TCA § 57-3-204 — Retailer's licenses — Fees — Disposition of alcoholic beverages after retailer ceases doing business — Sale by manufacturer and other entities. [Effective on July 1, 2021. See the version effective until July 1, 2021.]

For the retail sale of alcoholic spirituous beverages, including beer and malt beverages, as in this chapter defined, a license may be issued as herein provided. Any person, firm, or corporation desiring to sell alcoholic spirituous beverages, including beer and malt beverages, to patrons or customers, in sealed packages only, and not for consumption on the premises except for conducting tastings pursuant to § 57-3-404(h)(2), shall make application to the commission for a retailer's license, which application shall be in writing and verified, on forms herein authorized to be prescribed and furnished; and the commission may, subject to the restrictions of this chapter, issue such retailer's license. If the premises with respect to which the license is sought is owned by a person, firm or corporation not the applicant, the application shall include the name and address of the owner. If the ownership of the premises should change after a license is granted, the licensee shall, within ten (10) days after becoming aware of such change in ownership, notify the commission in writing of the name and address of the new owner. Each applicant for a retail license shall pay to the commission a one-time, nonrefundable fee in the amount of three hundred dollars ($300) when the application is submitted for review. A retailer's license under this section shall not be issued until the applicant shall have paid to the commission the annual license fee of eight hundred fifty dollars ($850). No retail license under this section may be issued to any individual: Who has not been a bona fide resident of this state during the two-year period immediately preceding the date upon which application is made to the commission or, with respect to renewal of any license issued pursuant to this section, who has not at any time been a resident of this state for at least ten (10) consecutive years; Who has been convicted of a felony under the laws of this state, any other state or the United States; Who has had a license related to the manufacture, sale or distribution of any form of alcoholic beverages revoked for cause; Who is not twenty-one (21) years of age or older; Who has an interest, whether direct or indirect, in a manufacturer, distiller, rectifier, liquor wholesaler, winery, distributor, retail food store or farm winery selling alcoholic beverages that is licensed in this state, except that the spouse of an applicant for a retail license may own and hold a farm wine permit if the spouse does not hold a retailer's license issued under this section; Who, other than as a member of the governing body of a city or county, appoints or supervises any law enforcement officer, who is a law enforcement official or who is an employee of the commission; Who intends to carry on the business authorized by the license as the agent or on behalf of another; Who at the time of the time of application for renewal of any license issued under this section would not be eligible for the license upon a first application; Who is the holder of a valid existing license issued for the sale of wine in a retail food store under § 57-3-803, and amendments thereto; Who does not own the premises for which a license is sought, or does not, at the time of application, have a written and enforceable lease thereon; Whose spouse would be ineligible to receive a license under this section for any reason other than citizenship, residence requirements or age, except that this subdivision (b)(2)(K) shall not apply in determining eligibility for a renewal license; and Whose spouse has been convicted of a felony or other crime that would disqualify a person from licensure under this section and such felony or other crime was committed during the time that the spouse held a license under this section. The commission may, in its discretion, issue such a retail license to a corporation; provided, that no such license shall be issued to any corporation unless such corporation meets the following requirements: No retail license shall be issued to any corporation if any officer, director or stockholder owning any capital stock in the corporation, would be ineligible to receive a retailer's license for any reason specified in subdivision (b)(2), if application for such retail license had been made by the officer, director or stockholder in their individual capacity; All of its capital stock must be owned by individuals who are residents of this state and either have been residents of the state for the two (2) years immediately preceding the date application is made to the commission or, with respect to renewal of any license issued pursuant to this section, who has at any time been a resident of this state for at least ten (10) consecutive years; No person owning stock in such corporation shall have any interest as partner or otherwise, either direct or indirect, in any business licensed to engage in the distribution of liquor, spirits, wine or high alcohol content beer in Tennessee; and No stock of any corporation licensed under this section shall be transferred to any person who is not a resident of this state and either has not been a resident of the state for at least two (2) years next preceding or who at any time has not been a resident of this state for at least ten (10) consecutive years. It is the intent of the general assembly to distinguish between licenses authorized generally under this title and those specifically authorized under this section. Because licenses granted under this section include the retail sale of liquor, spirits and high alcohol content beer which contain a higher alcohol content than those contained in wine or beer, as defined in § 57-5-101(b), it is in the interest of this state to maintain a higher degree of oversight, control and accountability for individuals involved in the ownership, management and control of licensed retail premises. For these reasons, it is in the best interest of the health, safety and welfare of this state to require all licensees to be residents of this state as provided herein and the commission is authorized and instructed to prescribe such inspection, reporting and educational programs as it shall deem necessary or appropriate to ensure that the laws, rules and regulations governing such licensees are observed. If a retail licensee ceases to do business through the voluntary or involuntary loss of the licensee's license, or if a person not licensed under this chapter obtains title to alcoholic beverages of a retail licensee as a result of a defaulted loan or execution, the wholesaler who sold the alcoholic beverages to the retailer shall purchase such alcoholic beverages from the retailer at a base price of the wholesalers' laid-in cost of such alcoholic beverage. A wholesaler shall be permitted an offset or charge against such payment for any outstanding obligation owed to the wholesaler by such licensee or for reasonable labor, restocking and transportation charges. Any licensee objecting to the reasonableness of the offset or charge may petition the commission to review such, and shall designate the wholesaler as a respondent. The commission shall conduct a contested case hearing pursuant to the Uniform Administrative Procedure Act, compiled in title 4, chapter 5, part 3, to consider the objection. The obligation imposed on a wholesaler under this section does not apply to any product which: Is damaged or cannot be legally sold in this state; Is not sold to a retailer within one hundred eighty (180) days of demand for repayment; The wholesaler from whom the product was purchased is not the designated distributor pursuant to § 57-3-301, at the time demand is made; Product contains a price tag not readily removable; or Is sold in a commemorative bottle, seasonal decanter or other novelty container. Notwithstanding § 57-3-406(b), if a retail licensee is not in debt to a wholesaler for any credit law violations or refused check and provides a thirty-day irrevocable notice of surrender to the commission prior to the termination of the license, the licensee shall be able to sell any unopened bottle inventory to any customer below the cost paid by the retailer to purchase the alcoholic beverages from the wholesaler so long as the price is not lower than ten percent (10%) of such purchase price. A retail licensee selling a product in accordance with this section shall not subsequently purchase that product from the wholesaler prior to termination of the license. A retail licensee unable to sell product in accordance with this subdivision (c)(4) shall be able to keep the remaining product for personal use. A manufacturer licensed under § 57-3-202, or under chapter 2 of this title, is authorized to obtain a license under this section for the retail sale of alcoholic beverages or products containing alcohol subject to the further restrictions of this subsection (d). A manufacturer seeking to obtain a retail license under this subsection (d) shall apply to the commission on such forms as the commission may prescribe. A retail license issued under this subsection (d) may be located only on the licensed premises of the manufacturers and may be located on such premises whether or not such premises is located in a jurisdiction which has authorized retail sale of alcoholic beverages pursuant to § 57-3-106. A manufacturer licensed to sell at retail at its retail location under this subsection (d) may sell only such products as are manufactured on the manufacturer's premises; provided, that at such retail location no more than five gallons (5 gal.) or one sixth (1/6) of a barrel of its products may be sold to any one (1) individual per visit to the premises. A retail license issued under this subsection (d) may be issued to a manufacturer, regardless of the residency or domicile of the manufacturer, notwithstanding the requirements imposed by subsection (b). Notwithstanding any other law to the contrary, a retail licensee, held by a manufacturer or distiller, may serve samples of the product manufactured or distilled at the premises to any person of legal drinking age without cost or may include such samples as part of a tour of the manufacturer's or distiller's premises available to the public with or without cost. Such samples may be made available at either the premises of the retailer or at such other location on the premises of the manufacturer or distiller holding such retail license which other location has been disclosed to the commission and may be any location on the premises permitted by federal law. If the retail license under this subsection (d) is held by a manufacturer of high alcohol content beer authorized to manufacture such beverages, then: Notwithstanding any other law, the retailer may sell its products at such retail location which are manufactured on the manufacturer's premises in accordance with subdivisions (d)(7)(B) and (C) in sizes and containers that are made available through the general wholesale/retail distribution system; provided, that subsection (e) related to the delivery of alcoholic beverages by wholesalers shall be applicable; Such retailer may also offer and sell beer, as beer is defined in § 57-5-101(b), for consumption on or off-premises, at the same physical location at which it offers samples of and sells its high alcohol content beer; provided, that such beer and high alcohol content beer is brewed on the manufacturer's premises located at the retail location; and further provided, that such manufacturer may distribute such beer as defined in § 57-5-101(b) only to wholesalers licensed pursuant to chapter 5 of this title. A wholesaler of such products may permit a manufacturer to deliver its products to the retail premises operated by such manufacturer directly; provided, that the wholesaler permitting such direct shipment must include the amounts delivered in its inventory and depletions for purposes of tax collections; Notwithstanding any other law to the contrary, the hours and days on which such beer or high alcohol content beer may be sold at retail by a manufacturer authorized to manufacture such beverages pursuant to § 57-2-103(f) shall be as set by the governing body of the local jurisdiction in which the manufacturer is located, and such governing body shall further have the authority to authorize the sale of high alcohol content beer and beer within the same store notwithstanding § 57-3-404(e)(1); Such retailer may sell no more than five gallons (5 gal.) or one sixth (1/6) of a barrel of beer or high alcohol content beer or any combination of such beverages to any one (1) individual per visit to the premises. A manufacturer licensed under chapter 2 of this title, or this chapter 3, may distribute alcoholic beverages or products containing alcohol only to a wholesaler licensed pursuant to § 57-3-203 where such alcoholic beverages or products are intended for sale at retail in this state; provided, however, that, where such alcoholic beverages are not intended for resale, a manufacturer may make complimentary distributions as allowed by § 57-3-404 and on a periodic basis to its employee or employees in the normal course of employment and to others not licensed under this chapter for routine business or marketing purposes. A wholesaler may permit a manufacturer to deliver its products to the retail premises operated by such manufacturer directly; provided, that the wholesaler permitting such direct shipment must include the amounts delivered in its inventory and depletions for purposes of tax collections imposed pursuant to §§ 57-3-302, 57-6-201 and 57-3-501. No wholesaler may restrict the sale of its products to a retail license held by a manufacturer but must make its products available to any retailer licensed under this section. Subsection (d) applies only in those jurisdictions where the voters have approved the sale of alcoholic beverages for off-premises consumption by referendum held pursuant to § 57-3-106 or where the voters have, by local option election, approved the issuance of such special retail license. A special local option election as authorized by this subsection (f), shall be conducted in the manner prescribed in § 57-3-106; provided, that the question submitted to the voters shall be in the following form: To permit licensed manufacturers to obtain a license to sell alcoholic beverages at retail in (here insert jurisdiction). Not to permit licensed manufacturers to obtain a license to sell alcoholic beverages at retail in (here insert jurisdiction). In any county having within its boundaries a manufacturer, where the voters of municipalities located within such county have approved the sale of alcoholic beverages, pursuant to § 57-3-106, and where the total population of such municipalities exceeds fifty percent (50%) of the population of the county, no such referendum shall be required; provided, that the authorized retail sales by a manufacturer where no referendum is required is not effective until January 1, 1995. A restaurant licensed by the commission pursuant to § 57-4-101(a)(1) may also own, or operate, a separate retail license issued under this section to permit off-premise consumption, if such entity satisfies the further conditions of either subdivision (g)(2) or (g)(3). Notwithstanding the restrictions of § 57-3-208, a restaurant or its affiliate may own or operate a license issued pursuant to § 57-3-204 if: The retail licensee is located within the same structure as the restaurant in a defined section or portion of the structure as approved by the commission; The retail package store and the restaurant are located in a structure constructed prior to 1925 that is placed on the national register of historic places; The structure within which such retail package store and restaurant are located shall not be closer than three hundred feet (300') nor more distant than three hundred fifty feet (350') from a federal interstate highway; The structure within which such retail package store and restaurant are located shall be no farther than one hundred feet (100') from a public park adjacent to a navigable waterway, and shall be no closer than five hundred feet (500') nor more distant than five hundred fifty feet (550') from a railway station providing commuter rail service that railway employs standard gauge locomotives and coaches; and The structure within which such retail package store and restaurant are located shall be located within a county having a metropolitan form of government with a population in excess of five hundred thousand (500,000), according to the 2010 federal census or any subsequent federal census. Notwithstanding § 57-3-208, the retail license issued pursuant to this subsection (g) to a restaurant or its affiliate shall be subject to the requirements of this title. It shall be the duty of the commission to verify that all persons owning or operating a retail license issued under this subdivision (g)(2) meet the qualifications to receive a license. Notwithstanding the requirements of § 57-3-208, a restaurant, or its affiliate, may also own or operate a license issued pursuant to § 57-3-204, if: The location of the retail licensee is in the same structure as the restaurant; provided, the retail operations are conducted in a portion of the structure as identified to and approved by the commission; The structure within which the restaurant and the retail licensee are located is situated on: A tract or tracts of land having at least twenty-four (24) contiguous acres; Land adjacent to a federal interstate highway; and Property no farther than two hundred fifty feet (250') from a commercial railroad tract, upon which tracts of land there is a residence constructed prior to 1860 and upon which tracts is located a historic stable and carriage house; The retail licensee is owned or authorized to be operated by an entity recognized as exempt from taxation under Internal Revenue Code Section 501(c)(3) (26 U.S.C. § 501(c)(3)); and The retail licensee is located within a county having a metropolitan form of government with a population in excess of five hundred thousand (500,000), according to the 2010 federal census or any subsequent federal census. Notwithstanding § 57-3-208, any retail license issued pursuant to this subdivision (g)(3) shall be subject to the requirements of this title. It shall be the duty of the commission to verify that the entity owning or operating the retail license meets the qualifications of this subdivision (g)(3) and that all of the owners or operators authorized by the nonprofit entity to operate the license otherwise qualify under this title. Notwithstanding this section or § 57-3-208, a terminal building of a commercial air carrier airport that is a member of the Tennessee Association of Air Carrier Airports may obtain a retail license under this section authorizing the licensee to sell alcoholic beverages at retail in accordance with this subsection (h). A retail license issued under subdivision (h)(1) authorizes a terminal building of a commercial air carrier airport to operate one (1) or more noncontiguous retail stores located within the area of the terminal building secured by the transportation security administration or its successor organization. A retail store licensed under this subsection (h): May sell alcoholic beverages that: Are manufactured within this state; Are packaged in tamper-resistant sealed packages; and Indicate on the packaging that the customer is prohibited from consuming the alcoholic beverage until the customer reaches the customer's final destination; Notwithstanding § 57-3-406(e) and (h), may sell alcoholic beverages on any day and during any hours during which the terminal building of a commercial air carrier airport is authorized to sell alcoholic beverages for on-premises consumption; May store inventory at one (1) or more secure locations other than the premises of the retail store that are located within the terminal building; May transfer and transport inventory to and from storage locations; and Shall not conduct consumer educational seminars or authorize its employees or agents to receive complimentary samples at a sales demonstration under § 57-3-404(h) . Subsection (a) and subdivisions (b)(1), (2), (3)(A), and (3)(C) shall apply to retail stores licensed under this subsection (h). The commission shall verify that a terminal building of a commercial air carrier airport meets all qualifications for licensure under this subsection (h) prior to issuing a license. As used in this subsection (h), unless the context otherwise requires, “terminal building of a commercial air carrier airport” has the same meaning as defined in § 57-4-102 . Acts 1939, ch. 49, § 8; 1945, ch. 167, § 5; 1949, ch. 284, §§ 4, 5; C. Supp. 1950, § 6648.13 (Williams, § 6648.11); impl. am. Acts 1963, ch. 251, § 20; Acts 1972, ch. 656, § 1; 1976, ch. 505, §§ 1, 2; 1977, ch. 461, § 1; T.C.A. (orig. ed.), § 57-117; Acts 1980, ch. 771, § 2; 1981, ch. 156, §§ 1, 2; 1984, ch. 746, § 1; 1988, ch. 836, § 1; 1990, ch. 794, §§ 1, 2; 1993, ch. 368, §§ 1, 2; 1995, ch. 214, § 1; 1995, ch. 396, §§ 4, 5; 1996, ch. 925, § 1; 1997, ch. 543, §§ 1-3; 2004, ch. 876, § 3; 2009, ch. 395, § 3; 2010, ch. 788, §§ 1, 2; 2010, ch. 1009, § 5; 2011, ch. 448, §§ 13, 15, 16; 2012, ch. 947, § 3; 2014, ch. 554, §§ 15, 27, 32; 2015, ch. 428, § 1; 2016, ch. 1068, § 1; 2018, ch. 783, §§ 5, 7-10. Compiler's Notes. For tables of population of Tennessee municipalities, and for U.S. decennial populations of Tennessee counties, see Volume 13 and its supplement. Acts 2010, ch. 1009 was repassed over the governor's veto on June 4, 2010. Acts 2018, ch. 783, § 14 provided that sections 7 through 12 of the act shall be repealed on July 1, 2021, and the provisions of this section and §§ 57-3-208 and 57-3-212 as they existed prior to being amended by Sections 7 through 12 of the act shall be reinstated. Amendments. The 2018 amendment added (c)(4); and, effective from April 20, 2018 until July 1, 2021, substituted “approved for transfer and reissued as herein provided. New licenses shall only be issued for jurisdictions that first approve the retail sale of alcoholic spirituous beverages by local option election conducted under § 57-3-106 after April 1, 2018, or to applicants who have filed applications prior to April 20, 2018” for “issued as herein provided” at the end of the first sentence in (a); In the second sentence of (a), added “Except as provided in the preceding sentence, in all instances,” at the beginning, inserted “ first acquire the right to purchase an existing license, from an existing licensee and then” preceding “make application”, inserted “, and disclosing the name of the proposed transferor of the license” following “prescribed and furnished”, substituted “approve the transfer of” for “issue” preceding “such retailer’s license”, and added “as set forth in § 57-3-212 .” at the end; in (b)(1), inserted “or retail license transfer” near the beginning and “or application for transfer” near the end of the first sentence, and inserted “or transferred” following “issued” and substituted “has” for “shall have” in the second sentence; in (b)(2), inserted “or transferred to or held by,” following “issued”; and in (b)(3) and (b)(3)(A), inserted “, transferred to, or maintained by” following “issued to”. Effective Dates. Acts 2018, ch.783, § 14. April 20, 2018. Cross-References. Nonresident seller's permittees prohibited from interest in business licensed under this section, § 57-3-604 . Textbooks. Tennessee Jurisprudence, 16 Tenn. Juris., Intoxicating Liquors, §§ 8, 9, 15. Attorney General Opinions. The residency and corporate asset location requirements for applicants seeking a license as an alcoholic beverage wholesaler or package retailer under T.C.A. §§ 57-3-203 and 57-3-204 violate the Commerce Clause of the United States Constitution. OAG 12-59, 2012 Tenn. AG LEXIS 59 (6/6/12). The residency requirements set forth in T.C.A. § 57-3-204(b)(2)(A) , as amended by Acts 2014, ch. 554, § 27, violates the Commerce Clause of the United States Constitution. The requirements facially discriminate against nonresidents, and the intent expressed in T.C.A. § 57-3-204(b)(4) does not establish a local purpose sufficient to justify the discriminatory licensing provisions. OAG 14-83, 2014 Tenn. AG LEXIS 86 (9/12/14). NOTES TO DECISIONS 1. Implied Condition of License. 2. Name in Which License Issued. 3. Conspiracy to Sell Without License. 4. Exceeding Terms of License. 5. Durational Residency Requirements Violated Dormant Commerce Clause. 1. Implied Condition of License. A licensee to sell liquor at retail accepted his license with the implied condition that laws and regulations which would curtail it might legally be made during the term of the license. Davis v. Boyd, 192 Tenn. 409, 241 S.W.2d 510, 1951 Tenn. LEXIS 421 (1951). 2. Name in Which License Issued. Where son operated liquor store under trade name and county and state licenses were issued in trade name and city license was issued to the mother as doing business under such trade name, claims made against the son in bankruptcy proceedings for debts incurred in trade name were valid and the fact that licenses were not issued in the name of the son did not render such contracts illegal. Robinson v. Hamilton Wholesale Liquor Co., 132 F.2d 285, 1942 U.S. App. LEXIS 2581 (6th Cir. Tenn. 1942). 3. Conspiracy to Sell Without License. The sale of intoxicating liquors by one not licensed by the state to do so is a misdemeanor and there can be a conviction under former T.C.A. § 39-1-601 for the crime of conspiring to commit such offense. Owens v. State, 178 Tenn. 32, 154 S.W.2d 529, 1941 Tenn. LEXIS 25 (1941) (decided prior to enactment of § 39-12-103 in 1989). 4. Exceeding Terms of License. If the commission finds that persons who have been issued a retail license have gone into the wholesale field it has the duty to call them to account for their actions, and if the proof shows that this is true it has the discretionary right to revoke their licenses. Little v. MacFarland, 206 Tenn. 665, 337 S.W.2d 233, 1960 Tenn. LEXIS 416 (1960). In considering whether terms of licenses had been violated by holders of retail licenses commission could properly consider the definitions of “retail sale,” “sale at retail,” “retailer,” “wholesale sale” and “sale at wholesale” as contained in former T.C.A. § 57-3-101 . Little v. MacFarland, 206 Tenn. 665, 337 S.W.2d 233, 1960 Tenn. LEXIS 416 (1960). 5. Durational Residency Requirements Violated Dormant Commerce Clause. Liquor retailer residency requirements in T.C.A. § 57-3-204 violated the Dormant Commerce Clause as the Commerce Clause limited state alcohol regulations, and the durational residency requirements (DRR) were discriminatory on their face; the Twenty-first Amendment did not authorize states to impose DRR on the owners of liquor retailers and wholesalers as they were not inherent to a legitimate three-tier system, and DRR discriminated against nonresidents by creating a barrier to entering the Tennessee retail liquor market and favored Tennessee interests at the expense of interstate commerce. Byrd v. Tenn. Wine & Spirits Retailers Ass'n, — F. Supp. 2d —, 2017 U.S. Dist. LEXIS 58315 (M.D. Tenn. Apr. 14, 2017), aff'd, — F.3d —, 2018 FED App. 0035P, 2018 FED App. 35P, 2018 U.S. App. LEXIS 4081 (6th Cir. Feb. 21, 2018). Durational residency requirements in T.C.A. § 57-3-204(b)(2)(A) , (3)(A)-(B), and (3)(D) violated dormant Commerce Clause because they were facially discriminatory by preventing out-of-state residents from obtaining retail licenses and protecting in-state residents who were retailers, and there was no evidence that Tennessee could not achieve its goals through nondiscriminatory means; those provisions were severed from Tennessee statute. Byrd v. Tenn. Wine & Spirits Retailers Ass'n, — F.3d —, 2018 FED App. 0035P, 2018 FED App. 35P, 2018 U.S. App. LEXIS 4081 (6th Cir. Feb. 21, 2018). Two-year residency requirement for retail license applicants violates the Commerce Clause because not only is the requirement ill suited to promote responsible sales and consumption practices, an interest the United States Supreme Court recognizes as legitimate, but there are obvious alternatives that better serve that goal without discriminating against nonresidents; the State remains free to monitor the practices of retailers and to take action against those who violate the law. Tenn. Wine & Spirits Retailers Ass'n v. Thomas, — U.S. —, 139 S. Ct. 2449 , 204 L. Ed. 2 d 801, 2019 U.S. LEXIS 4399 (June 26, 2019). Because the predominant effect of the 2-year residency requirement for retail license applicants is simply to protect the Tennessee Wine and Spirits Retailers Association's members from out-of-state competition and has little relationship to public health and safety, that provision violates the Commerce Clause and is not saved by U.S. Const. amend. 21, § 2; the 2-year durational-residency requirement plainly favors Tennesseans over nonresidents. Tenn. Wine & Spirits Retailers Ass'n v. Thomas, — U.S. —, 139 S. Ct. 2449 , 204 L. Ed. 2 d 801, 2019 U.S. LEXIS 4399 (June 26, 2019). Two-year residency requirement for retail license applicants violates the Commerce Clause because it expressly discriminates against nonresidents and has at best a highly attenuated relationship to public health or safety; the 2-year residency requirement poorly serves the goal of enabling the State to ensure that only law-abiding and responsible applicants receive licenses, and it is not needed to enable the State to maintain oversight over liquor store operators. Tenn. Wine & Spirits Retailers Ass'n v. Thomas, — U.S. —, 139 S. Ct. 2449 , 204 L. Ed. 2 d 801, 2019 U.S. LEXIS 4399 (June 26, 2019).