An Act to create small-batch alcohol licenses.

Be it enacted by the Legislature of the State of South Dakota:

Section 1. That § 35-2-6.4 be AMENDED:

35-2-6.4. No manufacturer or wholesaler licensee under this title, nor any officer, director, stockholder, agent, or employee thereof or any relative of the licensee, officer, director, stockholder, agent, or employee, may be in any way financially interested, either directly or indirectly, or participate in the operation of the business of any retailer licensee other than by reason of sales to the licensee.

A retailer licensee who is a party to any action prohibited by violates this section is guilty of a Class 2 misdemeanor.

This section does not apply to a person licensed as a:

(1) Small-batch brewery, as defined in § 35-15-2;

(2) Small-batch cidery, as defined in § 35-14-1;

(3) Small-batch distillery, as defined in § 35-13-13; and

(4) Small-batch winery, as defined in § 35-12-13.

Section 2. That § 35-12-13 be AMENDED:

35-12-13. For the purposes of this chapter, the term, farm winery, means anyTerms used in this chapter mean:

(1) "Farm winery," a manufacturer that is not a small-batch winery, located in this state producing wine, as defined in § 35-1-1, in a total quantity not in excess of no greater than one hundred fifty thousand gallons within a calendar year, where at least fifty percent of the raw materials used in the finished product are grown or produced in this state, and without the use of wine imported from outside this state; and

(2) "Small-batch winery," a manufacturer located in this state producing wine in a total quantity no greater than three thousand seven hundred fifty gallons in a year, where at least fifty percent of the raw materials used in the finished product are grown or produced in this state, and without the use of wine imported from outside this state.

Section 3. That § 35-12-14 be AMENDED:

35-12-14. The fee for a farm winery license is five hundred dollars.

The fee for a small-batch winery license is five hundred dollars.

Section 4. That § 35-12-16 be AMENDED:

35-12-16. There is hereby levied on all alcoholic beverages produced by any person licensed pursuant to this chapter an excise tax at the same rates and collected and administered in the same manner as the taxes imposed on alcoholic beverages in chapter 35-5. Notwithstanding any other provision of law, the taxes imposed on a farm winery shall and a small-batch winery must be deposited in the general fund.

Section 5. That § 35-12-17 be AMENDED:

35-12-17. Any An applicant for a license as a farm winery or small-batch winery shall verify, under oath, compliance with the requirement to use agricultural products grown or produced in this state. However, if If South Dakota agricultural products are not available in sufficient quantities, the applicant may use imported agricultural products for the period covered by the license, but may not use imported alcoholic beverages. Any person who signs a statement as provided for in this section, knowing the statement to be false or untrue, in whole or in part, is guilty of perjury.

Section 6. That § 35-12-18 be AMENDED:

35-12-18. A licensed farm winery or small-batch winery may sell on the licensed premises alcoholic beverages produced by the licensee for on-sale or off-sale consumption.

A licensed farm winery may sell alcoholic beverages produced by the licensee to any wholesaler or retailer authorized to receive the alcoholic beverages.

A licensed farm winery may sell alcoholic beverages to any licensed artisan distiller, farm winery, microbrewery, or microcidery, if the alcoholic beverage is used in the manufacturing process.

The quantity of alcoholic beverages sold pursuant to this section may not exceed the total production limits for the license as specified in § 35-12-13.

Section 7. That § 35-12-19 be AMENDED:

35-12-19. A licensed farm winery or small-batch winery may hold on the licensed premises an artisan distiller license, a microbrewery license, or a microcidery license. A licensed farm winery or small-batch winery may hold on the licensed premises any license issued pursuant to subdivision 35-4-2(4), (6), (12), or (16).

Section 8. That § 35-12-20 be AMENDED:

35-12-20. A licensed farm winery or small-batch winery may operate additional locations in this state by obtaining additional licenses of the same class pursuant to this chapter. The quantity of alcoholic beverages produced under the original license and any additional licenses combined may not exceed the total production limits for the license as specified in § 35-12-13. Any additional license issued pursuant to this section has the privileges of the original license as specified in §§ 35-12-18 and 35-12-19.

Section 9. That a NEW SECTION be added to chapter 35-12:

If a person licensed as a farm winery produces wine in a quantity below the maximum limits set forth in subdivision 35-12-13(2), the person does not lose eligibility for the person's current class of license.

Section 10. That § 35-13-13 be AMENDED:

35-13-13. Terms used in this chapter mean:

(1) "Artisan distiller," any a manufacturer located in this state producing, rectifying, or blending distilled spirits, as defined in § 35-1-1, in a total quantity not in excess of no greater than fifty thousand gallons within a calendar in a year, where at least thirty percent of the raw materials, other than water, used in the finished product are grown or distilled spirit, other than water, are produced in this state;

(2) "Distiller," any a manufacturer located in this state producing, rectifying, or blending distilled spirits, as defined in § 35-1-1, that, which is not an artisan distiller or a small-batch distillery; and

(3) "Small-batch distillery," a manufacturer located in this state producing, rectifying, or blending distilled spirits in a total quantity no greater than one thousand two hundred fifty gallons in a year, where at least thirty percent of the raw materials used in the distilled spirit, other than water, are produced in this state.

Section 11. That § 35-13-14 be AMENDED:

35-13-14. The classes of licenses pursuant to this chapter, with the fee of each class, are as follows:

(1) Artisan distiller--, five hundred dollars; and

(2) Distiller--, two thousand five hundred dollars; and

(3) Small-batch distillery, five hundred dollars.

Section 12. That § 35-13-18 be AMENDED:

35-13-18. Any Except as otherwise provided in this section, an applicant for a license as an artisan distiller or small-batch distillery shall verify to the Department of Revenue, under oath, compliance with the requirement to use agricultural products raw materials, other than water, grown or produced in this state. However, if If South Dakota agricultural products are not available in sufficient quantities, the applicant may use imported agricultural products for the period covered by the license. Any A person who signs a statement as provided for in this section, knowing the statement to be false or untrue, in whole or in part, is guilty of perjury.

Section 13. That § 35-13-19 be AMENDED:

35-13-19. A licensed artisan distiller or small-batch distillery may sell on the licensed premises alcoholic beverages produced by the licensee for on-sale or off-sale consumption.

A licensed artisan distiller may sell alcoholic beverages produced by the licensee to any wholesaler or retailer authorized to receive the alcoholic beverages.

A licensed artisan distiller may sell alcoholic beverages to any licensed artisan distiller, farm winery, microbrewery, or microcidery, if the alcoholic beverage is used in the manufacturing process.

The quantity of alcoholic beverages sold pursuant to this section may not exceed the total production limits for the license as specified in § 35-13-13.

Section 14. That § 35-13-20 be AMENDED:

35-13-20. A licensed artisan distiller or small-batch distillery may hold on the licensed premises a farm winery license, a microbrewery license, or a microcidery license. A licensed artisan distiller may hold on the licensed premises any license issued pursuant to subdivision 35-4-2(4), (6), (12), or (16).

Section 15. That § 35-13-21 be AMENDED:

35-13-21. A licensed artisan distiller or small-batch distillery may operate additional locations in this state by obtaining additional licenses of the same class pursuant to this chapter. The quantity of alcoholic beverages produced under the original license and any additional licenses combined may not exceed the total production limits for the license as specified in § 35-13-13. Any additional license issued pursuant to this section has the privileges of the original license as specified in §§ 35-13-19 and 35-13-20.

Section 16. That a NEW SECTION be added to chapter 35-13:

If a person licensed as an artisan distiller produces, rectifies, or blends distilled spirits in a quantity below the maximum limits set forth in subdivision 35-13-13(3), the person does not lose eligibility for the person's current class of license.

Section 17. That § 35-14-1 be AMENDED:

35-14-1. Terms used in this chapter mean:

(1) "Cider manufacturer," any a manufacturer located in this state producing cider, as defined in § 35-1-1, that which is not a microcidery or a small-batch cidery;

(2) "Microcidery," any a manufacturer located in this state producing cider, as defined in § 35-1-1, in a total quantity not in excess of no greater than twelve thousand barrels within a calendar in a year; and

(3) "Small-batch cidery," a manufacturer located in this state producing cider in a total quantity no greater than three hundred barrels in a year.

Section 18. That § 35-14-2 be AMENDED:

35-14-2. The classes of licenses, with the fee of each class, are as follows:

(1) Cider manufacturer--, two thousand five hundred dollars; and

(2) Microcidery--, five hundred dollars; and

(3) Small-batch cidery, five hundred dollars.

Section 19. That § 35-14-5 be AMENDED:

35-14-5. A licensed microcidery or small-batch cidery may sell on the licensed premises alcoholic beverages produced by the licensee for on-sale or off-sale consumption.

A licensed microcidery may sell alcoholic beverages produced by the licensee to any wholesaler authorized to receive the alcoholic beverages.

A licensed microcidery may sell alcoholic beverages to any licensed artisan distiller, farm winery, microbrewery, or microcidery, if the alcoholic beverage is used in the manufacturing process.

A licensed microcidery may sell up to six hundred barrels of alcoholic beverages produced by the licensee within a calendar year to retailers authorized to receive the alcoholic beverages.

The barrel limit in this section does not apply to any sales made to special event retailers licensed pursuant to § 35-4-124 and served by employees of the microcidery or to any transfer of alcoholic beverages between a licensed microcidery and any additional locations authorized pursuant to § 35-14-7.

The quantity of alcoholic beverages sold pursuant to this section may not exceed the total production limits for the license as specified in § 35-14-1.

Section 20. That § 35-14-6 be AMENDED:

35-14-6. A licensed microcidery or small-batch cidery may hold on the licensed premises an artisan distiller license, a farm winery license, or a microbrewery license. A licensed microcidery may hold on the licensed premises any license issued pursuant to subdivision 35-4-2(4), (6), (12), or (16).

Section 21. That a NEW SECTION be added to chapter 35-14:

If a person licensed under this chapter produces cider in a quantity below the maximum limits set forth in § 35-14-1, the person does not lose eligibility for the person's current class of license.

Section 22. That § 35-15-1 be AMENDED:

35-15-1. Terms used in this chapter mean:

(1) "Malt beverage manufacturer," any manufacturer located in this state producing malt beverages, as defined in § 35-1-1, that, which is not a microbrewery or small-batch brewery;

(2) "Microbrewery," any manufacturer located in this state producing malt beverages, as defined in § 35-1-1, in a total quantity not in excess of no greater than thirty thousand barrels within a calendar year in a year; and

(3) "Small-batch brewery," a manufacturer located in this state producing malt beverages, in a quantity no greater than seven hundred fifty barrels in a year.

Section 23. That § 35-15-2 be AMENDED:

35-15-2. The classes of licenses, with the fee of each class, are as follows:

(1) Malt beverage manufacturer--, two thousand five hundred dollars; and

(2) Microbrewery--, five hundred dollars; and

(3) Small-batch brewery, five hundred dollars.

Section 24. That § 35-15-5 be AMENDED:

35-15-5. A licensed microbrewery or small-batch brewery may sell on the licensed premises alcoholic beverages produced by the licensee for on-sale or off-sale consumption.

A licensed microbrewery may sell alcoholic beverages produced by the licensee to any wholesaler authorized to receive the alcoholic beverages. A licensed microbrewery may sell alcoholic beverages to any licensed artisan distiller, farm winery, microbrewery, or microcidery, if the alcoholic beverage is used in the manufacturing process.

A Except as otherwise provided in this section, a licensed microbrewery may sell up to one thousand five hundred barrels of alcoholic beverages produced by the licensee within a calendar year to retailers authorized to receive the alcoholic beverages.

The barrel limit in limitations on sales of alcoholic beverages under this section does do not apply to any sales made to special event retailers licensed pursuant to § 35-4-124 and served by employees of the microbrewery, or to any transfer of alcoholic beverages between a licensed microbrewery and any additional locations authorized pursuant to § 35-15-7.

The quantity of alcoholic beverages sold pursuant to this section may not exceed the total production limits for the license as specified in § 35-15-1.

Section 25. That § 35-15-6 be AMENDED:

35-15-6. A licensed microbrewery or small-batch brewery may hold on the licensed premises an artisan distiller license, a farm winery license, or a microcidery license. A licensed microbrewery may hold on the licensed premises any license issued pursuant to subdivision 35-4-2(4), (6), (12), or (16).

Section 26. That a NEW SECTION be added to chapter 35-15:

If a person licensed under this chapter produces malt beverages in a quantity below the maximum limits set forth in § 35-15-1, the person does not lose eligibility for the person's current class of license.