alcoholic beverage control division - kansas legislature · 2017. 1. 17. · abc mission the...

Alcoholic Beverage Control Division Legislative Briefing

Debbi Beavers, Interim Director

January 17, 2017 Email: [email protected] | Phone: 785-368-6290

mailto:[email protected]

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ABC Mission The Alcoholic Beverage Control (ABC) Division’s mission is to promote, serve and protect the health, safety and welfare of Kansans by regulating the liquor industry and enforcing the liquor, tobacco and other laws administered by the Kansas Department of Revenue (KDOR). ABC Priorities/Initiatives In order to administer and enforce liquor laws in the most efficient, effective and responsive manner, the ABC Division is driven to: 1. Make it as easy as possible for liquor licensees to comply with liquor laws.

A. Enforcement agents are delivering new licenses and educating new business owners/managers on how to comply with liquor laws, sharing best practices and answering questions. This promotes a sense of partnership between licensees and ABC. 84% of all new licenses in FY 16 were delivered by the agent. Owners/managers received personalized education at the time of license delivery.

B. To assist licensees in becoming and remaining compliant with liquor laws, ABC provides an easily navigated website with online references licensees may access. Included on our website are:

a. Handbooks for each license type, with the goal of sharing information, statutory requirements and expectations in plain language

b. Statutes and regulations c. Industry forms d. Links to our online systems for licensing, payments and label registration

C. Improve interactions with liquor licensees and ABC stakeholders via social media through the ABC Facebook page.

D. Conduct routine meetings with liquor industry representatives and perform on-premise visits by ABC management to help create and maintain industry understanding, open communication lines and promote transparency.

2. Maintain and improve compliance with statutes and regulations. Enforcement related activities are generally being re-allocated with an emphasis on changing the behavior of repeat violators. Follow-up compliance visits are being conducted with the goal of reducing the rate of recidivism.

ABC is placing a greater emphasis on customer service, educating licensees and support when lesser alleged offenses are discovered. Public One Stop Service Engine (POSSE) ABC System Update In late 2014, ABC successfully implemented a new computer system. Licensees are using the online portal to apply for new licenses, renew their existing licenses and pay online fees or fines via credit/debit card or electronic check. Licensees can also monitor their accounts and the status of their applications through the portal. The user-friendly system guides applicants through the process, reducing errors and making the process much more efficient. Online applications for CY16 superseded paper applications by 14%. ABC is pleased with the online system’s 57% adoption rate for 2016 applications.

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Licensee Surveys The ABC is focused on providing excellent customer service and making it as easy as possible for licensees to comply with liquor laws. We are also concerned with the overall perception of the Division. To measure our effectiveness, each month three anonymous surveys (administered via Survey Monkey) are emailed as follows:

• New Licensee Survey. Sent to all new licensees who provide an email address. Focus is on the licensing experience, license delivery and education provided by their local enforcement agent.

• Existing Licensee Survey. Sent to randomly selected existing licensees focusing on customer service, agency services and ease of compliance with liquor laws.

• Enforcement Related Survey. Sent to randomly selected existing licenses focusing on ABC regulation of the industry and maintaining a level playing field for licensees.

On an annual basis, ABC surveys approximately 42% of licensees. Permit holders are excluded from the surveys. Customer Satisfaction

95%

96%

97%

98%

2013 2014 2015 2016

97%

98%

97%

96%

Posi

tive

Resp

onse

s

New Licensees pleased with ABC Customer Service

84%

86%

88%

90%

92%

2013 2014 2015 2016

87%

91% 91%92%

Posi

tive

Resp

onse

s

Existing Licensees pleased with ABC Customer Service

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Division Service

Enforcement Related Questions

80%

85%

90%

95%

2013 2014 2015 2016

85%

89%87%

92%

Post

ive

Resp

onse

s

Existing Licensees agreeing

Quality of service has improved over the last 2 or 3 years

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016

88% 93% 90% 86%

Posi

tive

Resp

onse

s


ABC ensures licensees who fail to comply with liquor laws do not get a competitive advantage over complying licensees

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016

79%95% 91% 92%

Posi

tive

Resp

onse

s


Licensees who violate liquor laws are held accountable

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2016 Legislative Changes The 2016 Legislature passed Senate Bill 326 which amends the liquor control act. The bill contained the following changes effective July 1, 2016. Microbrewery Licensees

• A microbrewery may produce up to 60,000 barrels of domestic beer per calendar year. If the licensee holds a 10% or greater ownership interest in one or more entities that also holds a microbrewery license, the total number of barrels manufactured by all licensees is limited to 60,000 barrels per calendar year.

• Microbrewery licensees who have 10% or more common ownership may also transfer their beer for sale or storage among licensees.

• A microbrewery whose premise is also licensed as a club or drinking establishment can sell and transfer their beer to the club or drinking establishment.

Residency Term • Applicants for a farm winery, microbrewery or microdistillery must be a Kansas resident,

removing the requirement to be a resident of Kansas for one year. Hard Cider – Effective January 1, 2017

• A definition of hard cider is added. The definition of wine is amended to clarify that hard cider is a subset of wine.

• A microbrewery will also be able to manufacture up to 100,000 gallons of hard cider per calendar year provided they obtain a permit and qualify for an alternating premise with the Alcohol and Tobacco Tax and Trade Bureau (TTB). If the licensee holds a 10% or greater ownership interest in one or more entities that also holds a microbrewery license, the total number of gallons manufactured by all licensees is limited to 100,000 gallons per calendar year.

• A microbrewery must use at least 30% of Kansas agricultural products when manufacturing hard cider.

• A microbrewery can transfer hard cider to their packaging and warehousing facility.

0%

20%

40%

60%

80%

100%

2013 2014 2015 2016

76%

85% 83% 84%

Posi

tive

Resp

onse

s


Penalties are fair, effective and reasonable

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Organizational Units ABC is a standalone division within the KDOR funded through the vehicle operating fund. The following illustration is a breakdown of current personnel.

Unit FTE Management 3 Assistant Attorney General 1 Administrative Staff/LAA (Legal) 7.5 Licensing 9 Enforcement 17 Tobacco 12* TOTAL 49.5

*Effective January 1, 2017 the Cigarette and Tobacco Enforcement (CATE) unit was relocated from the ABC Division to the Division of Taxation within KDOR in an effort to consolidate cigarette and tobacco enforcement with the emerging Master Settlement Agreement (MSA) team. Licensing There are currently 5,069 active liquor licenses and permits. The following is a summary by type for CY2014 through 2017:

License Type 2014 2015 2016 2017 Retail Liquor Stores 752 753 769 759 Class "A" Clubs 264 252 244 233 Class "B" Clubs 101 78 83 67 Public Venues 5 5 5 5 Drinking Establishments 1788 1797 1827 1898 Caterers 192 193 182 214 Beer Distributors 35 35 34 36 Spirits Distributors 26 28 38 33 Wine Distributors 37 41 40 39 Microbreweries (MB) 25 23 33 39 MB Packaging & Warehousing Facility 1 1 0 1 Microdistilleries 3 4 4 8 Non-Beverage User 11 11 14 14 Farm Wineries 33 36 37 41 Farm Winery Outlets 10 8 8 11 Farmers' Market Sales Permit 6 6 9 6 Special Order Shipping 478 513 556 594 Packaging & Warehousing Facility 1 1 1 1 Manufacturers 4 2 3 4 Supplier Permits 871 934 1004 1066 Vineyard Permits 0 0

TOTAL 4643 4721 4891 5069 Note: Temporary liquor permits have been removed from the above chart and are addressed below. Licensee density maps are attached.

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Cereal Malt Beverage (3.2% beer) licensing Cereal Malt Beverage (CMB) retailers are licensed and regulated by the cities and counties. The attached maps show the number of CMB retailers reported to the ABC for calendar year 2016. The locally issued CMB license allows the business to sell cereal malt beverages and flavored malt beverages (FMB) containing 3.2 percent alcohol by weight or less. Gallonage Tax The ABC Licensing Unit is responsible for collecting gallonage taxes while the Miscellaneous Tax Segment, which is part of the Division of Taxation, is responsible for collecting liquor enforcement and liquor drink taxes. The following liquor related taxes were collected during FY 2013- FY 2016.

Gallonage Tax Rates per Gallon:

Alcohol/Spirits $2.50 Fortified Wine $0.75 Beer, CMB and FMB $0.18 Light Wine $0.30

Liquor Tax Revenue:

Tax Type

FY 2013

FY 2014

FY 2015

FY 2016

Gallonage – Alcohol and Spirits* $11,067,034 $10,225,181 $10,498,059 $10,692,777 Gallonage - Beer $7,426,081 $8,060,582 $8,149,230 $8,326,418 Gallonage - CMB $1,855,093 $1,685,221 $1,566,165 $1,409,987 Gallonage - Wine $1,568,866 $1,818,040 $1,721,203 $1,763,212 Liquor Enforcement (8%tax) $60,511,555 $64,538,260 $68,505,242 $67,754,222 Liquor Drink (10% tax)** $39,208,693 $40,619,417 $42,149,374 $43,792,301

TOTAL TAX REVENUE $121,637,322 $126,946,701 $132,589,273 $133,738,917

* 10% of Gallonage Tax on alcohol and spirits goes to KDADS Community Alcoholism and Intoxication Program and 90% to the state general fund. ** 70% of Liquor Drink Tax goes to Local Alcoholic Liquor fund; 5% goes to the KDADS Community Alcoholism and Intoxication Program; and, 25% to the

state general fund.

0

100

200

300

400

500

600

FY 11 FY 12 FY 13 FY 14 FY 15 FY 16

300

460 446480 473

566

Temporary PermitsTrend

Temporary liquor permits have been steadily increasing over the past few years as indicated in the graphic to the right. Temporary liquor permits are $25 per day.

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Revenue Collected by ABC for FY 2013 - FY 2016:

Revenue Source FY 2013

FY 2014

FY 2015

FY 2016

Liquor License, Registration and Permit fees $2,199,635 $2,077,790 $2,322,678 $3,587,352 Label fees $934,635 $546,013 $1,008,480 $1,183,855 Cereal Malt Beverage Retail Stamps $92,605 $78,425 $84,210 $78,975 Gallonage Tax $21,917,074 $22,021,757 $21,934,870 $22,192,394 ABC Liquor Fines $488,891 $605,595 $471,153 $224,433

Total Liquor Revenue Collected $25,632,840 $25,329,580 $25,821,391 $27,267,009

Liquor license and permit fees range from $2 - $10,000 and are deposited in the State General Fund with the exception of 50% of on-premise licenses fees. Liquor Enforcement The Enforcement Unit provides investigative services necessary for the Division to effectively enforce the liquor laws. There are currently 17 enforcement agent positions commanded by a Chief Enforcement Officer. Enforcement agents are certified law enforcement officers. They conduct criminal and administrative investigations when necessary and appropriate. Agents: Perform background investigations relating to liquor license applications to ensure the

applicant meets ownership requirements Conduct educational visits with new licensees to ensure new owners know how to stay

in compliance with liquor laws Provide training to licensees, local law enforcement officers, Regional Prevention

Centers (RPC) and other interested coalitions Conduct hidden ownership investigations when there is reason to believe the licensee on

record is not the true owner and could be fronting illegal activities Conduct underage enforcement activities including controlled-buy investigations, bar

checks, and furnisher checks Perform private club membership checks Investigate industry complaints Conduct regular compliance inspections Lead or participate in joint enforcement operations with local law enforcement agencies

focusing on issues relating to public safety including underage laws, over-service and source investigations

Enforce the tax on illegal drugs on behalf of the Director of Taxation Enforcement agents work closely with local, state and federal law enforcement agencies as well as local, regional and state public safety coalitions. Investigations resulting in alleged criminal violations are presented to the County or District Attorney for possible criminal prosecution against the individual suspect and/or the ABC Assistant Attorney General (AAG) for potential administrative action against the license.

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Below is a KDOR press release regarding a recent intensive investigation by ABC enforcement agents. Kansas ABC agents arrest James "Jimmy" A. Hall in Wichita after a multistate investigation Oct. 25, 2016 TOPEKA – Late on Friday, Oct. 21, Kansas Alcoholic Beverage Control agents arrested James “Jimmy” A. Hall in Wichita after a multistate, ongoing investigation into Jayhawk Beverage Distributors. Alcoholic Beverage Control charged Hall with forgery, identity theft, making false information, obtaining an ABC license by fraud and the purchase and sales and distribution of alcoholic liquor without a license. He was booked into the Sedgwick County Jail. The operation targeted a warehouse location for Jayhawk Beverage Distributors in the 8600 block of East 37th Street, Wichita. Originally based in Pittsburg, Kan., the company had moved to Wichita. ABC agents recovered approximately $70,000 worth of contraband and evidence at the scene. As part of the investigation, agents worked in conjunction with law enforcement agencies from Kansas, California and Florida. Law enforcement agents or people with additional information for the investigation into Hall or the distribution company should contact the Kansas Department of Revenue or the Division of Alcoholic Beverage Control. Enforcement Activities for FY 2013 to FY2016:

Activity Performed

FY 2013

FY 2014

FY 2015

FY 2016

SALES TO MINORS Random Controlled Buys (RCB) Performed 538 479 421 346 Violations 93 74 67 50 Compliance Rate 83% 85% 84% 85% Recidivism - RCB Performed 83 87 58 54 Compliance Rate 88% 86% 90% 83%

Inspections 2796 1889 2364 2308 New License Delivery – Educational visits 384 405 424 405 Other Liquor Investigations 1289 1277 1415 1416

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Licensee Administrative Action The Licensee Administrative Actions (LAA) Unit is staffed by an Assistant Attorney General (AAG) assigned to the ABC, a legal assistant and one administrative specialist. The AAG reviews cases presented by enforcement agents and local law enforcement agencies to determine the appropriateness of the charges and administratively prosecutes violations of the liquor laws before the Director. Following are the number of liquor citations and tax orders issued for FY 2013 through FY 2016 and the total fines collected for those years:

Activity FY 2013

FY 2014

FY 2015

FY 2016

CITATIONS Liquor Law Violations 435 318 338 295

Tax Orders 220 245 327 50*

Total Liquor Citations Issued 655 563 665 345

FINES Liquor Law Violations $304,580 $411,090 $171,100 $151,800

Tax Orders $185,311 $194,505 $297,202 $ 73,091*

Total Liquor Fines Collected $489,891 $605,595 $468,302 $224,891 *Referrals for tax violators have not been sent to ABC consistently resulting in a decrease in tax orders and fines collected. Administration The ABC currently has one administrative assistant who performs general staff support. Other administrative duties (such as budget preparation and maintenance, personnel record keeping, management of equipment, records and systems) have been redistributed to remaining office personnel. Drug Tax Enforcement ABC agents enforce the tax on illegal drugs across the state. Agents issue drug tax assessments and execute tax warrants, seizing property from drug dealers to satisfy the drug tax debt. Drug taxes collected are distributed as follows: 75% to the local law enforcement agency that conducted the drug investigation and the remaining 25% is deposited into the state general fund. Drug Tax Collections

Activity FY 2013

FY 2014

FY 2015

FY 2016

No. of Assessments 466 312 288 126

Collected $1,280,399 $1,452,241 $1,037,492 $ 898,157

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Cigarette and Tobacco Enforcement (CATE) The compliance rate for tobacco sales to minors dropped to 62% in 2005 - well below the federally required 80% rate. At that time, the state had to decide between taking a $5.4M reduction in prevention and treatment block grant funds or pay a $2.2M penalty to be used to raise the compliance rate. The Kansas Department for Aging and Disability Services (KDADS) entered into an Interagency Agreement with KDOR/ABC to create the CATE Unit. The CATE Unit began in July 2007 and is partially funded annually through KDADS. The objective of the CATE Unit is to ensure compliance with the Synar Amendment and protect federal block grant funds received by KDADS by strengthening enforcement of the cigarette and tobacco laws. It also enhances the KDOR effort to enforce the Cigarette and Tobacco Products Act, the requirements for the sale of cigarettes, and any amendments or regulations adopted thereunder. Additionally, CATE conducts the compliance checks under the Synar Amendment and contracts with the Federal Food and Drug Administration (FDA) to conduct tobacco inspections. The CATE Unit consists of 9 statewide inspectors partially funded by the FDA, one half-time attorney, two administrative positions (one funded by the FDA and one funded through KDADS) and a program coordinator position. State of Kansas CATE Responsibilities: CATE inspectors perform statewide cigarette and tobacco enforcement activities aimed at reducing sales of cigarette and tobacco products to minors. These activities include controlled-buy investigations at all youth accessible retail licensee locations. Follow-up enforcement revisits and inspections are made at locations that have sold to a minor. Outcomes for CATE enforcement activities for FY 2013 – FY 2016 are:

Inspections FY 2013 FY 2014 FY 2015 FY 2016

Number Performed 2750 2860 2883 855 Violations 144 85 64 26 Compliance Rate 95% 97% 99% 97%

Sales to Minors FY 2013 FY 2014 FY 2015 FY 2016

Other Controlled Buys Performed 3107 2979 3022 2232 Violations 144 158 250 168 Compliance Rate 95% 97% 92% 92%

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Synar Responsibilities: CATE inspector responsibilities include conducting controlled-buy investigations required under the federal Synar amendment. Under Synar, the state must maintain a minimum compliance rate of 80% for sales of cigarettes to minors or risk losing a portion of the federal block grant monies allocated to Kansas for substance abuse programs.

Food and Drug Administration (FDA) Responsibilities: In 2010 KDOR was awarded a contract with the FDA to conduct, on their behalf, tobacco inspections of retail locations for compliance of FDA regulations pertaining to the advertising and sale of tobacco products to youth. This is an annual contract currently with renewal options through FFY2017. The FDA contract allowed expansion of the CATE Unit to perform the obligations of the contract. It also funds the administrative position and partially funds the program coordinator.

Activity FFY 2013 FFY 2014 FFY 2015 FFY 2016 Attempted Buys 131 364 443 461 Sales Made 7 37 40 33 Compliance Rate 94% 88% 91% 93%

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2017 Map Attachments: 1. Retailer Licenses 2. On-Premise Licensees 3. Liquor-by-the-Drink (Wet/Dry Counties) 4. Dry Cities (No Retail Sales) 5. Distributor Licenses 6. Farm Winery and Outlet Licenses 7. Microbrewery Licenses 8. Microdistillery Licenses 9. Manufacturer Licenses 10. CMB Off-Premise Retailers – licensed & regulated by cities and counties 11. CMB On-Premise Retailers – licensed & regulated by cities and counties

Kansas Retailer Licenses

The data used for this mapwas derived from the

Kansas Department of Revenue,Alcoholic Beverage Control Division,

Liquor Licensing Database.

# of Counties # of Licenses Per County

(1) 0

(74) 1 - 5

(17) 6 - 10

(11) 11 - 99

(2) 100 - 120

Total: 761 Retailer Licenses

January 5, 2017

Kansas On-Premise Licenses





(7) 0

(64) 1 - 10

(16) 11 - 25

(13) 26 - 100

(5) 101 - 504

Total: 2,415 On-Premise Licenses

January 5, 2017

Kansas Liquor by the Drink Map(Wet and Dry Counties)

The data used for this map was submitted by

the Kansas county clerks.

# of Counties

(66) 30% food sales requirement

(33) No food sales requirement

(6) No liquor by the drink

Total: 105January 5, 2017

Kansas Map of Dry Cities(No Retail Liquor Store Sales)

The data used for this mapwas submitted

by the Kansas city clerks.

Name of the City, CountyMoundridge (McPherson County)

Parkerfield (Cowley County)

Hesston, North Newton (Harvey County)

Nickerson (Reno County)

Total: 5 Dry CitiesJanuary 5, 2017

Kansas Distributor Licenses





(11) 1 - 5

(5) 6 - 10

(2) 11 - 26

Total: 105 Distributor Licenses

January 5, 2017

Kansas Farm Winery and Outlet Licenses

The data used for this map was derived from the Kansas Department of Revenue, Alcoholic Beverage Control Division,

Liquor Licensing Database. For Dark Green counties, the left number represents Farm

Wineries and the right number represents Farm Winery Outlets.

# of Counties Counties with Wineries and Outlets

(18) Farm Wineries

(7) Farm Wineries and Farm Winery Outlets

(2) Farm Winery Outlets

Total: 41 Farm Winery Licenses11 Farm Winery Outlet Licenses

January 5, 2017

Kansas Microbrewery Licenses





(12) 1

(2) 2

(1) 3

(1) 4

(2) 5+

Total: 40 Microbrewery Licenses

January 5, 2017

Kansas Microdistillery Licenses





(6) 1

(1) 2

Total: 8 Microdistillery Licenses

January 5, 2017

Kansas Manufacturer Licenses





(2) 1

(1) 2

Total: 4 Manufacturer Licenses

January 5, 2017

Kansas Cereal Malt Beverage LicensesOff-Premise Retailers

The data used for this map was derived from the2016 Cereal Malt Beverage applications and stampreports received from the cities and counties by the

Alcoholic Beverage Control.

# of Counties # of Off-Premise Retailers Per County

(61) 1 - 10

(32) 11 - 25

(6) 26 - 50

(4) 51 - 200

Total: 1,641 CMB Off-Premise Retailers

January 5, 2017

Kansas Cereal Malt Beverage LicensesOn-Premise Retailers

The data used for this map was derived from the2016 Cereal Malt Beverage applications and stampreports received from the cities and counties by the

Alcoholic Beverage Control.

# of Counties # of On-Premise Retailers Per County

(2) 0

(64) 1 - 10

(30) 11 - 25

(6) 26 - 50

(3) 51 - 98

Total: 1,317 CMB On-Premise Retailers

January 5, 2017

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