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Charleston bars may suffer if state cracks down on liquor license requirements

Balancing out drinks

Egan and Sons. Photographed November 13, 2013. Grace Beahm/Staff

An already pricey pour of Pappy Van Winkle bourbon could prove even costlier for Charleston restaurants and bars if South Carolina stiffens requirements pertaining to how much food a liquor license holder has to serve.

Under state law, an establishment can offer liquor by the drink so long as it is "primarily and substantially engaged in the preparation and service of meals,” which are legally distinguished from hard-boiled eggs, Slim Jims and other snacks cooked off-site. To qualify for a liquor license, an establishment must have refrigerated space, a stove, menus and table seating, among other amenities.

As for the “primarily” part of the statute, South Carolina hasn’t previously quantified it. But a recent ruling by an S.C. administrative law judge has encouraged a group of Columbia residents who are trying to rid the Five Points area of late-night college bars.

According to Judge Deborah Durden’s decision, which denied a liquor license to The Roost, a microwave oven is not a stove; heating up a hot dog is not cooking and 5 percent of total sales doesn’t amount to an establishment’s primary business.

“This is precedent-setting,” the Columbia attorney lobbying for stricter enforcement told The State, which first reported on Durden’s ruling and its potential consequences. The attorney, Dick Harpootlian, has vowed to contest liquor license renewals for any late-night establishments which don’t meet the standards set by Durden’s decision.

Although Harpootlian hasn't revealed what he considers an appropriate percentage, The State reports some opponents of late-night bars are agitating for South Carolina to mandate that liquor-by-the-drink venues should derive 50 percent of their revenue from food.

If that interpretation is adopted by the S.C. Department of Revenue, more than 1000 bars could be forced out of business, a University of South Carolina study found. And a Virginia attorney who unsuccessfully challenged his state’s longstanding ratio rule says independent, upscale bars and restaurants are likely to be disproportionately affected.

“I hate to see this terrible thing spreading,” says Cameron W. Gilbert, who represented McCormack’s Whisky Grill and Smokehouse in a case decided last November.

“There is an irrational fear that if you just have liquor by the drink, there will be bars on every corner and society will crumble into anarchy,” he continues. “The irony is the ratio rule actually promotes the kind of establishments you want to prevent.”

For example, Gilbert says, chain restaurants can boost their food sales by serving family-friendly lunches, which isn’t a tenable strategy for most ambitious cocktail bars. Alternately, dive bars can keep their drink sales down by pouring swill: He points to a defunct Virginia restaurant that offered $8 burgers and one-buck shots.

In Virginia, as in South Carolina, beer and wine sales aren’t counted against food sales, so “you can pour 100,000 gallons of beer a month and be a DUI factory” without penalty, Gilbert says. “But if you carry high-end products, you can really get hit.”

At McCormack’s in Richmond, a shot of Johnnie Walker Odyssey is priced at $225. If the restaurant sells just one, it either has to sell 16 Scotch duck eggs (or their equivalent) to keep its food and drink sales even for the night, or quintuple what it charges for ham biscuits and nachos. Gilbert doesn’t believe the latter is a realistic option for a restaurant looking to stay in business.

Rather, he suggests, the state should “exempt liquor over a certain cost, or say, ‘once you hit a certain number, we’re not worried about your ratio.’ A ratio is not going to accomplish what they want.”

Gilbert is hoping the Virginia Supreme Court will hear the McCormack’s case on appeal. In South Carolina, higher courts are likely to resolve the issues raised by Durden’s ruling, which is under reconsideration.

In the meantime, the Department of Revenue "will continue to enforce the licensing statutes and regulations, as currently written," according to spokeswoman Bonnie Swingle.

Reach Hanna Raskin at 843-937-5560 and follow her on Twitter @hannaraskin.

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