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Direct Sales to Retailers


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Missouri is direct to retailier. In fact, with another permit we can go direct to end user from our own distillery sales.

We searched all over the regs, but it was the lack of regulation that means you can do it. Have to have the correct state permit is all. Most all of the wineries around here drive all over the state to deliver to their retail contacts so they can keep the 25% margin distributors want.

Already contacted several retailers and set up for distribution.

However, shipping across state lines adds to the permit requirements, so don't think you can simply UPS to a store in another state without checking the receiving state regs.

When doing your research remember if you can't find an answer to contact the state wine and or beer boards. They know the regs better than anyone.

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In New York State a Distillery is not permitted to sell direct to consumers or retailers, EXCEPT:

Some licenses come with the right to apply for and acquire a Wholesale Distributor license allowing for self distribution (the Distillery license does not INCLUDE the Wholesale license, only the right to apply for one, pay the additional fees and carry the appropriate bonds); and

Sales to consumers may be conducted at the site of a NYS Farm Distillery (DD Distillery License)and must be carried out totally at the distillery and the customer must come and get the product and pay for it there and then.

Ralph

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In Virginia, you can sell directly to consumer IF you either are a farm (or lease land) that produces 51% or more of your agricultural products OR are a non-profit historical site. Otherwise, we are a control state and all sales and distribution go through Virginia ABC.

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I can't add anything specific to the NY situation (Ralph explained it above), but my non-legal opinion is that the recent Supreme Court decision regarding interstate wine sales may well apply to all other alcohols. The TTB Newsletter dated January 22, 2010 recently mentioned direct sales of spirits and directly mentioned the SC decision.

In Granholm v. Heald, the U.S. Supreme Court (May 16, 2005 decision) declared unconstitutional State laws that prohibited direct shipment of wine to consumers within the State from out-of-state businesses but permitted direct shipment to those consumers from in-state businesses. This decision has led to the reexamination of laws in several states. Many states are reviewing and amending their alcohol beverage rules in light of the decision, and litigation continues as suits have been brought by retailers and consumers in several States. As a result, the regulatory schemes in place in many states are in some degree of flux.

The final sentence seems to be quite the understatement.

Personally, I'd be ecstatic if could sell my spirits direct to retailers in nearby states. It's not like I want to put my spirits in every store and have them sit gathering dust. I'd rather get into the few stores where there are customers that appreciate what I'm doing. The small scale distiller simply isn't able to compete with the large scale producer. Unfortunately, the current distribution models favor the large distilleries/blenders/bottlers. jmo.

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...We searched all over the regs, but it was the lack of regulation that means you can do it...

Just an FYI to anyone dealing with their state on alcohol laws, this statement is not always true- In Wisconsin, unless it is expressly allowed by regulations you CAN NOT do it!

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The State of Missouri allows me to hold all three licenses; manufacture, wholesale, and retail. Each license is separate from the other with independent fees. The resale license gives me the right to sell my products here at the distillery only. I can have no other interest in any retail business that sells alcohol. It sure helps the bottom line when you can have access to all three tiers!!

Cheers!

Jim

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If I read the Illinois Liquor Control Commission website correctly you can't hold a distributors and producers permits.

What about a straw man setup? Say have a spouse or sibling hold the distribution permit. Adequate distribution seems to be one of the big hurdles in getting a DSP up and running. NO one can or will sell the product you make with the same passion as you can.

I apologize if this is a little off topic, I'm just looking for a answer outside the box as so many of us reside in 3 tier states.

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loophole (plural loopholes)

1.A method of escape, especially an ambiguity or exception in a rule that can be exploited in order to avoid its effect

Loopholes, strawman, end arounds, and other legal manuvers are usually reserved for short term, "get out of Dodge" quick efforts of advantage. It exposes opposition of intent and will quickly be resolved by the lawmakers. You are going to have a lot of time, money and sleepless nights invested in your distillery and you do not want to be caught in the middle. Be up front.

I cannot stress highly enough, and I am confident many working distillers will agree, work with your state's Dept of Revenue and Alcohol Board. Involve them. You will be creating employment and additional taxes. Reality: If you do not respect them think of the resources they have against your own, if needed to defend yourself. You will not light a cigar at the end of the day and say "well, I guess I showed them!".

Many of the laws on the books are 75 or so years old. a little effort, well a lot of effort, and you can change them to your advantage. The guys in NY, WA, and others have done this. Better to stay "in the box" on this one.

If you are working on your business plan, even if allowed to deliver, look into other fees associated: Salesman, registry of delivery vehicle , etc.

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I personally am not opposed to paying the appropriate alcohol taxes for whatever state I sell to. As a small distiller, I'm going to have 0.00001% market share. Always. I'm very happy with that amount.

I'm much more interested in getting my products to the few people interested in artisanal spirits, and the kinds of spirits I make.

The current distribution mechanisms (legally imposed) all disproportionally favor the large producers/distributors. The business model where they place their brands on liquor store shelves leaving no room for small off brands (such as those from micro-distillers). The barriers to entry into the distribution network (as wholesalers) is very high ensuring that there's no competition at that level. In NY, there are two (count 'em, two!) spirits distributors for all of upstate NY. And they have no interest in small craft spirits, you can be certain of that.

The illusion that craft distilling will grow like craft beer did, is false. (Sorry Bill.) It's false because the laws that allowed craft brewers to have brewpubs (selling direct to the public), allowed for small distributors due to low licensing fees, low cost of entry for the producer and the like simply do not exist for spirits. Many states still consider spirits "bad". They are "evil" and must be regulated for the public good. Except they'll allow their corporate friends to dominate the market. There's no shortage of booze in NY state, you can be certain of that.

I'd be ecstatic with a one page form like F5000.24 (Federal Excise Tax) for the states, especially file once a year. I probably won't ever be big enough to have to file 50 forms (one per state), but that would be better than the current system. Will it change? probably not.

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  • 2 weeks later...

The government's preference for big producers goes back to the beginning, literally, with passage of the first excise tax in 1791. It's the same logic as requiring employers to withhold taxes from employees. It's easier for the government to keep tabs on a few big guys than a bunch of little guys.

There are some big producers who get around the 3-tier system by what someone else called the strawman. The Johnson and Philips families do it in the northern midwest. The Philips side produces, the Johnson side distributes. The Goldring family has something similar in the South with Sazerac (producer) and various distributor entities. One wrinkle is that the distributor has to be incorporated in the state where it distributes, even though there are multi-states distributors, like Southern, that link them together through a holding company.

Direct sales without the subterfuge mostly exist in states where there is a strong wine industry.

In Kentucky and Tennessee, which permit gift shop sales by producers, the producers actually have to sell the product to a distributor and buy it back through the retail entity. It's all paper, the product never leaves the premises.

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  • 1 month later...

Bump....

Are any of you guys allowed to sell liquor by the drink (i.e on-premise consumption or what they call here as private retail sales) on your general premises?

Guy Rehorst, are you giving away samples or selling them drinks?

I'd love to have the ability to sell my product here, other than for off-premises consumption

Basically, I want to do what a brew-pub does.

Thanks all.

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Bump....

Are any of you guys allowed to sell liquor by the drink (i.e on-premise consumption or what they call here as private retail sales) on your general premises?

Guy Rehorst, are you giving away samples or selling them drinks?

I'd love to have the ability to sell my product here, other than for off-premises consumption

Basically, I want to do what a brew-pub does.

Thanks all.

We do it all. We can give free samples- 1.5oz max of any combination of spirits. We rarely do, but instead sell a "tasting flight" for $3 which we refund if they end up buying a bottle. We can also sell cocktails at the distillery as long as the only alcoholic products used were produced at the distillery.

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Well that's not legal for a regular old micro-distillery in New York. Even farm distilleries (or wineries) are not allowed to charge for samples.

And I've already had the secret agent spies from the SLA show up whining for a drink ("It's my birthday", seriously) and laughing at my equipment ("That still is so small! hahaha). Yes they do that here in NY, it's called their "enforcement unit". Our tax dollars at work.

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