(1) For purposes of applying 16-2-211, MCA, a reduced markup rate of 20 percent will be applied to all liquor products acquired from a distillery that manufactures, distills, rectifies, bottles, or processes 25,000 proof gallons or less of liquor nationwide annually.

(2) The 20 percent reduced markup rate is determined using a 100 percent reduction in markup after agency liquor store commissions and discount costs and the costs to operate the state liquor warehouse have been accounted for. These costs account for half of the standard markup normally collected on product sold by the department. The department will annually review the associated agency liquor store commissions and discount rate costs and the costs to operate the state liquor warehouse to ensure these costs do not exceed the reduced markup. The department will publish any adjustments to the reduced markup based on the results of the annual review.

(3) A distillery requesting a reduction in the state markup must certify with a sworn statement, on a form supplied by the department, that the number of proof gallons they have manufactured, distilled, rectified, bottled, or processed nationwide annually is at or below the 25,000 proof gallon threshold.

(4) A distillery requesting a reduced markup rate must submit this form and meet the specified requirements at the time of initially registering with the department and by February 15 of each of the following calendar years in order to receive the reduced markup rate.

(5) The following effective dates will apply for those distilleries that meet the reduced markup rate criteria:

(a) the department will apply the reduced markup rate to existing liquor products effective November 1, 2011;

(b) for each liquor product introduced thereafter, the distillery's current applicable markup rate will apply with an immediate effective date;

(c) each subsequent year, the distillery's applicable markup rate will be effective May 1 with the department's May, June, and July quarterly price book or the next available price book if the form is submitted after the February 15 annual deadline; and

(d) failure to submit the form annually to the department by February 15 will result in a 40 percent markup rate for liquor products, 20 percent for sacramental wine products, and 51 percent for fortified wine products.

(6) The department may request and examine any distillery's books and records for the purpose of determining the accuracy of the total number of proof gallons reported by the distillery.

(7) For the purpose of this rule, a distillery is considered a vendor.