RULES AND REGULATIONS
Title 40—LIQUOR
LIQUOR CONTROL BOARD
[ 40 PA. CODE CHS. 1, 3, 5, 7, 11, 13 AND 17 ]
License Applications and Management Contracts
[40 Pa.B. 1149]
[Saturday, March 6, 2010]The Liquor Control Board (Board), under the authority of section 207(i) of the Liquor Code (47 P. S. § 2-207(i)), amends 40 Pa. Code Chapters 1, 3, 5, 7, 11, 13 and 17.
Purpose
Several of the changes pertain to the use of management companies by licensees and to the level of interest in the licensed business that the management companies may have. The Board has found with increasing frequency that holders of hotel licenses, and to a somewhat lesser degree, holders of restaurant and eating place malt beverage licenses, are using management companies to carry out day-to-day activities. While Act 10 of 2002 amended the Liquor Code (47 P. S. §§ 1-101—8-803) to acknowledge and regulate this process, sections 4-404 and 4-436(f) of the Liquor Code still require that the licensee itself be the only party that is ''pecuniarily interested'' in the license. (47 P. S. §§ 4-404 and 4-436(f)).
Unfortunately, the term ''pecuniarily interested'' is not defined in the Liquor Code and the case law is somewhat scant. This presents a problem to the industry as it tries to draft agreements that would allow them to avail themselves of the opportunity to use a management company in a manner that does not violate the Liquor Code. When analyzing a management agreement, the Board has been guided by the Commonwealth Court decision in Appeal of: E-J Westside Inn Corp., 449 A.2d 93 (Pa. Cmwlth. 1981). In that case, the Commonwealth Court held that a party has a pecuniary interest in a license when it participates in the profits of the licensed business and exercises substantial control over the business.
The purpose of this part of the rulemaking is to let the licensed community know how the Board interprets the Commonwealth Court's decision and the factors that the Board will consider when reviewing an arrangement between the licensee and a third party. The definition of ''pecuniary interest'' incorporates the factors specified in the E-J Westside decision: participation in the profits of the licensed business and exercising ''substantially'' all right to control the business. Further, the rulemaking codifies the Board's use of a 10% threshold in participation in the proceeds of the business as its trigger for further review of a management contract. This has been the administrative standard utilized by the Board for at least the last 2 decades.
Sections 4-404 and 4-436 of the Liquor Code mandate that the Board be satisfied upon receipt of the application and proper fees for issuance of a liquor license that the applicant is the only person pecuniarily interested in the license to be issued and that the applicant is a responsible person of good reputation. The rulemaking clarifies that the same standards the Board applies when determining the fitness of licensees will also be applied to the management companies they utilize. In other words, management companies are subject to sections 4-404 and 4-436 of the Liquor Code, requiring that the contractual arrangement does not give the management company (a nonlicensee) a pecuniary interest and the license, and that the management company is also a responsible person or entity of good reputation.
The final-form regulations specify that the Board may refuse an interest based upon the factors provided in section 4-470(a.1) (47 P. S. § 4-470(a.1)), of the Liquor Code: reputation, criminal history and current or prior involvement in other licenses. The final-form regulations clarify that management companies are subject to the Liquor Code's requirement that the entity be a responsible person or entity of good reputation. Put another way, the purpose is to clarify that the Board has the authority to examine the reputation of a management company in the same manner that it can examine the reputation of the licensee which employs the management company.
In addition, the regulations are amended to notify the licensed community of the process that shall be followed to notify the Board that a management company is being used. The Board will notify the applicant or licensee, in writing, of the Board's decision to either approve or refuse the involvement of a person providing services as a management company. The final-form regulations do not set forth a specific time frame for the Board to notify an applicant or licensee of the Board's decision regarding approval of a management contract. The Board believes that setting a specific time frame would be impracticable, because the management contracts that it reviews are highly variable in their scope, complexity and number of parties involved. Additionally, the approval or rejection of a management contract represents an after-the-fact event (that is, the licensee has already engaged the services of the management company) and therefore does not adversely affect the operation of the licensed business, as the licensee can continue to utilize the management company pending Board approval.
The rulemaking establishes a fee of $350 for the Board's review of a management contract. In certain circumstances, a fee can be waived by the Board if the intent of the applicant is to simply advise of a minor change or correction to a previously approved management contract. For example, there would be no fee assessed when an applicant is fixing a typographical error for a name of a party or an address, where an applicant is providing an exhibit that was referenced in the approved agreement but was inadvertently not provided originally, where an applicant is providing a missing page to an already approved contract or exhibit, where an applicant is reporting a name change as to one of the parties, or where an applicant is reporting a change in the mailing address or a change in contact information. However, a fee will be required by the Board if an applicant is reporting that one of the owners of the management company has changed, or if an applicant is reporting that the agreement is being assigned.
Another change involves the procedures for cleaning and maintaining systems for serving draft beer. This change reflects the fact that changes in technology allow for cleaning methods that do not require weekly cleanings and will encourage licensees to adopt these more modern methods. There has been uncertainty in the licensed community because the improved technology has been available for several years, but the ability for a licensee to use this technology under the existing regulations has not been clear. It is anticipated that the licensed community will realize a savings if the draft beer systems do not have to be completely emptied and cleaned every week. The enforcement officers of the Bureau of Liquor Control Enforcement, Pennsylvania State Police also have been uncertain about the permissibility of this advanced technology. Resolving these uncertainties should help make enforcement more efficient, predictable and cost-effective.
A further change pertains to tastings that are conducted at State stores. Tastings were first authorized by Act 15 of 2003. See 47 P. S. § 2-215(e). In response, the Board drafted regulations to govern these tastings. Having now conducted several years of tastings, the Board feels that amendments will make the tastings more efficient and more consumer-friendly. The specific amendments allow sponsors of in-store tastings to import those products to be tasted into this Commonwealth, rather than requiring sponsors to purchase the products from the Board. It also allows partially-consumed bottles being used for tastings to be stored at wine and spirits stores, rather than requiring that they be discarded.
Another change pertains to the information the Board considers when assessing an applicant's reputation. The amendment reflects the fact that the Liquor Code contemplates a review of the reputation of the individuals associated with the licensee in addition to the licensee itself. Good reputation is a characteristic required by the Liquor Code in determining eligibility for a license. The amendment makes it clear that the reputation of the officers, directors, shareholders, members and partners of an applicant entity will be considered in determining eligibility for a license. Improved clarity and predictability will make the application process more efficient and thus more economical for the applicant for a license.
Administrative amendments have been included in Chapter 17 (relating to special rules of practice and procedure for matters before the Board). These changes allow prehearing submission of proposed exhibits to the Board's Hearing Examiner and encourage the parties to exchange documents before a hearing. All participants in hearings should benefit from this process to clarify the issues before a hearing begins. Other changes benefit hearing participants by clarifying the time within which a protest to an application must be received. The Board's authority to issue its own subpoenas is also clarified, and thus the administrative process is simplified.
The remaining amendments address administrative changes that will facilitate and improve the Board's administration of the Liquor Code. Each of these changes as presented responds to the public interest in an efficiently regulated alcohol beverage industry in this Commonwealth while keeping pace with changes in the dynamic marketplace for alcohol beverages.
Proposed amendments relating to requiring vendor tax clearance have been completely withdrawn. These proposals were found in §§ 1.1, 3.8, 3.142(a)(2) and 11.143. The proposal intended to place merchants on notice that the Commonwealth's Contractor Responsibility Program applied to business entities that sell liquor and liquor accessories to the Board. These sales of liquor and liquor accessories are not subject to the Commonwealth's Procurement Code. The proposal would have required that the merchants of the Board provide documentation demonstrating that they had necessary tax clearances from the Departments of Revenue and Labor and Industry. During the pendency of the proposal, however, the Commonwealth revised its administrative procedures regarding the payment of Commonwealth vendors. Under the new procedures, merchants selling liquor and liquor accessories to the Board are currently ineligible to receive payment of their invoices if they do not have tax clearance from the Departments of Labor and Industry and Revenue. As the implementation of these new Commonwealth procedures resolved the issues to be addressed by the proposed regulations, the regulations have been withdrawn in their entirety.
Moreover, the Board has withdrawn proposed amendments to § 3.8(a) and (b) (relating to certificate of completion; certificate of approval; letter of authority), as the Board is currently uncertain as to how it wishes to proceed regarding the policy changes reflected in the regulations. Accordingly, it was decided to withdraw the proposed amendments and resubmit them to the Independent Regulatory Review Commission (IRRC), in a subsequent regulatory package, after the Board further reflects on how to proceed.
Summary of Amendments:
The amendments add three new definitions, establish regulations for management agreements, revise procedures for wine and spirits tastings in stores and revise rules of hearing procedure. Obsolete regulations about cleaning draft beer systems are updated. The following are summaries of the regulatory changes:
• Defines the term ''pecuniary interest.''
• Clarifies that the reputation of stockholders, directors, officers and members of corporate or other business entity licensees will be considered in assessing the reputation of the licensee.
• Establishes rules and procedures for approval of management agreements and sets a fee for review of such agreements.
• Recognizes that licensees are using new technology to assure that malt or brewed beverage dispensing systems are clean.
• Codifies the Board's established practice that the purchase price for transfers of licenses that involve changes in ownership must be placed into escrow.
• Amends regulations on ''tasting events'' to clarify the amount of alcoholic beverages that may be given. It also allows sponsors of in-store tastings to import into this Commonwealth, products to be tasted rather than making them buy the products from the Board. It also allows partially-consumed bottles being used for tasting to be stored at wine and spirits stores, rather than requiring that they be discarded.
•Amends hearing procedures related to issuance of subpoenas and the time for filing protests.
Affected Parties
The regulations will affect licensees and applicants for licenses issued by the Board. It will affect anyone participating in a hearing before the Board.
Paperwork Requirements
The amendments will not significantly increase paperwork for the agency or most of the regulated community.
Fiscal Impact
With respect to the regulatory changes pertaining to management contracts, members of the regulated community who utilize a management company will be required to pay the $350 processing fee under § 3.142(c). No other additional costs, except for the previously mentioned $350 fees, are expected to be borne by the regulated community, as the regulatory changes merely codify existing Board practices in reviewing these management contracts. Fees assessed on applicants and licensees utilizing management companies would be retained by the Board, resulting in an overall increase to the Board's revenues, which can be utilized to defray the current administrative costs associated with processing the contracts. The records of the Board's Bureau of Licensing estimates that since June 2005, there are a total of 486 management companies on file with the Board. Further, since the start of 2009, the Board has received 64 applications for management companies, which included a copy of the management contract. Accordingly, if the Board would receive a total of 85 management contracts through the end of 2009, the Board would receive approximately $30,000 in fees.
There are no expected costs or savings expected for the regulated community regarding the proposed modification to § 1.5 related to evaluating the reputation of licensees. Further, the Board does not expect that the proposed change will result in any costs or savings for either the Commonwealth or local governments.
With respect to the amendments pertaining to beer line cleaning, it is possible that the regulated community may realize potential costs or savings depending on its utilization of any newly approved beer line cleaning systems. Costs or savings nor both, would be speculative and outside the Board's control. The Board does not expect that the proposed change will result in any costs or savings for either the Commonwealth or local governments.
With respect to the amendments in §§ 13.201 and 13.211 (relating to definitions; and tasting events), there are no expected costs or savings expected for the regulated community regarding the amendments. Further, the Board does not expect that the amendments will result in any costs or savings for either the Commonwealth or local governments.
With respect to the amendments in §§ 13.223 and 13.228 (relating to procurement of wine or spirits, or both; and disposal and storage of partially-used liquor and empty containers) members of the regulated community which provide in-store tastings may realize savings as a result of being able to provide and transport the wine and spirits from their own stock, as opposed to having to purchase products from the Board. Further, savings may be realized in that the final-form regulations would allow members of the regulated community to reseal bottles used at such in-store tasting events and transport them for additional tasting events, thereby reducing the number of bottles needed for tasting events. If members of the regulated community sponsoring in-store tasting events all chose not to purchase their products from the Board, as permitted by these regulations, the Board has estimated that its loss of tax revenue would be approximately $200,000 per year, based upon the Board's experience with conducting tasting events. It should be noted that the estimated loss of $200,000 per year would be realized in savings by the regulated community.
With respect to the amendments to administrative hearing procedures, there are no expected costs or savings expected for the regulated community. Further, the Board does not expect that the proposed changes will result in any costs or savings for either the Commonwealth or local governments.
With respect to the remaining administrative amendments represented by the final-form regulations, there are no expected costs or savings expected for the regulated community. Further, the Board does not expect that the amendments will result in any costs or savings for either the Commonwealth or local governments.
Effective Date
This final-form rulemaking will become effective upon publication in the Pennsylvania Bulletin.
Public Comment/Contact Person
Comments and questions should be addressed to James F. Maher, Assistant Counsel, Office of Chief Counsel, Liquor Control Board, Room 401, Northwest Office Building, Harrisburg, PA 17124-0001.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on May 17, 2007, the Board submitted a copy of the notice of proposed rulemaking, published at 37 Pa.B. 3418 (July 21, 2007), to the Independent Regulatory Review Commission (IRRC) and the House and Senate Committee (Committees) for review and comment.
Under section 5(c) of the Regulatory Review Act, IRRC and the Committees were provided with copies of the comments received during the public comment period, as well as other documents when requested. In preparing these final-form regulations, the Board has considered all comments from IRRC, the Committees and the public.
Under section 5.1(j.2) of the Regulatory Review Act, (71 P. S. § 745.5a(j.2) on November 18, 2009, these final-form regulations were deemed approved by the Committees. Under section 5.1(e) of the Regulatory Review Act, IRRC met on November 19, 2009 and approved the final-form regulations.
Findings
The Commission finds that:
(1) Public notice of intention to adopt the administrative amendments adopted by this order has been given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202) and the regulations thereunder, 1 Pa. Code §§ 7.1 and 7.2.
(2) The amendments to the Board's regulations in the manner provided in this order are necessary and appropriate for the administration of the Liquor Code.
Order
The Board, acting under authorizing statute, orders that:
(a) The regulations of the Board, 40 Pa. Code Chapters 1, 3, 5, 7, 11, 13 and 17, are amended by amending §§ 1.1, 1.5, 3.1, 5.23, 5.51—5.54, 7.2, 13.43, 13.51, 13.201, 13.211, 13.223, 13.228, 17.5, 17.7 and 17.13; and by adding §§ 3.141—3.143 and 5.50 to read as set forth in Annex A.
(b) The Board shall certify this order and Annex A and deposit them with the Legislative Reference Bureau as required by law.
(c) This order shall become effective upon publication in the Pennsylvania Bulletin.
PATRICK J. STAPLETON, III,
Chairperson(Editor's Note: The proposal to amend § 3.8 and to add § 11.143, included in the proposed rulemaking at 37 Pa.B. 3418 has been withdrawn by the Board. The amendment of § 3.1 and the addition of § 5.50 were not included in the proposed rulemaking which appeared at 37 Pa.B. 3418.)
(Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 39 Pa.B. 6915 (December 5, 2009).)
Fiscal Note: Fiscal Note 54-63 remains valid for the final adoption of the subject regulations.
Annex A
TITLE 40. LIQUOR
PART I. LIQUOR CONTROL BOARD
CHAPTER 1. GENERAL PROVISIONS § 1.1. Definitions.
The following words and terms, when used in this part, have the following meanings, unless the context clearly indicates otherwise:
Alcohol—Absolute alcohol, ethyl alcohol, cane spirits, Cuban spirits, grain spirits, fruit spirits, high wines and other spirits by whatever name or designation given.
Board—The Liquor Control Board of the Commonwealth.
Examiner—An individual learned in the law appointed by the Governor under the Liquor Code.
Liquor Code—The Liquor Code (47 P. S. §§ 1-101—8-803).
Pecuniary interest—An interest that sounds in the attributes of proprietorship. There is a rebuttable presumption of a pecuniary interest when a person receives 10% or more of the proceeds of the licensed business or when control is exercised by one or more of the following:
(i) Employing a majority of the employees of the licensee.
(ii) Independently making day-to-day decisions about the operation of the business.
(iii) Having final authority to decide how the licensed business is conducted.
§ 1.5. Reputation: Use of criminal and citation history.
(a) When considering whether a person is reputable or the repute of a person under any section of the Liquor Code or this title, the Board may consider whether that person has been convicted of any crimes including misdemeanors and felonies, the person's history regarding licenses issued by the Board, including the citation history of the licenses, and any other factor the Board deems appropriate.
(b) When considering the reputation of a corporation, partnership, limited liability company or other business entity, the Board will consider the reputation of its stockholders, directors, officers, managers or members.
CHAPTER 3. LICENSE APPLICATIONS
Subchapter A. GENERAL PROVISIONS § 3.1. Definitions.
The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
Authorized agent—An individual whose signature appears on the reverse side of a Wholesale Liquor Purchase Permit Card, provided the individual is regularly employed in the business or establishment of a permit holder.
Bar/counter—A smooth flat surface affixed to the premises on which drinks and food are served.
Bench—A long seat for more than one person.
Booth—A table usually surrounded by one or two benches, serving as partitions.
Chair—A single seat with back, often with arms, and supported on legs or a pedestal.
Eating space—A space at least 18 inches wide by 12 inches deep, which is suitable for a service setting of plate, utensils and drink.
Management contract—An agreement between a licensee and a management company to operate, manage or supervise all or part of the operation of the licensed premises.
Permit holder—A retail liquor licensee, registered pharmacist, hospital, State-owned institution, manufacturing pharmacist or chemist, manufacturer of products for nonbeverage purposes, or other person to whom a Wholesale Liquor Purchase Permit has been issued by the Board.
Retail liquor licensee—A person, partnership, association or corporation holding a hotel, restaurant, club or public service liquor license or other license issued under the Liquor Code for the sale of liquor and malt or brewed beverages at retail.
Seating—The number of patrons able to be served meals in a restaurant or eating place retail dispenser premises where a stool, chair, booth or bench is provided to sit on, and where an eating space is provided.
Stool—A backless and armless single seat supported on legs or a pedestal.
Table—A piece of furniture having a smooth flat top supported by one or more vertical legs.
Subchapter M. MANAGEMENT CONTRACTS Sec.
3.141. Management contracts. 3.142. Reporting. 3.143. Board approval and licensee responsibility. § 3.141. Management contracts.
(a) A licensee may contract with another person to manage its licensed premises.
(b) A management contract must reserve to the licensee the capability to direct its own business.
(c) A management contract must be in writing, and a copy shall be maintained on the licensed premises where it shall be available for inspection by the Board.
(d) A management contract may not give a pecuniary interest to a management company.
§ 3.142. Reporting.
(a) Current licensees or applicants for licenses that have management contracts shall file with the Board's Bureau of Licensing (Licensing) on forms supplied by Licensing, the identity of all persons who are parties to the management contract.
(b) Current licensees or applicants for licenses that enter into, modify or terminate management contracts shall, within 30 days, file a written notice with the Board that this has occurred. The changes shall be reported on forms which will be furnished upon request by the Board.
(c) Licensees filing notice of the establishment or modification of a management contract shall pay a fee of $350. No fee is payable when a licensee gives notice to the Board that a management contract has been terminated. Likewise, no fee is required when a licensee is notifying the Board of a nonsubstantive change to an existing management contract, such as the correction of a typographical error, the providing of a page or document inadvertently omitted from an earlier submission, or a name, address or contact information change as to one of the parties.
§ 3.143. Board approval and licensee responsibility.
(a) The Board will notify the current licensee or applicant, in writing, of the Board's decision to either approve or refuse the involvement of a person providing services as a management company.
(b) The Board may refuse the involvement of a person providing services as a management company. The Board's refusal may be based upon the following:
(1) The creation by the management contract of a pecuniary interest in the license.
(2) Facts upon which the Board could refuse a person's involvement in the license which may include reasons specified in section 4-470(a.1) of the Liquor Code (47 P. S. § 4-470(a.1)) such as reputation, criminal history, and current or prior involvement in other licenses.
(c) The licensee's use of a management company will not affect the licensee's responsibility for violations of the Liquor Code or this title.
CHAPTER 5. DUTIES AND RIGHTS OF LICENSEES
Subchapter B. EMPLOYEES OF LICENSEES
EMPLOYMENT OF OTHERS§ 5.23. Appointment of managers.
(a) The operation of a licensed business requires a manager. A licensee shall appoint an individual as manager for each licensed establishment. The manager shall devote full time and attention to the licensed business.
(b) An individual licensee holding multiple licenses may designate himself as manager of only one licensed establishment. If a license is held by more than one individual, the manager may be one of the individuals or another person the licensee may designate.
(c) The manager appointed by a licensee shall be a reputable person. The licensee shall notify the Board in writing of the name and home address of the manager and the date and place of birth. If there is a change of manager, the licensee shall give the Board written notice within 15 days of the change together with full information for the new individual who is appointed as manager. Each notice of the appointment of a manager or notice of a change of manager shall be accompanied by the appropriate fee.
(d) When a background investigation is conducted to obtain or verify information regarding an individual appointed as manager, a total fee of $135 will be assessed. An individual may not act in the capacity of manager after the licensee has been notified that the individual has been disapproved by the Board. The designated manager shall devote full time to the licensed business and may not be employed or engaged in another business unless prior written approval is obtained from the Board. If the designated manager is currently a Board-approved officer, member, partner or shareholder of that licensee, a fee of $60 will be assessed.
(e) Appointment or approval, or both, by the Board of a manager will not exempt the licensee from the penalties provided by law and this title for violations committed in the licensed establishment or in the course of the operation of the licensed business.
(f) The Board may rescind the approval of an appointment of a manager at any time for any cause which it deems sufficient.
(g) In the event of the illness or extended vacation of a licensee, the Board may approve the appointment of a manager for a period not to exceed 30 days. In case of emergency, the approval may be extended upon written request of the licensee.
(h) The licensee, without Board approval, may designate one of its employees as the person in charge of the business for a period of time not to exceed 15 calendar days, when the manager is absent from the licensed premises.
(i) A club manager or steward may engage in employment outside his duties as manager or steward except as provided in section 4-493(11) of the Liquor Code (47 P. S. § 4-493(11)).
(j) If approved by the Board, management contracts may permit the manager for the licensed premises to be employed by the management company; however, the licensee shall have unfettered discretion in all aspects of management of the licensed business, including the employment of the manager and sales of food, alcoholic and nonalcoholic beverages. The licensee's discretion includes control of the manager's hiring, firing, discipline, salary and duties. The manager is an agent of the licensee.
Subchapter D. SANITARY CONDITIONS AND LIGHTING AND CLEANING OF MALT OR BREWED BEVERAGE DISPENSING SYSTEMS
CLEANING OF MALT OR BREWED BEVERAGE DISPENSING SYSTEMS § 5.50. Definition.
The following words and terms, when used in this subchapter, have the following meanings unless the context clearly indicates otherwise:
Malt or brewed beverage dispensing system—A keg or other container of malt or brewed beverages together with all components used to serve those beverages on draft.
§ 5.51. Cleaning of malt or brewed beverage dispensing systems.
(a) A licensee that uses a malt or brewed beverage dispensing system in its licensed premises shall clean the system at its sole expense. One licensee may not clean a malt or brewed beverage dispensing system for another licensee.
(b) The method of cleaning must leave the entire malt or brewed beverage dispensing system in a clean and sanitary condition. The cleaning method used must include cleaning the entire system with a chemical cleaning solution or other cleaning method approved by the Board. The following alternative cleaning methods have Board approval:
(1) Live steam.
(2) Hot water and soda solution, followed by thorough rinsing with hot water.
(c) The frequency of cleaning for the malt or brewed beverage dispensing system shall be as follows:
(1) Once every 7 days for the faucets.
(2) Once every 7 days for the dispensing lines, valves, joints, couplers, hose fittings, washers, o-rings, empty beer detectors (known as ''FOBS'') and draft foam control units, except if the licensee has an operating ultrasonic, electromagnetic or other system that retards the growth of yeast and bacteria in the dispensing lines. If such a system is installed and operating, the licensee shall follow the cleaning frequency and cleaning method guidelines of the system's manufacturer.
(3) The Board may approve different cleaning frequencies.
§ 5.52. Certificate or record required.
(a) The malt or brewed beverage dispensing system may be cleaned for the licensee by a person, other than another licensee, thoroughly equipped to do so by a method enumerated in § 5.51 (relating to cleaning of malt or brewed beverage dispensing systems). The licensee shall obtain from the cleaner a certificate showing the date cleaned, the name of the person by whom cleaned and the method utilized. The certificate shall be kept on file at the licensed premises at all times for inspection by the Board.
(b) The malt or brewed beverage dispensing system may be cleaned by the licensee. The licensee shall maintain and keep a record of the date of each cleaning and the method utilized. This record shall also be kept on file at all times for inspection by the Board.
§ 5.53. Pressure maintenance.
If a compressed gas or other pressurizing system is used in the malt or brewed beverage dispensing system, it shall be designed to preserve the normal flavor of the malt or brewed beverage and not introduce contaminants such as dust, water or oil, into the system.
§ 5.54. Responsibility for condition of equipment.
The licensee has the sole responsibility of maintaining equipment used in dispensing malt or brewed beverages on draft in a clean and sanitary condition. The mere fact that records of licensees indicate that the malt or brewed beverage dispensing system has been cleaned is no defense to enforcement action under the law and the provisions of this subchapter if the malt or brewed beverage dispensing system is at any time found to be in an unsanitary condition.
CHAPTER 7. TRANSFER, EXTENSION, SURRENDER, EXCHANGE AND SUSPENSION OF LICENSES
Subchapter A. TRANSFER OF LICENSES § 7.2. Transfers of ownership.
When an application is filed for transfer of a license from one person to another, a bill of sale of the business or fixtures shall be executed by the licensee and shall be exhibited to the Board or its representative. The purchase price of the business, either in the form of cash or legal obligation as security for the purchase price, shall be placed in escrow with an attorney or financial institution, to be paid to the original licensee upon the approval of the transfer by the Board. The actual transfer of ownership of the business may not pass until approval of the transfer of license has been given. The transferee shall exhibit a deed or lease for the premises, or bill of sale, or both, as the case may be. The license may not change hands until the license transfer has been approved by the Board and the original licensee may continue the operation of the business and may sell liquor or malt or brewed beverages until formal approval of the transfer is given. If the original licensee does not continue operation of the business under the license, no liquor or malt or brewed beverages may be sold and the license shall be surrendered to the Board until the transfer is approved.
CHAPTER 13. PROMOTION
Subchapter A. ADVERTISING
ADVERTISING OF BRAND NAMES § 13.43. Interior display.
(a) A licensee may install or permit to be installed electrically operated signs or devices, lithographs, framed pictures, cardboard displays, statuettes, plaques, placards, streamers or similar items advertising brand names and intended for interior display on the licensed premises.
(b) When the point-of-sale material, as described in subsection (a), is of maximum value as set by the Board, no background material may be used in conjunction with the installation.
(c) Signs or displays intended for use interchangeable in a window, doorway or in the interior must meet the requirements for both maximum area, as provided in § 13.42 (relating to window and doorway display) and maximum value as set by the Board.
GIVING AND ACCEPTING THINGS OF VALUE § 13.51. General prohibition.
(a) Except as provided herein and in § 13.52 (relating to advertising novelties), no in-State or out-of-State manufacturer, licensee or group of licensees, their servants, agents or employees, may directly or indirectly, in person, individually or through a trade organization, contribute to or accept from another licensee or group of licensees of a different class, their servants, agents or employees or a trade organization of licensees of a different class, anything of value by means of advertisements, contributions, purchase, sale of tickets, donations or by any device, for any purpose.
(b) Manufacturers of alcoholic beverages and their servants, agents, employees or representatives are not prohibited from participating in the activities of conventions of State or National organizations of retail liquor licensees, or distributor or importing distributor malt beverage licensees. The participation shall be limited to the payment of registration fees entitling the registrant to admission to the convention, to the insertion of advertising in the convention program of the State or National convention and to the furnishing of food, beverages and entertainment to persons who are bona fide registrants at the conventions.
(c) This section does not prohibit an in-State or out-of-State manufacturer, licensee or trade organization from providing another in-State or out-of-State manufacturer, licensee or trade organization routine business entertainment as defined in § 13.1 (relating to definitions). The routine business entertainment shall be subject to the following conditions:
(1) Routine business entertainment shall be provided without a corresponding obligation on the part of the recipient to purchase alcoholic beverages or to provide any other benefit to the donor or to exclude or restrict from sale the products of any other licensee or in-State or out-of-State manufacturer.
(2) The donor, its servants, agents or employees shall accompany the recipient during routine business entertainment. When items such as tickets are donated by manufacturers to importing distributors for the ultimate use of retailers, the donor is considered to be the importing distributor and it is the importing distributor, or its servants, agents or employees, who shall accompany the retailer.
(3) Routine business entertainment that requires or includes an overnight stay is prohibited.
(4) No more than $800 may be spent in a calendar year on any recipient licensee.
(5) Included under the $800 yearly entertainment cap for a recipient licensee are the licensee, a spouse, employees and guests.
(6) Licensees, in-State manufacturers and out-of-State manufacturers shall keep complete and accurate records of all expenses incurred and all routine business entertainment received for 2 years. These records must contain the name of the recipient and donor of the entertainment, the type of routine business entertainment, the date and, in the case of a donor, the amount of expenditure for each occasion.
(d) After prior written agreement, manufacturers may reimburse importing distributors or distributors for the cost of affixing the manufacturers' beer brand logos to importing distributors' or distributors' delivery vehicles.
(e) The sponsorship of a tasting upon a licensed premises will not be considered giving or accepting a thing of value.
Subchapter D. TASTING EVENTS
GENERAL PROVISIONS § 13.201. Definitions.
The following words and terms, when used in this subchapter, have the following meanings, unless the context clearly indicates otherwise:
In-store tasting events—Tasting/tasting events held upon the premises of a State Liquor Store.
Sponsor—A sponsor of a tasting event may be any licensed vendor, importer, distributor, importing distributor or manufacturer or its agent or employee who is 21 years of age or older.
Standard size alcoholic beverage—A standard size alcoholic beverage is 12 fluid ounces of a malt or brewed beverage, 4 fluid ounces of wine (including fortified wine) or 1 1/2 fluid ounces of spirits.
Tasting/tasting events—A presentation of alcoholic products to the public for the purpose of market research, disseminating product information and education of the public as to quality and availability.
TASTING EVENTS § 13.211. Tasting events.
(a) Tastings may be conducted by sponsors upon licensed or unlicensed premises.
(b) Sponsors conducting a tasting event shall adhere to the following requirements:
(1) Products used shall be legally procured and properly registered and taxes on the products shall be paid.
(2) Purchase requirements may not be associated with the tasting.
(3) Products offered will not exceed a standard size alcoholic beverage for that product. For example, if wine is offered, each glass of each wine offered to a participant will not exceed 4 ounces in volume. A tasting event comparing a brand of Chardonnay from California to a brand of Chardonnay from France would allow the participant to receive one 4-ounce glass of each Chardonnay.
IN-STORE TASTING EVENTS § 13.223. Procurement of wine or spirits, or both.
(a) Wine or spirits used during the in-store tasting events shall be procured by the sponsor in accordance with the sampling process as specified in § 13.81 (relating to samples of liquor), by purchase from the Board or the sponsor may provide and transport the wine and spirits from its own stock.
(b) A maximum of four products per sponsor per in-store tasting event may be made available for tasting by consumers.
(c) Wine and spirits used during an in-store tasting event shall be dispensed from original containers prepared by the manufacturer with labels visible to the consumer.
§ 13.228. Disposal and storage of partially-used liquor and empty containers.
(a) At the conclusion of the in-store tasting event, sponsors shall either discard unused portions of opened liquor containers at the State Liquor Store or may reseal the partially-consumed liquor containers. The resealed partially-used containers shall be placed in storage at the store for use at a subsequent store tasting or may be removed from the premises. No partially-consumed liquor containers may be placed in storage at a store for more than 15 days. After 15 days, partially-used containers of liquor may be discarded by the Board.
(b) Sponsors shall dispose of all empty liquor containers in accordance with section 4-491(5) of the Liquor Code (47 P. S. § 4-491(5))
(c) Resealed partially-used containers may not be furnished to employees of the Board or any other person and may only be used for a subsequent in-store tasting.
CHAPTER 17. SPECIAL RULES OF PRACTICE AND PROCEDURE FOR MATTERS BEFORE THE BOARD
Subchapter A. GENERAL § 17.5. Subpoenas.
(a) Issuance. Except for subpoenas issued upon the Board's own motion, issuance of subpoenas will be as follows:
(1) Subpoenas for the attendance of witnesses or for the production of documents will be issued only upon written application to the Board, with a copy of the application to the opposing party.
(2) Written application shall specify as clearly as possible the relevance of the testimony or documentary evidence sought. Requests for documents must specify, to the extent possible, the documents desired.
(3) Failure to adhere to this subsection may result in the refusal by the Board to issue the requested subpoenas.
(b) Service. Service of subpoenas shall be as follows:
(1) A subpoena shall be served personally upon the witness by the party requesting the subpoena, who shall be responsible for witness fees.
(2) Subpoenas for the production of documents shall be served upon the individual in possession of the documents, if known, or the agency head, who may designate a custodian of the documents.
(3) Service shall be made at least 48 hours prior to the hearing, unless the witness agrees to waive the 48-hour requirement.
(4) Failure to adhere to this subsection may result in a ruling by the Board denying the enforceability of the subpoena.
(c) Supersession. Subsection (a) supersedes 1 Pa. Code § 35.142(a) (relating to subpoenas). Subsection (b) supplements 1 Pa. Code § 35.142(b) and (c).
§ 17.7. Exhibits.
(a) Exhibits to be presented in connection with a hearing shall be submitted in five copies each at the time of the hearing unless otherwise directed by the Board.
(b) Documents that the Board, a party, petitioner or intervener expects to offer as exhibits may be presented to the Board's hearing examiner and all other parties of record in advance of a hearing. The documents are not evidence unless admitted into the record by the hearing examiner at the hearing. Presentation of documents to the other parties before a hearing is encouraged.
(c) Subsection (a) supersedes 1 Pa. Code § 33.15 (relating to number of copies).
Subchapter B. LICENSE APPLICATIONS § 17.13. Protests/intervention procedure.
(a) Form. A protest or petition to intervene must be substantially in the following form and contain:
(1) The identity of the protestant or petitioner—name, address and telephone number.
(2) The matter to which the protest or petition is addressed.
(3) A concise statement of the objections, including the legal basis for consideration as a valid protest, if applicable.
(4) In addition to the requirements in paragraphs (1)—(3), petitions to intervene must contain the following:
(i) A statement of the direct interest of the petitioner in the proceeding.
(ii) A description of how the petitioner will be aggrieved in the event of a Board decision contrary to the petitioner's direct interest.
(b) Time. A protest or petition to intervene shall be filed with the Board within 30 days of the posting of notice of application as required under Chapter 3, Subchapter B (relating to notice posting). The Board may accept an untimely filed protest or petition to intervene, but only upon good cause shown.
(c) Notice. A petition to intervene shall be served upon the applicant in compliance with 1 Pa. Code §§ 33.31—33.37 (relating to service of documents). With respect to a valid protest as determined by the Board, service upon a party is not required. The Board will notify the applicant of a valid protest if a hearing is convened.
(d) Action or petition to intervene. An answer to a petition to intervene or protest is not required.
(e) Hearings. When the Board orders a hearing, valid protestants and those who have been granted status as intervenors will be notified of the time and place of the hearing at least 10 days in advance of the hearing. The Board will render its decision based upon the record. Failure to appear or testify at the hearing may remove the reasons for protest or intervention from the Board's consideration.
(f) Limitation of participation in hearing. If the Board determines that two or more protestants or intervenors have substantially similar interests and positions, the Board may indicate the similarity of interests in the notice of hearing and direct that one or more persons testify as representative of the similar interests. Designated representatives shall advise the Board at the time of hearing. If no designation has been effected, the Board will select a representative protestant or intervenor, or permit all or a portion of the group to testify as time permits or as appropriate under the circumstances.
(g) Supersession. This section supersedes 1 Pa. Code §§ 35.23, 35.24, 35.27—35.32 and 35.35—35.41 (relating to protests; intervention; and answers).
[Pa.B. Doc. No. 10-389. Filed for public inspection March 5, 2010, 9:00 a.m.]
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