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dhdunbar last won the day on August 20

dhdunbar had the most liked content!

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About dhdunbar

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    Ellensburg, WA
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    Retired from ATF and began consulting for DSP's in 2012. When I'm not working, I like to head outdoors. That can mean simply sitting on the deck reading. Regulation bores me. Helping others deal with it does not.

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  1. dhdunbar

    TTB Retail License in Multi Vendor building

    The key is separation of the DSP from the retail area by a floor to ceiling partition and access to the DSP from a public space. The retail area outside the boundaries of the properly separated DSP is treated the same as a shoe shop, restaurant or tasting/retail area that is appended to, but not a part of, the DSP premises. Assuming you would sell in the food court, you would operate, in the retail area, a different business of the same ownership, i.e., tghe entity that owns the DSP would operate as a DSP within the confines of the established DSP premises, and separately as a retail liquor dealer beyond the confines of the DSP premises,. . That is true, or should be true, in the case of every distillery that has a tasting room from which they sell and they are deemed to sell at the tasting room if they charge to tours or parking without a separate charge for the "free" tastings. This goes back to the provisions of 26 USC 5178 and 27 CFR 19.54 and the liquor dealer regulations in part 31. Those are the general rules and they are pretty ironclad, but specific circumstances do matter, so start with the above, but do not end there.
  2. dhdunbar

    Amendment to drop DSP Bond Time Line

    Missed this. That is too long. If you haven't found anything out on this., call the help desk and see if they can get things moving.
  3. What exactly defines separation? I think that with TTB you are looking only at curtilage, i.e. - whether the two structures are so intimately related, the words of the Supreme Court, that the DSP premises is under the umbrella of the privacy that extends to the residence. The Supreme Court held that four factors should be considered in extent of curtilag questions, only one of which was proximity. I think it possible that in some cases the curtilage of a residence would not extend to an adjacent business. For example, your public grocery store next to your house. So, while we reduce the analysis to those four factors, it is the interaction of the factors from which curtilage emerges. I know that reduction vs. emergence is a wonky take on the issue and that practical people will say, I want a hard rule. But where curtilage emerges from the confluence of factors, a hard rule is not possible. I think TTB could say, for purposes of ensuring the protection of the revenue, which lies behind the access requirement, that 37.184 feet is the minimum. I think too many people then would see 37.184 feet and think anything outside of that, say 37.185 feet is acceptable. But it may not be. There are three other factors to consider. So, to go to your first question - What is the minimum distance between a DSP and a residence? TTB will not commit to this. The nearest I have had is 38 feet. They turned down 25. We disclose the full circumstances in both cases. I am not convinced that the results are necessarily replicable, which is the basis, I think, if your complaint. I mentioned four factors that the court says must be considered. The distance is quantifiable., The other three are not. For example, one is whether there is an enclosure around the home. If they DSP is within the enclosure, then it may be within the curtilage of the home. If the entire lot is fenced, and the two buildings are 1000 feet apart, how does the enclosure rule play out? And what constitutes an enclosure? If they are 30 feet apart, but have 20 foot fence between them, as opposed to a foot high, perhaps decorative fence, how does the enclosure rule play out. And what if the enclosure is a dense, eight foot hedge. It is like scoring ice skaters in the Olympics, different judges have different perceptions. Why isn’t getting your local municipality and local fire marshall to approve your plan part of the application process for the TTB? The short answer to this question - congress leaves that issue to the states to decide. Nothing in either the FAA Act or the IRC gives TTB authority to ask the question, "Does this premises comply with state and local law?" One of the conditions for issuing an FAA basic permit is that the operation must not be in violation of state law, but the courts have held that congress intended to required only that the state allow the activity itself, not approve of the particular operation. That is, if Texas says no one can have a distillery in a dry county, then TTB cannot approve an application to establish a DSP in that county. If Texas says some people can have a distillery in a county, but only under conditions it imposes, then TTB must approve a distillery in that country whether or not the distillery satisfies the conditions. Think states rights on that one. Shouldn't there be a “basic” insurance policy that all DSP’s must have, and then options based on your particular situation? About this, I know nothing. Are you suggesting that DSP insurance, like auto insurance, should be mandated? "Should" is a really hard word. My "should" is perhaps your "must" and someone else's "shouldn't." I suspect the notion is fraught with unintended consequences. Note - Today, on the application form, the instructions for describing the premises state you may not have a DSP on land that also has a residence. It does so in two, not just one, of the instructions. This goes back to TTB's position on the matter in 2009 and is clearly counter to experience. TTB has told me that the old case by case rule still applies. The instruction should be fixed. To all of this I append, I am not an attorney and none should be construed as legal advice.
  4. I just wanted to take a moment to update everyone in regards to this topic and how it relates to possible insurance implications. As recently as June, many insurance carriers have taken a step back and started to assess their book of distillery clients in order to maintain a strong program and competitive rates. In doing so, many of the "admitted" carriers (of which there really are only about 4 that do it well) have determined that a mixed use building poses a "life-safety" hazard. What this means is that if there are "residences" in the same building as a distillery then it is not a desirable risk and will be declined. This is important information and I am passing it on to my clients who have established DSP's, with TTB's approval, in buildings that also contain a residence.  We can do that, under the proper circumstances, but this raises real questions about whether you would want to. Aaron - is there any problem with a DSP being located on the same tract of land as a residence, where the two buildings are separate, but in proximity to one another? Is there some distance guideline? I have ten or more clients who have done this, again with TTB's approval after full disclosure, but since they invariably construct the building, and cannot escape from a lease, if the insurance industry takes exception, or is likely to take exception, then perhaps others need to reevaluate the option before committing. Thanks for this information and I - along with others, I suspect - am looking forward to your response about collocation in different buildings, but on the same tract.
  5. dhdunbar

    Bourbon/American Whiskey

    The following is not exactly on point, but it points us in the direction; (l) Class 12; products without geographical designations but distinctive of a particular place. (1) The whiskies of the types specified in paragraphs (b) (1), (4), (5), and (6) of this section are distinctive products of the United States and if produced in a foreign country shall be designated by the applicable designation prescribed in such paragraphs, together with the words “American type” or the words “produced (distilled, blended) in __”, the blank to be filled in with the name of the foreign country: Provided, That the word “bourbon” shall not be used to describe any whisky or whisky-based distilled spirits not produced in the United States. If whisky of any of these types is composed in part of whisky or whiskies produced in a foreign country there shall be stated, on the brand label, the percentage of such whisky and the country of origin thereof. The standard their describes only those whiskies that meet the stand for rye, malt, corn and wheat [(b)(1)], blended whiskey [(b)(4)], blends of straight whiskey [(b)(5)] and spirit whiskey [(b)(6)], but it points in the right direction,. If all the whiskey meets the rye standard, then it is rye, 40% American, 40% Turkish, etc, but is class I2, not class 2. If it does not meet any of those standards, one presumes that it is whiskey. I suggest that you ask TTB to answer this question before jumping into these waters.
  6. "A local moonshine operation did get approved in a new building, where the distillery is on the bottom floor, and apartments are above on the second floor. It does come down to separation. It does really come down to the local codes, and interpretation of international fire codes as well." Yes and no. For TTB it comes down to how the two are separated so as not to endanger the revenue. A good deal of that is egress and ingress. Separation is also important to local jurisdictions. But it is usually a different issue. It is about safety and protecting people. So the method of construction becomes more important. As always, you have to satisfy both the federal and local agencies that have jurisdiction. It was not ten years ago that TTB presented the following slide at TTB expo when discussing location, saying the following were prohibited because the DSP and residence were connected in TTB's opinion: Sorry for the size, but I can't shrink it. See the presentation at http://www.mountainmoonshine.com/images/Pittfalls_of_Artisan_Distillers_s06-bw-Amended.pdf, but remember that some water has passed under the bridge since then, so what you read there may not be accurate today. I started arguing withg TTB about this in 2012. O'm pretty well comfortable with the issues to address on point 1, although some situations fall on the cusp between when I would say, "I anticipate no problem" and when I would say "we will have to try and see what happens." Point 2 depends on the separation, access, etc. Point 3 is still prohibited routinely,. Point 4 - I've been successful on three occasions, but I'm not fully confident about how to handle all the objections TTB might raise. There is some history here of which I am probably not aware, because others have probably also written back and forth with TTB's Regulations and Rulings Branch, as I have, and they may have insights into the matter that I do not have. Of any of you have done so, let's share what we have learned, so that we narrow the number of "submit and see" circumstances. Note, I don't want to hear what has been approved, I want to hear what TTB said about the circumstances that lead it to approve or not approve. Observational evidence doesn't do much good, because we can't assume that on every case TTB was told about residences :-).
  7. With TTB, the issue is always separation. I've not run across a situation in which the material separating was an issue, perhaps because no residence is ever going to want to be separated from a DSP by a chain link fence, which is an acceptable partition for DSP premises from the rest of the world - witness outside tanks. With TTB the only issue I have ever encountered is whether the resident can possibly object to TTB's right of entry to the DSP. TTB is not concerned with safety, because it has no authority in law to be concerned with safety. Those are local issues. As to insurance for the residences, Silk City's report is the first instance I've heard of about the issue. Since other of my clients have not told me about any such problems, if you want the lease, I don't know if I would raise the possibility with the landlord.
  8. I don't know why I'm not accepting messages. I have received them in the past I'll look into that. I will PM you with my email address and telephone number. It depends upon the degree of separation that exists between the upstairs residence areas and the downstairs DSP. We can talk about it.
  9. dhdunbar

    Expanding our Tasting Room

    Yup, 5178 is the section. There are a couple of problems. It says that you can't locate a DSP for production of spirits anywhere liquors of any kind are sold at retail. Section 19.52 pretty well parrots that, changing the prohibition to establishing a DSP at any location where liquors of any kind are sold at retail. TTB's most recent changes to the online, DSP commodity application say that you can have a tasting room on DSP general premises, but that you cannot make retailer sales of liquors from that tasting room. That is in line with the language of the statute, but it will require an amendment of the registration to show general premises, if you have none, and approval of the other use under 19.54.and .55. Note that the Permits on Line application now requires that you affirm that you know that when you have a tasting room on general premises, the general premises must be separated from the bonded premises by a floor to ceiling wall. They use the word wall, the regulation in general talks about partitions, which is the more appropriate term, I think. I also think that they include the affirmation without reference to any section of the regulation, because they may be at a loss to find an appropriate section. The nearest I can come is the requirement that doors and other openings onto the bonded premises be secured when no one is on the premises. That is fine, until one confronts the allowance for an outside tan k. Where is the ceiling? But TTB bats last when it comes to interpreting the rules. All things considered, taking the tasting room off from DSP premises is the simplest solution, provided the partitions reach floor to ceiling. Hope this helps..
  10. dhdunbar

    Is owning a separate bar prohibited?

      Add to that - 311.060(4) "The term “financial interest” as used in this chapter is defined to mean all interest, legal or beneficial, direct or indirect, in the capital devoted to the licensed enterprise and all such interest in the net profits of the enterprise, after the payment of reasonable and necessary operating business expenses and taxes, including interest in dividends, preferred dividends, interest and profits, directly or indirectly paid as compensation for, or in consideration of interest in, or for use of, the capital devoted to the enterprise, or for property or money advanced, loaned or otherwise made available to the enterprise, except by way of ordinary commercial credit or bona fide bank credit not in excess of credit customarily granted by banking institutions, whether paid as dividends, interest or profits, or in the guise of royalties, commissions, salaries, or any other form whatsoever.311.060(4). When a law or regulation or rule says "directly or indirectly" you need to know how widely the agency having jurisdiction cast the "indirect" net. You get a double indirect whammy here, because the law prohibits either a direct or indirect financial interest and the financial interest it prohibits can be either direct or indirect. No amount of speculation in this forum will replace a telephone call to the ABC asking them, "Is a person deemed to have a beneficial, indirect, financial interest in a retailer as a result of a direct or indirect, financial interest held by the person's spouse in that retailer." Then follow that up with an email or other document stating what you think you were told and asking for confirmation of your understanding. I think my first advise remains my best advice, "Go the the state ABC, tell them exactly what you want to do, don't be coy or clever, conceal nothing, and do as they say."
  11. dhdunbar

    Is owning a separate bar prohibited?

    Well, people should question what I say if I don't cite sources, and argue with me if they think I'm wrong, because I can be wrong. My take on the prohibition against retail sales on DSP premises was aimed at another comment and I did not make that clear. My capitalized response was intended to drive home a much more general point, which your answer recognizes. It was not intended as a comment on what you said, but as a an expansionb on what you said. It is about the relationship between state and federal law, the need to comply with the strictest of the two, and the fact that words as used in one law may not mean the same thing as the same words the other. So perceived conflict may only be an appearance of conflict. The Missouri retail provisions is but one example of where conflict does not exist, even though it might appear to exist, if one does not understand how the different laws and regulations rely on different definitions or understandings. That is a first principal. If we don't understand that, then we hit all sorts of foul balls when trying to figure out what is allowed and what is not, e.g., the distillery premises for state purposes can be different than the distillery premises for federal purposes. so I jump up and down insistently on the point that nothing says they have top be the same. The question of retail sales has to be examined independently for state and federal requirements, keeping in mind the definitions used in each statute. I think people often misunderstand that. And I think that statement does not create a straw man. People do misunderstand that. But it was not directed at your comment. And question me when it seems that what I say is off the mark. Make me justify.
  12. dhdunbar

    Is owning a separate bar prohibited?

    To be clear To be clear. Under federal law, you may NOT sell at retail on either the bonded or general premises of a DSP. Period. No exceptions. However, you may sell from a retail space that is attached to the DSP premises, but is separated by, what TTB is not officially saying, in its new permits on line applications, what muyt be a floor to ceiling partition (the application says wall, but chain link has always sufficed when persons disclosed the sales to TTB and clear not all have). Once a retail space is off DSP premises, TTB simply does not care how far away it is. It could be in Nome, AK. You are required to register as a retail liquor dealer at that location, just as every retailer is reacquired to register and I'd wager not one in ten does. You are also required to keep records of receipt and any sales of more than 24 wine gallons at a single pop. Want to bet few if any know about the 24 wg provision? Want to bet that TTB won't be asking them unless it comes to believe that they are regularly wholesaling without a permt? TTB does make provisions for the operation of a taxpaid room in the immediate vicinity of the DSP or on DSP general premises, but not on bonded premises. You can operate as a wholesaler from that premises without need of an FAA basic permit, or need to register as a wholesale dealer under the separate dealer regulations, but must keep records required in part 19.. As a wholesaler, you may make sales at retail from the taxpaid storeroom, unless it is on DSP general premises, when sales at retail are prohibited by law. So, what do you do in MO. THERE IS NOTHING THAT SAYS THAT YOU CANNOT HAVE THE RETAIL AREA ON WHAT THE STATE REGARDS AS DISTILLERY PREMISES BUT IS NOT INCLUDED IN THE DSP PREMISES ON YOUR FEDERAL REGISTRATION. THEY ARE SEPARATE LAWS WITH SEPARATE RULES SEPARATELY APPLIED. YOU MUST HEED THE MOST STRINGENT WHEN ONE ALLOWS WHAT THE OTHER PROHIBITS, BUT THE EXTENT OF DSP SPACE CAN BE DIFFERENT FOR EACH, ALLOWING SALES FROM THE SAME AREA, WHICH IS ON THE DSP FOR STATE PURPOSES AND OFF THE DSP FOR FEDERAL PURPOSES. Some things need to be said in capital letters. :-).
  13. dhdunbar

    Bottling line help

    I know nothing of the technical info here. Ignorance is bliss. Silk City - re damned if you do and damned if you don't - a winery told me many years ago there was a reason they used neck labels. Neck labels hide apparent differences in fill level when the contents are actually within tolerances. TTB's only guideline on this that I know of on headspace, "Section 5.46 - headed standard liquor bottles, provides "Headspace. A liquor bottle of a capacity of 200 milliliters or more shall be held to be so filled as to mislead the purchaser if it has a headspace in excess of 8 percent of the total capacity of the bottle after closure." Hope this isn't too far off topic.
  14. dhdunbar

    Wording for lease

    They should not because it does not constitute an agreement by which you have right of occupancy. What they will accept is another story.
  15. dhdunbar

    Adding a Signing Authority to ttbonline.gov

    I have four questions pending, from how to amend the operating trade name; to who can be the key contact (TTB says it has to be someone who has a financial interest in the business, but only one person does, and he can't operate as a key contact because he is in the main an absentee. Plus, what happens in the case of large, publicallyy held entites like Anheuser Busch?; to how to revoke a power of attorney (the applications wizard takes you into a black hole and that may be your problem too; to a collocation with a residence issue, which the instructions say can't be done and which I have done, successfully at least 10 times in the past, with fuill disclosure of all circumstances, so they seem to be changing the rules by a single line in the instructions. I assume that there are a lot of people like us who are suffering the slings and arrows of outrageous fortune. So too, I imagine, are those who answer the telephones and are unfailingly polite and helpful when I get through. My problem is not with them. It is with management who supervised this roll out. In sum, did no one beta test the darned thing before they implemented it? I'm calling again right now and intend to keep calling all day long. I've got five clients who are looking to me for help :-). Make that :-(. ,