Commercial Kitchen Rental

[Brothers Vilgalys Spirits]

So we've reached the point where we're just trying to raise seed money, and of course the biggest cost there is the facility itself. We've flirted with the idea of contract manufacturing, but I haven't come across any facilities nearby that would be a good fit. However there are several commercial kitchens in the area that lease time and space for very good prices, which would drastically cut down the amount of money we'd need to raise to get underway. My product is a spiced honey liqueur, and I'll be blending it with bulk NGS anyway (adding a still when we can afford one), so there's no "practical" reason why a kitchen wouldn't work.

Does anybody know how much of a quagmire it would be to lease time and space in a commercial kitchen? My understanding is that the kitchen would have to apply for the DSP, while I would need a wholesalers permit to warehouse the spirits. Does that mean that whatever space is used for spirits couldn't be used for regular kitchen stuff? Would they also need to partition off a section?

I'm imagining that this would be very difficult to make work, but it would save me a ton of money. Any thoughts are appreciated.

[Jedd Haas]

There are two sections in 27 CFR you need to read. The one on "alternating premises" and the other on "additional businesses on the premises of the distilled spirits plant." Between those two and some creative thinking, you will find the answer.

[Brothers Vilgalys Spirits]

There are two sections in 27 CFR you need to read. The one on "alternating premises" and the other on "additional businesses on the premises of the distilled spirits plant." Between those two and some creative thinking, you will find the answer.

Thanks that cleared up quite a bit!

[okolehao]

Let me know what you come up with and what the TTB says about it. That would allow more people to get their foot in the door.

[Brothers Vilgalys Spirits]

TTB says this is a no-go, unless the kitchen is willing to set aside space dedicated to spirits (and no other purpose). Alternating proprietorships have to be with another DSP.

Pretty much what I expected to hear, but at least now its official.

[Beauport Bob]

Thinking Federal, not State, it sounds like you are speaking to TTB as a DSP operator. If you have no still as you suggest, you would not have a DSP license. What if when you purchased the G N S you paid the federal tax consequence due?

[Brothers Vilgalys Spirits]

Someone may correct me if I'm wrong, but I think you still need a DSP to buy spirits in bulk and then make beverages, regardless of the origins and tax status of those spirits. Suppliers can't sell you bulk spirits unless you have the appropriate licenses, and those bulk spirits (taxpaid or not) can only be stored on a DSP's bonded premise until bottled and shipped.

Looking at the code, it's in CFR 27, subpart E (specifically 27.1.82)

I'll add that I really do want a still (like oh, so badly) but since we're focusing on one product with a neutral spirit base, and given the cost of a production still, it doesn't make a whole lot of sense to start with one right away.

Good news is the kitchen folks are very nice and may be willing to set aside bonded space specifically for spirits. We'll see where that goes.

[cowdery]

Thinking Federal, not State, it sounds like you are speaking to TTB as a DSP operator. If you have no still as you suggest, you would not have a DSP license. What if when you purchased the G N S you paid the federal tax consequence due?

Incorrect. What he describes is rectification, which does makes him a producer. Same deal for a bottler.

[fruffenach]

This is a little off from the original post but part of the responses relate to my question.

I am trying to determine the correct permits I need as far as the TTB goes and have received mixed responses.

First, a very abbreviated version of my plan: In order to get things up and running and to market faster, I want to purchase aged bourbon barrels, age them and then have it bottled. I will purchase from a DSP and transfer to a DSP for aging and bottling. At no time will I ever actually be storing the spirits myself or have physical possession.

I have been told all I need is a basic wholesale permit to do this and I am pretty sure there are people out there doing this based on a wholesale permit. Now for my question. I looked at the TTB regulations mentioned above but they don't seem to address what I want to do. I had contacted the TTB about using a home address on the permit application since I will never have possession of the spirits but they never really addressed my question and gave me information on a DSP Permit. To me, it doesn't seem like there are any references to this type of business model. Can anyone help clarify this for me?

Thanks,

Fred

[Jedd Haas]

Fred, what you are talking about is "contract distilling." You should start by finding your supplier; they will be the one with the permits, and depending how much they are willing to accommodate you will determine (to some degree) the permits you need.

Your location will also make a big difference. If you need to purchase in one state and move the product to another state, you'll need to learn about "transfer in bond." Depending on your state regulations, state authorities may consider you a wholesaler; and in some states, this will prevent you from becoming a DSP. Look up the "three tier system."

Your next move should be talking to your state and local alcohol regulators.