GUIDELINES TO THE STATE OF ILLINOIS 30-DAY CREDIT LAW
INTRODUCTION
The state 30-day Credit Law, although simple in concept, is operationally somewhat complicated. In order to assure against technical or negligent violations, books and records must be kept meticulously, and thorough clerical procedures must be established and maintained.
This office has prepared and regularly updated this document as a basic guideline for our member companies and subscribers. It is derived from three sources: the statute, the supplementing regulations, and precedent (past practice). As well, it takes into account the current Illinois Liquor Control Commission standard of zero tolerance for error or omission.
This document is divided into two parts. Part I quotes the applicable laws and regulations. Part II is a statement of reporting, clerical and bookkeeping requirements in outline form, expanded or explained where clarification is considered necessary.
The complexity of business suggests that no regulation or interpretation can be all-encompassing, and that newly complex questions are guaranteed to present themselves from time to time. As they do, they will be resolved and this document will be supplemented accordingly.
Where operational requirements are uncertain, it will be so stated, with the very strong recommendation that company personnel who are responsible for compliance consult with the Executive Director in the decision making process. It cannot be over emphasized that where there is any reason whatsoever as to compliance, the question should be directed to the Executive Director by the executive bearing the responsibility for compliance. This responsibility should not be delegated, nor should discussions between company and Wine and Spirits personnel be utilized for any purpose other than fact-finding.
PART I. THE LAW
The Illinois Liquor Control Act (Former Section 122): now Section 5/6-5.
Except as otherwise provided in this Section, it is unlawful for any person having a retailer's license or any officer, associate, member, representative or agent of such licensee to accept, receive or borrow money, or anything else of value, or 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, or from any person connected with or in any way representing, or from any member of the family of, such manufacturer, importing distributor, distributor or wholesaler, or from any stockholders in any corporation engaged in manufacturing, distributing or wholesaling of such liquor, or from any officer, manager, agent or representative of said manufacturer. Except as provided below, it is unlawful for any manufacturer or distributor or importing distributor to give or lend money or anything of value, or otherwise loan or extend credit (except such merchandising credit) directly or indirectly to any retail licensee or to the manager, representative, agent, officer or director of such licensee. A manufacturer, distributor or importing distributor may furnish free advertising, posters, signs, brochures, hand‑outs, or other promotional devices or materials to any unit of government owning or operating any auditorium, exhibition hall, recreation facility or other similar facility holding a retailer's license, provided that the primary purpose of such promotional devices or materials is to promote public events being held at such facility. A unit of government owning or operating such a facility holding a retailer's license may accept such promotional devices or materials designed primarily to promote public events held at the facility. No retail licensee delinquent beyond the 30 day period specified in this Section shall 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 licensee; provided that the purchase price of all beer sold to a retail licensee shall be paid by the retail licensee in cash on or before delivery of the beer, and unless the purchase price payable by a retail licensee for beer sold to him in returnable bottles shall expressly include a charge for the bottles and cases, the retail licensee shall, on or before delivery of such beer, pay the seller in cash a deposit in an amount not less than the deposit required to be paid by the distributor to the brewer; but where the brewer sells direct to the retailer, the deposit shall be an amount no less than that required by the brewer from his own distributors; and provided further, that in no instance shall this deposit be less than 50 cents for each case of beer in pint or smaller bottles and 60 cents for each case of beer in quart or half‑gallon bottles; and provided further, that the purchase price of all beer sold to an importing distributor or distributor shall be paid by such importing distributor or distributor in cash on or before the 15th day (Sundays and holidays excepted) after delivery of such beer to such purchaser; and unless the purchase price payable by such importing distributor or distributor for beer sold in returnable bottles and cases shall expressly include a charge for the bottles and cases, such importing distributor or distributor shall, on or before the 15th day (Sundays and holidays excepted) after delivery of such beer to such purchaser, pay the seller in cash a required amount as a deposit to assure the return of such bottles and cases. Nothing herein contained shall prohibit any licensee from crediting or refunding to a purchaser the actual amount of money paid for bottles, cases, kegs or barrels returned by the purchaser to the seller or paid by the purchaser as a deposit on bottles, cases, kegs or barrels, when such containers or packages are returned to the seller. Nothing herein contained shall prohibit any manufacturer, importing distributor or distributor from extending usual and customary credit for alcoholic liquor sold to customers or purchasers who live in or maintain places of business outside of this State when such alcoholic liquor is actually transported and delivered to such points outside of this State. No right of action shall exist for the collection of any claim based upon credit extended to a distributor, importing distributor or retail licensee contrary to the provisions of this Section. Every manufacturer, importing distributor and distributor shall submit or cause to be submitted, to the State Commission, in triplicate, not later than Thursday of each calendar week, a verified written list of the names and respective addresses of each retail licensee purchasing spirits or wine from such manufacturer, importing distributor or distributor who, on the first business day of that calendar week, was delinquent beyond the above mentioned permissible merchandising credit period of 30 days; or, if such is the fact, a verified written statement that no retail licensee purchasing spirits or wine was then delinquent beyond such permissible merchandising credit period of 30 days. Every manufacturer, importing distributor and distributor shall submit or cause to be submitted, to the State Commission, in triplicate, a verified written list of the names and respective addresses of each previously reported delinquent retail licensee who has cured such delinquency by payment, which list shall be submitted not later than the close of the second full business day following the day such delinquency was so cured. Such written verified reports required to be submitted by this Section shall be posted by the State Commission in each of its offices in places available for public inspection not later than the day following receipt thereof by the Commission. The reports so posted shall constitute notice to every manufacturer, importing distributor and distributor of the information contained therein. Actual notice to manufacturers, importing distributors and distributors of the information contained in any such posted reports, however received, shall also constitute notice of such information. The 30 day merchandising credit period allowed by this Section shall commence with the day immediately following the date of invoice and shall include all successive days including Sundays and holidays to and including the 30th successive day. In addition to other methods allowed by law, payment by check during the period for which merchandising credit may be extended under the provisions of this Section shall be considered payment. All checks received in payment for alcoholic liquor shall be promptly deposited for collection. A post dated check or a check dishonored on presentation for payment shall not be deemed payment. A retail licensee shall not be deemed to be delinquent in payment for any alleged sale to him of alcoholic liquor when there exists a bona fide dispute between such retailer and a manufacturer, importing distributor or distributor with respect to the amount of indebtedness existing because of such alleged sale. A delinquent retail licensee who engages in the retail liquor business at 2 or more locations shall be deemed to be delinquent with respect to each such location. The license of any person who violates any provision of this Section shall be subject to suspension or revocation in the manner provided by this Act. If any part or provision of this Article or the application thereof to any person or circumstances shall be adjudged invalid by a court of competent jurisdiction, such judgment shall be confined by its operation to the controversy in which it was mentioned and shall not affect or invalidate the remainder of this Article or the application thereof to any other person or circumstance and to this and the provisions of this Article are declared severable. (Source: P.A. 83‑762.)
Section 5/10-1(c) and (d). Violations, Penalties, Searches and Seizures
(c) Any person who shall make any false statement or otherwise violates any of the provisions of this Act in obtaining any license hereunder, or who having obtained a license hereunder shall violate any of the provisions of this Act with respect to the manufacture, possession, distribution or sale of alcoholic liquor, or with respect to the maintenance of the licensed premises, or shall violate any other provision of this Act, shall for a first offense be guilty of a petty offense and fined not more than $500, and for a second or subsequent offense shall be guilty of a Class B misdemeanor.
(d) Each day any person engages in business as a manufacturer, foreign importer, importing distributor, distributor or retailer in violation of the provisions of this Act shall constitute a separate offense.
(Source: P.A. 90‑739, eff. 8‑13‑98; 91‑239, eff. 1‑1‑00.)
Section 5/10-3. Act of agent or employee…
Every Act or omission of whatsoever nature constituting a violation of any of the provisions of this Act, by any officer, director, manager or other agent or employee of any licensee, shall be deemed and held to be the act of such employer or licensee, and said employer or licensee shall be punishable in the same manner as if said act or omission had been done or omitted by him personally. (Source: P.A. 82‑783.)
LIQUOR CONTROL COMMISSION RULES AND REGULATIONS
Rule 9. (Section 100.90 IL. ADM. CODE) Credit to Retail Licensees
The following rule shall govern in the application of the provisions of Section 6-5 of the Act [235 ILCS 5/6-5] relating to extension of credit to retail licensees by manufacturers, distributors and importing distributors:
a) Where two or more retail licensees are controlled by common ownership and one or more of the retail licensees becomes delinquent, all retail licensees under the common ownership shall be deemed delinquent.
b) In totaling the 30 day period for the purpose of determining the delinquency of a retail licensee, the first day shall be the day immediately following the date of the invoice of the purchase in question, and all successive days shall be included, Sunday as well as holidays, up to and including the thirtieth successive day.
c) Payment by check on or before the thirtieth day following the date of the invoice shall be considered payment, providing the check is deposited and cleared within the period prescribed by the ordinary course of business.
d) Where a bona fide sale of a retail business occurs, the purchaser shall not be deemed delinquent because of the delinquency of the purchaser's predecessor in interest; however, in the event there is a continuity of interest, direct or indirect, between the seller and the purchaser, the latter shall be deemed delinquent in the same manner, and to the same extent, as was the seller.
e) Where there exists a bona fide dispute between the retail licensee and the wholesale licensee as to the fact of payment for a given sale, the sale in itself shall not be deemed sufficient grounds for considering the retail licensee delinquent.
f) Where a retail licensee pays a salesman, or other agent of the wholesaler, the payment shall be deemed effective upon the receipt of the money or check by the salesman or other agent.
g) Where a retail licensee is deemed delinquent and, therefore, not able to purchase for cash, or otherwise, any alcoholic liquors, the retail licensee may, nevertheless, purchase beer for cash.
h) Payment received from a delinquent retailer after the first business day of the calendar week and before a verified written statement of delinquency has been submitted to the Commission will entitle the manufacturer, importing distributor or distributor submitting the list to delete that retailer's name from the list.
i) Determinations of delinquency or non-delinquency shall be made by the Chairman, Executive Director or any individual so authorized by the Chairman or Executive Director on the basis of the verified report of delinquency and any affidavits or counter-affidavits before him or her. Any licensee objecting to such determination may request the Commission in writing for a hearing which will be set at the next regularly scheduled meeting of the Commission.
j) A copy of any verified written list of delinquencies shall be simultaneously forwarded to those licensees listed therein by the manufacturer, importing distributor or distributor submitting the list.
k) Payment in cash by the retail licensee shall mean payment in legal tender as provided by the United States Code, checks (including certified checks, cashier's checks, teller's checks or traveler's checks), debit cards, drafts and electronic transfer of funds, provided the transfer of funds is initiated by an irrevocable payment order on or before delivery of the alcoholic liquor.
(Source: Amended at 23 Ill. Reg. 3787, effective March 15, 1999)
Rule 3. (Section 100.30 IL. ADM. CODE) Violation of Federal Law, State Statute or City, Village or County Ordinance or Regulation.
a) No person holding a license issued by the Commission shall in the conduct of the licensed business or upon the licensed premises:
1) Violate any Federal law or State statute, 2) Violate any city, village, town or county ordinance or resolution regulating the sale of alcoholic liquors, 3) Suffer or permit a violation of any Federal law or law of the State of Illinois, or of any rule of the Commission, 4) Suffer or permit a violation of the city, village, town or county ordinance or resolution regulating the sale of alcoholic liquor.
b) Violations may be proved by evidence that the licensee has been convicted of a violation of a Federal law or a law of the State of Illinois in the conduct of the licensed business or upon the premises, or has been found guilty of violating any city, village, town or county ordinance or resolution regulating the sale of alcoholic liquors.
c) Proof before this Commission of facts which establish a violation of any Federal law, State statute, city, village, town or county ordinance or resolution or rule of the Commission, shall be sufficient cause for imposing a fine, revocation or suspension of any license issued by the Commission, irrespective of whether or not a conviction has been obtained in any court.
(Source: Amended at 23 Ill. Reg. 3787, effective March 15, 1999)
PART II. REPORTING, CLERICAL AND BOOKKEEPING REQUIREMENTS
1) Distributors are prohibited from delivering to retailers who are past due. Deliveries to retailers who have invoices more than 30 days old on the distributor’s books must cease as of the 31st day, irrespective of whether the retailer has been posted delinquent with the State.
(A) Aging. The 30-day period commences the day after the invoice date. It includes weekends and holidays and may in fact expire on a non-business day. Accordingly, distributors must age accounts so as to assure against an illegal sale, even if the 30-day period expires on a non-business day.
(B) Logging Payment. Payment is accomplished on the day cash or a check is delivered to a salesperson or other employee of the company. However, business records must be maintained which establish the actual date of delivery of payment. Accordingly, when a salesperson or driver receives payment of an invoice, in order for that payment to be regarded as the effective date of payment, (a) the employee must notify the house of its receipt; (b) this notification must be accurately and permanently logged by the company; and (c) the check must be currently dated. If the check is postdated, it should either be returned, or should not be reported or accepted as payment until the effective date of the check.
Allegations of non-compliance will be based both on the retailer’s record of payment and the distributor’s record of receipt. If the two contradict each other, it is vital that the distributor’s records can be shown to have been accurately maintained, particularly in the instance of a delivery which is dependent upon prior payment of a delinquent invoice to a driver or a salesperson. The above guidelines and standards should be meticulously observed, and for State purposes, the back-up records should be kept for two years.
(C) Posting and Depositing Payments. The Law requires that checks be “promptly deposited for collection.” Ordinary business practice would dictate that payments be posted and receipts deposited within 2 business days after receipt is logged. It is not clear whether the State will accept a practice where deposits are delayed for more than 2 days after receipt, as in the case of salespersons who hold receipts until Friday of each week.
(D) Employee Negligence or Defalcation. Under no conditions should employee tampering with retailer accounts be overlooked. A record should be made immediately of any such activity, particularly if it resulted in an apparent violation of the credit law. Appropriate action should be taken under a union contract, including action to terminate the employment where called for. It should be emphasized to drivers, salespersons and clerical personnel that checks must be examined for post-dating and may not be accepted as payment until the effective date of the check. Acts of employees are deemed to be acts of the licensee under Section 5/10-3. It would therefore seem prudent for employers to maintain strict controls over those employees involved in the operations, and initiate discharge action where an employee ignores these rules and guidelines.
2) Distributors must report all delinquent retailers to the State by Thursday of each week. Every Thursday, distributors must report those retailers who on the first business day of the week (ordinarily) Monday) became delinquent, meaning those retailers whose oldest invoices aged past 30 days since the prior Monday. The statute suggests that delinquent reports may be filed from Monday through Thursday but since it permits such reports to be withheld until Thursday, the latter has become the practice. However, failure to file a report by Thursday is non-compliance and cause for a citation, with exceptions otherwise noted herein.
(A) Preparing and filing the Report. Although the statute calls for triplicate filing of a “written list”, the Commission now accepts our electronically-produced delinquent list, designating reporting distributors for each reported retail location. The report slips or faxed and emailed lists received from the reporting distributors are maintained by the Wine and Spirits Distributors of Illinois as original filings.
Delinquent removals should be promptly faxed or emailed to the WSDI office for same day action. The WSDI offices will receive delinquent reports at anytime throughout the week. If a retailer pays before the delinquent list is published, it may be omitted from the list (Rule 9{h}). A report in the hands of WSDI for processing can be cancelled by telephone prior to 3:00 P.M. on Thursday with immediate follow-up documentation by fax or email to the WSDI office. All reports should be faxed or electronically submitted to WSDI. Phoned reports should be for errors and omissions only and must be followed up by faxed or emailed documentation. Error corrections which remove a retailer from the delinquent list (for reasons of erroneous reporting or those deemed as a bona fide dispute by the ILCC, for example) will be removed from the delinquent list by the WSDI office, published on our removal list, and will be posted on the WSDI website (www.wineandspiritsil.com) for review. If Thursday is a State holiday, then the reports are to be filed on the next business day. A copy of the delinquent report must be sent to the retailer (Rule 9{j}). If a distributor has no delinquent accounts, then he must file a “verified written statement that no retail licensee…was then delinquent…” (Sec. 5/6-5).
(B) Cross Reporting. The statute states that delinquent retailers with multiple licenses are delinquent at all locations (Sec. 5/6-5). Rule 9{a} extends cross reporting to all delinquent retail licensees “controlled by common ownership”, which has been interpreted as being 5% or more ownership in the same person. Corporate chains are automatically common ownership. WSDI has developed a cross-index of known multiple licensees which comes very close to identifying all retailer licensees under “common ownership”. Distributors are encouraged to report new multiple licensees as they are discovered.
(C) Bona Fide Disputes. The statute exempts a retailer from delinquency where, as a result of a specific sale or invoice, there is a “bona fide” dispute with the distributor as to the amount due. This presumes that there is a legitimate controversy over delivery or the amount invoiced. When a bona fide dispute is declared, the distributor should prepare a specific back-up record, noting that the invoice was not paid “because of a bona fide dispute under Section 5/6-5”, and should update the record until the dispute is resolved. This record should be readily available in case of an allegation of non-compliance by the Commission.
Certified bona fide disputes may be resolved at any time either by negotiation or court action. When this occurs, the distributor must promptly issue a credit memo in the amount of any reduction of an invoice amount.
Retailers who have been posted delinquent by a distributor may be removed from the list under the note: “bona fide dispute” if the latter turns out to be the case after the original posting.