Website Tip results in seizure of $1MM of JD

[pepcycle]

http://www.foxnews.com/story/0,2933,307608,00.html

How scare is this?

Let me see now. B-F says these are collector's who purchased the whiskey legally and then sell it and share it amongst themselves.

Sounds familiar.

Is the Gazebo to be raided next???

[luv2hunt]

But it says "illegal" untaxed whiskey, which leads me to believe that this is not whiskey purchased by someone and then kept as a collectors item....future investment. Come on....if you have a warehouse full of stuff, you've been stealing from somewhere! A distillary employee? A distributor? A liquor store owner? Somebody's in big trouble!! And can you believe they're going to DUMP it all? The least they could do is donate it to the Getz for auction!!

What gives them the right to destroy it anyway? I mean....it's not like they found cocaine....or something totally illegal to own?

Dawn

[barturtle]

The ABC would make more money auctioning it all off...that would be one way to help recoup the costs of running the office.

[craigthom]

It's unclear why it is illegal, other than being untaxed. How many of us have bottles from other countries for which US taxes weren't paid?

[HighTower]

This raid netted bottles that were there to be signed for collector's from all over the world. Randy Piper owns Cowboy Jacks, and this raid cost him about $2 million.

I know guys that were over there for the BBQ, and people over here that had bottles amongst that stash, that were there for a signing. These guys buy Barrels of Jack at a time, and they pick certain dates for them to be bottled, like 07-07-07 and get people like Jimmy Bedford and Frank Bobo to sign them.

They even took the personal collection from Sulley's Store, which I think is just :shithappens:

Is this going to be the future for collectors? They can't get together on a website and then go and meet up in the likes of Bardstown and swap bottles with their friends?

I feel for these guys, I really do. Lots of people have lost lots of money, here.

The collector's forum in question is a site not unlike this one, with some of the biggest JD collectors in the world on there.

Scott

[TNbourbon]

A couple of points regarding Tennessee (and, understand, I'm not an advocate here, just an interested resident -- these are 'like-it-or-not' facts):

• it is a felony to import or export alcohol across the Tennessee state line unless one is a state-licensed distributor. Period. True, it's a law rarely enforced, but a law nonetheless;
  
• Moore County is 'dry'. Period. If any money was changing hands for liquor in Moore County -- whether privately among collectors, or at 'retail', open-market or black-market (outside of exempted, on-site Jack Daniel's Distillery collectible bottles) -- it was an illegal transaction.
  

These facts/laws are long-standing, and a secret to no one. I certainly don't support what appears to be state heavy-handedness in raiding what seems clearly to be collectibles, not an active retail market. It's a cold slap to all of us who 'collect' whiskey, especially here in Tennessee, and I hope the whiskey is returned to legitimate owners. Still, when one skirts around plain law, it should be with an understanding of the possible consequences.

[ILLfarmboy]

A couple of points regarding Tennessee (and, understand, I'm not an advocate here, just an interested resident -- these are 'like-it-or-not' facts):

• it is a felony to import or export alcohol across the Tennessee state line unless one is a state-licensed distributor. Period. True, it's a law rarely enforced, but a law nonetheless;
  
• Moore County is 'dry'. Period. If any money was changing hands for liquor in Moore County -- whether privately among collectors, or at 'retail', open-market or black-market (outside of exempted, on-site Jack Daniel's Distillery collectible bottles) -- it was an illegal transaction.

These facts/laws are long-standing, and a secret to no one. I certainly don't support what appears to be state heavy-handedness in raiding what seems clearly to be collectibles, not an active retail market. It's a cold slap to all of us who 'collect' whiskey, especially here in Tennessee, and I hope the whiskey is returned to legitimate owners. Still, when one skirts around plain law, it should be with an understanding of the possible consequences.

All very true. I have often thought if laws like this were rigorously enforced it might ultimately lead to their repeal. Overall lax enforcement combined with prejudicial "targeted" enforcement leads to law enforcement abuse and public apathy and ultimately keeps bad laws on the books.

[luv2hunt]

Somebody explain to me how they were "untaxed"? I don't understand. A collector would have legally bought it from somewhere in the first place. I don't believe I have to collect or pay tax on a personal collectible when I sell it in the future?? Am I wrong? I'm not selling retail?? I'm selling a personal item??

[barturtle]

Well, I'm not sure. But if they were export and duty wasn't paid when brought back into the states...

[gothbat]

Details seem to be hard to come by but what I'm getting is that they just screwed a bunch of collectors on some frivolous, but certainly real:

it is a felony to import or export alcohol across the Tennessee state line unless one is a state-licensed distributor. Period.

technicality? That sucks and, as I usually comment about things like this, that's the government for ya!

[TNbourbon]

Somebody explain to me how they were "untaxed"? I don't understand. A collector would have legally bought it from somewhere in the first place. I don't believe I have to collect or pay tax on a personal collectible when I sell it in the future?? Am I wrong? I'm not selling retail?? I'm selling a personal item??

Dawn, Tennessee doesn't have a state income tax. Its property taxes are relatively low. What Tennessee DOES have is a very high, regressive sales tax, on everything from food to diapers and, of course, liquor. From a legal standpoint, if you visit me in Tennessee and I pass on to you a bottle of Stagg I just bought around the corner at Oasis Wine & Spirits, it doesn't matter that I've already paid sales tax on it -- I'm still expected to collect and pay to the state a tax on my sale to you. The sale took place in Tennessee. (Sure, no one cares about yard-sale items, etc., but something as highly-regulated as liquor gets cut no slack. Liquor, too, after all, is highly taxed in Tennessee.)

Additionally, Tennessee is one of many states with a 'use' tax, which essentially is a sales tax on out-of-state purchases. If I drive to Kentucky and buy VROHH 10yo BIB, I'm supposed to pay the difference between Tennessee's sales tax (9.25% in my county) and what I paid in Kentucky (0%). The fact that this use tax is collected only on the honor system doesn't make it any less a legal requirement.

So, if a collector sends/brings his JD bottle to Metropolitan Moore County/Lynchburg to be signed by Jimmy Bedford, then sells it to a fellow collector, it's the triple-whammy -- not only did he/she import it illegally, it can't be sold in 'dry' Moore County, and sales tax is due on the transaction!

[ILLfarmboy]

Somebody explain to me how they were "untaxed"? I don't understand. A collector would have legally bought it from somewhere in the first place. I don't believe I have to collect or pay tax on a personal collectible when I sell it in the future?? Am I wrong? I'm not selling retail?? I'm selling a personal item??

That part stumped me too. But then You have to look at it from the perspective of a money grubbing bureaucrat. As Tim said it is a felony to import alcohol into Tennessee unless you are a state-licensed distributor. And a state licensed distributer would have payed or collected a tax from the end consumer remitting the money to the state. So, because the whiskey was brought into the state illegally the state didn't get "their cut" so in their eyes its untaxed whiskey.

[ILLfarmboy]

... if you visit me in Tennessee and I pass on to you a bottle of Stagg I just bought around the corner at Oasis Wine & Spirits, it doesn't matter that I've already paid sales tax on it -- I'm still expected to collect and pay to the state a tax on my sale to you. The sale took place in Tennessee. (Sure, no one cares about yard-sale items, etc., but something as highly-regulated as liquor gets cut no slack. Liquor, too, after all, is highly taxed in Tennessee.)........

.....................So, if a collector sends/brings his JD bottle to Metropolitan Moore County/Lynchburg to be signed by Jimmy Bedford, then sells it to a fellow collector, it's the triple-whammy -- not only did he/she import it illegally, it can't be sold in 'dry' Moore County, and sales tax is due on the transaction!

So all private sales of all things technically require the seller to collect a tax? That sucks! I thought ILL. was bad requiring you to pay a sales tax on used automobiles!

The part about a tax due on "an illegal transaction" sounds a lot like the federal marijuana tax/stamp. :bigeyes:

[gblick]

it is a felony to import or export alcohol across the Tennessee state line unless one is a state-licensed distributor. Period.

So if I decide to move to Tennessee, I can't bring my bunker with me?

[TNbourbon]

So if I decide to move to Tennessee, I can't bring my bunker with me?

From a strictly legal standpoint, only if you pay the local distributor for each item what would be/have been his cut had it gone through the 3-tier system here. That ensures that the appropriate state 'sin' tax has been paid, because the distributor will make sure you pay it -- he's not going to. Obviously, they only enforce such inanities when the economics make it worthwhile. Apparently, two storage buildings of collectible whiskey is deemed 'worthwhile'.

As I've noted in this and various other threads here over the years, these are laws that are rarely enforced -- but laws nonetheless. And when they're enforced, it's ALWAYS about collecting taxes, because Tennessee -- much like the pre-Prohibition U.S. -- relies on excise (sales) taxes for its revenue.

Tennessee this year raised its tax, for example, on a pack of cigarettes 60 cents, a near-tripling of the previous tax. We are a long, skinny state bordered by 8 other states -- including a long border with Kentucky, which has a much lower tobacco tax. Tennessee revenue agents currently are sitting in Kentucky-border convenience store parking lots and signaling the state highway patrol when folks in cars with Tennessee plates head south with more than the legal limit of cigarette cartons (2) for personal use:

http://www.tennessean.com/apps/pbcs.dll/article?AID=2007711030351. Note the next-to-last paragraph:

"...'People forget the Department of Revenue is a significantly sized department — there's 1,200 employees, almost a $100 million budget," he said. "It's nothing for us to pull 10 agents and focus on something. We do it all the time.'

Farr also said he expects lower-than-projected cigarette tax collections to rebound soon..."

So, things like the Jack Daniel's seizure is pretty much business as usual here.

[craigthom]

Liquor laws are weird ones. I'm driving to Georgia for Thanksgiving, and I'm carrying a bunch of bourbon for a fun little get-together with my brothers. I will be on my best behavior driving through Tennessee and Georgia.

[Phischy]

What's the make, model and license plates on your car?

I'm .... uh... just curious.

[cowdery]

Tim explained the situation very well. Some of the other confusing elements probably can be attributed to bad reporting.

In short, a sales tax, depending on how it's written, is a tax on all sales except those specifically exempted. Unlicensed means untaxed. Small private transactions are simply impossible to police, but when multi-million dollar enterprises are involved the taxman takes a big interest.

In Kentucky, the ABC has on a couple of occasions issued general warnings to people trying to re-sell their Maker's Mark commemorative bottles, just to let them know that the unlicensed sale of alcohol is illegal. The "sticky" notes on the subject here all contain that same caveat.

What I wonder about is Brown-Forman and whether or not anyone officially associated with the distillery will be implicated. Brown-Forman doesn't own everything in Lynchburg, just almost everything. The fact that it was happening doesn't surprise me but the fact that it was happening in Lynchburg does, to some extent.

I find it doubtful that anyone involved in these enterprises was unaware that what they were doing is illegal.

[TNbourbon]

Here are the relevant Tennessee statutes:

http://www.wineinstitute.org/programs/shipwine/reference/tennessee_felony_statutes.htm

[luv2hunt]

So, any further local news on this?

[TNbourbon]

So, any further local news on this?

Not a peep after the original story here Friday.

[cowdery]

Thanks for the link to the statutes, Tim. There are some things there I don't quite understand, but here is a pretty clear statement that would seem to apply to this case: "It is unlawful for any person, firm, corporation or association to possess untaxed alcoholic beverages as defined in § 57-3-101 in this state in quantities in excess of three gallons (3 gals.) in either wet or dry counties. A violation of this subsection is a Class E felony."

I checked § 57-3-101 and while it defines "alcoholic beverages" it does not define "untaxed" or "taxed." Therefore, we have to assume that possession of more than 15 750ml bottles of Jack (i.e., more than three gallons) on which any state tax has not been paid is a Class E felony. Bottles purchased from a person who did not charge and pay any required state taxes, such as but not limited to the sales tax, including bottles purchased outside of Tennessee, would therefore be considered "untaxed."

Bottles known not to be sold in the United States would have to have arrived in those storage spaces without any Tennessee tax ever being paid on them except, of course, by the producer, unless the possessor was a licensed entity licensed to purchase them from the producer. Therefore, their presence is prima facie evidence of a violation, which permits their seizure.

Now they just have to determine who "possessed" them. Notice that no arrests were announced, just the seizure. The Fox story said "authorities ... received permission to search (the) two storage buildings." Who gave them permission? Probably some guy who is rolling over on his partners in exchange for a deal even as we speak. Waterboarding, anyone?

The ABC agent on the scene said just enough to establish that that the items found had to be contraband. I note that the state police were not present, so it's being treated as an ABC matter.

Where this could conceivably affect someone reading this who resides in Tennessee is that if you possess a lot of alcoholic beverages -- say, whiskey -- say, more than three gallons worth -- and you can't prove you paid all the required taxes on it by, for example, producing sales receipts from licensed Tennessee alcohol retailers, then all of your whiskey could be seized and you could be charged with a Class E Felony under TCA 57-3-401(a), at the very least. If more than 15 750ml bottles are items that were never sold legally in Tennessee, that will serve as prima facie evidence of the violation.

In other words, unless they make all of their transactions through licensed Tennessee retail channels, whiskey collectors are felons in Tennessee.

We've now established that a million dollar collection is worth busting. Is a $500,000 collection worth busting? How about $100,000?

Something to think about.

[craigthom]

If more than 15 750ml bottles are items that were never sold legally in Tennessee, that will serve as prima facie evidence of the violation.

In other words, unless they make all of their transactions through licensed Tennessee retail channels, whiskey collectors are felons in Tennessee.

Unless one pays the tax oneself, although I don't know if just paying the use (sales) tax would be enough for them. They may also require a liquor tax.

[HighTower]

So, any further local news on this?

Here's the first news story just after the raid, even has a video.

Scott

[luv2hunt]

UH....I'd say they made a business out of it! There wasn't any small fry enthusiast stuff going on there!! HA! I hope they get all the opportunistic e-bay businesses too!

Dawn