As they’ve watched Virginia’s brewery and wine industries boom, craft distillers have begun to feel the state is unfairly harsh on businesses that make the stronger stuff.
In a General Assembly committee room Tuesday, the spirits industry, with the help of both Republican and Democratic backers, tried to methodically chip away at state regulations, asking a House of Delegates subcommittee to pass legislation letting distillers serve more alcohol to customers, open earlier on Sundays and build remote tasting rooms to expand their clientele.
But the biggest change in state law sought by the Virginia Distillers Association involves money, and distillery owners’ contention that they’re in a state of financial servitude to the Virginia Department of Alcoholic Beverage Control.
Unlike wineries and breweries, when distilleries sell bottles of their own products out of their tasting rooms, 54 percent of the markup profits goes to the ABC, the state monopoly that runs 370 liquor stores throughout the state.
“We need to be able to keep what should be ours,” said Christine Riggleman, the owner of Silverback Distillery in Nelson County and wife of former Republican candidate for governor Denver Riggleman.
“When they sell a $30 bottle of booze at the distillery, about half of that’s going to the state,” said Curtis Coleburn, a lobbyist for the distillers association who said breweries and wineries pay a dollar or less in taxes when they sell an equivalent amount of alcohol through their tasting rooms.
Riggleman and her daughter, Abby, led the charge for reforms at Tuesday’s hearing in a House General Laws subcommittee hearing. Riggleman said her husband, who dubbed his 2016 campaign for governor the “whiskey rebellion” and dropped out of the GOP primary in March, was away on travel.
Though several other pro-distiller proposals died in the subcommittee, a bill to let distilleries keep the profits on their own bottle sales passed on an 8-0 vote, prompting the bill’s sponsor, Del. Nick Freitas, R-Culpeper, to jokingly thank the panel for supporting his “booze equality bill.”
But because the policy change could cost the state millions in revenue, it also will need a green light from the House Appropriations Committee before it can get to the floor for a full vote.
At the hearing, ABC Chief Operating Officer Travis Hill said the bill would cost his agency an estimated $1.7 million in fiscal year 2019 and $2.3 million in fiscal 2020.
“I’m not here to oppose policy,” Hill told the subcommittee. “I think what I’m here to say is we have concerns over the revenue impacts.”
According to a recent ABC presentation, Virginia has 352 wineries, 262 breweries and 62 distilleries. All three categories have seen major growth as new businesses continue to pop up.
However, the loosening of state alcohol laws that helped fuel that growth has drawn the ire of restaurant owners. The restaurant industry has tried to fight the rise of tasting rooms that operate like bars without being subject to the ABC rules that force restaurants to make at least 45 percent of their gross sales from food and nonalcoholic drinks.
Thomas A. Lisk, a lobbyist for the Virginia Restaurant, Lodging and Travel Association, said his organization didn’t oppose Freitas’ bill to let distilleries reap the benefits from their own bottle sales. But if they’re buying bottles from the ABC to make cocktails in their tasting rooms, the distilleries should be paying the same price as restaurants, Lisk said.
A separate bill filed by Del. Matt Fariss, R-Campbell, would have lifted restrictions on how much alcohol distilleries could serve in tasting rooms, striking a rule that says no person can be served 3 ounces of spirits, or two shots, in one day. Fariss’ bill also would have upped the amount of liquor distilleries could put into mixed drinks from 1½ ounces to 2 ounces.
Del. Barry Knight, R-Chesapeake, cautioned that lawmakers set those limits because the state didn’t want to send a signal that it’s OK with distillery customers imbibing to the point of being drunk.
Fariss asked if there were any “heavy drinkers” among the group that set the existing limits.
“If you want it to burn, that’s your choice,” Fariss said. “We’d like for you to have a stiff drink versus a little fruity tasty drink.”
Lisk said the restaurant association strongly opposed loosening the drink rules.
“We’re now getting beyond the distillers serving samples,” Lisk said. “We’re getting to the point where the distillery is going to be a bar.”
Fariss’ legislation and a bill allowing distilleries one remote store/tasting room died for lack of a motion.
A pro-distillery bill filed by Del. Kathleen Murphy, D-Fairfax, that would have let tasting room bottle sales begin at 10 a.m. on Sundays instead of at noon also failed in the subcommittee. When that bill was being discussed, a representative for the Distilled Spirits Council of the United States suggested normal ABC stores should also open early on Sundays to be fair to “larger manufacturers.”
Sen. Bryce Reeves, R-Spotsylvania, has filed four bills in the Senate to relax distillery regulations, but they have yet to be heard in committee.
Christine Riggleman, who opened Silverback in 2015 and announced an expansion to more distillery-friendly Pennsylvania last summer, said that even though all the bills didn’t pass, the legislation ending her tasting room’s status as a mini-ABC store would be enough to keep the business in Virginia. Without it, she said, “we can’t grow.”
“We’re just sustaining,” she said.