Legislators cut controversial food sales provision from bar bill

Concerns of restaurant owners are now allayed as a new bill meant to punish false reports to the ABC Board has had a controversial provision removed that would have penalized businesses with a poor food/alcohol sales ratio.

February 7, 2013; 6:00 AM • by RVANews staff

By Michael Schuster | Capital News Service

The Senate is poised to pass a bill to revoke the liquor licenses of bars and restaurants that file false tax returns or other financial information with government regulators.

Senate Bill 1349, sponsored by Sen. A. Donald McEachin, D-Henrico, received a unanimous endorsement Friday from the Senate Committee on Rehabilitation and Social Services. It is now before the full Senate.

Committee members changed the bill by eliminating a provision strongly opposed by mixed beverage license holders.

McEachin’s original legislation would have required the Alcohol Beverage Control Board to revoke the licenses of establishments if they don’t sell a substantial amount of food as well as drinks.

Under existing law, at least 45 percent of a mixed beverage restaurant’s gross receipts must come from the sale of food and non-alcoholic beverages. The original draft of SB1349 had instructed the ABC Board to suspend or revoke a mixed beverage license if the establishment fell short of the 45 percent target “more than two times in a 10-year period.”

That passage was dropped from the substitute bill that the committee approved on a 15-0 vote and sent to the Senate floor.

Bar and restaurant owners said it would be unfair to crack down on establishments if their food sales miss the 45 percent ratio.

“I don’t think the system we have in place right provides an equal playing field for the relationship between mixed beverage licensees and the ABC,” said Scott O’Neil, who operates a bar in Roanoke.

“Right now, the records we have to submit is only based on financial sales. If it were based on the volume of alcohol sales, then I think it would be a lot more logical, because many of us [licensees] often take a loss on food sales just to meet the 45 percent ratio.”

The bill’s objective is to punish liquor license holders for filing false financial information with the ABC Board.

SB1349 states that the board shall suspend or revoke a license if it finds that the licensee has defrauded or tried to defraud a government agency “by making or filing any report, document, or tax return … that is fraudulent or contains a willful or knowing false representation of a material fact.”

An establishment also would lose its mixed beverage license if it “has willfully deceived or attempted to deceive the Board, or any federal, state, or local government or governmental agency or authority, by making or maintaining business records required by statute or regulation that are false or fraudulent.”

McEachin said the bill would promote good business ethics.

“This particular piece of legislation is definitely a kitchen-table issue, but it’s necessary to ensure that ethical business practices are maintained here in Virginia,” McEachin said. “The 45 percent ratio has been argued in the state for a long time. But at this point, I think the committee is more concerned with regulation of business records, rather than the ongoing ratio debate. So in that case, the bill can certainly be effective.”

State officials hope that the threat of the revocation of a liquor license will cause a bar or restaurant owner to think twice before submitting false financial records.

“For the time being, financial submissions are the only way to really effectively monitor mixed beverage license holders. But I’m sure the dispute will continue to come up,” said Allen Ricks, an ABC representative.