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Retailer Payments to Distributors, Importing Distributors, and
It is the purpose of this Policy to make the industry aware of the permissible
methods of payment for alcoholic liquor between retailers and manufacturers,
distributors and importing distributors.
It is the policy of the State of Illinois to allow manufacturers, distributors
and importing distributors to extend credit for no more than 30 days to
retailers for the purchase of wine and spirits; to allow for various payment
methods which are considered cash equivalents; and to allow for finance and
banking charges which are standard in the course of business if such charges are
properly disclosed to retailers.
III. Background, Statute, Regulation
235 ILCS 5/6-5 provides in relevant part that a retail liquor licensee shall not
accept or receive credit (other than merchandising credit in the ordinary course
of business for a period not to exceed 30 days) directly or indirectly from any
manufacturer, importing distributor or distributor of alcoholic liquor, and any
manufacturer, distributor or importing distributor may not loan or extend credit
(except such merchandising credit) directly or
indirectly to any retail liquor licensee. Retail liquor licensees delinquent
beyond the 30 day period specified in the Section shall not solicit, accept or
receive credit, purchase or acquire alcoholic liquors, directly or indirectly
from any other licensee, and no manufacturer, distributor or importing
distributor shall knowingly grant or extend credit, sell, furnish or supply
alcoholic liquors to any such delinquent retail liquor licensee. The Section
also provides that the purchase price of all beer sold to a retail liquor
licensee shall be paid by the retail liquor licensee in “cash” on or before
delivery of the beer.
The 30 day merchandising credit period allowed by Section 5/6-5 commences the
day immediately following the date of invoice and includes all successive days
including Sundays and holidays to and including the 30th successive day
[Regulation 100.90(b)]. Note that the question of whether the invoice date or
the actual date of delivery of the product is not addressed in the statute or
rule. It is the opinion of the Commission that the date for computation of the
credit period will be based upon the date of the invoice if that date and
delivery are the same, and on the delivery date of the invoice is dated before
the date of delivery.
Section 5/6-5 further provides that every manufacturer, importing distributor
and distributor shall submit to this Commission, by Thursday of each week, a
verified written list of the names and addresses of each retail liquor licensee
purchasing spirits or wine from such entity which, on the first business day of
that calendar week, was delinquent beyond the permissible merchandising credit
period of 30 days. A verified written statement that no such retail liquor
licensee was then delinquent beyond such permissible merchandising credit period
should also be filed. Such entities shall also submit to the State Commission a
verified written list of the names and respective addresses of each previously reported delinquent retail liquor licensee which has cured such delinquency by
payment, not later than the second full business day following the day such
delinquency was cured.
Such written reports shall be posted by the Commission in each of its offices,
available for public inspection, not later than the day following receipt, and
such reports constitute notice to every manufacturer, importing distributor and
distributor of the information contained therein. Actual notice to such entities
of the information contained in the posted reports, shall also constitute notice
of the information.
In addition to other methods allowed by law, payment by check during the period
for which merchandising credit may be extended shall be considered payment. All
checks received in payment for alcoholic liquor shall be promptly deposited for
collection [Regulation 100.90(c)]. A post-dated check or a check dishonored on
presentation for payment is not deemed to be payment.
Regulation 100.90 further states in relevant part that: (e) where a bona fide dispute exists between the retailer and the wholesaler as to the fact of payment of a given sale, the sale itself shall not be sufficient grounds for considering the retailer delinquent; (f) where a retailer pays a salesman, or other agent of the wholesaler, such payment is effective upon receipt of the money or check by the salesman or agent; (g) even though a retailer is delinquent and not able to purchase any alcoholic liquors for cash, or otherwise, the retailer may purchase beer for cash; (h) payment from a delinquent retailer after the first business day of the week and before a verified written statement of delinquency has been submitted
entitles the manufacturer, importing distributor or distributor submitting to
delete that retailer’s name from the list;
(i) determinations of delinquency shall be made by the Chairman, Executive
Director or any individual authorized by them on the basis of the verified
report of delinquency and any affidavits or counter-affidavits submitted, and
any licensee objecting to the determination may make a written request for a
hearing at the next regularly scheduled meeting of the Commission; and
(j) a copy of any verified written list of delinquencies shall be simultaneously
forwarded to the licensees listed therein by the manufacturer, importing
distributor or distributor submitting such list.
Regulation 100.240 deals with transactions involving the use of checks and their
equivalent and specifically prohibits the selling or furnishing of alcoholic
liquor at retail to any person on credit or on a passbook, or order on a store,
or in exchange for any goods, wares or merchandise, or in payment for any
services rendered. But the use of money orders, traveler’s checks, drafts or
checks or the equivalent of any of them not be considered the extension of
credit so long as same are not postdated, and promptly deposited and collected
in due course. “funds, provided the transfer is initiated by an irrevocable
payment order on or before delivery of the alcoholic liquor.
A. Extension Of Credit
Distributors may extend credit to retailers for the purchase of alcoholic liquors for a period of time not to exceed 30 days, except that payment for beer purchases by the retailer be made in cash or its equivalent, on or before the delivery of the beer.
B. Methods Of Payment
A retailer has not been discharged from its obligation to the distributor until
the distributor has been paid in cash or its equivalent. The following are
considered as cash equivalents:
- Checks, including money orders, traveler’s checks, drafts, certified
checks, cashier’s checks or teller’s checks so long as they are not post-dated, and if honored by the retailer’s bank in the ordinary course of business. The distributor’s obligation is to promptly deposit checks for collection.
- Electronic fund transfers provided the transfer of funds is initiated by an irrevocable payment order on or before delivery of the alcoholic liquor. In computing the 30-day period, if the funds are withdrawn from the retailer’s account on the 30th day, the fact that the funds are not deposited into the distributor’s account until the 31st day is immaterial.
- Credit cards may be used to purchase wine and spirit products. Any widely recognized credit card, including but not limited to Visa, MasterCard, American Express, Discovery and Diners Club, may be utilized. [Sec. 5/6-19, Sales on Credit – Exceptions as to Clubs and Motels, which controlled credit relationships between retailers and consumers was repealed by P.A. 90-432, eff. 1/1/98. The final sentence of Sec. 5/6-19 stated, “(T)hat nothing herein shall be construed to prevent payment by credit card or other credit device for the purchase of liquor in the original package or container for consumption off the premises.]
C. Calculation of Payment Period
The first day of calculation begins with the day after the date of delivery
(invoice date) and includes each successive date subsequent, including Sundays and holidays, to the 30 day limit. In the event that the delivery of the product is subsequent to the invoice date, the actual delivery date will be the
first day for the purpose of calculation. The date of delinquency shall be the
first day after the 30 day period, or the 31st day. Receipt of any cash
equivalent by a salesman or other agent of the distributor, is considered as
being effective immediately upon receipt. For purchases of wine and spirits, a
post-dated check which is cleared prior to the end of the 30 day credit period,
including any properly disclosed finance charges, is considered to be a valid
payment. Also, an “NSF,” void, or stop payment check, for purchases of wine and
spirits, which is properly replaced with cash or cash equivalent before the end of the 30 day period, including any properly disclosed finance and bank charges,
is considered to be valid payment.
D. Additional Finance and Bank Charges
Finance charges on credit issued and bank charges for NSF, void, or stop-payment
checks are considered to be standard business practices. Distributors may
include finance charges, other usual and customary charges in the industry and
bank charges provided:
- A statement is printed on the original invoice which is delivered to the
retailer at the time the merchandise is received indicating such finance and
bank charges shall be assessed, with a statement specifying the terms and
amounts of charges imposed.
- Finance and bank charges must be within prescribed legal limits. Any such
finance or bank charges which have been properly disclosed to the retailer are
considered to be part of the cost of the merchandise as of the invoice date, and
therefore the entire amount, including any finance or bank charges, must be paid
before the retailer can be considered to be non-delinquent.
- If a distributor engages in the practice of adding a finance or bank charge,
such charges must be added to all accounts, and may not be waived for any
- All provisions of Section 5/6-5 remain effective whether or not the
distributor chooses to impose finance or bank charges.
A retailer making payments via electronic transfer of funds may not charge the
distributor for the costs of such transfer, nor may a distributor charge the
retailer for the distributor’s bank charges for electronic transfer. Such
transfers are considered to be for the benefit of each, and therefore as other
acceptable payment methods are available, each party need not bear the other
party’s burden of such transfers.
E. Delinquency List
Section 5/6-5 of the Illinois Liquor Control Act and Regulation 100.90 provide for the existence and maintenance of the delinquency list. The general parameters of the list are stated above, and the Statute and Regulation should be consulted for additional information.
Although being listed as delinquent is not a violation of the Liquor Control Act, purchasing while delinquent is. For this reason, particular attention will be paid to those licensees who have been delinquent for an extended period of time, and the Commission will conduct investigations into licensees delinquent beyond the 30 days allowable on a case-by-case basis.
F. Bona Fide Disputes
Any party to the transaction may request a dispute be determined to be “bona fide.” This Commission shall, on a case-by-case basis, be the determiner of
whether the circumstances surrounding a commercial transaction require the
retailer be placed on the delinquent list [100.90(i)]. This Commission, upon
submission of the matter to it, in sufficient time to conduct its investigation before the expiration of the 30-day period, shall look at the facts surrounding the matter, including the retail liquor licensee’s oral or written statements, oral or written statements of the distributor, documentation, etc., questioning the payments, or lack thereof. The Commission cautions all parties that an oral submission of a dispute may be a wholly insufficient basis for the Commission to make such a requested determination. Documentation is the suggested method of submission, which may include invoices, affidavits, or other written or tangible items. If the Commission initially determines that a bona fide dispute does or does not exist, the licensee which continues to maintain the opposite position shall be entitled to a formal hearing, upon written request.
G. “Common Ownership”
Rule 100.90 (a) states that licenses which are owned in “common ownership” will all be declared delinquent if one such license is declared delinquent. Neither the statute nor rule defines the concept of “common ownership.”
The Commission has reviewed the following Illinois statutes which deal with
joint or common forms of ownership:
35 ILCS 5/ Illinois Income Tax Act Illinois Compiled Statutes, Revenue, Illinois Income Tax Act ARTICLE 15. DEFINITIONS AND RULES OF INTERPRETATION. (35 ILCS 5/1501)
Common ownership in the case of corporations is the direct or indirect control or ownership of more than 50% of the outstanding voting stock of the persons carrying on unitary business activity.
30 ILCS 168/ Tobacco Product Manufacturers' Escrow Act Illinois Compiled
Statutes, Finance, Tobacco Product Manufacturers' Escrow Act
"Affiliate" means a
person who directly or indirectly owns or controls, is owned or controlled by,
or is under common ownership or control with, another person. Solely for
purposes of this definition, the terms "owns", "is owned", and "ownership" mean
ownership of an equity interest, or the equivalent thereof, of 10% or more, and
the term "person" means an individual, partnership, committee, association, corporation, or any other organization or group of persons.
625 ILCS 5/ Illinois Vehicle Code Illinois Compiled Statutes, Vehicles, Illinois
ARTICLE I. DEALERS (625 ILCS 5/5-101) Sec. 5-101
(b) An application for a motor vehicle financing affiliate's license must be
filed with the Secretary of State, duly verified by oath, on a form prescribed
by the Secretary of State and shall contain all of the following:
(3) A list of the business organization's officers, directors, members, and
shareholders having a 10% or greater ownership interest in the business,
providing the residential address for each person listed.
765 ILCS 1005/ Joint Tenancy Act Illinois Compiled Statutes, Property, Joint
Sec. 2.(a) When a deposit in any bank or trust company transacting business in this State has been made or shall hereafter be made in the names of 2 or more persons payable to them when the account is opened or thereafter, the deposit or
any part thereof or any interest or dividend thereon may be paid to any one of
those persons whether the other or others be living or not, and when an
agreement permitting such payment is signed by all those persons at the time the
account is opened or thereafter the receipt or acquittance of the person so paid
shall be valid and sufficient discharge from all parties to the bank for any
payments so made. (b) When shares of stock, bonds or other evidences of
indebtedness or of interest are or have been issued or registered by any
corporation, association or other entity in the names of 2 or more persons as
joint tenants with the right of survivorship, the corporation, association or
other entity and their respective transfer agents may, upon the death of any one
of the registered owners, transfer those shares of stock, bonds, or other
evidences of indebtedness or of interest to or upon the order of the survivor or survivors of the registered owners, without inquiry into the existence, validity
or effect of any will or other instrument in writing or the right of the
survivor or survivors to receive the property, and without liability to any
other person who might claim an interest in or a right to receive all or a
portion of the property so transferred.
(765 ILCS 1005/3) Sec. 3.
Except as otherwise provided in this Act, all joint obligations and covenants
shall be taken and held to be joint and several obligations and covenants.
(Source: Laws 1919, p. 633.) (765 ILCS 1005/4) Sec. 4. If any person shall
assume and exercise exclusive ownership over, or take away, destroy, lessen in
value, or otherwise injure or abuse any property held in joint tenancy or
tenancy in common , the party aggrieved shall have his civil action for the
injury in the same manner as he would have if such joint tenancy or tenancy in
common did not exist. (Source: Laws 1935, p. 936.)
The Commission, having considered the foregoing statutory authority, and the
ownership threshold established by the Liquor Control Act, concludes that for
the purposes of determining whether licenses will be declared delinquent under
Sec. 5/6-5 and Rule 100.90, that “common ownership” shall be any ownership
interest of “more than 5%” of the total ownership interests in such licenses.
H. Bankruptcy of Retailer
In the event any bankruptcy proceeding is instituted by or against a retail
liquor licensee, the “automatic stay” provision of federal bankruptcy law
prohibits a change in the financial circumstance of that licensee. Simply
stated, this means that the retailer shall not be reported “delinquent” under
Sec. 5/6-5 of the Act; if the retailer has already been reported delinquent,
that delinquency shall not be effective. The retailer shall not be required to
pay any outstanding bill for alcoholic liquors, and no attempts to collect such
a debt are valid. (See In Re: William Tell, Inc., Bankrupt. William Tell Ii,
Inc., Appellee, v. State of Illinois Liquor Control Commission, Appellant,
United States District Court For The Northern District of Illinois, Eastern
Division, 38 B.R. 327; 1983 U.S. Dist. LEXIS 16665; 11 Collier Bankr. Cas. 2d
(MB) 235, May 26, 1983)
In order for the retailer to continue to purchase alcoholic liquors, the following steps are necessary:
- Filing of the Bankruptcy petition
- Filing of a Motion to Stay the application of Sec. 5/6-5
- Entry of an Order by the Bankruptcy Court directing:
- That the application of Sec. 5/6-5 against the retailer is stayed.
- That the retailer shall be allowed to purchase alcoholic liquors “for
- Service of Motion and Order upon the Commission and the Wine and Spirits
Distributors of Illinois.
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