Make now sell later?

[sliznut]

Hi I'm new here and I have a question.

What if you make whisky and have it aging in barrels before you are licensed and setup officially with the government and then upon licensing could you sell the whisky you had previously made? The purpose of this would be to have some product to sell when you get credentialed.

[Michaelangelo]

Without a DSP you are not allowed to produce anything

[John D]

Not trying to offend but are you for real.

[CountySeat]

The only way I've seen something like that done legally is to have another distillery produce it for you before you are licensed. They "contract distill" is and then sell it to you to sell as your own product. I know Journeyman in Three Oaks, MI did it that way with their first batches of rye - they were made by Koval I believe.

[sliznut]

So is it common for distilleries to open and not have a whiskey to sell for say 2 years while they age?

[CountySeat]

Many will start with selling an unaged whiskey or other clear spirits and use smaller barrels to cut the time frame down for aging to 9-12 months.

[sliznut]

Cutting the barrel size down makes sense. Thank you CountySeat

[Craft Distillery Resources]

Cutting the barrel size down works if the mash is right, still is right, proof is right. What you are talking about is a felony.

[dhdunbar]

I think others have, or at least should have, convinced you that distilling first is a bad idea.

Someone mentions felonies, and may want to argue, but who has been prosecuted for moonshining lately? That is only the criminal side. Consider this. The tax is due on production. Only a DSP can defer the tax. If you have spirits that you made before you became a DSP, they are taxable when produced -on the sport - with penalties running 5% a month up to 47.5% if they are kind and go with the leasst noxious of penalties. If you can prove you don't have the money to pay, and survive the heart attack you get when you receive the assessment in the mail, TTB might compromise the liability, but the civil side can be devastating.

Did I mention forfeiture provisions?

Did I mention that you would not be on their good side when you actually got around to applying?

Don't even think about it.

[Silk City Distillers]

These guys were clearly of the make now, sell later variety. Who gets prosecuted? Check the date, this was released last week. This wasn't 8 people with 46 stills among themselves, this was 8 arrested, with the remainder lucky enough to get their hand slapped (probably because they'd never used it, or weren't caught with spirits or enough other materials to implicate them in production). Forfeiture of property? Worth losing your house or other property over?

I especially like the cheeky comment at the end: "encouraged to visit…and apply for a permit"

http://www.ttb.gov/press/fy14/press-release-march2014.pdf

For Immediate Release

March 7, 2014

Contact: Tom Hogue (202) 453–2180

FY–14–3

TTB and Florida Authorities Conduct Joint Moonshine Operation

Washington, DC — This week, Alcohol and Tobacco Tax and Trade Bureau (TTB) investigators conducted a joint operation with special agents from the Florida Division of Alcoholic Beverages and Tobacco targeting illegal possession of stills and illegal production of distilled spirits.

The joint operation resulted in 8 arrests and seizure of 46 stills by Florida authorities.

The possession of unregistered stills and the production of distilled spirits without a Federal permit and without payment of tax are Federal felony offenses which may result in the seizure and forfeiture of land and other property associated with the illegal activity.

Persons wishing to distill spirits legally are encouraged to visit the TTB distilled spirits homepage at http://www.ttb.gov/spirits/index.shtml for guidance and to apply for a permit.

[dhdunbar]

Yea - I no sooner said that when TTB made its news release. In fact, I just came here to post it and you beat me to it.

But my point isall the more valid. There may be no federal prosections - they were arrested by state authorities - but TTB may be makng a trip to the bank to seize the bank accounts of the moonshiners, once they get a handle on the potential liabilities.

That was the gist of the message I was trying to deliver when I posted the other day - don't take the lack of criminal cases as an indication that you are bullet proof.

It is likely that TTB used IRS special agents assigned to it under a budget agreement when it investigated these cases. They will want to show something in return. And if the moonshiners were engaged in the business of making the booze for sale, they may open themselves up to asset forfeiture provisions, which allow the government to go after anything purchased with the proceeeds of the illegal activity. But I'm out of my depths here because the only time I was involved with this was contraband cigarette cases. I'nm not sure how the provisons apply to moonshiners. I think no one on this formum wants to find out.

Let me add to this warning - TTB can and has required still makers to provide lists of their customers.

[Jedd Haas]

Let me add to this warning - TTB can and has required still makers to provide lists of their customers.

A supplier we used for our development stills sent us an email to that effect a while back. He complied with the TTB and the hundreds and possibly thousands of unlicensed customers he supplied are now all known to TTB. No worries for us, of course.

[drycreek]

Wouldn't it make more sense to sell now and make later? You can market your product and create a brand while your waiting on your DSP. I have no idea what I'm doing and have yet to make a batch of alcohol even after receiving my DSP. I've spent the last year talking to bartenders, retailers and the general public asking what they like to pour, what sales and feedback on my bottle and label design. The next step has been crunching the numbers determining market price points lining up vendors getting a true idea for COGS and establishing margins. The final step has been interviewing wholesalers and being sent to the buyers for retail chains for feedback on the branding and design of which I've received feedback on what the retailer projected they could sale the product and starting commitments. All of this has been done with the understanding the product has yet to be made. So far no one has asked or cared how the product is made, quality, taste or experience. You have time work on on what you can make your product for and what you can sale it to the wholesaler. At the end of the day it's about price, marketing, creating a demand and how your going to meet that demand. New venture for me and maybe i'm doing it backward but at the end of the day it's all about making the retailer money.

[mendodistilling]

You can arrange production by any dsp to make you product and they will likely have an arrangement for storage duration and cost for that duration or extension and fees reguarding those time frames. This is the only way to legally manufacture and start age claims before licensed by the ttb. You can show a transfer of bond once you are licensed and make age claims accordingly to the date of manufacturer, regardless of where it originated or ended up before you got it, from the day its been made by whomever, you start the clock. a lot of companies who own brands do this without ever having a dsp license. they distribute it or sell it but do not produce it themselves. Many gin makers come to mind right off hand.