Liquor inventory, payment questions answered
By John Flynn, Bureau Chief
Liquor Licensing Bureau
I keep reading in the media how bad the business climate is and how long we as a state and nation may have to endure until there is a “decent” recovery. But in my workings with many members of the alcohol, tavern and restaurant industries, I hear the increased hum of activity coming back. Ah, the sweet signs of spring in Montana's weather and economy!
Still, many retailers are trying to find unique ways to grow those little seedling dollars while the summer economic sun has not quite arrived. While I applaud the entrepreneurial spirit, aggressive management, and innovative marketing, some practices are just a bit too far outside the box.
The following FAQs help to define acceptable practices for inventories and payments.
Can a beer wholesaler or table wine distributor deliver product to a retail licensee and bill them on a monthly basis?
No. Under Montana law, a retail licensee must pay for product within seven days of delivery (16-3-243 MCA). An extension or acceptance of credit longer than the seven days will be considered as giving or receiving financial assistance, which may be considered an undisclosed ownership violation as well as a seven-day credit limit violation.
A common version we have seen lately is when the retailer leaves the check for the wholesaler/distributor but post dates it or makes arrangements for it not to be cashed until well after the seven days. This is considered a violation.
If a retail license is transferred or foreclosed on, is the subsequent licensee responsible for the debt of the licensee under the seven-day credit limit?
Yes, the debt becomes the obligation of the new owner, and the beer wholesaler or table wine distributor cannot deliver product to the new owner until the debt is paid (ARM 42.13.109). Over the past year, we saw too many of these, an unfortunate sign of how hard the economy was on both the retail and the wholesaler/distributor sides.
A cautionary note to all parties is to be honest with each other. For the retailer, running up a large bill on the last delivery or two, then leaving it for the subsequent licensee will eventually come back to you. For the wholesaler/distributor, always pay attention to the signs of struggling retailers, which normally you have knowledge of long before your retailer even lets you know they are closing.
And resist the urge to aid the retailer who is leaving by taking a final large order knowing the incoming licensee will eventually have to pay you, so you can't lose. That tends to set a bad tone for a new relationship.
Please remember that under a violation of the seven-day credit limitation, the licenses of all parties involved-brewers, beer importers, wholesalers, and retail licensees-are subject to suspension or revocation.
Can a beer wholesaler or table wine distributor exchange or accept return of product?
Yes, if the reason constitutes an ordinary and usual commercial reason such as defective product, error in delivery, product unlawful to sell, termination of retail business or wholesale franchise, change in product, discontinued product by a manufacturer not by a retailer or seasonal business.
Claims such as overstocked product, slow moving product or seasonal products are not acceptable. Several retailers are placing their wholesalers and distributors in a tough spot by asking them to take back slow moving product under the claim that is either change in product mix or discontinued product. The claim of “change in product or discontinued product” is available only to manufacturers, wholesalers and distributors, not retailers.
Can a retailer sell product to another retailer? If a retailer owns more than one location can it transfer product to another location?
No in both cases.
Depending on the type of license, retailers may only acquire inventory from a licensed manufacturer, licensed wholesalers and distributors. We have seen situations in which retailers are behind on their payments to wholesalers and distributors, and choose to purchase beer and wine from large box retail stores or local grocery stores and convenience stores.
These actions lead not only to violations for the retailer, but strained relations between the retailer and the licensed wholesaler/distributor. My advice to retailers again is to be honest with your suppliers, and work with them sooner than later on your problems.
Also, please remember that liquor must be acquired only from an agency store, and that the law requires immediate revocation of the license if liquor comes onto the licensed premises from any other source.
As always, please feel free to contact us at the Liquor Control Division. We enjoy working with all of you – manufacturers, wholesalers and distributors, and retailers – to find solutions that make the industry go forward.
Call us at toll free at 1-866-859-2254 (444-6900 in Helena) with any questions.