4 Pa. Code § 7.343 - Divestment of State Stores and initial private licensing

(a) The Council shall, by June 30, 1987, develop a plan to provide for the divestment of the State Store system by the Department of General Services and the issuance by the Department of Revenue of initial licenses for the private retail and wholesale distribution of liquor within this Commonwealth. The plan may include, but shall not be limited to, the following provisions.

(1) Auction of State Store assets. The Department of General Services shall, between July 1, 1987, and March 31, 1988, sell by auction to the highest qualified bidder the right to purchase, upon the cessation of their operations the inventory, tangible property and fixtures of each State Store. The Department shall establish a minimum bid for each auction equal to at least $10,000 more than the book value of the assets of any store plus the wholesale cost of anticipated surplus inventories at the time the State Store ceases operation. The Department shall guarantee to each bidder a minimum specified stock of surplus inventory. In order to be qualified to bid for the assets of State Stores, each bidder must agree to accept a license for the operation of a private retail wine and liquor store as provided by paragraph (2) of this subsection and to commence the operation of a private store pursuant to the conditions provided by this section.

(2) Issuance of private licenses. In order to maximize the proceeds of the auction of State Store assets and to facilitate the orderly transition to a private system for the retail sale of wine and liquor, the Department of Revenue shall issue to the successful bidder for the assets of each State Store a private license for the sale of wine and liquor for off the premises consumption within the service territory of each State liquor store. The privately licensed operations shall provide product availability, hours of operation and customer services at least equivalent to that offered by State Stores. Within areas of this Commonwealth defined as "urbanized" by the United States Census Bureau, the privately licensed establishments must operate within a one mile radius of the State Store replaced by the licensee, within portions of communities defined by the Census Bureau as "Standard Metropolitan Statistical Areas" and which are not classified as "urbanized" the privately licensed establishment must be located within a four mile radius of the State Store and in other areas the privately licensed establishment must be within a ten mile radius. The licensee shall commence full commercial operations within 90 days of the issuance of a license pursuant to this paragraph.

(3) Termination of State Store operations. The Department of General Services shall develop a plan for the disposition of the State Store system which provides for the continued operation of each State-owned liquor store for up to 90 days following the auction of the right to purchase the property of the store. The Department shall further provide for the continued operation of liquor wholesale distribution for a maximum period of twelve months to the extent necessary to provide an adequate supply of consumer products and services during the phase-in of operations of private retail outlets and wholesale distributors. Each State-owned liquor store may remain in operation for not more than 45 days, but not later than June 30, 1988, following the opening of the substitute privately licensed wine and liquor store in order to assure adequate continuity of services to the public. Upon the termination of operations of any State Store, its property, fixtures and surplus inventory shall be sold to the successful bidder upon the terms of the winning bid at the auction provided by paragraph (1) of this subsection.

(4) Wholesale licenses. Effective July 1, 1987, the Department of Revenue shall provide for the issuance of licenses to all liquor importers, distilleries and wineries licensed by the Board and to other applicants qualified pursuant to thelaws preserved by § 7.346 (relating to terminated statutory functions and duties of the Board) for sales to the Department of General Services, for private wholesale liquor distribution to supply the private retail liquor stores to be licensed pursuant to subsection (a)(2) of this section and to all retail liquor licensees.

(5) Disposition of other property. On or prior to July 1, 1988, the Department of General Services shall dispose of all of the inventory, tangible property, fixtures and other assets of the liquor wholesale distribution system and any other remaining property previously held by the Board pursuant to the provisions of section 2405 of The Administrative Code of 1929 (71 P. S. § 635) (relating to the sale of unserviceable property).

(b) Applicants for licenses issued pursuant to subsection (a)(2) of this section for private retail wine and liquor stores shall be qualified to participate in the auction provided by subsection (a)(1) of this section only upon a demonstration that the applicants meet the following qualifications:

(1) Financial interests. The names and addresses of all parties with any direct or indirect legal or equitable ownership interest in the operations of the licensed establishment proposed to be operated by the applicant shall be listed in the license application including all interested individuals, general or limited partners, all stockholders of any closed corporation and all stockholders owning five percent or more of the voting stock of a public corporation. As provided by section 404 of the Liquor Code (47 P. S. § 4-404), parties not listed in a license application or amendment thereof shall not have any ownership interest in a licensed business.

(2) Interlocking interests. Neither the applicant nor any party with a direct or indirect legal or equitable ownership interest in the operations of the licensed establishment proposed to be operated by the applicant shall be a licensed distributor, importing distributor, importer, distiller, winery, limited winery, manufacturer, retail liquor licensee, retail dispenser or hold, directly or indirectly, more than two other licenses issued pursuant to subsection (a)(2) of this section.

(3) Criminal history. Applicants and all parties with any direct or indirect interests in the operation of licensed establishments proposed to be operated by the applicant shall be of good repute and shall demonstrate satisfactory compliance with the laws of this Commonwealth and other jurisdictions as evidenced by a detailed criminal history evaluation conducted by the State Police and the Federal Bureau of Investigation. No license shall be granted to any applicant if any person with a direct or indirect ownership interest in the activities of the applicant has been convicted of any crime involving fraud, moral turpitude or racketeering or within a period of five years immediately preceding the date of any application has been convicted of any felony.

(4) Financial responsibility. Applicants shall post bonds, cash, negotiable securities or letters of credit equal to the minimum bidding price established by the Department and shall further post bonds to assure compliance with the provisions of this order in the amount of $25,000, or at a greater amount if determined to be necessary by the Department of Revenue, for each place at which the licensee has applied to engage in business. Applicants shall demonstrate, by submitting audited financial statements, that they possess sufficient financial resources to operate a licensed establishment, pay all taxes due and owing to the Commonwealth and assume liability for the safe operation of the licensed premises. Bonds and letters of credit shall be posted and are subject to forfeiture for violations of this order in the same manner as provided by sections 465 and 466 of the Liquor Code (47 P. S. § § 4-465 and 4-466).

(5) Tax clearance certificates. All applicants shall file a certificate obtained from the Department of Revenue indicating whether the applicant has any current tax deficiencies due and owing the Commonwealth. No applicant shall be permitted to participate in the auction if the applicant has any tax assessments or deficiencies outstanding except for amounts subject to proper appeal.

(c) Licenses shall be issued pursuant to subsection (a)(2) of this section to successful bidders upon a demonstration that the licensee shall comply with the following terms and conditions and licenses shall be subject to suspension or revocation for any violations of the following requirements.

(1) Financial interests. Notice shall be given to the Department within 15 days of any change in financial interests as provided by subsection (b)(1).

(2) Criminal violations. Notice shall be given to the Department within 15 days of any criminal indictments or convictions as provided by subsection (b)(3) and the ownership interest of any parties subject to such convictions shall be totally divested by the licensee within 30 days of the date of any conviction, guilty plea or plea of nolo contendere.

(3) Financial responsibility. Licensees shall continue to maintain the bonding for the operation of a facility required by subsection (b)(3) of this section.

(4) Tax collection. Licensees shall collect and remit to the Department of Revenue the Emergency Liquor Tax as provided by the act of June 9, 1936 ( P. L. 13, No. 4, Ex. Sess.) (47 P. S. § § 794 and 795) and the Sales and Use Tax as provided by Article II of the Act of Tax Reform Code of 1971 (71 P. S. § § 7201-7282).

(5) Wholesale purchases. Licensees shall acquire wine and liquor exclusively from either the Board, the Department of General Services or wholesale licensees as authorized pursuant to subsection (a)(4) (relating to divestment of State Stores and initial private licensing) and shall keep a detailed log of all wholesale wine and liquor transactions.

(6) Interlocking businesses. Licensees, and all parties with any direct or indirect interests in the operation of licensed establishments, shall comply with the provisions of sections 411 and 443 of the Liquor Code (47 P. S. § § 4-411 and 4-443) and shall not have any direct or indirect interest in the activities of any distributor, importing distributor, importer, distiller, winery, manufacturer, retail liquor licensee, retail dispenser or more than three other licenses issued pursuant to subsection (a)(2) of this section.

(7) Inventory control. Licensees shall establish adequate security provisions to protect their inventory from unauthorized sale or diversion and prevent its unauthorized distribution.

(8) Hours of operation. Licensees shall limit their hours of operation in a manner to be determined by the Council.

(9) Sales to minors. Licensees shall establish procedures to ensure that sales of wine and liquor are not made to minors, intoxicated individuals or mentally ill or incompetent persons.

(10) On-premises consumption. No licensees shall permit the consumption of alcoholic beverages on the premises of the licensed establishment, except for the sampling or tasting of products as approved by the Council.

(11) Employes. Licensees shall comply with the provisions of section 493(13) of the Liquor Code (47 P. S. § 4-493) regarding the employment of minors in any capacity which involves the sale, handling or distribution of alcoholic beverages.

(12) Local regulations. Licensees shall operate only at locations for which they were authorized to conduct business and shall operate only at locations for which they have all required local approvals for their intended business activities including zoning approvals and business permits.

(13) Local option. No licensee shall make retail sales of wine and liquor in any municipality which has prohibited the operation of a State Store or prohibited the sale of malt or brewed beverages for off-premises consumption pursuant to section 472 of the Liquor Code (47 P. S. § 4-472).

(14) Related business activities. No licensee shall engage in any separate business activities upon any licensed premises without prior approval of the Department of Revenue.

(15) Sales of motor fuel. No license shall be issued for a place of business where the principal business will be the sale of liquid fuels or oil.

(16) Business locations. No license shall be granted if the proposed location to be licensed is within 300 feet of any church, hospital, charitable institution, school or public playground unless the activities of the licensee will not interfere with the operation of such church, hospital, charitable institution, school or public playground and no license shall be granted if the proposed business is located in any area which will be detrimental to the welfare, health, peace or morals of the inhabitants of the neighborhood within 500 feet of the place to be licensed.

(17) Amusement places. No licensee shall operate any theater, circus, museum or other place of amusement or any bowling alley, game room, video arcade or other recreational area or have any passageway or communication between a licensed premise and a place of amusement or recreation.

(18) Consumer services. Licensees may make deliveries, accept checks and credit cards and provide other consumer services except to the extent restricted by the Council.

(d) Licenses issued pursuant to subsection (a)(2) of this section shall be nontransferable prior to July 1, 1988. In the event the licensee ceases to conduct commercial operations or fails to provide the consumer service required by this order, the Department of Revenue shall revoke the license and as soon as practicable issue a replacement license. On or after July 1, 1988, such licenses shall be transferable, but only upon the prior approval of the Department to persons complying with the provisions of this order.

Notes

4 Pa. Code § 7.343

This section cited in 4 Pa. Code § 7.342 (relating to phase-out plan).