ASSEMBLY BUDGET COMMITTEE

STATEMENT TO

ASSEMBLY, No. 4436

STATE OF NEW JERSEY

DATED: JANUARY 5, 2012

      The Assembly Budget Committee reports favorably Assembly Bill No. 4436.

      This bill makes various changes to the statutes governing the sale and distribution of products by New Jersey wineries and creates a new out-of-State winery license governing New Jersey direct sales by wineries licensed in other states.

      Under the bill, plenary wineries that produce a maximum of 250,000 gallons per year and farm wineries will be permitted to directly sell their products to licensed retailers after paying a fee.  The maximum production of 250,000 gallons per year is based on the federal Internal Revenue Code’s definition of a small producer of wine.  The bill requires plenary wineries to pay a graduated fee ranging from $100 to $1,000 based on the winery’s annual production; farm wineries will pay a fee of $100.  All plenary and farm wineries will continue to be able to sell their products to licensed wholesalers.

      The bill permits plenary wineries that produce a maximum of 250,000 gallons per year and farm wineries to sell products at retail at 18 sales rooms but eliminates the provision in current law that permits them to open joint sales rooms with other plenary wineries or farm wineries.  Under current law, all plenary and farm wineries may operate six individual sales rooms and jointly operate twenty-one sales rooms.  Additionally, the bill permits plenary wineries that produce a maximum of 250,000 gallons per year and farm wineries to directly ship up to 12 cases of wine to any person over the age of 21 in New Jersey or any other state for personal consumption and not for resale.  The bill specifies that a case of wine may not exceed nine liters.  The bill requires a winery to retain the original invoices for any wine shipped for at least three years on the winery premises for inspection by the State.

      The bill also creates an out-of-State winery license which may be issued to wineries, licensed in other states, that produce a maximum of 250,000 gallons of wine per year.  The bill permits a licensee to sell its products to wholesalers and retailers and at retail in 19 salesrooms apart from the winery premises, for consumption on or off the premises, at a fee of $250 for each salesroom.  The bill allows a licensee to ship up to 12 cases of wine per year to any person in this State over the age of 21 for personal consumption and not for resale.  The bill specifies that a case of wine may not exceed nine liters.  The bill sets the annual fee for the out-of-State winery license at $938, which is the same fee paid by plenary wineries.  The bill provides for the collection of all applicable State taxes for sales made by the holders of out-of-State winery licenses.

      The bill clarifies that the holders of the new out-of-State winery license, like all other license holders, are subject to the “State Uniform Tax Procedure Law,” R.S.54:48-1 et seq., including the tax clearance and licensing provisions of section 5 of P.L.2004, c.58 (C.54:50-26.3).

FISCAL IMPACT:

      The Office of Legislative Services notes that this bill has an indeterminate fiscal impact on the State, as revenue from various taxes and fees are unknown.  Revenue might be gained from: 1) taxes related to additional sales of New Jersey wine by licensed New Jersey wineries to out-of-State buyers; 2) the purchase of licenses by eligible out-of-State wineries; and 3) taxes from the out-of-State wine being shipped to individuals in New Jersey.  The additional State costs of enforcing tax compliance are also unknown.