENT REQUIRED: |
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Note: The state fiscal year is July 1 through June
30. For example, FY 2009 is July 1,
2008 – June 30, 2009.
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Product and supplier registration fees. The Liquor Control Fund (Fund 7043) may experience a gain in
revenue of approximately $180,600 in FY 2009 from S liquor permit holders
registering their products sold in Ohio.
However, this fund may also experience a loss in revenue of $10,500 to
$12,800 from B-2a permit holders and certain other wine manufacturers from
paying a lower annual supplier registration fee.
·
Direct shipping liquor permit fee disposition. Approximately $11,500 in direct shipping liquor permit fee
revenue would be diverted from the Undivided Liquor Permit Fund (Fund 7066) to
the Liquor Control Fund annually. Of
this amount, $5,750 would subsequently be deposited in the GRF. The bill also increases the maximum wine
production allowable for B-2a and S direct shipping liquor permits, meaning
that amounts diverted to the Liquor Control Fund and the GRF may be higher than
noted above.
· New or modified liquor permits. This bill creates or modifies the requirements for several liquor permits, which may result in the issuance of additional liquor permits. Liquor permit fees are deposited into the Undivided Liquor Permit Fund and then distributed to the GRF, the Statewide Treatment and Prevention Fund (Fund 4750), and local governments, meaning that those funds or local governments may experience a gain in liquor permit fee revenue. Processing fees of $100 for new permits issued are deposited in the Liquor Control Fund (Fund 7043).
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Permissible ID notification. The bill requires the Division of Liquor Control in the
Department of Commerce to provide retail liquor permit holders with a notice of
the permissible forms of identification when checking the age of the person
buying alcohol. The Division noted that
it would send out a mailing to retail permit holders containing the
notice. One-time postage costs for
these mailings would be approximately $10,000 in FY 2009.
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LOCAL
GOVERNMENT |
FY 2008 |
FY 2009 |
FUTURE YEARS |
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Municipalities and
Townships |
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Revenues |
Potential gain from the
issuance of new liquor permits |
Potential gain from the
issuance of new liquor permits |
Potential gain from the
issuance of new liquor permits |
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Expenditures |
- 0 - |
- 0 - |
- 0 - |
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Note: For most local governments, the fiscal year is the calendar year. The school district fiscal year is July 1 through June 30.
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New liquor permit types.
Municipalities and townships receive a portion of liquor permit fee
revenue. The issuance of new D-5m, D-5l
and D-5j liquor permits would result in a minimal gain in liquor permit revenue
for the local government where the liquor permits are issued.
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In
addition to allowing a liquor permit holder to accept a military identification
card that contains a picture and age data as proof of a purchaser's age in
addition to a driver's license or other appropriate identification card, the
bill contains modifications, clarifications, and corrections to Ohio's liquor
and alcoholic beverage tax laws. Those
with fiscal effects are described in detail below.
Direct shipping wine manufacturers
The bill makes a number of
changes or clarifications to the laws governing holders of S and B-2a liquor
permits, which are permits issued to wine manufacturers that enable the direct
shipment of wine to consumers and retail permit holders, respectively. Currently, there are 602 S and 180 B-2a liquor
permit holders. Of these permit holders,
443 S and 17 B-2a permit holders are located outside of Ohio. Specifically, the bill:
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Specifies
that B-2a and S permit holders must register the products they sell in
Ohio. There is a $50 product
registration fee for each new beer or intoxicating liquor product sold in the
state. Currently, only B-2a permit
holders must register their products with the Division of Liquor Control
(DOLC). If S permit holders register
around the same number of products as B-2a permit holders (an average of six),
revenue gained from product registration fees would be approximately $180,600
in FY 2009.
If each of the 602 S permit holders were to register six products, this
would mean that DOLC staff in the Beer and Wine Compliance section would have
to process approximately 3,600 product registrations. There are two employees currently working in that section and one
vacancy that is already within DOLC's budget.
DOLC indicated that once the vacant position is filled, the three staff
members would be able to handle the temporary increase in administrative work
without the need for additional staff.
·
Requires
B-2a permit holders and small domestic wine manufacturers not holding either
direct shipment permit to pay an annual $76 supplier registration fee. Currently, B-2a permit holders and all wine
manufacturers outside of Ohio who sell through a licensed wholesale distributor
in Ohio and not holding either direct shipping permit pay a $300 annual
supplier registration fee and a $100 initial application fee. Based on the number of out-of-state B-2a
permit holders (17) and the number of small (producing less than 250,000
gallons annually), out-of-state wine manufacturers paying the supplier
registration fee, but not holding either direct shipping permit (30-40), the
lower fee for these entities would reduce revenue by up to $12,800 (57
manufacturers x ($300 current fee - $76 proposed fee) = $12,800 loss) annually.
·
Clarifies
that manufacturers holding only an S permit are exempt from the $300 annual
supplier registration fee. There is no
fiscal effect from this provision since these permit holders are already exempt
as long as they do not sell through a licensed wholesale distributor in Ohio.
·
Modifies
the disposition of B-2a and S liquor permit fee revenue for out-of-state wine
manufacturers (manufacturers that do not hold A-2 permits). Currently, the $25 fee for these liquor
permits is deposited in the Undivided Liquor Permit Fund (Fund 7066), part of
which is distributed to the local government in which the permit was issued. Instead, the bill routes the permit fees
from out-of-state wine manufacturers to the Liquor Control Fund (Fund 7043)
from which, once each fiscal year, 50% of the fees collected are to be paid
from the Liquor Control Fund to the GRF.
Based on the current number of out-of-state direct shipping permits,
this would have the effect of diverting approximately $11,500 from the
Undivided Liquor Permit Fund to the Liquor Control Fund annually (460 permits x
$25 fee). Of this amount, $5,750 would
be deposited in the GRF.
·
Increases
from 150,000 to 250,000 gallons the maximum annual amount of wine that a wine
manufacturer can produce and still qualify for a B-2a or S permit. This provision may enable additional
manufacturers to qualify for direct shipping permits. If additional permits were granted, there would be a gain in
revenue to the Liquor Control Fund and the GRF.
Other liquor permit changes
The bill also creates or
modifies a number of other liquor permits.
They are described in detail below.
While it is uncertain how many new liquor permits may be issued as a
result of the bill, liquor permit fees are deposited into the Undivided Liquor
Permit Fund and distributed to the GRF (45%), the Ohio Department of Alcohol
and Drug Addiction Services' Statewide Treatment and Prevention Fund (Fund
4750) for treatment and prevention programming (20%), and the local governments
where the liquor permits are issued (35%).
All of these would gain their proportionate share of revenue if there
are additional licenses issued. All
permanent liquor permits, in addition to the stated fee, carry a $100
processing fee that covers the Division of Liquor Control's expenses in
fingerprinting and making background checks for permanent license
applications. This fee is deposited
into the Liquor Control Fund.
D-5l permit – revitalization
districts
The bill allows for the
creation of revitalization districts for municipalities and townships with
populations of less than 100,000.
Revitalization districts are bounded areas that include or will include
a mix of entertainment, retail, educational, sporting, social, cultural, or
arts establishments. The bill specifies
the steps in creating such a district with application fees determined and received
by the municipality or township. All
townships would be eligible to create the districts, but Parma is the largest
municipality eligible.
The
bill creates the D-5l permit for restaurants or food service operations located
in revitalization districts that are in a municipality or township in which the
number of D-5 permits issued exceeds the one permit per 2,000 population quota
restriction, and that are located in a county having a population of no more
than 125,000 as of CY 2006. As of April
9, 2008, the Division of Liquor Control's permit quota report indicates that
there are 40 municipalities or townships that meet these qualifications. Not more than one D-5l permit can be issued
within each revitalization district for each five acres of land within the
district. The fee for this permit is
$2,344.
D-5m permit – center for the
preservation of wild animals
The bill also creates the
D-5m permit for a retail food establishment or food service operation located
in or affiliated with a center for the preservation of wild animals. There are no quota restrictions on the
number of D-5m permits. The fee for the
D-5m permit is also $2,344. This permit
appears to apply primarily to The Wilds conservation center in southeast Ohio.
Additionally, the bill
allows a permit authorizing Sunday liquor sales (a D-6 permit) to be issued to
a center for the preservation of wild animals if the center already has a D-5m
permit irrespective of whether or not Sunday liquor sales have been authorized
in that area. The fee for a D-6 permit
under this circumstance is $500.
D-5j permit – community
entertainment districts
The D-5j permit is issued to
retail food establishments or food service operations located within community
entertainment districts, which are similar to the revitalization districts
discussed above. Current law allows
such permits only if the community entertainment district meets one of several
qualifications regarding population and developer investment. The bill expands the circumstances under
which a D-5j permit can be issued by allowing community entertainment districts
in municipal corporations having a population of at least 5,000 and at least
$100 million will be invested in development and construction in the
district. The permit fee for each D-5j
permit is $2,344. Current law requires
that only a maximum of 15 D-5j permits may be issued in each community
entertainment district.
Military identification cards – acceptable
identification
Under current law, a liquor
permit holder, agent, or employee of a permit holder cannot be found guilty of
a violation of the Liquor Control Law or any rule of the Liquor Control
Commission in which age is an element of the offense if certain conditions are
met. One of those conditions is that
the person buying alcohol exhibited to the permit holder a driver's license or
an identification card issued under the Driver's License Law showing that the
person buying alcohol was of the age required to purchase beer, intoxicating
liquor, or low-alcohol beverages.
This bill authorizes a
liquor permit holder to accept a military identification card that contains a
picture and age data as proof of a purchaser's age in addition to a driver's
license or other appropriate identification card. This provision appears to have no direct fiscal effect on the
state or local governments.
Notice to permit holders
The bill also requires the
Division of Liquor Control in the Department of Commerce to provide, not later
than 90 days after the bill's effective date, retail liquor permit holders with
a notice of the permissible forms of identification when checking the age of
the person buying alcohol. The Division
of Liquor Control currently licenses over 24,000 privately owned and operated
manufacturers, distributors, and retailers of alcoholic beverages. Retail permit holders hold the vast majority
of the liquor permits the Division issues.
The Division noted that it
would send out a mailing to retail permit holders containing the notice in
addition to posting the notice at its web site. It is likely that these mailings would not qualify for bulk
postage rates since bulk rates require a minimum number of presorted pieces per
zip code (500 pieces for first-class mail) and permit quotas limit the number
of liquor permit holders in any given municipality or township to one per 1,000
or 2,000 people, depending on permit type.
Therefore, it appears that one-time postage costs for these mailings, at
42 cents per piece (effective May 12, 2008), would be approximately $10,000 in
FY 2009.
Tax payments and small manufacturer
exemptions
The bill makes
changes relating to reporting requirements and the tax payment period for wine
and mixed beverage manufacturers and wholesalers. Specifically, B-2a and S permit holders must file a monthly
report with the Tax Commissioner providing the amount of the wine, cider, and
mixed beverages produced and/or sold in the state along with the appropriate
excise taxes. Currently, B-2a and S
permit holders file annual tax reports.
However, the bill also allows the Tax Commissioner to authorize filing
of returns and the payment of tax for periods of longer than one month, meaning
that there likely would be no practical effect from this provision if these
permit holders were authorized to submit reports as they do currently.
The bill also clarifies that
holders of direct shipment permits are required to pay the two cent per gallon
tax on wine sales and distribution.
This tax is deposited to the Ohio Grape Industries Fund (Fund 4960),
which is used to fund viticulture research and grape product marketing
efforts. Under current law, B-2a and S
permit holders should already be remitting all applicable taxes.
Currently, any licensed Ohio wine
manufacturer who produces 500,000 gallons or less in a calendar year is granted
an exemption from the wine excise tax during the following year and a refund on
any excise tax paid during the current year. The bill removes
the stipulation that the exemption is allowed in the following calendar year
and also allows the exemption to be claimed monthly against current
taxes levied. Essentially, this would
mean that a small wine manufacturer would take the credit up front rather than
receiving a refund at a later date. As
a result, there may be some timing issues related to when the exemptions are
claimed, but there appears to be no net direct fiscal effect on excise tax
revenue to the GRF.
LSC fiscal staff: Jason Phillips, Budget Analyst