Confusion about NYS licenses

[StevenD]

Hi, i've been scouring the forum as well as the NYS liquor Authority website concerning the various classes of distiller's licenses and what they make an individual entitled to. Thank you Ralph at Tuthiltown, your posts have been very helpful and informative but unfortunately I'm still a bit confused. Am I correct that a class A-1 and Farm (class D) licenses give you the right to manufacture AND wholesale liquors to wholesalers and retailers? I also understand that a class D license is only given under the stipulation that you use "primarily" NYS farm and food products in your production but what about products that are not grown in NYS such as certain Gin botanicals? ...for that matter im not certain barley and rye are grown in abundance in NY?? What constitutes "primarily"? In a certain piece of legislation i just read on the NYS Senate website the term "entirely made from NYS Ag Products" was used leading to further confusion. Thank you very much.

[Ralph at Tuthilltown]

Hi Steve:

You are right, the law is contradictory at worst, ambiguous at best. All indications I have received by the State are that "primarily" may be interpreted as more than 50%, though as you rightfully point out the statute says "entirely". We were required to acquire three (3) NYS licenses in order to sell all our products at our tasting and sales room: A-1, which permits us to use non-NY raw materials; DD, which permits us to sell NY State products made under the DD license (primarily NY raw materials) in our shop but does not permit sale of non-NY raw materials made goods like our Single Malt and our Rum; and our Farm Winery (latest acquisition) which permits us to sell ANY NY State branded spirits regardless of the source of the materials. So if you are choosing license classes under current law, your best bet is to get the A-1 and the Farm Winery license, this combination gives you the broadest choices with the least number of licenses. Yes you are correct about the A-1 and DD licenses and the wholesale aspect, though the licenses only give you the opportunity to APPLY for a wholesale license, so you must also make that application, I believe there is no additional fee, but you have to go through the submission and application process (don't ask me why, they will already have your info, just they have not the wherewithal to go to the file and look up all the data already on file, absurd but true).

You should also contact the Governor's office, and your local legislators to urge them to get the SLA Chief Counsel to include the distillers in his process as he writes the new ABC Statutes. I have forwarded to the Gov's office the following:

Immediate concerns:

1. Involvement of Small Producers in the rewrite of ABC Law now underway at the SLA Legal Division to ensure small Producers needs are considered;

2. Level the playing field so all micro/farm/craft producers all enjoy the same treatment under law (Example one: wineries and brewers pay to register their labels once at a lower rate than distillers, and distillers must reregister every label every year at $250 per label/brand, the same rate as the major producers pay, and since variety is an advantage producer this can become a major annual financial burden on the small startup Distiller, discouraging creativity and variety by making it an annual financial burden. Example two: wineries and brewers may sample and sell goods at farm and greenmarkets. Distillers are excluded from these marketing opportunities.)

3. Cut paperwork, the SLA and the Tax Department should rely upon the electronically filed twice monthly reports to the Fed for tracking the work and production of small NYS producers since the Fed reports are more comprehensive than the State reports; amend State label registration process to match the Fed, so label approvals would follow the Fed approval and not require vetting by the State (which typically takes two months or more after the Fed approval is received); streamline the applications process (the State application process duplicates the Fed Basic Permit application, but applicants must first await the Fed Basic Permit before beginning the State process which typically takes four to six months and often longer, unnecessarily.) Another example: Label registration; brewers and wineries pay a lower registration fee, register their brands once and are not required to refile and repay annually. Micro and Ag Distillers must pay $250 a year per brand label. It is the soul of the small distiller to be innovative and explore new uses for agricultural raw materials; this ridiculous inequity between wineries/brewers and the distillers discourages innovation and penalizes prolific producers who make a broad range of products from NY Ag raw materials, thereby limiting the range of experimentation for the producers, and variety for the consumer.

Longer term concerns:

• Licensing of Producers should be reassigned to the Department of Ag and Markets, this is already suggested by Ag and Markets, it should be pushed through. The SLA is simply not equipped to understand or work with the problems faced by small farm and micro producers. This transfer of regulatory responsibility would also settle once and for all the question of the nature of the Producers’ operations as FARM operations and their products as FARM PRODUCTS;

• Move all reporting and all forms online and get rid of the cumbersome and slow paper and mail system now in place. Make all information from reports public and accessible in Summary form to the licensed Producers so they may benefit from the compiled industry information and put that information to use;

• Change SLA mentality, which is: the Permittees are dishonest and will break the law. Current interpretation of the ABC law (which interpretation is mandated to the SLA by ABC Law) is based on the premise: If it is not written explicitly in the law that a permittee MAY do something, they may NOT regardless how benign the action or how it may benefit the State and the Producers. This is counter to all other interpretations of Law. The existing mentality of the SLA is an assumption a Producer will break the law. It is an insult and violates all notion of “innocent till proven guilty”, a basic tenant of the Constitution;

• Revision of the License structure, so there is one “Producer” license, fees based on the volume of production in “proof gallons” (matching the Fed, presently all Fed reporting is based on “proof gallons” but the State requires reports in both proof gallons and wine gallons forcing compliance managers to recalculate all production numbers for the State which are already clear and accounted for with the Fed in proof gallons, the industry standard), again, leveling the playing field among the small Producers of all categories. (Example: We must carry the A-1, DD and Farm Winery licenses in order to sell all our goods to Farm Wineries and to sell all our own products at the distillery tasting room. We are forced to make 50 gallons of wine a year to maintain our Farm Winery license in order to sell our Single Malt and Rum at the distillery shop; our Farm Distillery license enables us to sell only products made with primarily NY raw materials but a Farm Winery can sell ANY New York State branded spirits.)

There needs be more voices than mine speaking into the ears of legislators. The major impacts to remind the legislature and Governor are on:

• Agriculture, small farms
  
• New markets
  
• Rural Economic Development
  
• Entry level jobs in rural areas
  
• Tourism potential
  
• TAX REVENUE
  

Please contact your legislators and sing this chorus. Persistence is the ONLY WAY this will be addressed.

Good luck. Keep in touch.

Ralph

[delaware_phoenix]

I'd agree pretty much with what Ralph says, though I don't think Ag & Markets is much better equipped or knowledgeable than SLA.

Tax and production reporting is handled through Taxation and Revenue, not the SLA. Current tax rate in NY is based on liters, irrespective of proof. If NY were to change their tax rate to be based on proof gallons rather than liters, higher proof products would pay more tax than lower proof products. So I'm not sure such a change would be for the better.

Certainly the state operation reporting can be simplified, but currently I'm not required to report to the state the different kinds of spirits I produce as we do for the Feds. The taxation and reporting should be simplified to one page and be based on total products sold.

Either the state needs to grant automatic approval to TTB license holders once they obtain their Federal permits, or they need to get involved in the beginning and grant preferential processing to distillery/winery/brewery licensees so we're not waiting months on end after having Federal approval.

My expectation of change is limited in the current political climate in Albany. New York seems to be developing quite a good little micro-distillery industry in spite of the current obstacles, and they could help the economy out by supporting it.

[StevenD]

That is fantastic information, thank you very much. I am only in my business planning stage at the moment but when the time comes I would love to be involved with fighting for this type of legislation. I hope to visit your distillery in the next month or so, my brother moved up to Newburgh NY and I understand it is pretty close. Thanks again

[Ralph at Tuthilltown]

Ag and Markets may well be ill equipped at this time to simply assume that responsibility for the Production side of micro spirits, beer and wine. However neither is the SLA. And at the least Ag and Markets understands agriculture and what farms need and protects the interests of New York farmers. And since the majority of products made in NY (that are not vodka from GNS) are made with agricultural raw materials no less than milk or juice, it is the logical agency to oversee Production licensing and enforcement. Falling into the realm of Ag and Markets also protects the small producer to a large extent from DEC misunderstanding of the nature of the small producer. The DEC originally classified our distillery as an Industrial Use, our products as industrially produced and our waste stream as "hazardous industrial waste" with all the accompanying problems that come with that designation. It was not till we acquired a verification from Ag and Markets that the DEC backed off and recognized our Farm status, our products as Farm products and our waste stream as "Food Waste" which falls under a completely different set of regulations.

There is currently no agency in New York that fully comprehends the movement and its implications. It is my opinion that the appropriate agency to regulate Production is Ag and Markets; which by the way made this same proposal and agrees that (notwithstanding the financial implications for the management of their assumption of the regulatory role) the scale and methods utilized by wineries, breweries and distillers operating on the scale we are suggesting, are agricultural in nature.

R

[Ralph at Tuthilltown]

FARM DISTILLERS be aware, the Department of Ag and Markets is requesting we apply for a vendors permit, classifying us as "middlemen" and therefore we need to register with Ag and Markets as such. The fee is not at issue, it is modest. However, we disagree with the determination that we are required to acquire the permit.

We are a Farm under New York State Law, running a "farm operation" and selling the goods we produce, which are "farm products" at the Farm. We are not middlemen. If you are holding a Farm Distillery permit and doing business with local growers, we suggest you enter into leases for the land or trees producing your raw materials, thereby making them a part of your Farm Operation and ensuring your goods are "Farm Products". The leases are simple and your attorney should be capable of drawing one up that does not intimidate your growers. In order to qualify their lands as your Farm Operation you must show you are financially responsible for the crop.

This also applies to the Department of Environmental Conservation; if you are not a "farm" producing "farm products" your effluent is "industrial waste" and requiring a whole raft of permits for its disposal. Being a "farm" producing "farm products" that effluent is considered to be "food waste" and much more easily disposed of.

R

[SDI]

I'm in the process of getting a Farm Distillery license. Looking for a source of NYS flaked corn and rye. Could someone give me a referral?

Rich