dhdunbar

There are parallel discussion going on. On the other thread someone has posted the section of the law that applies to controlled groups. So, fools rush in where .... Here is the section on controlled groups ‘‘(2) CONTROLLED GROUPS.— ‘‘(A) IN GENERAL.—In the case of a controlled group, the proof gallon quantities specified under subparagraphs (A) and (B) of paragraph (1) shall be applied to such group and apportioned among the members of such group in such manner as the Secretary or their delegate shall by regulations prescribe. [This is standard - for beer, the brewer has to file a notice (Sec, 25.167) which includes, among other things, "If the brewer operates more than one brewery, a statement of the locations of all the breweries and a statement of how the 60,000 barrel limitation for the reduced rate of tax will be apportioned among the breweries. If the brewer is a member of a controlled group of brewers, a statement of the names and locations of all other brewers in the group and a statement of how the 60,000 barrels limitation will be apportioned among the brewers in the group." For beer, that is, it is flexible and up to the taxpayer.] ‘‘(B) DEFINITION.—For purposes of subparagraph (A), the term ‘controlled group’ shall have the meaning given such term by subsection (a) of section 1563, except that ‘more than 50 percent’ shall be substituted for ‘at least 80 percent’ each place it appears in such sub section. [ Here is where the Philadelphia lawyer comes into play,. It appears that this section 1563 was not amended, so the old language remains. The section defines three types of controlled groups, parent-subsidiary, brother-sister, and combination. Here is how it defines a parent-subsidiary controlled group, but keep in mind that where that section says 80%, we substitute 50%. _____________________________ (1)Parent-subsidiary controlled group - One or more chains of corporations connected through stock ownership with a common parent corporation if— (A) stock possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote or at least 80 percent of the total value of shares of all classes of stock of each of the corporations, except the common parent corporation, is owned (within the meaning of subsection (d)(1)) by one or more of the other corporations; and (B) the common parent corporation owns (within the meaning of subsection (d)(1)) stock possessing at least 80 percent of the total combined voting power of all classes of stock entitled to vote or at least 80 percent of the total value of shares of all classes of stock of at least one of the other corporations, excluding, in computing such voting power or value, stock owned directly by such other corporations. ____________________________ The lesson here is don't even think about trying to understand it unless you must. I'll spare you the other definitions and a trip into subsection(d)(1) etc .... ‘‘(C) RULES FOR NON-CORPORATIONS.—Under regulations prescribed by the Secretary, principles similar to the principles of subparagraphs (A) and (B) shall be applied to a group under common control where one or more of the persons is not a corporation. Most of you are LLC's. This says that the rules apply to you too. Again, don't go here unless you must and most importantly: Do not follow the advice of any who is not an attorney familiar with tax law AND controlled groups. It is just too damned hard to follow. Errors can be expensive.

First, let me say stupid things - for which I don't need permission, because there is no stupid filter that will stop me, as I soon may demonstrate - then get out that grain of salt, and I'll comment. But I ask in advance for forgiveness of things that will be proven wrong. There are a number of issues being discussed here that deserve comment. Congress has thrown everyone who collects taxes, or advices on taxes, or has accounting software in place, a knuckleball, in the form of the January 1 implementation date. I can’t call it a curveball. A curveball breaks, but it is a curve. It follows the regular rules of motion, just as writing law, for good reason, is supposed to follow the regular order regular this act did not. A mathematician can create an equation to describe a curve ball's motion and a batter’s brain can adjust the swing, at the lightning speed of a Google search, to make contact. A knuckleball, on the other hand, is chaotically unpredictable. There is no equation that can predict its motion. this is a knuckleball, if for no other reason than we don't know what we don't know and aren't likely to know soon what itis we don't know, let alone the unanticipated consequences that exist even with the due deliberation this Act lacks. Add to the "rightnow" implementation date, the temporary nature of the decrease in the excise tax on spirits. When will people have it figured out? Not yet, that is certain. Today TTB writes in today's newsletter, "Congress has passed the Tax Cuts and Jobs Act of 2017, which makes extensive changes to the Internal Revenue Code of 1986, including provisions related to alcohol that are administered by TTB. The Tax Cuts and Jobs Act will become law when the President signs it. We are currently assessing the impact of these changes on TTB forms, regulations, and systems and will issue guidance and information in the coming weeks. Please visit our webpage for updates." Forms, regulations, and systems, with no time to consider the changes that are needed now, not later, in all of them. TTB's advice to follow the announcements it will be making on its webpage is sound. Giving everyone six months or more to to figure things out would have been sound too. But that did not happen. Accepting that this is a knuckleball - I'm not passing judgement on its merits, I'm talking about trying to take a swing that makes sound contact with the provisions - let's take a look at what I've been told the new provisions say. "What I've beenb told" is code words for "I have not read the Act and so am relying on what others say, just like most of those who voted on it. Let's start with the temporary nature of the cut. From the link adamOVD provided: “However, the tax breaks for the spirits industry will also expire in two years unless Congress acts to extend them or make them permanent in the future. The two-year period was set in order to make the estimated overall $1.5 trillion cost of the package work within Senate rules and allow it to pass with a simple majority vote instead of requiring support from 60 Senators to end debate and move to a final vote. Gorman indicated that the industry’s lobbyists will continue to push Congress to make the changes permanent.” From what I read, the $1.5 trillion is a pipedream. Yes , statistics, liars, and damn liars all inhabit the same den, but the national debt tripled after Reagan's tax cuts. That is not a politically motivated statement. I am saying, I can't put much faith in ideologically driven prognostications of greatly increased revenues offsetting the decreases in rates. Answers float like a butterfly, but can sting like a bee. The changes would have been better as a standalone amendment granting a permanent tax cut ; one that was not tied to artificial and perhaps unjustified assumptions that were needed to sneak it in under senatorial rules. As others have said, it probably is the kind of cut that congress is likely to extend. But if the deficit hawks start circling, and the choice comes down to cuts in Medicaid and Social Security that will cause congressmen real problems with their constituency, even in heavily gerrymandered districts, who knows what congress may do? "Likely to extend" and "unlikely to repeal" are different. Think automatic renewal of subscriptions. You can't rule out non action. It is often an easy course. Next, the thread contains a reference to moving everything into non bonded storage if the reduced rate expires. The easy answer is, "If the sun does set on the reduction, which I think is doubtful, then a friendly banker would be a good friend to have, because the cost of borrowing the money needed to prepay the taxes would probably be a hell of a lot cheaper than paying them at the increased rate, but …." But moving "everything" will not work. Let's go there next. Huffy2k posts - "Joe Dehner said in another thread on this topic, just move all of your product out of your bonded facility into a non-bonded storage area at the end of 2019." But moving all of the product into a non-bonded storage area will not work. For spirits that you can reasonably anticipate soon selling, and which you could bottle and withdraw taxpaid before the sunset, prepayment makes sense. The loan would be short-term. But, because there are no provisions under which you can bottle taxpaid spirits, you could not prepay the taxes on anything not removed from bond, in a bottle, your newly rented non bonded warehouse, at the time the sunsets. What can you do with barrels of taxpaid spirits? That is a serious and rhetorical question. There are provisions for qualifying to bottle taxpaid wine, but similar provisions do not exist for spirits. That would require changes to the law, not just regulation. I think such changes are unlikely. Do I need to say that impossible is probably a better guess? The "remove them from bond strategy" would then require that you hire an actuary and determine where the savings/sales curves intersect and take a flier on bottling x-years., worth of anticipated sales of spirits that don't have to age and removing them in anticipation of the sales you project. Aged spirits would require a completely different calculation. If you held a two year old spirit in a bottle for two additional years before you sell it, how much more would it have been worth if you kept it in the barrel for two years and then bottled it, paying the higher tax rate? Plus, you might have to grant the bank, that is extending the additional funds need to bloat your inventory, a security interest in the extra spirits you produce to get the x-year's supply into the bottle. If you have existing loans, the existing lenders are likely to have default first position on any spirits you produce, in addition to everything else you own, so the new lender might be, let's say, a little reluctant to bet on your ability to sell the product fast enough to repay the loan. Good luck with those sorts of calculations. Next, Roger posts, "On the negative side it may very well cause a flood on the market of new Fakeilleries (big and small) who will all be MGP "ish" type drones, dumping Fake Craft on the market at even lower prices than before, therein causing even greater harm to actual Craft Distillers." Here, things really complicated. The first rule is easy to anticipate. It will follow the EFT rules. All of a company's locations will be lumped together to determine if, and when, they exceed the 100,000 ceiling. The second set of rules will bend your minds, because TTB is going to write rules that prevent a large distiller from creating a number of small distillers, or acquiring an interest in existing smaller distillers, from allocating production between the locations, in an attempt to multiply the number of 100,000 proof gallon thresholders, as a way of avoiding taxes. Welcome to controlled groups. The IRS and TTB have both been all over this in the past and because of the possible consequences of TTB adopting an awkward position, for the IRS, in other areas, TTB has always clung closely to the IRS's lead. Whatever TTB does,m the rules are going to require that any distiller that is part of a controlled group aggregate its removals with the removals from all locations which are a part of the same controlled group. I can guarantee that, because it is a principal built into the tax code for all sorts of taxes, including beer and wine excuse taxes, which both have reduced rates for small producers. TTB will write rules that lump, for tax purposes, the members of controlled groups, as defined in those rules, into a single entity, the controlled group. Look at the provisions for wineries (Sec. 25.152) to see what the entails. I'd quote the definition of controlled group found there, but it would send you to Philadelphia in search of a lawyer. I know, I've been down that road with a client in the past. TTB also must address the difference between contact bottling and alteration of proprietors, as it has done already with breweries and wineries. I've been on both sides of that issue and I assure you getting the wrong legal advice on how to structure alternation can be a very expensive experience. Note that the word "very" occurs once and only once in this long discussion. Very means very. So TTB will have to provide some rules that prevent contract bottling under the guise of alternating proprietors. Again, look to the wine and beer provisions - you will find them in industry circulares available on TTB's website - for an idea of how that is going to go. I'll add this, it is possible that you could see large distillers taking positions in craft distilleries, but I think the impetus to gobble both shelf space and distributor attention drives such scenarios more than the reduced rate ever will. That sort of competition is a reality with which you all must live, with or without the reduced rate legislation. Further, I think those limitations are likely to slap a lid on growth, no matter how much capital is available from the reduced taxes you will be paying. It is one thing to be able to produce 5,000 cases a year; it is another thing to be able to sell them. Brentondouglas comments on a sliding scale. Now that the law is passed, that will not happen, but it is certainly manageable if it does - see wine law and regulation - and would have returned a more immediate benefit to the smaller producers, since the larger producers would have had to set a price point based on higher mean excise tax rate. Finally, and then I will shut up, the provision that allows removal of bottled spirits to another bonded premises is going to allow some "downstreaming" of taxes. That will be less possible in bailment states, and the cost of the distribution system might well dvour any savings made by the delay of taxation. But the in bond transfer of bottled spirits will facilitate bonded warehouses to which bottled spirits are shipped for consolidation with others' products for shipments to more distant markets. Again, this is going to lead to additional regulation, since the consolidator who pays the tax is going to have to justify the rate paid. The consolidator is going to be on the hook if a distillery withdraws from two or more different locations and doesn't bother to tell the consolidator that the aggregate amount removed has exceeded the 100,000 ceiling. There is a provision in the law and regulation (Sec. 19.56), that provides, "As a general rule, if a person intends to establish a bonded warehouse, other than one established on the bonded premises of a distilled spirits plant qualified for the production of spirits or contiguous to such premises, the proposed warehouse must have a minimum capacity of 250,000 wine gallons of bulk spirits and the need for such a warehouse must be clearly shown. TTB may consider an application to establish a bonded warehouse with less capacity provided a need is clearly shown." TTB regularly approves such applications, and I generally advise clients not to worry about it, just apply for discontinuous premises. But a consolidation warehouse is going to raise different issues. TTB may not be willing to waive, so willingly, the 250,000 requirement. I'm sure there will be more to discuss. This is just a start.

Regarding sticks. It seems we used to use a long wooden stick at a vinegar plant to measure the volume of alcohol in a large tank. We also used a stick - wood again, and again as I recall - when measuring the depth of the alcohol in tank trucks. I don't recall making any adjustments for the absorption factor of the wood, but we did have to watch how it would seep up the stick by a process for which Silk City probably has a name. As I recall, the measurements were not critical to anything. But all tax determination gauges were made by weight. Period. That is still the requirement. See 19.284. Because cutting to proof is essentially a tax determination gauge, although it is not called that, since the tax determination gauge for packaged spirits is made based on the label claims and number of bottles per case, I would conjecture that TTB would like the gauge in the bottling tank made by weight. However, the regulations allow all other required gauges to be made by volume (19.284 (c)), so the reduction to proof before bottling, which is a required gauge (19.283(g)) may be done by volume. That said, Silk City's reference to bakers would seem to apply. You run the real risk of missing the cut, if you measure your spirits by volume.

There is a simple bottom line here. Silk City said it. Once you have determined the proof to whatever degree of accuracy your vision, your instruments, and the five decimal conversion factors of TTB's tables will allow, just apply the factors in Table 4 and enter the result, properly rounded, into your records. That is what TTB tells you to do and it is also what makes sense. Meerkat's variance is illustrative. I've not checked his calculations, I'll just accept them. His variance is 0.1 proof gallons on a total of 1882 proof gallons, or 0.0053%. But the "actual" corrected volume of the liquid does not change with temperature. I'm forced to use quotation marks around actual because we have no way of determining the "actual" quantity. All of our measurements are estimates. The he calculated, 0.1 pg difference arises from the accuracy of the five decimal place, more than likely irrational, conversion factors in the table. With each decimal place added to the conversion factors, to the limits of our ability to calculate them, the variance shrinks. Meerkat's variance says, by its election to use five decimal conversion factors, TTB expresses the intrinsic difference it is willing to accept when the variables, volume and proof, are held to be spot on accurate. In practice, of course, TTB is willing to accept a lot greater variance than that, since we cannot measure apparent proof to anything like PeteB's 1:1000 as we stare at the meniscus of the spirits in the flask or at the apparent temperature reading on the thermometer. Nor is any instrument certified to such accuracy.

Silk City and the others are correct. The density matters not unless you have high solids (600 milligrams per 100 milliliters. I'll quote the regulations, which you find in part 30. I've parsed into bullet items it to keep the issues separated. The emphasis is mine.: §30.41 Bulk spirits. When spirits (including denatured spirits) are to be gauged by weight in bulk quantities, the weight shall be determined by means of weighing tanks, mounted on accurate scales. Before each use, the scales shall be balanced at zero load; thereupon the spirits shall be run into the weighing tank and proofed as prescribed in §30.31. However, if the spirits are to be reduced in proof, the spirits shall be so reduced before final determination of the proof. The scales shall then be brought to a balanced condition and the weight of the spirits determined by reading the beam to the nearest graduation mark. From the weight and the proof thus ascertained, the quantity of the spirits in proof gallons shall be determined by reference to Table 4. However, in the case of spirits which contain solids in excess of 600 milligrams per 100 milliliters, the quantity in proof gallons shall be determined by first ascertaining the wine gallons per pound of the spirits and multiplying the wine gallons per pound by the weight, in pounds, of the spirits being gauged and by the true proof (determined as prescribed in §30.31) and dividing the result by 100. The wine gallons per pound of spirits containing solids in excess of 600 milligrams per 100 milliliters shall be ascertained by [one of two methods I will not quote here]. The instructions for the use of Table 4 are straightforward. §30.64 Table 4, showing the fractional part of a gallon per pound at each percent and each tenth percent of proof of spirituous liquor. This table provides a method for use in ascertaining the wine gallon (at 60 degrees Fahrenheit) and/or proof gallon contents of containers of spirits by multiplying the net weight of the spirits by the fractional part of a gallon per pound shown in the table for spirits of the same proof. Fractional gallons beyond the first decimal will be dropped if less than 0.05 or will be added as 0.1 if 0.05 or more. Example. It is desired to ascertain the wine gallons and proof gallons of a tank of 190 proof spirits weighing 81,000 pounds. 81,000 × 0.14718 = 11,921.58 = 11,921.6 wine gallons. 81,000 × 0.27964 = 22,650.84 = 22,650.8 proof gallons. The science of the issue is also straight forward. Heat changes volume, but it does not create mass. Heat does not change the weight, since weight is a measure of gravitational mass. Gravitational mass is equivalent to inertial mass. Thus, you can ignore temperature. I'll add I'm not a physicist. I'm just regurgitating what I've read.

Where are you getting your information that neutral spirits must be filtered? They do not have to be filtered to be vodka. Reread the reg. No offense. But it is important to give correct info to avoid misleading people. Saying that you do not need to filter neutral spirits to manufacture vodka does not say what you do need to do, and you do need to do something. More often than not, what you do need to do is filter, not because it is required by regulation, but because some "treatment" is required and filtration is the most common solution. So, you are right, it is not necessary, in all cases, to filter, but filtration is what is done, in most cases, to satisfy the requirement that you do something to treat the spirits to change the class and type from neutral spirits to vodka. Its's also the handiest treatment, because people often filter, as a matter of routine, to make a better product, even if they are not changing the class and type. If you designate the product as vodka (19.305) at the time you make the production gauge (19.289 and 19.304), you can bottle it as vodka without further "treatment." But if you designate it as neutral spirits when you make the production gauge,, not vodka, it needs further "treatment" to change the class and type(5.22). The further treatment of spirits not produced as vodka under 19.305, is done oin the procecssing account., under a formula. (19.348 and 5.27). TTB has provided for a general use formula, so that you need not file a formula if you follow the procedures found in RR 2006-3 (https://www.ttb.gov/rulings/2016-3.pdf). So, while it is true that the further treatment of the spirits that you chose to designate as neutral spirits at the time of the production gauge, need not be filtration, unless you redistill such spirits, or treat them with some other material, then you must filter them before you may redesignate them vodka. Filtration is the default treatment, not by regulation, but by practice. To say that you do not need to filter neutral spirits before redesignating them vodka is correct, but it is potentially misleading to someone who does not understand the nuances. I just try to do my best to explain what people must do if they want to comply.

MGL - I assure you that I know regulations pretty well. Sometimes I mess up, but this is not one of them. Neutral spirits is a class. Vodka is a type under the class. You can produce vodka in three ways. Vodka has a standard of identity. So let's look at the regulation. (a) Class 1; neutral spirits or alcohol. “Neutral spirits” or “alcohol” are distilled spirits produced from any material at or above 190° proof, and, if bottled, bottled at not less than 80° proof. (1) “Vodka” is neutral spirits so distilled, or so treated after distillation with charcoal or other materials, as to be without distinctive character, aroma, taste, or color. You can make vodka by filing a statement of production procedure and then designating it vodka at the time of the production product gauge. That fits into the "so distilled" provision. Youy are correct about such a product not having to be filtered. But it is not designated neutral spirits. it is designated vodka. If you designate the distillate as neutral spirits at the time of the production gauge, the "so treated after distillation with charcoal or other materials" provision comes into play. Generally, the treatment is either redistillation, per the Tito model that someone mentioned, or filtrations. There might be some other way to "so treat" neutral spirits, but I don't know anyone who is employing that. Next, 5.27 says, "Formulas are required for distilled spirits operations which change the character, composition, class or type of spirits as follows:" One of the as follows states, this includes " (l) 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; and Recently TTB has granted a general use formula that allows you to filter without filing a formula, so you are covered, but the formula is still required. This sort of discussion is why I do not like to post short answers that do not cite a specific section of regulation. Last night it was late and I broke that rule, so the challenge was appropriate, even it it might have been more politely worded :-). I'm glad to be found wrong, because I learn something from it. But this is not one of those cases.

On the issue of a barn - if you are locating on a tract that has a residence, it complicates things. I know that six people will probably respond that they know of situations where it has not been a problem, but in the last month TTB has has specifically asked me, on three occasions, if a DSP for which I have made application, is located on a tract that also has a residence. One was in a commercial building in the downtown area of a city and another was located in a rural area, which, when the specialist looked at the Google Maps satellite view appeared to be in an areas that also had residences. Yes, the specialist took a look at Google Maps to see that. When I asked about it, the specialist said that since the bonding requirement went away, a lot of people want to start a small distillery in their backyard, so they are checking on it. I submit a lot of applications for clients, so I get to see how things change. In short, just like investing, past performance is not an indicator of future results. TTB operating procedures, like markets, can change.

You can produce vodka by filtration of neutral spirits, so if you purchase bulk product, which you filter and blend, you could claim produced by. You can't add unfiltered neutral spirits to vodka and make vodka because of the requirement that you must further refine neutral spirits to manufacture vodka - although you could designate the neutral spirits as vodka a the time of the production gauge and no, I do not know how that sausage got ground. Further, you would have to have a statement about the percentage of neutral spirits that you have in the blend. You cannot claim distilled by unless you distill it all. It's too late to cite the sections of the regulations that apply.

TTB does not specify a type of building. It must be secure. All doors, windows and other opens must be secured when no one is on the premises. The regulations say premises must be continuous. Discontinuous premises can be approved and it is common to do so. A storage container is acceptable and you may describe it as such without concern about objection. You apply for that when you make your application. If you do not need a bond, then you do not need a consent of surety. Few startup small distilleries need a bond. Generally, my advice is to listen to no one who does not cite chapter and verse to allow you to confirm what they say., but it is too late tonight to quote the regulations on this. You will find it all in part 19.

I don't know the answer to your question, but I will make a comment anyway. Terms like "special use" and "Agriculturally Zoned" and "Agri-Business," when employed in a law or regulation, are usually defined in that law or regulation, in a general form "When used in this part, the term "Agriculturally Zoned means, ya da ya da." Two adjacent political jurisdictions, counties, for example, may define the term in two very different ways. Therefore, no one can answer the sort of question you pose without first knowing the specific code that applies and then looking at that code to see how the terms are used in that c code. If the street that separates my property from the property across the street is also demarcates different political boundaries, then the rules that apply to me may be very different than the rules that apply to my neighbor. Glenlyon is correct. Read the instructions carefully, but also read the definitions of the words that are used. You cannot escape that, perhaps onerous task, by asking on a forum like this what other people have learned in other jurisdictions.

I see no responses to this from people who know. You do not say what use the person to whom you wish to sell will put the spirits you bottle for them. From your question, I assume that the person with whom you would contract wants to offer the spirits for sale at wholesale to retailers. That does indeed trigger the customers need for a federal basic permit as a wholesaler, because they are purchasing for resale at wholesale. If, however, the customer is a retailer, for whom you bottle a private label, say Joe's Bar and Grill and you bottle spirits, under the bottling trade name, Joe's Bar Spirits Company, for sale at retail only, by Joe's Bar and Grill, Joe would not be required to have a wholesale basic permit because Joe is not purchasing for resale at wholesale. That is the federal law. Now, in general, states do not allow anyone to bring spirits into the state - the term used is often import - unless the person holds some sort of permit or license that allows them to do so. Why? Because the state wants to ensure tax collection, etc. Ditto for requiring a license or permit for the person who ships into the state and they require that such persons make periodic reports to the state of what was shipped into the state and to whom it was shipped. That is a the basic framework and it gets fleshed out in different ways. How it gets fleshed out is state specific and often is also product specific, i.e. the rules that apply to interstate shipments of wine are likely to be far more lenient than the rules that apply to the interstate shipment of spirits. Some states also have prohibitions against private labels, but that, I think, has been a passing prohibition, as private label business has grown in all sectors of the food and beverage market. Washington, for example, allows private labels, but only if the private label product is available for purchase by all retailers within the state. Now, that general statement gives you some terms that you can use to search the internet for answers or use when you ask questions of the state. For example, a search for the string "New York, import, distilled spirits" yields a link to the State's Department of Taxaction, https://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/abt/do_i_have_to_register.htm, which informs you that, "If you’re a distributor of alcoholic beverages (beer, wine, or liquor), you must register with the Tax Department" and that you’re a distributor if you "iimport (or cause to be imported) liquors into New York State for sale or use for any purpose." The emphasis is in the original. The site than says, as you scroll down the page, that you must makle application to register, which is obvious, I assume, and adds that the applicaiton will not be approved unless you have a license issued by the the State Liquor Authority. I keep the font size because it is a hyperlink. So, if a person im,ports for any purpose the person must register with the the DOR, to register the person must make application, and the application won't be approved unless the person has a license issued by the NY State Liquor Authority. That tells us that the federal permit is not sufficient. Follow the link and see what happens next. I'm not going down that rabbit hole this morning :-). I'll add one final bit of general advice. If you want to ask any regulatory agency a question, first try to find the answer yourself. If you can't kind it, ask, and if you can find it, ask anyway. You want to ask because you can misunderstand what the source you found is trying to say; but you want to know the answer already, if you can find it, because then you will have a better idea of how to formulate/frame your question and also, whether they answer you are getting from the person with whom you are speaking is B.S. That does happen.

This thread takes off in different directions. There is a difference between home wine and home beer production and commercial beer and wine production. It is a sensible distinction . The country already has 5000+ breweries. It does not need 40,000 or 400,000 home brewers added to the commercial rolls. I think, since you ask for my opinion, that the spirits situation is analogous. If you think TTB acts slowly now, what would you expect if they had to deal with double, triple, or 20 times the number of permits they now have. I think commercial producers who rely on responses from TTB do not want the DSP/Specials ratio to balloon. So, if they legalize home production, then they must make it separate from the commercial side. That means that congress y would need to pass a law - this is something TTB cannot do at its own initiative - and TTB would have to write regulations, limiting what home producers can do. No sales, etc. Next, what about limitations on quantities that a home distiller could produce. Wine is limited, for families, to 200 gallons annually. An alcohol equivalency standard, at 14% ABV and 40% ABV (wine and spirits respectively) would reduce the limit for spirits to 28 proof gallons of spirits a year, or 35 gallons a year. An equivalency standard at $0.17 per gallons vs. $13.50 a proof gallon - assuming 14% and 80% alcohol again - reduces the quantity even further. At $0.17 per gallon, 200 gallons of wine has a tax value of $34. That is the equivalent of 2.5 proof gallons of spirits at 80 proof. Since it is unreasonable to assume that moist people would adhere to such limits, congress might be reluctant to grant any right of home production. Would the congress authorize the yearly production of 200 wine gallons at 80 proof, or 250 proof gallons, having a tax value of over $3000? Or how about the argument that the kids would hijack Mom's the still and turn a keg of beer into spirits for their next party? I personally don't give a hoot. I'm not arguing for equivalency; I'm pointing out the sort of hurdles you could expect in the legislative process.

A final comment - I just got a call from a TTB specialist who is starting a review of an application I submitted on behalf of a client. She said she is just starting it, but wanted to ask, before she did, if the DSP was located on a tract that also had a residence. Again, she had not looked at the application. I talked with her briefly and asked if TTB was routinely asking this question now - it is the third time I've been asked about this in a month . She said that since the passage of the PATH Act, the one that did away with bonds for persons paying less than $50K in taxes, TTB has been getting a lot of applications from persons who want to start small distilleries in buildings near their residence, so they are asking up front if their is a residence, because the process is longer if there is. Note, she did not say, as TTB did ten years ago, that it is prohibited. She said the process takes longer. As an aside, because the comment is too short for me, it appears that some home distillers, who exist by virtue of a low profile and TTB enforcement priorities that wisely follow the no-harm no-foul rule, now want to qualify as distilleries, since they don't need a bond. I would conclude that it is home distillers, because the cost of the bond, what $130 at the minimum end of things, with fees, has never been a bar to entry by anyone who wants to make a business of distilling. That prospect may sound libertarian-cool, but my gut tells me things would not go well if TTB started handing out distillery permits like a Ped dispenser.

I think it's time to provide a little perspective. Anectodally, I have NEVER had anyone get hung up by federal requirements other than a residence issue, where the DSP and the residence were on the same property. That was a problem only once, when someone wanted to open a DSP in his uncle's garage, which was 20 feet from his uncle's residence and had habitual been used for residential purposes, was on the same tract of land, shared the same driveway, shared power, shared sewer, etc. It nearly checked off everything you would not want to have if you want to get approval. I flew the warning flag, the client said try, so I did. We failed. That was predictable. Otherwise, if you propose a business model, I can say from experience that you will find a way to fit the premises into what TTB requires. The biggest hurdle is the tasting/retail area and the all the more common request from TTB that we state that they are separated from the DSP by floor to ceiling partitions. That is generally and ambience hurdle compounded by space considerations. But we have always found a solution that worked and generally without any pain. So, I never advise anyone to roll the dice on TTB's asking about floor to ceiling separation and I never advise anyone not to disclose colocation with a residence. I don't want to have to explain why we omitted mention of either. Neither should you. Yes, people can get hung up by state and local requirements, but I have only had one person who had to abandon the general area where they wanted to locate, Hyannis, MA, where the local government wanted to impose additional sprinkler requirements without supplying sufficient water pressure and have sidewalks, etc, put into an area that otherwise had none and ... the client said to hell with it when the costs of renovations to comply topped $300,000. I had another person who suffered a nasty surprise over "M-something or other " fire ratings - I don't pretend to know the fire code - having to construct a fortress of a room after the county had said initially things were okay. But those are the only instances that I recall of real problems. I am sure that some of you have horror stories, but I've dealt with a hundred or so of you who want to get into the business of distilling and it has always worked out in the end. Things are not as bad as you imagine then can be. Don't get anxious over what your imagination tells you "can" happen. Life is too short for that. "Can" is a long way from "will." In the vast majority of cases bumps in the road are small.

Well, it is good that you live on 42 acres that can reasonably allow that, but if you lived in a residential neighborhood and wanted to open a DSP (or pig farm or shooting gallery or facility to test race car engines, or ...) on your property, say 10 feet from my house, I'd be glad that someone had the ability to say "no." That is, freedom comes in two flavors. The first is "freedom to," on which you focus. The second is "freedom from," on which my comments about pig farms and the like focus. I think I have a reasonable expectation of peaceful and safe enjoyment of my residence. So living together seems to imply some reasonable accommodation of the two sorts of freedom. The safe haven for the person who wants fairly unrestricted "freedom to" is living apart, which is what you chose. Today most can't make that choice .

TTB does not use the word, but the encumbrance you posit is what the law calls "curtilage." The road to approval passes through the need to satisfy TTB that the proposed location is not within the curtilage of the residence, thereby encumbering TTB's right, under law, to 24/7 access to the DSP. While I think the right of entry granted TTB by the law would, in most cases at least, prevail over claims of curtilage, TTB must deal with this because the law is specific, no DSP in any yard connected to a residence. The phrase is "connected to" and the question is how intimately.

In my opinion, HedgeBird describes exactly the way it must be done. I'm not an attorney, so you should treat what I say next as a question for your attorney, i.e., proceed it with the phrase, "Is it true that ...?" My take on this would be that by agreeing to sell the product once it is bottled, you enter into an agreement for future sale. It can't be an agreement for present sale because the goods that you must deliver under the agreement, spirits bottled and labelled with a private label, do not exist. Since it is not a present sale, title does not pass. You have merely identified certain goods to the agreement that will be sold when bottled. Since you have not sold, or contracted to sell, or delivered bulk spirits, the agreement does not violate Sec. 1.80. Since the bottle sizes are allowed, you do not have a problem with that either.

I will respond late to this conversation. If a residence is located on a separate property from the distillery, then, regardless of the proximity, TTB has not reason to take exception, . If the proposed distillery is located on the same piece of property as a residence, then TTB decides on a case by case basis whether to approve the location. I am not aware of a 50-foot rule. Proximity matters, but the real question is whether the location would create potential administrative difficulties, i.e., whether or not the residents might successfully claim that the proposed DSP premises is so bound to the residence that the right of privacy they have in the residence extends to the DSP. That depends on a number of factors, not just the proximity. Finally, TTB cares not, as Silk City observes about sprinklers, about the safety considerations or whether there is a church next door, or a school, or ... They have no law that grants them permission to consider such factors. They do have a law that requires them to consider whether the distillery is in a yard that is connected to a house. I have obtained approval in a number of instances, after making full disclosure. I suspect that there are examples out there where people did not disclose. Recently, at least one TTB specialist, has been asking for statements, as a part of the application, that the DSP is not located on property on which there is also a residence. Others have not asked this question. But the 50-foot rule is not a rule as far as I know.

I missed this, but having just fought with permits on line for about two hours trying to get it to "take" input #$%@%, I'm taking a little time to wind down. So 1. You cannot sell an entire barrel of spirits to a consumer unless you first bottle the contents of the barrel into bottles of a size allowed by federal regulation. 2. See 27 CFR 1.80 for the prohibition against selling beverage spirits in bulk (in containers in excess of one gallon). This is written into law and no variance can be granted. 3. See 27 CFR 5.47a for bottle and can sizes authorized for use. 4. See 27 CFR 19.513, 5.46(d) and 13.21(a) for discussion of distinctive liquor bottles.The best description is found in Sec. 19.513, so go there first. It's too late and the section is too long to quote it here.

I can answer this question. TTB and FDA both have jurisdiction over the labeling of alcoholic beverages. That is why you must register a DSP with TTB AND with the FDA. TTB has the primary responsibility for enforcing both the TTB and FDA requirements, but, in doing so, TTB defers to the FDA on matters of food safety, including ingredients. Someone on the forum once accused me of being good at cut and paste Google searches. I didn't respond directly, but I will say here that sometimes doing anything more than pointing someone in the direction of persons who can give them authoritative answers is the only responsible answer one can give. I think that is the case here. Here is how TTB puts it (see: https://www.ttb.gov/ssd/bal_product_safety.shtml): The Food and Drug Administration (FDA) is responsible for determining which ingredients are prohibited from use in food and/or beverage products. Under a Memorandum of Agreement (MOA) with the FDA, the TTB Beverage Alcohol Laboratory (BAL) analyzes alcohol beverage products for limited and prohibited compounds. The laboratory enforces these restrictions for alcohol beverages as per FDA guidance. For more information, please see the regulations at 21 CFR part 189, Substances Prohibited from Use in Human Food. You can find the full agreement at https://www.ttb.gov/main_pages/memo-understanding.shtml. This is the 1987 vestrion. There was also a 1974 version which you can find on TTB's website. Here, in more detail than you may want, is how TTB describes how to determine what you can add to beverage alcohhol )See: https://www.ttb.gov/formulation/determine-ingredients-beverage.shtml). Note the final comment, "For any questions regarding how GRAS determinations are made or the particular GRAS status of an ingredient, please contact the FDA's Center for Food Safety and Applied Nutrition. If TTB directs you to the FDA for answers, then that is where you should go. Don't rely on what people like me say. How to determine If and How Ingredients May be Used in Your Beverage Here is some information to help you determine if and how certain substances may be used as ingredients in your alcohol beverage products. Note that this is offered as guidance only; please refer to the complete text of 21 Code of Federal Regulations as the final authority. Learn more about: Substances that are Generally Recognized as Safe Food/color additives and limitations on their use Substances prohibited from use in human food Substances that are Generally Recognized as Safe (GRAS) You may use any substance that is “generally recognized as safe” (GRAS) by the U.S. Food and Drug Administration (FDA) in making your beverage. Criteria for Determining if a Substance is GRAS Per the FDA, "Under sections 201(s) and 409 of the Act, and FDA's implementing regulations in 21 CFR 170.3 and 21 CFR 170.30, the use of a food substance may be GRAS either through scientific procedures or, for a substance used in food before 1958, through experience based on common use in food. Under 21 CFR 170.30(b), general recognition of safety through scientific procedures requires the same quantity and quality of scientific evidence as is required to obtain approval of the substance as a food additive. General recognition of safety through scientific procedures is based upon the application of generally available and accepted scientific data, information, or methods, which ordinarily are published, as well as the application of scientific principles, and may be corroborated by the application of unpublished scientific data, information, or methods. Under 21 CFR 170.30(c) and 170.3(f), general recognition of safety through experience based on common use in foods requires a substantial history of consumption for food use by a significant number of consumers." FDA Lists of GRAS Substances The FDA has several lists of substances that can be used in food based on the GRAS provision. Per the FDA, “Importantly, these lists are not all-inclusive. Because the use of a GRAS substance is not subject to premarket review and approval by FDA, it is impracticable to list all substances that are used in food on the basis of the GRAS provision. 21 CFR Part 182 contains the remnants of a list, which FDA established in its regulations shortly after passage of the 1958 Food Additives Amendment. The list is organized according to the intended use of these substances. As part of the agency's comprehensive review of GRAS substances in the 1970s, FDA affirmed that the use of some of the ingredients on this original GRAS list is GRAS, and moved the affirmed uses of the substance to 21 CFR Part 184. 21 CFR Part 184 contains a list of substances that FDA affirmed as GRAS as direct food ingredients for general or specific uses. This list derives from the agency's 1970s comprehensive review of GRAS substances and from petitions that FDA received to affirm the GRAS status of particular uses of some food ingredients. 21 CFR Part 186 contains a list of substances that FDA affirmed as GRAS for certain indirect food uses. FDA's Internet site also contains a list of substances that have been the subject of a notice to FDA - i.e., when a firm has notified FDA about its view that a particular use of a substance is GRAS. You can access this summary of GRAS notices, along with FDA's response, from the GRAS Notification Program page. Can the use of a substance be GRAS even if it is not listed by FDA? Yes…The use of a substance is GRAS because of widespread knowledge among the community of qualified experts, not because of a listing or other administrative activity.” To learn more about GRAS, see FDA’s: Generally Recognized as Safe: Overview and Resources Frequently Asked Questions about GRAS Contacting FDA For any questions regarding how GRAS determinations are made or the particular GRAS status of an ingredient, please contact the FDA's Center for Food Safety and Applied Nutrition.

There may be someone on this forum who has the expertise to discuss FDA GRAS policy, but don't rely on what anyone says unless they cite both credentials for making the comments and sources by which you can verify them. I know that FDA provides for self-certification, but that it requires that anyone who self-certifies that an ingredient is GRAS must conduct the same research, etc, that the FDA would conduct if it were asked to grant approval, something for which it says it ho longer has the time. At least I THINK I know that. FDA explains the basic rules as follows (see https://www.fda.gov/food/ingredientspackaginglabeling/gras/) "GRAS" is an acronym for the phrase Generally Recognized As Safe. Under sections 201(s) and 409 of the Federal Food, Drug, and Cosmetic Act (the Act), any substance that is intentionally added to food is a food additive, that is subject to premarket review and approval by FDA, unless the substance is generally recognized, among qualified experts, as having been adequately shown to be safe under the conditions of its intended use, or unless the use of the substance is otherwise excepted from the definition of a food additive. Under sections 201(s) and 409 of the Act, and FDA's implementing regulations in 21 CFR 170.3 and 21 CFR 170.30, the use of a food substance may be GRAS either through scientific procedures or, for a substance used in food before 1958, through experience based on common use in food Under 21 CFR 170.30(b), general recognition of safety through scientific procedures requires the same quantity and quality of scientific evidence as is required to obtain approval of the substance as a food additive. General recognition of safety through scientific procedures is based upon the application of generally available and accepted scientific data, information, or methods, which ordinarily are published, as well as the application of scientific principles, and may be corroborated by the application of unpublished scientific data, information, or methods. Under 21 CFR 170.30(c) and 170.3(f), general recognition of safety through experience based on common use in foods requires a substantial history of consumption for food use by a significant number of consumers. You can find a discussion of the notification procedures at https://www.fda.gov/Food/IngredientsPackagingLabeling/GRAS/ucm083022.htm. These are simple Google searches. I've done them in five minutes. I'm not qualified to comment on them further.

Falling Rock - that is what I mean by "be generous."

Whoa - I misread this the first time. I bet you mean the proof and fill check you make at the time of bottling. I'll talk about that here. I wish I could do it in a few short words. I can't. The law says TTB must make regulations that make sure consumers are not misled as to the quantity of the product in the bottle. For spirits, the quantity is the volume, but it is also the proof. So TTB requires that you tell consumer how much and how strong. Because TTB is not making tests to determine if you are doing that, they require that you keep records to prove that you are. It sounds good in theory. It sounds professional. But it is not. Your records will not provide assurance of compliance. Let’s look at why I say that. The regulations provide for a record of the proof and the fill of bottles. You find the record requirement in 19.600, which is headed "Alcohol content and fill test record." It requires specific information, but you will not find a "form" that TTB offers as appropriate for your use. In the broad sense, the records you keep of the tests you perform for each bottling are supposed to allow a TTB official to determine that you are complying with Sec. 19.356. Sec. 19.356 requires that, during bottling, you take adequate samples of bottled spirits, at representative intervals, to "ensure" that products are within the tolerances established by that section. I add the emphasis to point out TTB doesn't tell you how to do what they require. The regulations do not discuss how many samples you must take and at what intervals you must take them in order to "ensure" compliance. They place the onus on you. Why doesn’t TTB give sample sizes and frequency? It doesn’t do that because it is impossible for you to do what they ask. Sampling is not an easy subject and I am not an expert. I know just enough to recognize hogwash. It is hogwash to expect any small distiller to have a sampling program that “ensures” compliance. It also is hogwash to expect any small distiller to have a sampling program that will allow statistically valid projections of compliance at any reasonable confidence level. If pressed about sample parameters, the TTB officer who is auditing your records would probably dance to the side with a comment, every case is different, so we can’t specify sample size. Well, sure, every case is different, but the rules for statistical sampling, i.e., for sampling from which the TTB officer can draw the conclusion required by 19.356, that the sampling program ensures compliance, don’t change. And that leads to problems. The basic rules of statistical sampling do not allow for a sampling program that will ensure compliance. Talk of ensuring is prattle. Since TTB cannot possibly create a sample standard that ensures, it punts. TTB says it is up to you to devise the program. Going a little deeper. If we want to draw a conclusion from a sample, we must know the sample size needed to establish, within an acceptable degree of accuracy, that the bottles are consistently within the tolerance established by 19.356. Assuming you select the sample in a valid way, given the sample size, the frequency of the sample, the expected error rate, and the universe from which it is obtained, you will have a level of assurance, say 95%, that between 96% and 98% are within the tolerances allowed. Note that it is a qualitative finding. It says nothing about how much things vary. An error of 5% counts just as much as an error of 50%. All errors are created equal in frequency sampling. Which is fine, as far as theory goes. But when the universe is small, i.e., the size of a bottling run by a small distiller, no sample size will provide results that will allow a conclusion of the sort, we are 95% sure that the between 96% and 98% of the bottles were within tolerance. Even if TTB were to have a standard that said, you must take sufficient samples to establish, with a 95% confidence level, that between 96% and 98% of the bottles were in tolerance, TTB would have to determine how taking stratified samples, instead of random samples, affect the assurance of compliance, what rate of error is expected, etc., i.e. how to deal with all the variables that bedevil students in college statistics classes, let alone a small distiller left adrift by broadly stated requirements for which TTB provides no further guidance. Worse yet, in a small business, audit standards provide that an auditor looking at compliance must assume that the internal controls are inadequate to ensure. And proof and fill tests are "internal controls." Because the auditor cannot place any reliance on internal controls (you could be inventing all the test data), the auditor would have to test every bottle to ensure compliance. But most of those bottles had best be gone from bond or your business is probably in deep trouble. My point? Sampling is not an easy subject and I am not an expert. I know just enough to recognize hogwash. It is hogwash to expect any small distiller to have a sampling program that ensures compliance. So, what would I recommend, recognizing that I am not TTB, but that TTB has chosen to punt? The practical answer is, provide the TTB officer with information that satisfies the TTB officer, who, like you, is without an objective standard for how many and how often to test. I know, that is a statement of the obvious, but it is all we are left with. My best advice, in practice, is ask yourself, based on your sampling, if you are reasonably sure that you are within tolerance. If you are reasonably sure and the TTB officer is a reasonable person, your program will pass the test. That is the best guide I can offer. I'd be interested in hearing comments from any statisticians and/or auditors on my comments.

The regulations (19.618 for other than packages and 19.619 for packages) require a gauge record for any of the required gauges specified. You can see the information that record must contain. Did you know, for example, that it is suppose to contain the proof of distillation? Well, it is. However, the gauge record section does not answer how you record, for posterity, the elements of the gauge. Obviously, the elements of the gauge are different if you determine the wine gallons by weight or by volume. By volume, you have two corrections: one for the built in error of the certified thermometer - for which you have a correction table, of course - and one to correct to the volume at 60 degrees H. For hydrometer readings, assuming you do not have one of the expensive density meters that TTB accepts, you need the correction for the variance from apparent proof that is intrinsic to the instrument, and for the correction to 60 degrees F. If you know how to use the tables in the gauging manual, it is easy to prepare a temple in Excel with formulas that allow you to enter the apparent readings and table values and convert the apparent readings to actual readings. Some people sell apps for doing that, but I've not checked them out. TTB provides a handy proofing worksheet with the package it sends when it approves an application to establish a DSP. It doesn't come with instructions, but it shows what they would like to see: Append one of those to each serially numbered gauge record, or to other records, hen no gauge record is required under 19.618 or 19.619, and you will have done everything TTB might require in its wildest dreams of compliance.