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Is owning a separate bar prohibited?

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Can the owner of a distillery also own and operate a bar in another part of town? (not just a satellite tasting room)
Thanks,
JD

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You might want to tell in which state (or which country!) you are... "It depends".

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You're looking for information on tied house laws. Many states make it very difficult to blatantly hold both licenses by the same person, obviously other people have navigated this issue creatively before.

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Federal law allows a producer to own 100% of a retailer.  Less than 100% ownership creates potential tied house violations.  However, there are substantial hurdles to TTB proving a tied house case, for example, need to show that the suppler's acts caused exclusion of products offered for sale by others in interstate commerce.  Those hurdles require time and effort (I know that because I have been there and done that successfully with the likes of major brewers and distillers) and no one in TTB, in their right mind, is going to go fishing for small fry like you when there are giant tunas to be had in major markets.  So you are probably immune from TTB scrutiny.

States are a different matter.  States which have tied house laws, and most have some sort of tied house law, often are not encumbered by things like exclusion.  Some are - in Washington they must show undue influence, whatever that may mean.  But were a state is not encumbered, the prohibition is often absolute. 

Now, as to creative navigation - states will likely have a different name for it.  Try "fraud" on for size.  You don't want to piss off state licensing authorities.  It can be expensive, in dollars, time, worry, and licensing problems.  To whit, if Warren Buffet caved to the Texas ABC and stopped selling alcohol in Flying J stops, because Berkshire Hathaway also owns a 20% state in a Mexican brewery, you have to believe there was no creative way through those waters for you.  He had access to all of the top attorneys and lobbyists and elected not to make a fight of it.  If you want to be a craft distiller, don't endanger that by trying to play clever games in waters through which Berkshire Hathaway,  with all of its financial and political resources,  can't find a safe channel.  

My best advise - 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.  

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Colorado, not allowed.  You can only own one tier of the three tier.  Some licenses have privileges of other tiers, i.e. A manufacturer can sell direct or through distribution, but you can't have ownership in a distributor or retailer.  

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to blufish_dist's  point - the rules vary from state to state and there is not a one of us here, I'll wager dollars to donuts, who can tell the rules in more than a few states.  From my experience I'm aware of what the rules were, at the time of my interest, in maybe five states, but I'd have to check for changes since I looked  and confirm that my understanding is consistent with the way the ABC interprets what is said.   Again, go to the appropriate agency and ask them.

It took me five minutes to find this online in the Missouri Department of Public Safety ATC website:

This three-tier system requires separate licenses for suppliers, wholesalers and retailers, and, with certain limited exceptions, prohibits distillers, winemakers, brewers, wholesalers or their employees from having a financial interest in the retail sale of intoxicating liquor. This three-tier system of distribution of alcoholic beverages protects against tied houses and exclusive outlets, protects against anti-competitive and monopolistic practices, fosters a stable industry, provides an orderly method for the collection of millions of dollars in state excise taxes each year and provides for a system of sound liquor control.

I didn't go hunting for the certain exceptions.  I'll leave that to you.

 

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Folks,

Many thanks for the responses. In the time since my original post I have come across the following from the Missouri ATC:

No Financial Interest in Retail Business - Distillers, wholesalers, winemakers, brewers or their employees, officers or agents, shall not, under any circumstances, directly or indirectly, have any financial interest in the retail business for sale of intoxicating liquors except a distiller whose manufacturing establishment is located within Missouri may apply for a license to sell intoxicating liquor by the drink in close proximity to the distillery.

https://atc.dps.mo.gov/licensing/liquor_mfgr_solicitor.php

"Close proximity" is not clearly defined anywhere, though.

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Some ambiguity allows for flexibility.  That is not always a bad thing. But when a word means "very near," according to Mr. Webster, and which could have been used alone, but is   nevertheless modified by "close," the authors presumably wanted to modify "very" with, well, "very."  That is,  very,, very near.  Therefore, I suspect that it means something like within the same block. not just within the same city or town.  But I'm guessing, of course.  

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JD, 

You may not own a separate retail by the drink license and a distillery in MO. No one on the DSP can. As for "close proximity" the Feds will allow a radius of several miles for a tasting room. Missouri however, will only allow it to be in/on the premises of the distillery. Hope that helps. 

Where/when are you opening?

 

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STL,

You can retail sell by the drink and by the bottle out of a bar that is in your distillery in MO and this in itself makes MO one of the best states to start a distillery.  Copper Run has a bar over their distillery in a second story.  We have a customer who will have their distillery in the same building as their bar restaurant and they will be selling the spirits that they produce at the bar.  There bar and restaurant currently stays packed with hundreds of customers every Friday and Saturday night. This is a great business model that nets you hundreds of dollars per gallon for the spirits that you produce. 

It is my understanding that you can self distribute to bars, liquor stores and restaurants in MO, but I have not seen the rules concerning this. Can someone point me in that direction?

Of course MO is the only state where it is legal to home distill under state law which really helps people to practice distilling before they open a distillery.  Of course home distilling is illegal under federal law but our state law enforcement agencies enforce state law concerning this matter not federal.

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To be clear

49 minutes ago, StL Distiller said:

As for "close proximity" the Feds will allow a radius of several miles for a tasting room. Missouri however, will only allow it to be in/on the premises of the distillery.

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. :-).

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Re: Southernhighlander, 

I am aware that you can sell by the drink and by the bottle, and yes, you are correct that MO is one of the best states in the US for distilling. What I think you misunderstood is that an individual may not have a retail liquor license separate from the one that they have listed with their DSP. So, for instance, you cannot own a bar and then decide that you are going to open a distillery. Trust me, I have been down this road. I have dealt with everyone at MO ATC and been represented by Charles Smarr on the issue. 

 

Re: Dhdunbar, 

I would never argue with your experience with TTB affairs. I was speaking specifically to what MO will NOT allow you to do, which is to have a "Tasting Room" not joined or immediately adjacent to your production facility. 

 

Hope this clarification is helpful. 

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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.
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1 hour ago, StL Distiller said:

Re: Southernhighlander, 

. What I think you misunderstood is that an individual may not have a retail liquor license separate from the one that they have listed with their DSP. So, for instance, you cannot own a bar and then decide that you are going to open a distillery. Trust me, I have been down this road. I have dealt with everyone at MO ATC and been represented by Charles Smarr on the issue. 

I did not misunderstand, or disagree with you in any way.

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4 hours ago, StL Distiller said:

JD, 

You may not own a separate retail by the drink license and a distillery in MO. No one on the DSP can. As for "close proximity" the Feds will allow a radius of several miles for a tasting room. Missouri however, will only allow it to be in/on the premises of the distillery. Hope that helps. 

Where/when are you opening?

 

Thanks for the reply. We're not set on a location or time yet, just trying to work out whether or not it's possible!

To be more specific: My friend and I want to open a distillery. My friend's wife wants to open a bar, and she does not want to have any ownership of the distillery. The bar would not be on the premises of the distillery, probably would be 3-5 miles away. We're having trouble understanding if that degree of ownership separation would be allowed.

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3 hours ago, Southernhighlander said:

STL,

You can retail sell by the drink and by the bottle out of a bar that is in your distillery in MO and this in itself makes MO one of the best states to start a distillery.  Copper Run has a bar over their distillery in a second story.  We have a customer who will have their distillery in the same building as their bar restaurant and they will be selling the spirits that they produce at the bar.  There bar and restaurant currently stays packed with hundreds of customers every Friday and Saturday night. This is a great business model that nets you hundreds of dollars per gallon for the spirits that you produce. 

It is my understanding that you can self distribute to bars, liquor stores and restaurants in MO, but I have not seen the rules concerning this. Can someone point me in that direction?

Of course MO is the only state where it is legal to home distill under state law which really helps people to practice distilling before they open a distillery.  Of course home distilling is illegal under federal law but our state law enforcement agencies enforce state law concerning this matter not federal.

Thanks! Above this post I have posted a more specific question regarding bar ownership, perhaps you know the answer.

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On 7/2/2018 at 12:33 PM, JDJDJD said:

No Financial Interest in Retail Business - Distillers, wholesalers, winemakers, brewers or their employees, officers or agents, shall not, under any circumstances, directly or indirectly, have any financial interest in the retail business for sale of intoxicating liquors except a distiller whose manufacturing establishment is located within Missouri may apply for a license to sell intoxicating liquor by the drink in close proximity to the distillery.

 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."  

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