16-2-211. State liquor markup reduction -- Montana-produced ingredients. (1) Based upon the percentage of Montana-produced ingredients that are used in producing a liquor, the department shall reduce the liquor markup charged by the department in determining the wholesale price of the liquor. To qualify for a reduced markup, the liquor must have been manufactured, distilled, rectified, bottled, or processed by a distillery that produces 25,000 proof gallons or less of liquor nationwide annually. The reduction in the markup must be determined as follows:

(2) For the purposes of this section, the liquor markup is the standard markup added to the department's base case price used in determining the wholesale price of liquor for products other than fortified wine or sacramental wine and does not include the reduced markup that results from the department's reduced prices for products designated for closeout or inventory reduction. The reduced markup must be applied to the standard liquor markup minus associated agency liquor store commissions and discount rate costs pursuant to 16-2-101 and costs of operating the central liquor warehouse and must be determined by the department on a yearly basis.

(3) (a) The percent of Montana-produced ingredients is determined as a percentage of the total applicable dry and wet weights of all the fermentable and flavor ingredients used in the production of the liquor as provided by rule adopted by the department.

(b) For the purposes of this section, a Montana-produced ingredient is an agricultural product, either processed or unprocessed, that in its unprocessed state was grown in Montana or, if it is a processed ingredient, that was processed in Montana from unprocessed agricultural products that were grown in Montana. Water is not an ingredient.