dhdunbar

The issue is clearly local. 1. TTB does not care if a distiller owns a retailer 100%. From you rlink, you are looking at tied house laws that say an industry member (read producer/wholesaler tiers) may not induce a retailer to buy its products to the exclusion, in whole or in part, of similar products offered for sale by others in interstate commerce. Simply put, one cannot induce oneself. If TTB does not care about that, it cares less about a landlord renting to persons in different tiers, unless of course someone like Diageo owns a premises that it leases to someone like Caesars and in return Caesar's puts Diago products in the well, etc. But that ain't you. Nor does it care how many persons on the same, or different tiers, occupy separate spaces within a retail complex. Nor does it license retailers. Retailers are required to register with TTB under an arcane law, I'd bet dollars to donuts most don't, and I can assure you that TTB is not canvassing the countryside looking for persons who do not comply. Given their responsibilities and resources, it would be absurd for it to do so. 2. Partial ownership is a potential problem with stress on the potential - if you are small, why would TTB bother looking at you, when they have major players engaged in major violations? I pursued those in a past life. I would never have pursued you.) A person (in the broad sense to include LLC's/corporations/ etc ) engaged in business as an industry member (producer/wholesaler tier) can't own or lease a premises to retailer if doing so induces the retailer to buy from the industry member to the exclusion, in whole or in part, blah blah blah. The blah, blah, blah is what makes it unlikely that TTB would even look at a small producer's trade practices. There are too many elements to prove and too few people to do it. 2. States often care. Most states' regulatory schemes have some provision against persons in one tier holding an interest in persons in another tier. This varies - in some a person's third cousin twice removed - okay, I exaggerate - could be relevant. But husband and wives are - or at least were - relevant in some states. In others, its pretty much wide open. One state, for example, prohibits ownership at more than one level if it results in "undue influence." Really? What might that be? The state's interpretation is pretty much that if someone who holds an interest, in a supplier, also holds an interest in a retailer, and that person uses threat to force the retailer , in which he has interest, to buy from the supplier, in which he has interest, that crosses the line into undue influence. However, that same state will not allow a person who owns a distillery to own a brewery or a wholesaler outright. It will allow the same person to be the sole member of two LLC's, one of which is a distiller and one of which is a brewer, but ... does it make sense. Don't try to make sense of it. The point - this is going to vary from state to state. There is no single answer. And the answers you get may well not make much sense to you. 3. Here is the single most important piece of advice I can offer you about these issue. Do not listen to what I say about it, or what anyone else says about it on this forum. Instead, contact the state ABC, or its functional equivalent, and ask them. If you have no idea who that is, visit TTB's website. They give you contact information. 3. Here is the second most important piece of advice I will give you. Before you ask a question of a state official, do your homework and try to find out what the state rules say about the matter. You can get bad answers from state agencies. Repeat - you can get bad answers. Be prepared, if you can, to question those answers. 4. If something is really important to you, and you are not comfortable asking questions because you do not know enough, then inquire about what someone like me, who does consulting, will charge to get an answer. But I stress, do this only if it really matters to you. Do I know the rules of every state? I do not. I know very few rules of very few states. I do know how regulatory schemes are structured. That can help identify the questions to ask. But I would never deem it appropriate for me to give you an answer about any state law without asking the appropriate official first. Abut federal law I'm more comfortable. But I routinely ask for confirmation if there is any doubt at all about how to interpret a provision.

What change to how the bond must appear? I submit a lot of applications and I've not heard of any change in the entries. I'd be interested to know the change for which they asked?.

"Other recent federal accounting standards?" What does that mean? Make them ante up and show you that standard, then show you where in the law or regulation it provides that the standard they show you applies to the requirement, under the IRC and part 19, that you make a record of tax determination. Let me go out on a limb and start sawing. They will not be able to do it. I'll keep on sawing. There is absolutely no requirement that the record of tax determination be an invoice. TTB auditors cannot insist that an invoice is required by part 19 when it clearly is not. I will cite the specific regulation: Section 19.572 - (in pertinent part)The required records may [my emphasis] consist of documents created in the ordinary course of business, rather than documents created expressly to meet the requirements of this part, provided that those documents: (a) Contain all of the relevant information required under this part; ( Are consistent with the general standards of clarity and accuracy; and © Can be readily understood by TTB personnel. However, Sec. 19.611 is more specific. It provides, (in pertinent part) - Form of record. A serially numbered invoice or shipping document [my empahsis again] , signed or initialed by an agent or employee of the proprietor, will constitute the record of tax determination. Although neither the proof gallons nor the effective tax rate must be shown on the record of tax determination, each invoice or shipping document [me again] must contain information sufficient to enable TTB officers to determine the total proof gallons and, if applicable, each effective tax rate and the proof gallons removed at each effective tax rate. For purposes of this part, the total proof gallons calculated from each invoice or shipping document constitutes a single withdrawal. They key here is that you must use an invoice OR shipping document; the document you use must be serially numbered; the document must contain the information that lets the auditor "determine" the proof gallons removed on the document (it does not need to state the proof gallons removed); and an employee must sign and initial it. Nothing requires that you date an invoice on the date of removal, but if you do not, and you use the invoice as the record of tax determination, the invoice will have to show the date that you made the removal. That means the date the case crossed the bond line, not the day the truck left the loading dock. I think I can climb safely back down the tree now. I do not think I've sawed off the limb and taken a great fall. It is always fair game to ask a TTB employee to show you where a requirement occurs. I invited such questions. They cannot change regulation by fiat or whim. They have to go through a process defined by the law, the Administrative Procedure Act, with opportunity for public comment. That is why it takes so long to get changes. What the auditor told you would seem to run counter, as you note, to the expressed rules in the regulation. That said, invoices are a great shortcut to proper records of tax determination. But serial numbered shipping documents that contain the required information (i.e., label proof, bottle size, number of bottles per case, and number of cases, as line item entries, suffice). If the auditor wants to see the invoice associated with the shipping document, that is fine, but if you want to use shipping documents, let them ask. I'll crawl back out on the limb again - There is no reason that you should have to create an invoice for a removal to a tasting room you own. "Invoice" A nonnegotiable commercial instrument issued by a seller to a buyer. It identifies both the trading parties and lists, describes, and quantifies the items sold, shows the date of shipment and mode of transport, prices and discounts (if any), and delivery and payment terms. I do not make that argument frivolously. You do not make sales to yourself. You need a serially numbered record of removals to either a tasting room, retail space, or a taxpaid storeroom on, or in the immediate vicinity of, general plant premises, or a taxpaid storage premises at another location from which distilled spirits are not sold at wholesale. Consider removals to state operated bailment warehouses, for example (say North Carolina, which requires that a DSP have a federal wholesale permit at the address of the states warehouse, but sales are made to county ABC's, not the state). Ask the auditor how he can require an invoice in those instances, since an invoice would indicate a sale had taken place when none had? Do you tell them to pound sand if they ask to see the invoice? Certainly not. But the imposition of ad hoc requirements is maddening.

I am sitting here thinking how best to respond to this. You are asking a "Records and Reports 101" question, which is a very valid question to ask. We do not learn calculus until we have learned algebra. As that implies, I've found that it is always best to establish a foundation on which to build. I want to do that here because it provides you with a way to identify the questions you need to ask about any entry you must make. My answer will not be of immediate practical value, but hopefully it will be of strategic value as you face what can seem like the daunting task of getting your operating reports right. I think it may best be addressed this by looking at the general goals of an audit (oh god no, I am neither an auditor nor accountant. I've just had to become familiar with the basics as a matter of necessity, not predilection). First, an audit attempts to verify that all transactions are included. That is also your first task. You must capture in your records any operations or transactions that affect a quantity required to be recorded. Even if you record every last change in quantity or components of the spirits in your DSP, you can't make proper reports unless you know how TTB classifies the operations and transactions. Checking for proper classification is the second audit goal. Your question is really, "What does TTB mean by "withdrawn tax determined." The meaning of the terms "withdrawn" and "tax determined"is not intuitively obvious. There is no way that anyone walking down any town's main street should have any idea of the correct answer to that question. But as the proprietor of a distillery, you damned well better know the answer. Here is my rule -any term TTB uses means what they say it means and what they say it means is sufficient to establish what it means. Unless we are gong to coufrt, or it is really important, don't argue. That means you must learn what TTB means by the way it uses terms. Your question is an effort to do that. TTB has an online glossary (http://www.ttb.gov/forms_tutorials/glossary/glossary.html.), but the problem is it is not complete. For example, it does not define "withdrawn," in any form of the word. However, the site does contain the following: Tax determination - The point at which a proprietor establishes the amount of tax due. Tax-determined spirits - When used with respect to the tax on any distilled spirits to be withdrawn from bond on determination of tax, shall mean that the taxable quantity of spirits has been established. The "withdrawn from bond" reference implies the meaning of the term "withdrawn." So you are forced to go through this sort of a learning process for all of the entries on the operating report forms. The third goal of an audit is to ensure that the operations and transaction are recorded in the proper period, that is, that you know "the point at which you must establish the amount of tax due." The answer is that you establish that at the time of withdrawal from bond. This means, quite literally, the time at which you take spirits in any container (Container. A receptacle, vessel, or form of bottle, can, package, tank or pipeline - where specifically included - used or capable of being used to contain, store, transfer, convey, remove, or withdraw spirits and denatured spirits. Container is a defined term. I am quoting 19.1) across the line that defines the boundary of your bonded premises (The premises of a distilled spirits plant, or part thereof, as described in the application for registration, on which the conduct of distilled spirits operations defined in 26 U.S.C. 5002 is authorized," quoting Sec. 19.1 again). Okay, those are confusing sentences. I admit that. But you can find definitions for most terms. The next goal of an audit is to determine if you are properly measuring the values, i.e., in DSP terms, if you are making the proper gauges in the proper way. For taxable withdrawals of cased goods, that means that you are determining the tax due based on the size of the bottle, the proof shown on the label, the number of bottles in the case and the number of cases removed. You do this from a record, usually an invoice, showing the removal (if invoices are not dated as of the date the spirits cross the bond line, then a bill of lading or similar document, as long as it contains the information necessary for a TTB employee to determine the tax due on the spirits you moved out of the area of the bonded premises. You then compute the liability at the rate of $13.50 a proof gallon, which for 80 proof 750ml/12 case is about $25.68, but TTB has rounding rules you must follow so you need to know them too. It also means that the auditor should check, and you should ensure, that you are recording the mandatory proof and fill checks and making corrections as necessary to correct proof and fill so that they fall within the accepted tolerances. That means that you must know how to conduct the test, when to conduct it (after all filtration, etc) and the tolerances allowed. Next, the auditor wants to know if you have presented the operations and transactions fairly in your operating reports (they are the equivalent of the income statement mixed with the balance sheet in terms of financial records). This is, again, a question of proper classification, accurate summation, etc... The question is, "Does the report, when read by someone who knows what the terms mean and where things should be shown, accurately reflect the nature, quantity, and timing of the operations and transactions you conducted. To recap - (1) you must know what the terms mean, (2) you must make sure the quantities are determined accurately, (3) you must enter the quantities determined accurately in the records,(4) you must accurately summarize, for the reporting period, the quantity shown in the records; (5) you must enter the quantity accurately on the proper report; and (6) you must include the transaction on the report for the proper period. that the entry is made on the report for the proper period. Proper is in each case is a function solely of TTB's rules. If you are signing reports and tax returns, learning those rules is your responsibility. I don't know any shortcuts to gaining that understanding. However, I will add, as an encouraging word, that most small distillers engaged in a very limited number of types of operations and transactions, so that they could make a template that would black out 90% or more of the cells found on the three operating reports and still record everything required. That makes the task they face seem far less daunting. Really, if you take the entries appropo to your operations, and only those entries, "one bird at a time," asking whether you know or have a way of determining if what you are entering is correct, it is not that hard. As I said, I am not by disposition an accountant, but I can grasp it. So can you.

Chris - quickly. As a distilled spirits plant dealing in beverage alcohol, it is unlikely that you will have packaged products. Both bottles and packages are containers. A container is "A receptacle, vessel, or form of bottle, can, package, tank or pipeline (where specifically included) used or capable of being used to contain, store, transfer, convey, remove, or withdraw spirits and denatured spirits. A package is "A cask or barrel or similar wooden container, or a drum or similar metal container." Both of those definitions appear in Section 19.1. Bottles are liquor bottles. 191. defines a liquor bottle as "A bottle made of glass or earthenware, or of other suitable material approved by the Food and Drug Administration, which has been designed or is intended for use as a container for distilled spirits for sale for beverage purposes and which has been determined by the Administrator to adequately protect the revenue." More succinctly, they are the bottles into which you place your spirits. Pat 19 includes an entire subpart devoted to liquor bottles. See the requirements there. I've just responded to our question about imported spirits with a rather lengthy discussion of why you have to learn how to classify. I will not repeat that here. Classification is an act of definition. Learning to classify is learning how to apply definitions to a set of rules. Good luck.

Let me ask,"How did you came to conclude that you would report this on the production report?" I'm not being facetious or smart assed about it. My question is Socratic. Stop, right now and answer it for yourself before you read further. Now, I will tell you that whatever reason you just gave is bogus. The spirits you describe are not distilling materials or material used in distillation; they are already distilled. They do not show up in Part IV anywhere. They do not show up on the production report period. TTB does not classify the receipt of spirits in bond as a production operation. You enter these spirits into your system by receiving them in the warehouse account. The imported spirits in question make their appearance in line 2 of the Report of Storage Operations - if you are the importer and receive them directly from customs custody, they would make their appearance on line 3, but that is not your scenario. Now, that is a fine pronouncement, but it does you little good. I've given you a fish but not taught you how to fish. To boot, I've not given you any reason to think that my answer is any better than yours. To understand TTB's system, which TTB does not do a good job of explaining from what I like to call "first principles," you have to understand which operations and transactions are production operations, which are storage operations, and which are which are processing. That is a matter of what accounting rules call "proper classification." The account works according to generally accepted accounting principals that include rules of classification. Proprietors of distilled spirits plant work according the the requirements of part 19, which has rules that govern production, storage, and processing operations. You conduct all operations, in spirits, on which tax has not been determined, within production, processing and storage accounts. When I teach about this, I stress that I have to repeat the "production-storage-processing" mantra until there is a moment of awakening. Proper classification is entering an operation into the proper account. The receipt of spirits in bond, whether they were produced in the United States or somewhere else, is usually, but not always, a storage operation (you could receive them in the processing account, line 2, if you intend to immediately process, for example bottle, them). That is the rule according to part 19. Storage operations take place within the storage account under the rules that govern storage operations. You record them in the storage records and report them on the storage report. Unless you understand how to classify operations and transactions according to TTB's regulatory fiat, the records and reports are going to be a source of both mystery and frustration. This is not a matter of "natural law" and the rules are not intuitively obvious. They are not necessary, but they are sufficient, and I'd describe the failure to understand classification as a recipe for a perpetual state of snafu. Now, I hate keeping records. My predilections stray very far from those of the person who likes to operate in a world of artificial rules, but in business you have to keep records that accurately reflect your financial transactions and as the proprietor of a distilled spirits plant, you have to keep a lot of records that reflect transactions in spirits as opposed to dollars. TTB's system is artificial, but it is designed to provide consistent accounting and meaningful reports. The rules do not have to be the way they are, but there must be a consistent set of rules. TTB is responsible for making the rules; you are responsible for knowing them. If you understand the skeleton of the system on which TTB hangs the recordkeeping requirements, you will experience a lot less frustration trying to live up to your end of the bargain. I'm not going to go further here. The situation you propose is hypothetical, but the need to be able to classify hypothetical situations properly is real. That is the root of my first question in this response. I will add that when you put a spirit in a bottle, you have to be able to prove that it is entitled to the label claims you make. Don't buy imported spirits without also receiving the documentation needed to satisfy TTB that you are not pulling a fast one with label claims. I'll not get into that further here. .

There are places for attorneys and this is one of them. I'm not an attorney. But, if you can't understand it, don't do it, is a good non-attorney rule of thumb. And don't nod like a bobble head just to give the appearance that you know. Really understand what you are getting into or avoid it. Complicated schemes are complicated for a reason. They weave a sinuous path. There are laws, they try to find a way around them, and if they don't do it right, you are screwed. That is general advice. I won't pretend to give advice on PPM's. Flying Red Pig is correct, PPM's appear to be boilerplate in a lot of instances. That is why you can find attorneys on-line who will do the memorandum for $2,000 or so. guaranteed in all 50 states, etc. I have no idea if that is a good idea, but m leary of schemes concocted by the MBA's in fiance who create deals - not spirits - as a way to make money. Further, the $1M requirement means that you are not going after money from typical friends and family. So, unless you know people with a bankroll, it would appear that the PPM is not going to do you any good. PPM's belong to the realm of games that are played above the rim. I'm happy to be the old white guy who can't jump. Ask yourself honestly, what have you got to offer that will attract persons who have large hunks of cash they want to invest. If the answer is that you have nothing, then why bother to worry about structuring sophisticated deals in the first place?. The poet and monk, Thomas Merton, once wrote, "Isn't life absurd enough already without our adding to it our own fantastic frustrations and stupidities? There are a lot of LLC's out there that are formed without any regard to a PPM. There members just want to distill. Isn't getting into the business of being a distiller absurd enough without schemes? Why add the potential frustrations and stupidities of PPM's. Unless you are in the business of crafting deals instead of bourbon, why would you want to do that.?

I will guarantee you that TTB will not approve of a distillery that is attached to a residence. It is too long to explain here, but basically, the law - not just regulation - says that you cannot have a distiller in a residence or any structure that is in a yard that is connected to the residence. TTB cannot approve something that is contrary to law. I've gotten approval for distilleries on the same tract of land, where we can reasonably argue that they are not connected within the meaning of the statute, but it will never happen if it is actually attached. I think I've posted on this before in more detail. I can't remember where or when.

My answer is correct, but how do you know that? Why trust me? I don't work or speak for the WSLCB. Seriously, the best advice I can give you is "Call them with questions like this." Don't rely on forum answers, especially when the answer given doesn't cite an authoritative source. I should have said that when I wrote my response. I didn't and that's shame on me. Good luck. If you want to make rum, buy the more expensive license and do it. You lose no sales/distribution privileges and gain a lot of flexibility with sourcing. But don't believe that. Call Olympia. That's what I do when I have a question.

Rum and agave are products that a person holding a craft license cannot make. You must be licensed as a distiller to make those products. The fee jumps from $100 to $2000. That is the folly of linking craft distilling to agricultural activities, but it is the price paid, I guess, for getting legislators to sign on.

If you are having someone contract to produce spirits for you, which you are going to sell at wholesale (i.e, you sell to other wholesalers or to retailers), then you will have to have a federal basic permit as a wholesale liquor dealer, without regard to whether you sell in the state of production or some other state. Next, for reasons of state taxation, there is no state that will allow someone to ship spirits into that state without some sort of licensing scheme. The schemes can vary, but someone within the state where the sales takes place will have to be licensed by the state to "import" spirits into the state and be responsible for paying taxes and labels, if the state has a labeling law. If you are the person responsible for bring them into the state, then you will have to be licensed by the state. If you are selling them to someone in the state that has a state license to import, then it is likely that you, as the person shipping into the state, will need to be licenses by the state, even if you have no presence in the state. You lso need to consider the need for "agents" licenses. But don't ask for advice about any of this here. Go directly to the state and let them tell you what they require. That is the way to stay out of trouble you do not need, especially if you are considering opening a distillery at some future date. You do not want to have been charged with a violation of state laws having to do with the illegal shipment of alcohol. Finally, you cannot use an associates DSP to produce spirits. The associate will have to produce the spirits, keep the records, pay the taxes, get the label approvals, etc. I think that you may know this, but the proper way to describe what must happen is that you are going to contract with a distilled spirits plant to have that distilled spirits plant produce spirits for you in return for a payment you make to them to buy the spirits from them. YOU are not going to use the distillery; the proprietor is.

I can't talk about things technical - Flying Red Pig seems to have the handle on that - but I can say that rice wine is beer under US standards. It is not a malt beverage because it is not brewed with the minimum mlt content, so FDA labeling rules apply, not TTB's. But a person who produces "rice wine" is a brewer and pays taxes as a brewer. Not all beers that contain rice are "rice wines," not by a long shot. Many are malt beverages. To a brewer in the US, rice is an adjunct. The term "adjunct" includes any grain other than malt. Talking about SE Asia gives rice wine an exotic air, but rice is the second most used adjunct in US brewing. According to the Beer Institute, "The basic ingredients in beer are barley, the hops, water and yeast. Varieties of beer use rice, corn, wheat, sorghum, and other grains. Every year, U.S. brewers purchase: 4.8 billion pounds of barley malt grown or processed in California, Colorado, the Dakotas, Idaho, Illinois, Minnesota, Montana, Oregon, Washington, Wisconsin and Wyoming 1.8 billion pounds of rice, corn and other grains from Arkansas, California, Illinois, Iowa, Louisiana, Mississippi, Missouri, Nebraska and Texas 15 million pounds of hops from Idaho, Oregon and Washington. You find rice in Budweiser, which some craft brewers use as a convenient foil to tout their character. Kind of takes the exotic out of it, right?

But you may only label it corn whiskey if it meets the standard for corn whiskey - 80% more corn, distilled at 160 or less. Moonshine allows a lot of possibilities that corn does not. For example, in the classic moonshine sense, the addition of sugar. I once had a ruler - I don't know where ti went - that asked people to help catch moonshiners by reporting large purchases of sugar to the government. I doubt that marketing effort encouraged many reports of stills in the hollows. There is also the question of whether "Moonshine" might not be a better label, for your target consumer, than corn whiskey would be, i.e., whether you might deliberately keep corn to less than 80% to avoid "having" to call it corn, if TTB actually stumbled to what you were doing. But marketing isn't my forte, so I should probably stick to what the regulations say you must, can't or may (as opposed to" can") do. That said, blustar, I don't know what rules, if any, TTB would go by when deciding whether to allow "moonshine" as a predominant feature on the brand label of a product identified, again predominantly, as the type "Corn Whiskey." I'll bet that could be all over the board.

TTB is not always clear about what it requires. I’ll try to set the record straight, with the caveat that TTB is the authority, not me. I think that the problem is that TTB is not very rigorous in explaining this issue. It address the need for formulas for vodka in two places. The first is in the regulations, where it clearly requires a formula. The second is in its comments on the need for pre-COLA evaluation, which means, in practice, the need to submit a formula before getting label approval. The latter is the source of the reference, above, to a formula not being required unless you ad harmless flavoring, coloring, blending materials. That statement has a limited application. It speaks to the matter of needing a pre-COLA evaluation for Vodka. You do not need a pre-COLA evaluation for vodka unless you add the harmless materials. Therefore, you do not need a formula to get the label approval, or at least you should not need it unless Formulas Online is acting up or programed incorrectly. WARNING: To remain vodka, the harmless materials added may only be citric acid and sugar and they must be added within the limits prescribed by §5.23. Exceed those limits or add something else – flavored vodka if it fits that standard and a distilled spirits specialty item if it does not. However, the fact that you do not need a formula to get the label approval does not mean that you do not need a formula for vodka. Generally, you do. The exception is when you produce vodka by original distillation in the production account, i.e., when you declare it vodka, not NSG, at the time of the production gauge. If you declare it NSG, then the further processing required by §5.22(a)(1) to turn it into vodka results in a change of class and type. That requires a formula. Am I sure of this? Yes I am. The regulation is not at all ambiguous about that. § 5.27(l) provides as follows: Formulas are required for distilled spirits operations which change the character, composition, class or type of spirits as follows … The production of vodka by (1) Treatment of neutral spirits with not less than one ounce of activated carbon per 100 wine gallons of spirits; (2) Redistillation of pure spirits so as to be without distinctive character, aroma, taste, or color; (3) Mixing with other spirits or with any other substance or material except pure water, after production … TTB should make this clear in the chart they furnish discussing pre-COLA evaluations and the need, or lack thereof, for formulas to get label approval. They do not. Their silence is confusing and can lead you astray from what §5.27(l) requires. You have to read the regulation with care to find that requirement. TTB should point you in that direction, unless, of course the author of the pre-COLA guidelines didn’t read with the care they expect you to use.

This is totally a matter of fire and zoning codes. TTb does not enforce or give one whit about zoning compliance, sprinklers or limits on the amount you store in a particular building, provided you have adequate bond. There is no authority in law for them to give an official damn about it. TTB does want the area to be secure against theft or any unauthorized entry. But that is it. Fire Marshall's have a different view of things. I'm not competent to comment on that any neither are most others, because Fire Marshall's often behave as feudal lords in their own fiefdom. Yes, there are provisions that removal spirits stored in wood barrels from the count. Be prepared to cite the authority for that statement. Ditto for zoning. You have to know the local codes. My advice is to talk with those who make these decisions in your area. Be nice. But do your homework. Don't be blown off by bad answers.

Remember that you must "adjust" for errors in the way hydrometers and thermometers read. All instruments contain errors and if you want accurate proofing, you must account for the errors built into them. In days of yore, all of the government hydrometers and thermometers had correction tables. The TTB website contains an example of a correction table. You can find it at: http://ttb.gov/pdf/sample-calibration-report.pdf. It appears that this calculator is actually an interpolation tool. That's great, but it is only going to provide results that are as good as ... what is the saying, "garbage in, garbage out."

You would write in under the category fruit and fruit products as grape wine (or pinot noir, etc), pear wine, apple wine, etc. If you are making brandy, be careful that the type of wine is appropriate for the type of brandy. That matters, in the same way that you can't make whiskey from molasses or rum from wheat.

The standard of identity for the class whiskey (class 2) includes a requirement that it be aged (unless it is corn whiskey and not all corn mashes make corn whiskey): Class 2; whisky. “Whisky” is an alcoholic distillate from a fermented mash of grain produced at less than 190° proof in such manner that the distillate possesses the taste, aroma, and characteristics generally attributed to whisky, stored in oak containers (except that corn whisky need not be so stored), and bottled at not less than 80° proof ... " That rules out label for whiskey for any whiskey other than corn whiskey that has not been stored in oak containers. Any labels that have been approved for such whiskey were approved in error. That, of course, never happens. Beware - corn whiskey is a type of the class whiskey. It is defined as: "whisky produced at not exceeding 160° proof from a fermented mash of not less than 80 percent corn grain, and if stored in oak containers stored at not more than 125° proof in used or uncharred new oak containers and not subjected in any manner to treatment with charred wood; and also includes mixtures of such whisky.' Next, the provisions requiring a class and type statement (5.35) say, ". The class and type of distilled spirits shall be stated in conformity with §5.22 if defined therein. In all other instances the product shall be designated in accordance with trade and consumer understanding thereof, or, if no such understanding exists, by a distinctive or fanciful name, and in either case (except as provided in paragraph ((2) of this section) followed by a truthful and adequate statement of composition. The "shall be stated" wording is an instruction that removes options. read it to say, "must be stated." If you make a whiskey that conforms to the corn whiskey standard, then you must label it as corn whisky. You may not label it with the fanciful name moonshine or Rye Dog, etc. If you make a product that is distilled from rye, or any grain mash other than one that meets the standard for corn whisky, as stated above, and do not store it in oak, it does not meet the standard for whiskey (corn or otherwise) or any other standard set forth in 5.22. Therefore, under 5.35, you must label it with a fanciful name immediately followed by a truthful and adequate statement of composition. By the way, you do not enter a statement of class and type on the COLA application. TTB reserves for itself the right to screw that up. What you are looking for is a "fanciful name" that will satisfy TTB. Rye Dog would seem appropriate as a fanciful name if you use a mash that is 51% rye, but who knows how TTB will go with that.

Yea - the bonding thing gets involved. The tax attaches to spirits at the time they are created, which is why you have an operating bond as A dsp, but it does not attach to beer until it is removed for consumption or sale, which is why brewers do not have an operating bond. Logic then dictates that since the beer removed from the brewery is not in bond, the liability does not transfer to your DSP operating bond. The term "consumption or sale" is defined in the beer regulations - Sec. 25.11, "Removed for consumption or sale. Except when used with respect to beer removed without payment of tax as authorized by law, (a) the sale and transfer of possession of beer for consumption at the brewery, or ( any removal of beer from the brewery" The law allows a brewer to remove beer without payment of tax to a distillery for use as distilling material. Prior to about 1997 (don't quote me on the year, but I'm close), the law only allowed removal from a brewery to a contiguous DSP. A taxpayer relief act then changed it to allow removals from any brewery. 26 USC 5053(f) now reads, "Subject to such regulations as the Secretary may prescribe, beer may be removed from a brewery without payment of tax to any distilled spirits plant for use as distilling material." I added the emphasis. Beer may be removed to any DSP, not just to a contiguous plant and when it is, it is a removal without payment of tax, not a transfer in bond. Some confusion can arise because the beer regulations have not been amended to reflect that change. They still state, at Sec. 25.201, that you may remove beer to a contiguous distilled spirits plant by pipeline without payment of tax. But as we have seen, it is no longer that restrictive. The spirits regulations were amended in 2011 and reflect the 1997 changes to the law. That is why Sec. 19.296 includes among fermenting materials, "beer received from a brewery without payment of tax." Wine is transferred in bond, beer is removed without payment of tax. And that is where the "round-about way the CFR handles this reflects the difference in bonding status of wine and beer." Given the provisions of law, yes, bluestar, it makes perfect sense. The lesson is that It is dangerous to attempt to jump between commodities. You will often end up with an erroneous conclusion. Finally, I have not read all of this thread, so someone else may have already noted that MadMacaw's citations posted in 2007 are all out of whack, notwithstanding the fact that he got them straight from a TTB agent. For example, if you bring wine onto a DSP premises for use as distilling material, you receive it in the production account. You do not enter it into the processing account. If you receive it for use as a flavoring, then you create the dump and batch record and conduct the operations in the processing account. . But you would not create a dump and batch record for wine received as distilling material - you either make neutral spirits or brandy, and all of that goes into production records and into the report of production operations. I didn't even read all of the citations in MadMacaw's post. I have no doubt that he reported accurately what the TTB agent said, but having been a regulatory for many years, I can vouch for the fact that not all their advice is good, even when I was the one giving it. I always told persons not to take my word, but to put their questions in writing and submit them for a written answer from someone who is authorized to state TTB's position. That is still good practice, if TTB can find the time to respond, given the way its budget has been bled in the name of deficit reduction.

Obviously, I'm jumping in late. I'll leave it to you to decide if that is better than never. Those who say that state law reigns here are correct. Federal tied-house laws do not prohibit 100% ownership of a retailer by an industry member (a producer or wholesaler), since the tied-house prohibition is against "inducing" the purchase by prohibited means. The legal logic dictates that one cannot induce one's self I ate the chocolate bar because I waxnted to, not because I was induced to do it. Because I jump up and down, insisting that you not listen to any advice that does not cite the source, here is the source: §6.26 Indirect interest.Industry member interest in retail licenses includes any interest acquired by corporate officials, partners, employees or other representatives of the industry member. Any interest in a retail license acquired by a separate corporation in which the industry member or its officials, hold ownership or are otherwise affiliated, is an interest in a retail license. Back to Top §6.27 Proprietary interest.(a) Complete ownership. Outright ownership of a retail business by an industry member is not an interest which may result in a violation of section 105((1) of the Act. (Partial ownership. Less than complete ownership of a retail business by an industry member constitutes an interest in a retail license within the meaning of the Act. Please note that, under federal law, "clever" arrangements that result in an indirect interest can result in tied house violations. I'm obligated to make that clear, but in practice, you are going to be small enough that TTB will not invest its limited resources in determining whether your less than complete interest is having an effect on interstate commerce that is worthy of federal attention. That is probably not true of state agencies, which often take a stricter look at things, if only because they do not have the burden of proving an effect on interstate commerce. Remember, you must obey state law. Federal law does not trump state law except where the courts hold that the state law conflicts with the commerce clause of the constitution. You do not want to go there. Indeed, in most cases, given the provisions of the 21st amendment, which grants states broad powers to regulate alcohol within their borders, state law will trump federal law if there is a direct and positive conflict between them, which only occurs when one prohibits what the other requires. Without direct and positive conflict, you can obey both laws by simply doing what one requires that the other does not prohibit, or not doing what one prohibits but which the other does not require. Cases of direct and positive conflict are rare and they certainly do not arise around the issue ofla distillery also holding a retail license. Federal law does, however, prohibit establishing a DSP for the production of spirit on any premises where liquor of any sort (beer, wine, or spirits) are sold at retail. The regulation is broader: Sec. 19.52(d) Restrictions on location of plants. A person who intends to establish a distilled spirits plant may not locate it in any ... [place] ... where liquors are sold at retail. Although at one time, TTB was sloppy about this, allowing, in some cases, retail sales on the general premises of the DSP plant, they have taken steps to "correct" what they perceive as that error. Correspondence from specialists will sometimes include a statement that " A DSP needs to have complete physical separation from the sampling/tasting area for both bonded and general premises because it will most likely involve the retail sales of alcohol which by law cannot be done on distillery premises. This would require a separate entrance from the outside and 4 walls around the sampling/tasting area. The sales of most other merchandise can be done on distillery general premises." That is a direct quote from an email I received from a specialist, even though the application in question clearly showed the separation and the outside entrances. The take home point, for me at least - TTB specialists are proceeding with caution on this matter now, probably as a result of some internal audit that found their inconsistencies and generated written instructions advising specialists not to approve tasting rooms, etc.. At any rate, the DSP application must describe the segregation of the distilled spirits plant from the retailer premises, just as you would describe the segregation of the distillery premises from the childcare center next door. Note - it does not matter that the lease you sign with the landlord includes both the dsp premises and the retail premises. Nor does it matter that the person (LLC, corporation, etc) that owns the distillery also owns the retailer outright. What matters is that you have segregation acceptable to TTB and that you describe the distillery in a way that excludes the retail area from the distillery premises. Some states take a different view; some do not. It is very state specific and the jargon used from one state to the next can vary significantly.The rules of an individual state may also differ for distillers, brewers (especially brewers, as witnessed by the brew pub model), and wineries. So, adopting my jumping up and down posture, I conclude, you should (1) not listen to any advice that is not state and industry specific; (2) make sure that the advice your receive reflects your exact situation; (3) ask the question of state agents, not an ADI forum, but also question the advice of the state agents because they sometimes give off the cuff answers that don't actually reflect the requirements; and (4) don't rely on experts like me, unless that purported expert is a liquor lawyer who is intimately familiar with the laws of the particular state - I'm nt - and even then, beware, because in my career I've had to sort out more than one mess created when someone acted on bad advice received from an attorney who should have known better. Finally, frame your inquiry to the state as follows: (1) Under what circumstances can a person - which includes LLC's, corporations, etc - who holds a license or permit as a distillery, provide tasting and/or make sales to the general public? (2) Under what circumstances can a person hold an interest in both a distillery license and a retail license? (3) Under what circumstances can persons who hold an interest in an entity operating a distillery, also hold an interest in a retail licensee? (4) Under what circumstances can a person allowed to serve sample and/or sell at retail, under any of the above arrangement, also serve cocktails? In each case, ask them to provide a reference to the rules on which they base their determination. And if possible, get it in writing. That should get you started down a road that leads to some definitive answers to your questions.

You are not going to get approval for a mobile DSP. But that does not say that you can't make a DSP using modular construction. I would be prepared to have a way of tying it to a foundation if TTB objects and it is impossible to predict when they will object or why. My best advice - don't guess or gamble. Until we have specific facst about a specific container located in a specific place and secured to that space in a specific way (even if by way of the weight of it alone), we are dealing in speculation. If someone knows of someone who has done what you propose, then perhaps permission to do so was granted by private letter ruling. And if it was not, then I'd be a little bit reluctant (okay, a lot reluctant) to start a letter to TTB saying, "As in the case of ABC Distillery, we wish to establish a DSP premises in a 40 foot storage container located on ...." I'd start preliminary inquiry with TTB, in the form of a mother may I letter, but i'd not actually make application until TTB has indicagted condistions under which they would approve and the local building department and fire marshal weigh in with their two cents worth. What is the time line? How serious are you? At the risk of appearing to troll for business - and I post a lot to these forums without mention of the fact my services are for sale - if you want to pursue this and would like help, give me a call and we can talk about how we might go about framing the issue, etc.

The "rollover" forms at http://ttb.gov/forms_tutorials/f511011/f511011_tutorial.html, (this one for the storage report, which means spirits takeb fropm containers holdoing one gallon or more) provide some basic infromation on this. For example, in the storage account, the rollover says the cell is for spirits removed for research or testing of your plant's "quality and product development." Note - "removed." This entry is spirits that leave bond. The regulations make a distinction between laboratory samples and products withdrawn for research or development, but the rollover instructions lump both lab samples and products withdrawn for research and development into the same category IF THEY ARE REMOVED FROM THE BONDED PREMISES FOR TESTING, ETC. Further, there is no other place on the report to put samples removed from bond for testing purposes. How did this come about? I don't know and it doesn't really matter. Sometimes it is important to understand how things came to be; sometimes it is not. I'd lump this into the latter category. Here is what the regulations say: Sec. 19.434 Spirits withdrawn from bonded premises.- (a) Laboratory samples. A proprietor may withdraw spirits without payment of tax, or may withdraw wine spirits or brandy free of tax, to the proprietor's laboratory, to the laboratory of an affiliated or subsidiary corporation, or, if approved by the appropriate TTB officer, to a recognized commercial laboratory. The samples must be used only for testing or analysis to determine the quality or character of the finished product and must be withdrawn in the minimum amounts necessary for the purpose. ( Customer samples. If a bona fide purchase agreement exists that is contingent upon quality approval, a proprietor may furnish to a prospective customer a sample of spirits not exceeding 1 liter for quality testing. A proprietor may furnish a sample not to exceed 1 liter to a prospective customer for quality testing in anticipation of a purchase agreement if the customer is authorized to receive bulk spirits for industrial use. © Research or development. A proprietor may withdraw spirits without payment of tax for research or development testing, for testing of processes, systems, or materials, or for the testing of equipment relating to distilled spirits or distilled spirits plant operations. The amount withdrawn must be limited to the amount reasonably necessary to conduct the test. If the test is to be conducted by someone other than the proprietor, the proprietor must obtain a written statement, executed by the consignee, agreeing to maintain records of the receipt, use, and disposition of all spirits received for purposes of the test. The statement must specify that records of operations will be available during regular business hours for inspection by TTB officers. (d) Conditions. The following conditions apply to the withdrawal and testing of samples under this section: (1) The spirits may not be used for consumer testing or other market analysis; (2) The proprietor must maintain the records specified in Sec. 19.616; and (3) Remnants or residues of spirits not used during testing must be destroyed or returned to the bonded premises of the proprietor. (e) Liability for tax. The proprietor must pay the tax on any samples of spirits withdrawn, used, or disposed of in a manner not authorized by this section. (f) Losses. When spirits are lost before use for a purpose authorized under this section, the proprietor must pay the tax or must file a claim for remission of tax liability in accordance with Sec. 19.263. Remember that you have to keep records of the transaction as well. TTB gets a little inconsistent, refrerring to everyting removed under 19.434 as samples: Sec. 19.616 Records of samples. (a) Required records. A proprietor must maintain records of all samples taken under Sec. Sec. 19.434 and 19.435. The sample record must show the: (1) The date that the samples were taken; (2) The account from which taken; (3) The purpose for which taken; (4) The size and number of samples taken; (5) The kind of spirits; (6) The disposition of each sample (for example, destroyed, returned to containers or the distilling system, retained for library purposes); and (7) The name and address of the recipient of the sample if a sample is to be analyzed or tested elsewhere than at the distilled spirits plant where taken. (8) Sample schedule. When a proprietor takes samples pursuant to an established schedule, the proprietor may maintain the schedule as the required record if it contains the information required by paragraphs (a)(2) through (a)(7). One final point. When I go through this process, I'm trying to demonstrate how I think about a question and how I go about getting the answer. The answers run long because I not only say, This is how it is," I also cite the regulation, or source and try to show what it actually says. When the regulations create a trail, from one section to the next, I follow it to show how I do that as well. It is neither fun nor an attempt to demonstrate knowledge. It's payback to an industry that makes my consulting possible. But I have to go through all of this because I don't know the answer when I start. The idea is to show you how to go about getting it so you can become independent of the need for consultants like me. Hint - putting the regulations into a word document and using the search function shortcuts a lot of aimless wandering. I'll leave it to you to check out the reference to 19.435.

Posted the previous with a flying fickled finger, if you are old enough to remember Laugh-In. You bottle in the processing account. I assume that you use an NSG base to make the product, with which I'm not familiar, but am led to believe that you macerate lemon peel, etc. The flow of the spirits through the records goes like this - production gauge (if you are the person who distilled the NSG), probably for entry into the processes account, but it could be storage. If you buy the NSG, or enter your distillation into storage, the NSG then flows from the storage account to the processing account on what TTB calls a dump record. Within the processing account, you use a batch record to record the "production" of the liqueur by maceration according to a formula you have on file with TTB. The processing operations are reported in the bulk section of the processing report that you submit to TTB. When the product is finished and you from bulk to bottle, you prepare the appropriate bottling records (that is, you subtract it from the bulk and add it to the bottled inventory in the processing account). It stays in the bottled account within the processing account until such time as you do something with it. It is not R&D. You may dispose of it either by destroying it - preparing the required record of destruction signed under penalties of perjury - or returning it to the production account for redistillation into NSG (having once been distilled at 190 or more, it must always be redistilled to 190 or more). Again, you have a record of the transfer between processing and production. Blustar is correct. You do not transfer bottled goods to the storage account. Storage is alwaus bulk. Bulk means containers of greater than one gallon.. Beverage alcohol cannot be bottled in containers of more than one gallon. If you have any problem with any of the terminology I'm using here, contact me. There are too many citations required to point you in the direction that will allow you to confirm what I'm saying. To keep the proper records and file the proper reports, you must understand how TTB uses words and what it requires. It is a bit of a learning curve, but it all starts with a basic understanding of the difference between production, storage, and processing and which operations take place in which account.

It was not a loss because you have it. Losses occur only when you actual lose some product. If you bottled it, you should have done so in the processing account, not the product

Here is the advice I give to persons who hire me to consult on applications. The operating entity has a legal name, e.g. ABC, LLC. It may also have an operating trade name, e.g., Right Way Distilling. The operating trade name is the name under which you hold forth to the public that you are doing business. If you hold forth that you are Right Way Distilling, TTB would issue the permit to: ABC, LLC, dba Right Way Distilling. Right way disitlling does not exist as a legal entity. Right Way Distilling might want to bottle under bottling trade names for any number of reasons. For example, it might bottle for Good Food Restaurant and use the bottling trade name “Good Food Spirits.” The label would say “Bottled by Good Food Spirits” (bottling trade name) but your invoices to Good Food Restaurants would bear that name “Right Way Distilling,” and tax returns, bonds and applications, etc., would t bear that name "ABC, LLC, dba Right Way Distilling." I have a rule of not believing anyone who can't site a source. I've tried to find something in writing where TTB has defined the terms. I have failed to find one. So I hope someone can find a source that confirms what I say. I'm sure of it, but the principal,trust but verify, applies.