Does Tennessee's rule that wholesalers must offer the same discounts and pricing terms to all retailers mean wholesalers cannot extend 10-day credit to liquor stores, because grocery store wine licensees must pay on delivery?

Plain-English summary

When Tennessee allowed grocery stores to start selling wine in 2014, the legislature added two new rules to the alcohol code:

1. Wholesalers must offer all retailers (liquor stores and grocery store wine licensees) the same discounts and pricing on the same terms in the same jurisdiction. Tenn. Code Ann. § 57-3-404(i).
2. Grocery store wine licensees must pay wholesalers in full at delivery, no credit allowed. Tenn. Code Ann. § 57-3-813.

But a pre-existing rule, Tenn. Code Ann. § 57-3-404(g), still let wholesalers extend up to 10 days' credit to retailers generally. A state senator asked the obvious puzzle: if every retailer has to get the same terms, and grocery store wine retailers can't get credit, does that mean wholesalers can't extend credit to liquor stores either?

The AG said no. Under standard rules of statutory construction (specific controls general, and statutes in pari materia are read together to avoid conflict), the specific rules about credit terms control over the general price-uniformity mandate. So wholesalers can continue to offer up to 10 days' credit to liquor retailers, even though they must take cash on delivery from grocery store wine licensees. A wholesaler also remains free, in any case, to demand cash on delivery from any retailer it chooses.

Currency note

This opinion was issued in 2016. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

Tennessee's alcoholic beverage code, Title 57, Chapter 3, regulates the wholesale-to-retail leg of the three-tier system. Three provisions in that chapter interact here:

• Tenn. Code Ann. § 57-3-404(g) (pre-existing): retailers and wholesalers may not sell alcoholic beverages on credit, except that wholesalers may sell on no more than 10 days' credit.
• Tenn. Code Ann. § 57-3-404(i) (added 2014): any discount or pricing made available to a retailer or retail food store wine licensee must be made available "on the same terms and conditions" to other retailers and food store wine licensees within the same jurisdiction.
• Tenn. Code Ann. § 57-3-813 (added 2014): a wholesaler may not sell "any product to a retail food store wine licensee on credit," and "payment for all sales to such licensee by a wholesaler shall be effected upon delivery of the product."

The textual puzzle the senator surfaced is real. Credit terms can function like a discount: a buyer who can pay 10 days after delivery enjoys 10 days of interest-free working capital. If § 57-3-404(i) requires the same "terms and conditions" for all retailers, and § 57-3-813 bars credit to grocery store wine licensees, one reading is that uniformity drags the prohibition over to all retailers.

The AG rejected that reading using three canons:

1. In pari materia and harmonization. Statutes on the same subject are read together; potentially conflicting provisions are construed to avoid conflict. Johnson v. Hopkins, 432 S.W.3d 840, 848 (Tenn. 2013).
2. Specific controls general. When a statutory scheme has both a general rule and a more specific provision, the more specific provision governs the matter it addresses. Matter of Harris, 849 S.W.2d 334, 337 (Tenn. 1993).
3. No clause should be inoperative. Every word and phrase should be given meaning; no provision should be left "inoperative, superfluous, void, or insignificant." United Canners, Inc. v. King, 696 S.W.2d 525 (Tenn. 1985); Tidwell v. Collins, 522 S.W.2d 674 (Tenn. 1975).

Applying these, the AG concluded that § 57-3-404(g) (the general 10-day-credit allowance) and § 57-3-813 (the specific cash-on-delivery rule for grocery store wine licensees) are the specific provisions addressing credit terms, while § 57-3-404(i) is the general price-uniformity rule covering discounts and pricing terms broadly. The specific credit rules control over the general. The 2014 amendments were cumulative to the pre-existing law, not repealers of it. Johnson v. Hopkins recognizes that courts disfavor repeals by implication.

The functional effect is straightforward: a wholesaler must offer the same discounts and pricing on the same terms to all of its retail customers, except that the wholesaler may, in its discretion, extend up to 10 days' credit to liquor retailers, and must take cash on delivery from grocery store wine licensees. The wholesaler can also choose to demand cash on delivery from any retailer it likes; nothing in § 57-3-404(g) makes credit mandatory.

Common questions

Q: Can a wholesaler refuse to extend credit to a particular liquor retailer?
A: Yes. Tenn. Code Ann. § 57-3-404(g) permits up to 10 days' credit; it does not require it. A wholesaler may choose to take cash on delivery from any retailer, and may have credit-policy rules (creditworthiness, account history) that legitimately differ across customers without violating the uniformity rule, so long as the policy is applied evenhandedly.

Q: Could a wholesaler offer special "1% net 10" terms to one retailer but not another?
A: That looks like a discount tied to credit terms, and § 57-3-404(i) would require it to be offered to other retailers and food store wine licensees on the same terms in the jurisdiction. The opinion did not work through every possible discount-plus-credit hybrid, but the price-uniformity rule applies to discount practices generally.

Q: Why are grocery store wine licensees treated differently?
A: The legislature, when it expanded wine sales to grocery stores in 2014, made a policy choice to require cash on delivery for those licensees. The opinion did not explore why; it simply applied the statute the legislature wrote.

Q: Does this apply to beer or other alcoholic beverages outside Chapter 3?
A: The opinion addressed only Title 57, Chapter 3, which covers liquor and wine sales under local-option provisions. It did not address beer or other beverages governed by different chapters.

Q: What if a wholesaler does extend credit to a grocery store wine licensee anyway?
A: That would violate § 57-3-813 and would expose the wholesaler to enforcement action. The statute's "shall" language is mandatory.

Citations and references

Statutes (as cited in the opinion):

• Tenn. Code Ann. § 57-3-404(g)
• Tenn. Code Ann. § 57-3-404(i)
• Tenn. Code Ann. § 57-3-813

Cases:

• Johnson v. Hopkins, 432 S.W.3d 840 (Tenn. 2013)
• State v. Netto, 486 S.W.2d 725 (Tenn. 1972)
• Matter of Harris, 849 S.W.2d 334 (Tenn. 1993)
• United Canners, Inc. v. King, 696 S.W.2d 525 (Tenn. 1985)
• Tidwell v. Collins, 522 S.W.2d 674 (Tenn. 1975)

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2016/op16-018.pdf

Original opinion text

STATE OF TENNESSEE
OFFICE OF THE ATTORNEY GENERAL
May 9, 2016
Opinion No. 16-18
Payment Method to Wholesalers by Retailers (liquor stores) vs. Retailer Food Stores (wine)

Question 1
Tennessee Code Annotated § 57-3-404(i) provides that discounts or pricing that are "made
available [by a liquor wholesaler] to a retailer or retail food store wine licensee shall be made
available on the same terms and conditions to other retailers and food store wine licensees."
Tennessee Code Annotated § 57-3-404(g) allows wholesalers of alcoholic beverages to extend up
to ten days' credit to retailers, but Tenn. Code Ann. § 57-3-813 requires retail food store wine
licensees to pay wholesalers upon delivery. Do these statutory provisions, when read in
conjunction, prohibit a wholesaler from extending credit to retailers other than retail food store
wine licensees?

Opinion 1
No. Licensed wholesalers of alcoholic beverages may extend up to 10 days' credit to
licensed retailers other than retail food store wine licensees.

ANALYSIS

The question is, in essence, whether a liquor wholesaler must require non-grocery-store
liquor retailers to pay on delivery because wholesalers are statutorily prohibited from extending
credit to grocery store wine retailers and, at the same time, wholesalers are statutorily required to
offer every retail customer, grocery store and non-grocery-store retailers alike, the same
discount or pricing on the same terms that it offers any other retail customer in its jurisdiction.

Three statutory provisions are involved in answering the question: Tenn. Code Ann. § 57-
3-404(g), Tenn. Code Ann. § 57-3-404(i), and Tenn. Code Ann. § 57-3-813. They are all part of
title 57, chapter 3, of the Tennessee Code. They are in pari materia, i.e., they all relate to one
another and they all have the same purpose, namely the regulation of traffic in intoxicating liquor
permitted by local option. In 2014, certain amendments were made to title 57, chapter 3, in
conjunction with the passage of a new law that permitted grocery stores (referred to in the statutes
as "retail food store wine licensees") to sell wine. Sections 57-3-404(i) and 57-3-813 are two such
amendments.

As was the law before the 2014 amendments and as is still the law, a wholesaler may, but
is not required to, sell alcoholic beverages to retailers on credit:

No holder of a license for the sale of alcoholic beverages for wholesale or retail
shall sell, deliver, or cause, permit or procure to be sold or delivered, any alcoholic
beverages on credit, except that holders of wholesale licenses may sell on not more
than ten (10) days' credit.

Tenn. Code Ann. § 57-3-404(g). Thus, wholesalers and retailers are generally prohibited from
selling alcoholic beverages on credit, but wholesalers are permitted to sell on credit of up to 10
days.

With the 2014 amendments, the legislature created a specific exception to this 10-day credit
provision by amending Tenn. Code Ann. § 57-3-813. As amended, § 57-3-813 prohibits
wholesalers from selling "any product to a retail food store wine licensee on credit" and
affirmatively requires that "payment for all sales to such licensee by a wholesaler shall be effected
upon delivery of the product." Thus, as of 2014, a wholesaler may extend credit for up to 10 days
to any retailer other than a grocery store that is licensed to sell wine.

Also as part of the 2014 amendments, a wholesaler is now required to offer all its customers
the same discount or pricing on the same terms and conditions that it offers any one customer:

. . . Any discount or pricing made available [by a wholesaler] to a retailer or retail
food store wine licensee shall be made available on the same terms and conditions
to other retailers and food store wine licensees within the same jurisdiction.

Tenn. Code Ann. § 57-3-404(i).

The question posed apparently stems from a concern that, (1) because a wholesaler has to
offer all of its customers the same discount or pricing on the same terms, and (2) because credit is
a term or condition of pricing and may be the functional equivalent of a discount, and (3) because
a wholesaler may not extend credit to grocery store wine retailers, it might follow that a wholesaler
may not extend credit to any customer at all, since doing so would result in offering more favorable
discounts or pricing terms to non-grocery store retailers than to grocery store wine retailers. In
other words, the question is premised on the idea that there is a conflict inherent in the three
statutory provisions because, in order to comply with the requirement that all customers receive
the same discounts and pricing on the same terms, a wholesaler can no longer offer credit to any
customer since it cannot offer credit to grocery store customers.

Questions involving statutory construction must be answered in light of reason, bearing in
mind the object and policy of the statute. State v. Netto, 486 S.W.2d 725, 728 (Tenn. 1972).
Statutes, like the three provisions involved here, that relate to the same subject or that have a
common purpose are to be construed together, so that one provision may be construed by
considering the words and legislative intent indicated by the language of another provision.
Johnson v. Hopkins, 432 S.W.3d 840, 848 (Tenn. 2013). As particularly relevant here, a specific
statutory provision will control over a more general statutory provision. Matter of Harris, 849
S.W.2d 334, 337 (Tenn. 1993).

When construing potentially conflicting statutes that are in pari materia, one must adopt
the most reasonable construction that avoids any statutory conflict and that provides for
harmonious operation of the laws. Johnson v. Hopkins, 432 S.W.3d 840, 848 (Tenn. 2013). A
statute that does not repeal a previous law is cumulative to the previous law. Id. The principles
of statutory construction also require that every word and phrase be accorded meaning. United
Canners, Inc. v. King, 696 S.W.2d 525 (Tenn. 1985). Put another way, a statute must be construed
so that no part is inoperative, superfluous, void, or insignificant. Tidwell v. Collins, 522 S.W.2d
674 (Tenn. 1975).

Application of these principles of construction to the three statutory provisions at issue
obviates any potential conflict and allows the provisions to be harmonized in concert with the
legislative intent. The 2014 amendments must be read as cumulative to the pre-existing law and
to each other. Thus, Tenn. Code Ann. § 57-3-404(i) is cumulative to Tenn. Code Ann. § 57-3-
404(g), and Tenn. Code Ann. § 57-3-813 is cumulative to both those provisions. No one provision
repeals or nullifies any other provision.

The statutory scheme provides as a general rule that wholesalers must offer the same
discounts and pricing terms to all customers in their jurisdictions, grocery store retailers and non-
grocery-store retailers alike. But the statutory scheme is then more specific with respect to the
extension of credit, which it treats separately from pricing terms in general. The legislature
specifically permits wholesalers (not retailers) to sell on credit for a very short period of up to 10
days to customers but provides, however, that retail food store wine licensees in particular may
not buy on credit. These specific provisions with regard to the extension of credit control over the
more general mandate that all customers be offered pricing on the same terms and conditions.

Harmonizing the three provisions in this way avoids any potential conflict, gives each
provision meaning, does not read any provision out of the statutory scheme, and comports with
the legislative intent that wholesalers may, in their discretion, continue to extend credit to liquor
stores even though they may not extend credit to grocery stores that sell wine. Obviously, a
wholesaler can refuse to extend credit to any given customer and, in that sense, can require non-
grocery store retailers to pay on delivery.

In sum, a wholesaler is required to offer the same discounts and the same pricing on the
same terms and conditions to all its customers in its jurisdiction, subject to the statutorily permitted
exception that the wholesaler, in its discretion, may extend up to 10 days' credit to retailers other
than retail food store wine licensees.

HERBERT H. SLATERY III
Attorney General and Reporter

ANDRÉE SOPHIA BLUMSTEIN
Solicitor General

SARA BETH MYERS
Assistant Attorney General

Requested by:
The Honorable Bill Ketron
State Senator
5 Legislative Plaza
Nashville, TN 37243