Frequently Asked Questions

WSDI is making available a tri-fold marketing piece entitled Regulation of Beverage Alcohol in Illinois: Understanding the Three-Tier System. Please click here to view a PDF copy, or email Louise Ito to request our marketing piece. We will be happy to mail out multiple copies. Please click here to email Lito@ilwsdi.org

DISCLAIMER: The following questions and answers are provided for general information only and do not purport to be legal advice, and are not intended to be legally binding on the Wine and Spirits Distributors of Illinois.

WSDI – ILCC Compliance Meeting

March 22, 2018

Q. What are the dollar limits for signs to be displayed at a retailer’s premises?

A. With the passage of PA 100-885, annual cost adjustments were eliminated. As of August 14, 2018, the following dollar limits apply:

Permanent outside signs: $3,000 per manufacturer;
Temporary outside signs: $1,000 per manufacturer;
Permanent inside signs: $6,000 per manufacturer;
Temporary inside signs: $1,000 per manufacturer;

Q. Please clarify how the ILCC determines whether signage is indoor or outdoor and permanent or temporary. For example:?

A. Rule of Thumb: Signage placed inside a licensed premise is inside signage (whether facing inside or outside); signage placed on the outside of retail premises is outside signage. If the material is non-permanent and the signage easy to take down (no tools), the signage is temporary; if tools are needed or it’s hard to remove, the signage is permanent.

Window scrims facing outward;

If the window scrim is mounted on the exterior of the window it is considered an outside sign. If it is on the interior of the window it is considered an inside sign. This is true whether the sign is facing inside or outside. If it needs a tool to take it off, it is considered a permanent sign. If not, it is temporary.
Paper posters;

For the most part, paper posters are going to be indoor signs because they are displayed inside.
Barrels;

The big, heavy, large oak cast-type barrels that have logos or trademarks on them are considered permanent inside signs. There is some variance among barrels, and we look at them on a case-by-case basis.
Non-functional display enhancers; and

A display enhancer should be associated with a product display. Display enhancers are a bit of a gray area. Examples of display enhancers are a basketball hoop that is temporarily up, a canoe, or perhaps a bike. If they are there for a temporary amount of time, they are considered temporary. If the item is still there after the display is gone, then it becomes a little more than a display enhancer.

In general, display enhancers have to be part of the messaging of the product display and the total value of both can’t be more than $300. The product display must bear conspicuous and substantial advertising matter. They are limited to one per brand, but the Commission considers different flavors as different brands.
Neon/LED signs

These are not posted outside very often. For the most part, we consider these inside or outside depending where they are displayed.

Signage that is on a licensed sidewalk café, beer garden or outside café is still considered inside signage.

Q. The ILCC has considered umbrellas inside signs, even when used in beer gardens or at sidewalk cafes. However, it is not clear whether umbrellas are permanent or temporary. If temporary, the retailer’s name can be included on the sign. Does the ILCC consider umbrellas to be permanent or temporary inside signs?

A. Umbrellas are considered inside permanent signs.

Q. Is it permissible to provide a retailer with brand identified tables, chairs, etc. if they are within the permanent POS dollar amount in that year?

A. No, we consider tables to be equipment and furniture. Those items must be sold to the retailer at the wholesale cost.

Q. Can a distributor provide a display enhancer (e.g., a cooler, grill, bike, basketball hoop, etc.) for use in part of a product display? If so,

A. Yes, but it must be branded.

Must it be on an invoice?

Product displays are not required to be on an invoice, but they must be documented with some other business record.
What is the allowable maximum wholesale value of the item?

The maximum allowable value is $300 per brand per retail location. The $300 does not include the cost of transportation and installation, just the retail item.
What must/can be done with the display enhancer after the use?
- Can it be taken back?
  
  Under the federal rules, they cannot be leased.
- Can it be destroyed?
  
  Yes, it can be destroyed.
- Can it be kept by the retailer or a retailer employee?
  
  It cannot be kept by the retailer or retailer employee unless they purchase it from you.
- Can it be raffled off to the consumer?
  
  Yes. However, raffles are sweepstakes and there are gaming rules that apply. It must be determined whether this is a direct consumer offering or a display enhancer. The analysis depends on what the intent was at the time the program began.
- Can a barrel revert to permanent inside signage?
  
  No, it cannot revert from being classified as temporary inside signage to permanent inside signage.

Q. Can you define or give specific examples of the following items listed under Equipment, Fixtures, Furniture, and Supplies in the latest ILCC Of-Value draft rule that must be sold on an invoice, at no less than cost?

Glassware (similar containers made of other materials)

Glassware is glassware. Any type of glassware has to be sold to the retailer branded with screen printing. The exception to that is that glassware can also be a consumer specialty item in a keep-the-glass type of promotion. So, if it flows through to the consumer, it can be given to the retailer. If its glassware that is going to stay in the bar, it needs to be sold.
Dispensing accessories

Dispensing accessories include standards, faucets, cold plates, rods, vents, taps, and countertop-branded shot machines. These items must be sold at no less than wholesale cost to the distributor.
Carbon dioxide (and other gases used in dispensing equipment)

If a distributor provides anything that the retailer would have to go out and purchase themselves, it must be sold to the retailer on an invoice with the associated cost.
Coasters

Same as for carbon dioxide.

In general, display enhancers have to be part of the messaging of the product display and the total value of both can’t be more than $300. The product display must bear conspicuous and substantial advertising matter. They are limited to one per brand, but the Commission considers different flavors as different brands.
Trays

Same as for carbon dioxide.
Napkins

Same as for carbon dioxide.
Cups

Same as for carbon dioxide.
Bar mats and napkin holders

These are considered temporary inside signage.

Q. Recently an agent found an item (i.e., a BBQ grill) in the basement of a retailer’s premises. The distributor followed the rule and made sure to 1) have a raffle box available; 2) clearly indicate the raffle date on signage; and 3) contacted the winner of the raffle and advised them they had won. The item was removed the next day by the retailer. Subsequently, an Illinois Liquor Control Agent found the item in the basement area not accessible by the distributor. The distributor was cited. How can a distributor avoid these types of situations?

A. The best advice is to be there at the time of the drawing and make sure that the consumer takes the item out of the retailer. Don’t simply leave it with the retailer to conduct the drawing and trust them to make sure that the item goes to the consumer.

Q. A distributor cannot pick up breakage after it is delivered to a retailer. If a merchandiser or sales person breaks product while building a display, how can a distributor properly document the replacement of broken product?

A. The typical bona fide rule is once it is in possession of the retailer, you can’t have a return. But there is always a little leeway with a rule when there is reasonableness. In a situation where a sales rep is trying to enhance a display and accidentally breaks product, we would consider that a bona fide reason for a return as the breakage occurred based on the activities of the distributor even though it was in the retailer’s possession. The product should be invoiced and notated. If it can’t be noted on the invoice by the invoicing system, appropriate records to document the transaction should be kept.

Q. Is it permissible for a distributor’s employee to be employed by a retailer? What if this employee is a stock clerk in a large format store, and the employee fills his/her company’s own products on the shelf, cooler, display, etc. but no other brands?

A. It would certainly be problematic if a large format store hired a distributor employee to only maintain the distributor’s products. Distributor employees are free to work a second job at retail or in a bar as long as it is not exclusive to the distributor’s products. The ILCC will evaluate this on a case-by-case basis. The analysis depends on where the employee is in the organizational chart. A low-level employee is given much wider latitude to take secondary employment at a retailer.

Q. With respect to product displays, federal law prohibits an industry member from taking back a product display and limits the value of a product display to $300.00 per brand at any one time in any one establishment.

What does the ILCC consider to be a product display?

A product display is defined as racks, bins, barrels, cast coolers and similar items whose primary function is to hold and display alcoholic liquor at point of sale at or on a retail licensed premise. The product display actually holds the product. The display enhancer would be what goes along with the product display. Coolers and buckets are considered to be product displays because they hold the product for the consumer to remove and they need to be branded.
Does the ILCC agree a display enhancer is not a product display?

Dispensing accessories include standards, faucets, cold plates, rods, vents, taps, and countertop-branded shot machines. These items must be sold at no less than wholesale cost to the distributor.
Carbon dioxide (and other gases used in dispensing equipment)

Yes.
Does the ILCC agree a display enhancer can be given to a retailer if the wholesale value is $300.00 or less?

Yes.

Q. Can a distributor provide consumer specialties (e.g., bottle openers, koozies, shirts, hats, etc.) to a retailer for purposes of that retailer providing the consumer specialties to customers? If so,

What are considered consumer specialties?

Consumer advertising specialties are trading stamps, nonalcoholic mixers, pouring racks, ashtrays, t-shirts, bottle openers, hats and that type of things.
Must the consumer specialties be on an invoice?

These items do not have to be included on an invoice. We prefer to have some type of record of them, but that record is not required to be an invoice.
Can the consumer specialties be given to both on and off-premise retailers?

Yes.
Is there a dollar value that cannot be exceeded at any one time or over any period?

There is no dollar limit, but we encourage you to treat similarly-situated retailers similarly.
What must be done with consumer specialties, if anything, after the promotion has ceased?

The items must go out the door of the retailer; they should not be left in the back room after the promotion has ended.
If the retailer does not dispose of old consumer specialties, would the retailer be issued a citation?

Yes.
Would the distributor or supplier be issued a citation if old consumer specialty items are not thrown out, given that the distributor/supplier does not have control over the retailer?

Currently it would be a violation for both the retailer and the distributor if the items are found there after the promotion is ended, but we are looking at how we can better approach getting the items out the door to consumers. Documentation on the distributor’s part is their best defense to a citation.

Q. Distributors have historically provided items with significant advertising content to on-premise retailers at no cost to the retailers. They have considered these items to be dealer loaders or non-cash discounts. Federal law allows such dealer loaders. Examples include bar rail mats, condiment trays, infusion jars, corn hole games, and other items that are not required to be sold by the Liquor Control Act (such as glasses, napkins and coasters). Please confirm:

The propriety of this practice;

Under the draft “of-value” rule we are okay with temporary inside signage and we would consider bar rail mats and condiment trays as temporary inside signage. Infusion jars are similar to glassware and must be sold at fair market value. Corn hole games also must be sold.
Whether there are any wholesale dollar limits associated; and

The temporary inside signage limits are applicable here.
That these items can be brought in by hand to the retailer (typically this is done by a sales person, and not through a delivery, which prevents the distributor’s ability to put the item on an invoice).

Yes.

Q. With respect to pricing, please confirm whether:

A distributor may offer a discount off the purchase of wine or beer if spirits are purchased, or vice versa;?

Yes, they may under 100.500 (d)(5)(B). However, the retailer must have the option of buying both products individually for whatever the price would be. It can’t be that they can only get the particular spirit if they buy the other product.
A distributor may offer retailers a “free” case of product if the retailer purchases a fixed number of other cases of product (i.e., the JoS. A. Bank Clothier’s suit pricing model); and

This type of offer is permissible under 100.500 (d)(5)(D) and (F).
A distributor may offer a discount off the price charged to the retailer for the described purchased product sold in combination with the “free” case. Also, the ILCC is taking a position that “double discounts” are illegal. Is the scenario described in this subparagraph a “double discount?” If so, why is it illegal? If not, what is a “double discount” and why is it illegal?

The ILCC doesn’t have the authority to weigh in on pricing. Double discounting is where it’s a discount on the initial purchase and then a discount in the form of a no-charge product; that’s permissible under 100.500 (d)(5)(F). It’s not within our purview to look at how you price your products. What we want to prevent is the buy 1, get 20, type of deal. Then you are getting into where you’re giving away alcoholic liquor.

Q. End-of-period promotions are permissible under both state and federal law (i.e., a retailer can earn “x” back per case the retailer purchases during a fixed time period). Please confirm whether:

A. End-of-period promotions are allowed if they are 1) made pursuant to a written agreement entered into at the time of sale, 2) extend for a specific period of time, 3) are calculated based solely upon the purchases made by the retailer receiving the cumulative discount, and 4) are documented on related sales and credit memorandum.

The “x” back per case can be in the form of a credit, rebate or product;

Yes, it can be in any of those forms.
The credit can be applied against future purchases;

Yes, as long as it is invoiced.
The rebate can be paid by check;

Yes, it can be paid by check.
The product can be shipped by truck or dropped off by a merchandiser or sales person; and

Yes, as long as it’s documented and as long as there is proof to justify what it is for.
The ILCC has any other end-of-period requirements?

In the context of restaurant or retail groups, you can provide one adequate payment for the discount to the common ownership, but it needs to be documented how the one payment was calculated, and it needs to have supporting information about the individual retail purchases that led to that cumulative discount.

Q. Both state and federal law allow manufacturers and distributors to make charitable donations.

Can donations only be made to a not-for-profit entity or to other groups?

Donations can be made to not-for-profit organizations including, but not limited to, charitable organizations, religious organizations, trade associations, political organizations, and fraternal organizations. As long as it’s a not-for-profit it is covered.
Can product be donated directly to the not-for-profit?

Yes.
What type of documentation would the ILCC like to see? (Note that only licensees can receive invoices.)

We like to see invoices that describe the donation and who the not-for-profit is, and those invoices should be kept for three years. The donation must be given with a donative intent and not for a commercial purpose.

Also, if you donate to a special event not-for-profit and the venue is a retail establishment, make sure that you take the unused product back and that it doesn’t become part of the retailer’s business.

Q. If a supplier is going to do the pouring for a tasting for a 501(c)(3) organization in order to raise money for the 501(c)(3) and the 501(c)(3) has been granted a Special Event Retailer license, can a distributor deliver product to the 501(c)(3) on a no charge invoice?

A. Yes.

Q. Federal law allows an industry member to furnish a sample of distilled spirits, wine or malt beverages to a retailer that has not purchased the brand from that industry member within the last 12 months. For each retailer, the industry member may give not more than 3 gallons of any brand of malt beverage, not more than 3 liters of any brand of wine, and not more than 3 liters of distilled spirits. If a particular product is not available in a size within the quantity limitations, an industry member may furnish to a retailer the next larger size.

Does the ILCC acknowledge this practice is lawful in Illinois?

It is in the new of-value rule and will be lawful as soon as it is approved. We modeled the federal law exactly.
How can distributors and manufacturers document samples for purposes of ILCC compliance? Typically, sales persons provide samples to retailers. As a consequence, samples cannot be on invoices.

Appropriate documentation is required. That documentation is required to be kept by the retailer and the industry member. The documentation is not required to be an invoice. If the industry member does not currently have an appropriate business record, the ILCC has developed a model form that could be used. That form, LC-15, is available for download on the ILCC website.
Is it permissible for a sales person who works out of his or her house to receive samples from his or her employer that are delivered to a retail licensee (at no charge) for that sales person?

Yes. It is not ideal, but it is permissible. The best way to do it would be to ship through FedEx or UPS.

Q. How can I report a retailer that I believe is operating illegally?

A. There are two options. The first is to call the ILCC office and we will gather the information and forward it to the enforcement division. The second is to use the online complaint form on the ILCC website. It is under the Investigations tab. Information received from the website usually goes to the supervisor the next day. Documentation such as pictures or signs cannot be attached to the website form so you would need to submit contact information and an agent will contact you.

Q. Is there any specific statutory rule that requires ILCC agents to have a visible badge or identification?

A. No, the agents carry credentials but there is no requirement that they have a visible badge.

Q. Can a retailer ever move product legally from one location to another?

A.Generally not. The only time a bona fide transfer is allowed is if someone is closing a business. We would allow them to transfer product from their closed business to another location.

Q. I have a retailer who is advertising substantial discounts on products. Examples include: 1) Buy 2 bottles of whiskey, get 1 case of domestic beer for free, 2) Buy 1 case of domestic beer, get a 2nd case for 1 cent, and 3) Buy 1 12-pack of domestic beer, get a 2nd 12-pack for 50% off. Is this legal?

A.The first would clearly be a problem because they’re advertising for free and giving away free product. The second would be problematic because the 1 cent is an insignificant amount; they are essentially giving something for free. The third is probably okay because you can factor in a reasonable price for two 12-packs of beer at one-and-a-half charge. The Commission really doesn’t have the authority to tell a retailer they cannot sell below cost.

Q. If these discounts are provided by the manufacturer, can we require the retailer to pass them along to consumers?

A.No. You can’t tell retailers how to structure their pricing.

Q. Are retailers permitted to sell alcohol below cost?

A.The Commission really doesn’t have the authority to tell a retailer they cannot sell below cost.

Q. Is there a law or rule that states that price promotions or discounts offered need to be announced in writing to retailers? Is there a time involved in posting these discounts? (i.e., by the first of each month, the 15th of the previous month, etc.)

A.The only thing that requires documentation in writing would be an end-of-period promotion. Sales incentives are required to be documented on related sales invoices or credit memoranda. You also must justify that you’re offering these to all similarly-situated retailers.

Q. Where can I find information on the Liquor Gallonage Tax rates that distributors pay in Illinois, Cook County and the City of Chicago?

A.This information is available on the Illinois Department of Revenue website, and we will add a link to the ILCC website.

Q. Can a retail venue holding a liquor license produce and sell a non-alcoholic base?

A.Yes.

Q. Are distributors allowed to give consumers glassware without charging the retailer?

A.Yes. This can be in the form of a consumer specialty that can be dropped off with the retailer in a keep-the-glass type of promotion, or in an event where the distributor is present at the retail premises and gives them out. The one thing to note is to be cautious and make sure that they are given to consumers and that the retailer does not keep them for use in their establishment.

Q. Can a distributor give away free alcohol to a 4A (Special Event Retailer) or 4B (Special Use Permit – 1 Day) licensee that has Dram Shop insurance?

A.Product can be given to a 4A Special Event Retailer as it is a charitable organization, not-for-profit. Product cannot be given to a 4B Special Use Permit as it is considered a regular retail business.

Q. For a convention/trade show, it is possible for a distributor to purchase their own product and send in for exhibition and demonstration purposes only?