dhdunbar

tstrong - repay the favor please - write me at dhunbar1@gmail.com and tell me about the TTB inspection. Are they really coming out to knock on your door?

TTroy - if the distiller provides you the vodka, which would be neutral spirits (distilled at 190 or above) reduced with water to less than 190, you may - and probably will - limit the lable claims that you make to "bottled by Troy." Next, if you buy the spirits from an out of state source, make sure you talk with the WSLCB about how you can get them and claim the privileges granted to craft distillers under Washington law. This presumes that you would contract for spirits produced from at least 51% Washington agricultural products. Note that the Washington Administrative Code (WAC), with which I am a little familiar because I live in the state, has specific provisions about contract production by craft distillers. Without looking, which I should do, but it is late, it allows one craft distiller to contract produce for another craft distiller as long as both claim the spirits against their 60,000 limit. I have looked before, but do not recall, how this applies in the case of a WA craft distiller contracting with an out of state distiller. One option, of course, is to pay for the distiller license ($2,000) and forgo the privilege of selling at the distillery. That presumes volume to justify the license fee, but if you did that, there would be no question that you are allowed to contract with out of state distillers. My question to you – which is rhetorical – is why do you want to buy 150-190 proof spirits? Why not buy 190 proof spirits and cut them yourself, since you will have to cut them from 150-190 to bottling proof anyway? If you bring in 190, then you could redistill in the processing account to purify them (which I think would entitle you to say "distilled and bottled by Troy," or filter them to purify them, which would allow you to say "produced and bottled by Toy." Finally, remember that neutral spirits are a bulk commodity. To avoid controversy, I will omit the arguments and jump right to the conclusion – consider it carefully before you agree to pay "craft" prices for neutral spirits.

I will try and discuss this issue in a general way. But specifics matter. The devil and the details rule applies. I apologize in advance for the length. With that warning, if you do not want to invest in a still, you can get spirits in two ways. · You can contract with an existing distillery to have the distillery produce spirits for you. · You can lease the use of the distiller’s premises, equipment, and even its employees for your own use. The route you choose determines the licensing requirements with which you must comply. In any case, you will need to be licensed. Remember that the details of the commercial arrangements you make –others are better able to suggest possible contractual provisions than I am - affect the way in which TTB and state agencies view the business relationship established by the agreements. In fact, your consideration of the fedeal and state implications may well drive the form that specific provisions, if not the whole agreement, take. For example, the provisions may affect the privileges you have under state licenses to sell either at wholesaler or at retail and the ability to offer samples. To the extent that any of that is an important part of your business model, you will want to pay careful attention. That said there is no universal answer to how states will react to the provisions of an agreement. It is strictly case by case. I’m going to discuss alternating proprietors below. While TTB makes provisions for that sort of relationship, I would be remiss if I did not state at the outset, and in bold letters, that some states will not allow alternation under any circumstances. Now let’s look at the alternatives. Contract Production You can contract with an existing distillery to have them produce spirits for you. If you do, you then have two more options. You may buy the spirits from the distiller either in bulk bottled and in cases. If you buy them in bulk (in containers of more than one gallon), you will need to establish a distilled spirits plant (DSP) where you process and bottle them. This requires a federal basic permit and registration. Essentially, you go through the same paperwork and have the same requirements that you would have if you also distilled; you just omit distilling operations and qualify to warehouse and process. In this case you would have a bonded premises and any spirits sold to you by the producer would be under your bond from the time of shipment by the producer to the time you pay the taxes. You would get the label approval. You would not be entitled to state on the label that you “distilled and bottled” the sprits, but you could say that you “produced and bottled them.” Some craft distillers would contend this is cheating the craft spirit, but it is a long established business model. Prior to the craft movement, any number of distilled spirits plants were not distillers. They bought everything in bulk and bottled it. If you buy the spirits in cases, which seems to be the model you envision, you do not need to qualify as a distillery. However, you will need to qualify with TTB as a wholesaler. Even if you own, from the outset, all of the grain and packaging and simply pay the distiller for the services rendered in producing and packaging the spirits, TTB will hold that you are “purchasing for resale at wholesale and while so engaged selling and offering for sale.” It will not allow you to receive the spirits and go about the business of selling them outside of the reach of regulation. Similarly, since many state tax schemes collect the taxes from the first distributor who comes to possess the spirits in the state, you will have to be licensed by the state as well. When you buy spirits bottled by someone else, the label would have to disclose, at a minimum, the identity of the bottler. The bottler could, however, adopt a “bottling trade name,” which could be a name that you have tregistered and which you grant the distiller permission to use only when “bottling for your account.” Ditto on brand names, etc, where trademark rules apply. However, if you own the trade marks under which the product is marketed, you may also, in some instances, run afoul of a state’s “private label” legislation. This generally should not be a problem when you are a wholesaler and not a retailer, but the issue can be a snarl to untangle and I can vouch from experience that states may misstate what their laws and regulations allow and prohibit. Finally, as a wholesaler, you could sub-job distribution to other wholesalers or sell to retailers directly. Here it is important to understand the franchise laws of the states in which you distribute. Appointing a wholesaler has contractual consequences under law. I’m not an attorney, so I cannot give legal advice, but I can advise you about the questions you want to ask your attorney when you draw the contract. Protection of the trade names and marks is one and franchise rights are another. Alternation of Proprietorships The second way to get spirits without investing in equipment is to lease an existing distiller’s equipment and premises for your use. If you chose this route, you would lease some or all of the existing distiller’s excess capacity. In the world of TTB, this is called an “alternating proprietorship” and TTB makes specific provisions for such an arrangement. The owner- DSP is the landlord; the leasing DSP is the tenant. As mentioned above, some states do not allow alternation. Without getting too far into the details, under the provisions of federal regulation, you would qualify as a DSP at the same premises as the existing DSP from whom you are leasing. If approved, only one of you could operate any one portion of the DSP at any one time. When you are using a part of the premises as a tenant, in the mind of TTB that part is yours, just as if you established a standalone operation. You must have the bonds, keep the records, get the label approvals, and pay the taxes that result from your operations as the proprietor of the DSP. If TTB shows up at the door, you will have to be there to answer their questions. Also, when you are operating portions of the premises, the landlord will have to remove all spirits belonging to it from the portion you are renting. Ditto for you when the premise alternates back to the landlord. The list goes on. The alternating proprietor model is actually quite common in beer and wine. To ensure that a large operation does not break down its production into separate entities and thus become eligible for reduced tax rates for which it is not otherwise eligible, TTB has published detailed explanations of what it expects. In those explanations, TTB gets very specific about the difference between contract production and alternation. Since there is no reduced rate for distilled spirits, the distinctions it makes may seem unnecessary, but since small distillers are pushing for reduced rates, and since contracts are often long term, you will probably want to make sure that your contractual agreement meets criteria TTB has established for breweries and wineries that alternate. Also, the TTB regulations incorporate by reference some dense provisions of the Internal Revenue Code related to “control groups” of entities, and Treasury does not give TTB carte blanch to interpret those sections in a way that might compromise excise taxes in other areas, say tires, just because that interpretioatoin would have no tax consequences to the excise taxes collected on spirits. The specific rules are too long and too many to discuss here. For a start, look at 27 CFR 19.141, “Procedures for alternating proprietors.” If you are still interested in the possibility, as many in the wine and beer industries are, take a look at the revenue rulings that supplement the regulations. I might add that this model could be a business venture unto itself for someone who has pockets deep enough to pay for excess production and is willing to deal with the headaches of alternation. It would allow the person to build a plant into which its own business could grow while initially spreading the cost with others through the incubator model. I see no reason, in federal regulation, that a plant could not have more than two “alternators,” which suggests the business model of operating an incubator as the primary activity in which one engages. But this collective approach comes with costs and the question of what a state will allow is a separate matter that is well beyond the scope of this post and, I mut confess, my ability to answer in mosty cases, without first sticking my nose into the rules and regulatons of the particular state.

As a consultant, I work with many persons who are starting out. My advice is consistent with the above. People contact me and want to get started submitting applications with TTB. Most often my response is "thether your enthusiam." If you were flat out lucky, you might get away with not dealing with local issues first, but that is where you will generally find stumbling blocks. For TTB, we can usually find a way that you can do what you want to do (well, you must pay taxes and have a secure premises, etc) if you can find a way to do it under state and local laws. There is absolutely no predicting how long delays might ensue for building permits and approval of occupancy. I'm not an attorney, so this is not legal advice, but if possilbe, make leases and sales agreements contingent on obtaining all necessary permits and approvals. Your real estate agent or attorney can assist with the actual language. Provisions re lease hold improvements can delay the day the rent starts, but more likely than not you will have some time when you are making payments without being able to operate. The trick is timing the completion of the DSP buildout with the TTB approval of the applications, so that you can begin getting your production procedures down. As you point out, unless your business plan has deep pockets, you don't want all those expenses with no prospect for cash flow. The timeline of 89.8 days you quote for federal approval is optomistic. I just had a DSP for whom I did the application, and to which TTB voiced no objection, sit in TTB for 142 days. The owner was patinent because the 107 day average (that is for September; August was 82 and July 118, so it varies a lot) did not come up until just before the congressional lock-out. Remember too, the days do not start to count until TTB has passed the application through its "triage" process, which can take two weeks or more. I like to think that I'm practiced enough in applications to beat averages, but I make no promises and stress that my clients must rely on the average and hope for better and not worse. I can't promise to work miracles. The time for label approval also varies. If you must get an approved formula for the product - many whiskeys, flavored vodka and gin not made by original distillation in the production accountare among those that require a formula - which TB calls pre-COLA evaluation, add 40+ average days to the process. You will not be able to submit the COLA until you have the approved formula. Again, no one should make promises about working miracle with these times. So, when I do a timeline for clients, and I do it for all, I start with the assumption that local issues have been resolved. We can turn out a federal an applicaiton in less than two weeks if they do their part. I could do my part it in a day or two actually, but two weeks is realistic. Two days is not going to happen. From there we have 110 days average and I call it 120 to allow for triage, until approvl. You can't register to use COLA and formulas on line until the permit is in hand. Add three weeks to the process. We are at 140 days or so. If no formula approval is required, add 45 days for COLA approval. If a formula is necessary, add 85 days. That puts you out 180 to 220 days after submission of the application until you can label. That is reality.

You can make many changes without getting a new label approval. The best way to check on which changes you may make without new approval is the TTB website. Here is a link that you can use in the future. http://www.ttb.gov/labeling/allowable_revisions.shtml#chart Where you wil find: 10. Change the net contents statement. YES YES YES Revisions must comply with all applicable regulations governing net content statements and standards of fill. Please ensure that all applicable type size requirements are met for each container size. TTB posts the latest information, so you will not get an answer there that was good yesterday but not today. I would add that TTB's answer line is user friendly. They will greet you pleasantly and thank you for your question.

If a government is arbitrary in enforcing its laws, should it expect its citizens to be anything but arbitrary in following them? If a lack of enforcement resources excuses a government from enforcing its own laws, does a lack of compliance resources likewise excuse citizens from following laws that they deem to be too expensive to abide First, you assume that the government is 'arbitrary." That is any interesting word. I think that they do "pick and chose" about where to place their resources. but I think in most cases the decisions are not arbitrary. Congress hands them a list of laws, says write regulations, and administer the programs necessary to enforce them. Congress separately hands them a budget and says this is the money you have to enforce the laws we have written. In essence, some of what congress requires becomes an "unfunded mandate." TTB cannot seek other funds to cover the gap between what it would cost to enforce and what it has available to do so. Nor can it run in the red. Therefore, it must pick and chose. But that is not an arbitrary process. It cannot decide, on whim, not to collect taxes, for example, or ignore the fact that someone is selling beer it labels as bourbon. Things sort themselves out by importance. In some cases the choice to enforce or not is obvious. In others it is not. That middle ground between things it clearly must pursue and things it clearly should not pursue at the expense of another program is where decisions become more "arbitrary." It is the ground where reasonable men disagree and usually agree to disagree. One solution to that is to look at some "arbitrary" things one year and look at others the next. But there are certain things it is unlikely ever to look at. In theory, distillers do not have that luxury. If it is required, the government can tell you that you must comply, regardless of the cost. If an agency has a regulation and it chooses to enforce that regulation, and if you are ensnared in that enforcement, and if they charge you, and if you challenge that in court, then the court is going to say that it will not replace its judgement with the agencies judgement, even if it would reach a different decision of the decision were its decision to make. It will then tell you that also are not free to pick and choose what requirements you will comply with and what requirements you will not comply with. That is a long and complicated sentence, with a series of important "ifs" attached. The probability of getting to the end of the sentence decreases with each of the "ifs" that we insert. In fact, most businesses do pick and choose, to some "reasonalbe" extenty, what regulations they will comply with and what regulations they will not. True, some cross lines that are clearly going to bring problems, for example, choosing not to Spay taxes, and end up in real trouble. But what about other, less clearly important requirements? for example, are all of your tanks equipped with a method for determining the number of wine gallons they contain? Have they been calibrated by a person certified to make the calibrations? If you move a tank, do you get it recalibrated by a person certified to make the calibration? If you answer yes, you are surely in the minority. Yet TTB does not have a tank enforcement initiative in force. They do not have an army of tank police going from distillery to distillery. But to answer your question directly, they could have such an army and they could rigorously enforce those requirements. If they choose to do so, you are not free to say, "I'd love to, but I can't afford it." If you ignore their requirement that you "come into compliance," they can take action to bring you into compliance If we come at the question from the ideological side, where "should" reigns, and if the "should" of your convictions includes the principal that TTB should enforce all regulation, then that same "should" leads directly to a conclusion that you should comply. If we come at the question from a pragmatic side, then TTB is freed from the requirement that it take you to task for not complying with the calibration requirements, for example, when it clearly has not affected the accuracy of your reports, the eligibility for the label claims you make for products, or the the taxes you pay. But in the end, it is for the agency to decide, not the distiller. That is true. The law does not afford citizens the same discretion it affords to the government, but courts do grant the government discretion within reason. That is a pragmatic way of letting a regulatory system work. Skewing to the ideological side makes the system rigid. Things that cannot bend break. I think that is the lesson of tree branches.

I take it you are in Iowa. Here is the information from the TTB web page: Mountain District Field Office 316 North Robert Street, Suite 322 St. Paul, MN 55101 (513) 684-2730 That is the district office. They will be able to give you the telephone number of your local investigator. Anyone can find the district office for their state at: http://www.ttb.gov/a...locations.shtml. Not all inquiries should be directed to the local or district offices, but routine questions about regulations are often best answered by people in the field. Questions that require a statement of policy should go to either the the NRC or headquarters. Here is some advice you may not like, but it is sound. Always try to know the answer to a question before you ask it, that way you will recognize when someone is spouting nonsense. I know that this is not easy if you are not familiar with negotiating the regulations, but it guards against off the cuff answers that are wrong. For example, before you call and ask about monthly reports, take a look at TTB's tutorial. You can find it it at http://www.ttb.gov/m...resources.shtml, which will link you to a tutorial on each of the operating reports.

I would be interested in knowing the outcome. When I called TTB a year or so ago and asked if the formula requirements were correct, that TTB required a formula for whiskey, but not bourbon or whiskey distill led from malt mash, etc, I was told that was correct, "because of all the white whiskey out there." I discreetly refrained from further comment on the grounds that I did not need a swarm of white whiskey hornets swarming around my head demanding to know why I'd stirred the nest up further. I think the request for a formula was probably made in error, but the general pushing of envelopes on standards of identity by persons in the craft movement is going to become a matter of contention at some time. For example, as you probably know, the regulations require statements of age on any product aged for less than four years. Want to bet money that this is often ignored? Such practices could lead to TTB requiring, for any product lacking an age statement, a formula for pre-COLA evaluation that includes a statement of the time the product spends in new charred oak.

I need to make a correction. The word "not" got dropped from what I wrote in one sentence. The first sentence of the third paragrph should read, "Old Thom” is not a brand name, but if it were it would NOT be considered a representation that the gin has age. Sorry. My editing skills are sometimes wanting.

Brian, First, since the standard of identity recognizes “Old Tom Gin” as a type of gin, you are correct; when you use the term “old” in the way you do, you are making a type claim type and not an age claim. Further, one of the citations TTB provided to you, 27CFR, 5.40(e) (2), provides as follows: If any age, maturity, or similar representation is made relative to any distilled spirits (such representations for products enumerated in paragraph (d) of this section are prohibited), the age shall also be stated on all labels where such representation appears, and in a manner substantially as conspicuous as such representation: Provided. That the use of the word “old” or other word denoting age, as part of the brand name, shall not be deemed to be an age representation. [My emphasis] “Old Thom” is not a brand name, but if it were it would be considered a representation that the gin has age. It is a very small reach to conclude that if you can use “old” in the brand name for a gin and TTB will not deem it to be an age representation, then you can use it in a statement of class and type that conforms to a standard set forth in §5.22 and it will not be deemed to be an age statement. That is good, because as the above section points out, §5.40(d) includes the following prohibition: “Age, maturity, or similar statements or representations as to … gin … are prohibited from being stated on any label.” That is a straight forward, unambiguous statement that can hardly be misconstrued. But we need to whisper it, because many crafty people out there have slipped labels by TTB’s scrutiny and it is easy to find gin labels that make reference to “age” in TTB’s Public COLA Registry. I believe aged gin was even a category in one of the recent contests for craft distillers’ products. What can I say? TTB has a total of 500 employees, only a small fraction of them deal with the labels that are submitted for approval and they are drowning in paper. The situation is only exacerbated by person like those who have advocated on forums like this that you submit 50 labels for a product and see what you can get to stick. However, slipping an age statement by a TTB specialist and having one demand that you state a period of aging are quite different situations. Here, if I were going to offer a defense, I would refer you to the provision for class and type statements that apply to beer. You will find, “The class of the malt beverage shall be stated and, if desired, the type thereof may be stated. Statements of class and type shall conform to the designation of the product as known to the trade.” That’s basically it. TTB has appended a few other provisions, but they come in at about one page. I would argue that is the extent of the government’s interest. The rest of it, I have concluded, is regulation that industry members have asked for to gain a leg up on the competition, delivering as a consequence a very complicated set of rules that certainly do not inform the consumer, baffle persons not intimately familiar with them, and even confound the TTB employees who are supposed to ensure that nothing gets approved that should not be approved. If you doubt my contention that a fair share of the blame falls on industry’s shoulders, take a look at the battles over the definition of whiskey. I’m working with someone on an article that will examine the genesis of the new oak requirement for American type whiskey. From my perspective, it had little to do with consumer protection and much to do with intra-industry battles waged to give those who produced straight whisky an advantage over rectifiers, who in terms of volume, were kicking the straight products’ collective butt in the marketplace. But that is another story, just as is unaged whiskey.

Here is the context in which to understand TTB’s likely position on the matter of aging premixed cocktails prepared for on premises consumption. §5171 of the Internal Revenue Code provides that operations as a processor may be conducted only on the bonded premises of a distilled spirits plant. §5002 (a)(5) defines processor to mean any person who manufactures, mixes, or otherwise processes distilled spirits. §5002(a)(6) provides that any mixing (after determination of tax) of distilled spirits for immediate consumption is not processing. The issue of exemption for cocktails thus hinges on whether they are mixed “for immediate” consumption. This is not new territory. Precedents exist. Prior to 1985, the government collected a “rectification” tax. It no longer does. Rectification and processing are different words for the same thing. The law still prohibits processing spirits anywhere other than at a DSP. Certain processing operations at a DSP sound a lot like mixing a cocktail in a bar. In fact, distilled spirits specialty items include “premixed cocktails.” But even when rectification was taxed, the government had no interest in prohibiting retailer’s mixing cocktails. That is the genesis of the exclusion contained in §5002(a)(6), which carries over into the language of the regulation found at §31.233, which others have already cited. The first test of these rules of which I am aware came with the advent of premixed margaritas. I recall a formal opinion of some sort on this issue, but I am unable to find it now. Confronted with the question of whether premixed margaritas held in a vat in anticipation of orders not yet received were “mixed for immediate consumption, ” TTB held that it would interpret “immediate consumption” to mean mixing of cocktails for consumption up to 24 hours in advance of an order. As I recall, the issue then went to sleep. TTB had no intention of ever enforcing the 24 hour rule, which was, at any rate, beyond its ability. The next innovation, infusions, tested the 24 hour rule. In its newsletter for the week of May 18, 2012 (http://www.ttb.gov/newsletters/archives/2012/ttb-newsletter051812.html), TTB responded to a request from the National Alcohol Beverage Control Association (NABCA). The NABCA asked TTB to state its position on the “increasing trend of bars and restaurants infusing distilled spirits with fruits, herbs, and other nonalcoholic ingredients in order to make infusions, which are served on premises in cocktails.” From my experience, I know that TTB had been aware of the practice for at least ten years, but had made non-action an unstated policy. It simply ignored the issue. The NABCA request brought it to a head. As TTB’s letter observed, it understands that infusions “are generally not for immediate consumption at the time the ingredients are mixed and would, accordingly, be subject to the IRC requirements.” The IRC requirements to which the letter refers were, of course, the requirements of §5171 that processing operations be conducted on DSP premises. The practice of making infusions at retail premises is clearly in violation of §5171, but let’s look at this from another angel. When the rectification tax was still in force, making an infusion was a taxable act. After the tax went away, as long as no one asked, TTB did not have to articulate a reason for not doing anything about retailers infusing vodka by stuffing a peach into the bottle. When the NABCA asked, TTB had to respond. It adopted a “no harm, no foul” rule even though it recognized that the act is subject to the IRC requirements. In truth, from the outset, enforcing a prohibition against infusions was a non-starter at the federal level. Even if TTB had proclaimed them illegal, with authorized staffing of a little over 500 people (and that is everyone), it would have been powerless to do much about what happens in the bars and restaurants where infusions are made. Thus, it’s letter to the NABCA, TTB states, “Since taxpaid spirits are used in the process, TTB believes there is little risk to the Federal excise tax revenue. Additionally, because infusions are served on premises as or in cocktails, we do not foresee FAA Act packaging and labeling concerns. Under these circumstances, TTB exercises its enforcement discretion not to take enforcement action solely on the basis of violations with regard to a retail liquor dealer that mixes taxpaid spirits to produce infusions for on-premise consumption.” However, TTB was not obligated to exercise what it calls its enforcement discretion. TTB says that infusions violate the provisions of §5171 and at the end of its infusions letter, TTB stated that although it was exercising enforcement discretion in the case of infusions, “This position does not apply to and TTB will continue to enforce prohibitions on processing with non-taxpaid spirits, bottling spirits, aging spirits in barrels, heating spirits, refilling of liquor bottles by retail liquor dealers, and with respect to any other conduct that may jeopardize the revenue. " TTB dressed the issue solely in revenue terms. We can turn now to barrel aging. Like infusions, barrel aged cocktails do not jeopardize the revenue. Like pre-mixed margaritas, they are not served from the original container. Thus, they do not run afoul, as infusions may do, of the provisions of §31.204, which prohibits using a liquor bottle “in which distilled spirits have been previously packaged for the storage of the mixture or compound pending that sale.” Thus, TTB could hold that the barrel is a suitable container required for use in lieu of liquor bottles. If TTB adopts such arguments, it may choose again to exercise its discretion and not enforce the provisions of the law that barrel aging cocktails tests, particularly in light of its obvious inability to do so effectively with the staff available to go out and do that. Ultimately, although the states may look to TTB for guidance, I think this will remain a state issue. Even if TTB again declares it will not enforce the federal law, as I suspect it would if pressed, any state may choose to enforce its laws. TTB’s position may influence the decision a state makes, but it may not. The 21st Amendment gives states broad power to regulate commerce in alcoholic beverages within their borders.

Ralph - TTB has delegation orders. They are a public document. The authority to grant approval is often delegated to the Director of the National Revenue Center (Cincinnati). In the case of requests for approval of a DSP on a parcel of land that also houses a residence, TTB looks to the Rulings and Regulations Division (Washington). Absent a ruling, the specialist at the NRC is likely to challenge any location where the proposed DSP is collocated with (on the same property as) a residence. That is their job. The challenge is proper. But it is not their job to say, "You can't do that." If my experience is a reliable gauge of where TTB stands, the specialist should instead ask, "Has this been approved?" If you do not want to experience a good deal of delay, it is best if you can say "yes," and upload the letter of approval to the application. I find it interesting that there is an upcoming meeting, particularly since the regulations were recently revised and the restrictions on location and use were left intact. TTB has not been blind to this issue and I suspect that the decision to leave them intact was reached after debate within the agency. I do not know this, since I am outside of the room where they would take place. However, since TTB is consciously approving some instances of collocation, i.e., it is granting approval for reasons other than inadvertent error by an inattentive specialist, it may be that they are motivated to provide some basic guidelines to escape the need to rule on ever instance individually. They could do this with some sort of "distance" rule, saying that anything over some arbitrary distance from the residence would be considered not to be connected, then allowing individuals to request approval for something inside that distance under the particular set of circumstances attendant to their situation. But in the interest of the small distiller, we should lobby for a rule that establishes a degree of separation beyond which TTB will hold that the two presumptively are not connected for purpose of Section 5178. That sort of rule allows the specialist to recommend approval without a ruling in some instances, but not deny the possibility in others, thereby allowing distillers to seek a ruling in instances where they do not satisfy the presumptive rule. In short, and I am rarely short, the fight should not be for a rule. I adhere to the warning, "Be careful what you ask for." The fight should instead be a fight for a reasonable way to allow farm distilleries. Farm distilleries come with at least two potential advantages, which probably do not need repeating here, but I'll do so anyway. First, they can save the distiller a bunch of money, thereby making the operation more feasible. Second, they fit a story that creates an image that can help sell product. I think we are arguing for the same thing; I just think that we need to be careful of unintended consequences. Finally, a note on ambiguity. I would argue that ambiguity can have advantages. It can create opportunities that a hard and fast rule can deny. It allows the line to shift more easily with the times. Draw a hard line in the sand and the issue is resolved, but not necessarily in favor of the small distiller. One can be stuck with hard lines until enough pressure builds to get it reconsidered. That can be years.

You are also "required" to tell TTB that you are beginning operations prior to firing up the still. Sec. 19.292(a) Beginning operations. "A proprietor must file a letterhead notice with the appropriate TTB officer before beginning or resuming production operations. A proprietor must not begin or resume operations before the time specified in the notice." This is a "notice," not an application. You do not have to wait for TTB's approval, which will never come anyway because they simply file notices. The reports that you must submit will depend upon the operations you are authorized to conduct. Assuming you are qualified to produce, warehouse, and process, you must submit a report of each operation month, even if you have no operations in the account. Stuff you put down the drain is "voluntarily destroyed." You need to keep the records on that. Smoogdog's advice on calling TTB is correct They are helpful. Don't forget tax returns. You can file quarterly if you give notice *(see 19.223(, but without notice you must file semi-monthly (see Sec. 19.234 - The proprietor must execute and file TTB F 5000.24 for each return period, even when no tax is due for a particular return period). Hope this helps.

Ralph at Tuthilltown - Correct - a this time the issue is not the parcel. It is the degree of connection. But don't waste time discussing this on the telephone with someone who cannot set policy. Any comments they make are not binding on the agency - indeed, any oral comments are not binding, even if made by the Administrator. By all means take notes of telephone conversations,but don't think you will be able to claim, "Well, so and so said." If you want answers on which you can reasonably rely, you must write down the particular circumstances and submit those circumstances for a ruling. I'll repeat, TTB makes case by case decisions. It is akin to Justice Potter's position that he could not define "pornography," but that he knew it when he saw it. Replace "pornography" with "connected to" and you will have TTB's current position, at least as they have expressed it to me, on the residence issue. So, don't expect that you are going to get an answer in the form of an algorithm that you can apply to any situation and say yes or no. If you insist on that, TTB may well say, citing 26 USC 5178, "Fine, here is what the law says, 'No distilled spirits plant for the production of distilled spirits shall be located in ... any ... yard ...connected with any dwelling house.' Since you insist on the one size fits all answer, We interpret 'yard' to mean parcel. We therefore will not approve an application." Do not ignore the fact that TTB wants to work with you on this. Prior approvals are evidence of that. But don't insist on boxing them in. That's my advice. It has worked for my clients.

Sure - Last night I posted on the issue of DSP's located in connection with a residence. That's one example. There is an approach to that issue, but the posts are mostly speculative or anecdotal. They don't go back to the basics, which is the law, 26 USC 5178, and how TTB must maneuver through that to reach a decision on whether to allow a particular location. Since TTB is the agency having jurisdiction, it writes the rules, and the courts give deference to TTB's interpretation of the statute. As long as the interpretation is reasonable, and the agency has followed the administrative procedures act, the courts will not replace TTB's position with their own position, even if they would reach a different conclusion than TTB has. Speculation, etc., is often a form of interjecting one's own opinion in place of TTB's. Citing anecdotal evidence ignores, in most cases, the particular circumstances on which TTB based the decision to approve. I want to point out how you must approach TTB if you want them to approve what you propose. Saying that "so and so" was approved, or that the law really addresses safety issues doesn't provide the information necessary to sway TTB's decision in your favor. That's one example. This morning, I posted on the issue of "tied house" and "three tier" requirements. There I directed the person to a source they could use to determine if the state in which they are located, Virginia, will approve the business model they propose. I tried to present a way to think about that issue. Again, the answer they are going to get is driven by particular circumstances. Last year I watch with amusement the discussion on unaged whiskey. Everyone knows it is out there. Some conclude that it is permissible, notwithstanding the standard of identity; others conclude that TTB has approved in error;and others conclude that the whiskey must have been aged - that is touched the inside of a barrel - or TTB would not have approved. The later is nonsense, since the label of any whiskey stored fin wood for less than four years must have a statement of the period it spent in the barrel. These labels do not. But I have no answer for this confusing state of affairs and have opted to advise my clients to let sleeping dogs lie. I am not about to ask the agency the "How could you do that when ...." question. Many of you have too much at stake. I will note, however, that TTB says that if you are going to label a product with the simple class type "whiskey," you must submit a formula for pre-COLA evaluation. How did that come about? When I asked if it were really true that "whiskey" required a pre-COLA evaluation, but whiskey labeled as "Rye Whiskey" or "Whiskey Distilled from Malt Mash" did not, the answer desk said, "Yes, because of all of the white whiskeys." I did not say one more word. It appears that in theory they want to see the aging to which the formula says the product will be subjected. So it appears that the issue is on their radar. It will be interesting to see what sort of changes TTB proposes in the NPR to up date the labeling regulations they say they plan on issuing in September (see Treasury's regulatory agenda for info). Will it be as simple as trying to do away with pre-approval of labels, in the manner of the FDA? Or will the agency actually try and wrestle with the issues things like its approval of "aged gin" labels are creating That's a sample. You are correct to call me on a statement that assumes its premise.

This is not a "tied house" issue in the traditional sense. Look instead for information on "three tier" rules and regulations. TTB will allow this activity, but you will have to construct according to its rules. The previous answer is correct; in the main it is a state issue. A simple search for "Virginia craft distiller retail sales" returns the following at http://www.abc.virginia.gov/newsletter/pdf/LicSpring2013.pdf, which is a Virginia ABC newsletter that includes an article on craft distilling in the state: It took legislation to make this happen. The Code of Virginia is very specific regarding the distribution of liquors. Unlike wine and beer, which can be purchased from any farm winery or brewery holding an ABC license, distilled spirits can be sold only at government (ABC) stores. Legislation enacted in 2006 (statute 4.1-119) permitted Copper Fox to open a government store. The provision authorized state stores for licensees using at least 51 percent of agricultural products grown on the licensee’s farm or on Virginia land leased by the licensee to operate as a state store. In Copper Fox’s case the grain used in producing its whisky was developed by Virginia Tech and is grown on the state’s Northern Neck. Virginia ABC carries four of the distillery’s products. Subsequent legislation added four other provisions for qualifying as a state store including: (1) licensees which operate as nonprofit associations owning property significant in American history —Mt. Vernon; (2) licensees operating a museum on the grounds of a historical building or site—A. Smith Bowman; (3) licensees USDA-certified as organic distilleries — Catocin Creek; and (4) licensees employing traditional distilling techniques including the use of authentic copper pot stills . . . in any county with a population of less than 20,000—Virginia Distilling Company. Each provision is unique to a distillery and was introduced by a legislator on the distillery’s behalf. For these five distilleries, qualifying as a state store is an advantage because they’re able to sell their product directly to consumers on the premise. The price of the spirits is the same as it is in Virginia ABC’s 343 retail stores. The convenience is that the consumer is able to make the purchase while the product still has top-of-mind awareness. It appears that the state may not allow sales for consumption on premises. Armed with this information, talk to your local ABC agent.

I have experience here. TTB will decide, on a case by case basis, whether to approve establishing a DSP in any "yard" connected with a residence. They will also decide, on a case by case basis, on whether to allow you to establish a DSP in a mixed use condominium. I have experience there as well. Remember: (1) TTB is not dealing with the language of the regulation alone. It is also dealing with the language of the law, which you can find at 26 USC 5178. It is darn close to the language you find in the regulation. Congressional intent is lost to history. The law stems from 1880's provisions for which we lack legislative history. At least, I have been unable to find any. (2) TTB may not approve anything that is contrary to law. Therefore, you are going to have to deal with the issue of whether the premises you propose is sufficiently connected to the residence to trigger the prohibition set forth in Section 5178. Neither ADI or any other association will be able to intercede in a way that will have TTB draw lines in the sand that define a particular set of circumstances that will allow it to say, if A and B, but not C or D, then it is (or is not) connected. It is going to be based on the entire set of circumstances. What TTB should do is enunciate how one should go about asking for an interpretation. When you write the TTB answer desk with minimal facts and ask "mother-may-I" questions, you get safe answers. The safe answer is "No, you may not." But the real answer is often, "Yes, you may." The burden is on you to frame the issues in a convincing way. I'm going to show up as a "newbie" on these posts. But I've been around a while. I just decided to start commenting here because I see so many answers that are not based on experience or want to argue why something should be other than what TTB says it is, or enter into speculation. In that regard, I really doubt the prohibition has anything to do with safety. For any attorneys lurking in the wings, the issue is probably tied to the common law notion of curtilage; at what point does the resident lose the reasonable expectation of privacy associated with the residence so that TTB's authority to enter the DSP premises at any time and use whatever force is necessary if entry is refused comes to trump 4th amendment rights? But I'm not an attorney either. By the way, if you actually sit down and prepare a detailed request and send it to the "Appropriate TTB officer," as you should, be prepared to wait for an answer. TTB is short staffed. If you don't understand the notion of "appropriate TTB officer," visit the definitions section of Part 19. That's section 19.1.

Let me add that, presuming you are removing cased goods, you determine the tax when you remove it from bond unless it a withdrawal that you can make free of tax - like export - and you determine the amount of the tax based on the label proof and bottle size. You can find instructions on how to gauge in Part 30 of the regulations. That section is called the gauging manual. Here is what it says: Where the quantity of spirits in a case is to be determined by volume, such determination shall be made by ascertaining the contents of one bottle in the case and multiplying that figure by the number of bottles in the case. For cases containing bottles filled according to the metric system of measure, the quantity determined shall be converted to wine gallons, as provided in §19.722 of this chapter. The wine gallons of spirits thus determined for one case may then be multiplied by the number of cases containing spirits at the same proof when determining the quantity of spirits for more than one case. The proof gallons of spirits in cases shall be determined by multiplying the wine gallons by the proof (divided by 100). If you have a deferral bond, you can defer taxpayment. Most small distillers can defer to quarterly returns. But remember, you must have sufficient bond to cover all of the liability that you build up and the discipline to set the money aside. You can find all you need to know about taxpayments in Part 19, starting at section 19.225.

I'm Dave Dunbar and I consult on federal and state compliance issues. I'm not here to advertise. I see a lot of urban legends getting started and want to comment before things get out of hand. I worked for ATF (TTB's predecessor agency as TTB is found of calling it) for about 35 years. My experience actually spans about half of the life of the agency, so I have an acquaintance with much of the regulatory history of issues with which distillers must deal. If you find me soliciting business by suggesting someone contact me for more information, slap my hand. I'll only respond to forum issues when I offer the information free of charge. Look to my posts to determine if I know what I'm talking about.