Micro-Distillery in building attached to a residence.

[drenright]

Does anyone have a craft distillery attached to a residence or know of any? I am aware that the TTB regs say it's illegal but wanted to know if anyone has either appealed this and gotten a reprieve or was anyone given an exemption. If they were given an exemption, under what clauses? Thanks for the help.

[Mash]

Not that I have ever heard.

[dhdunbar]

I will guarantee you that TTB will not approve of a distillery that is attached to a residence. It is too long to explain here, but basically, the law - not just regulation - says that you cannot have a distiller in a residence or any structure that is in a yard that is connected to the residence. TTB cannot approve something that is contrary to law. I've gotten approval for distilleries on the same tract of land, where we can reasonably argue that they are not connected within the meaning of the statute, but it will never happen if it is actually attached. I think I've posted on this before in more detail. I can't remember where or when.

[John McKee]

One note of clarification,

The TTB has been willing to license distilleries in buildings that are multi-use, such as a multi-story building with commercial interests on the ground floor and residences on the floors above. When this has been successful, the applicant had to prove that the points of egress to the distillery were 100% separate and distinct from the points of egress for the residential areas of the building.

However, this logic has not been successful in someone trying to get a distillery licensed, attached to their home or house. It just isn't going to fly, even if you ensure separate points of egress.

Cheers,

McKee

[Falling Rock]

From the ADI website...

Q: Can a distillery be in the same building that may have some residential units? Not an apartment complex but in a multi-floor mixed used building that may have some loft apartments?
A: This is very tricky and is the source of much debate. Here is the exact regulation: “Subpart F – Location and Use (of distilleries) § 19.131 Restrictions as to locations. Distilled spirits plants shall not be located in any dwelling house, or in any shed, yard, or enclosure connected with any dwelling house, or on board any vessel or boat, or on premises where beer or wine is produced, or liquors of any description are retailed, or (except as provided in §19.133) on premises where any other business is conducted.”

In my personal interpretation, if the distillery is physically connected to one of the loft apartments, it may not be approved. You may also run into local or county fire or zoning regulations that may prohibit the distillery in the building. I highly encourage you to reach out to the TTB directly to have a conversation about the specifics of your potential distillery space before you submit your DSP Application and wait the 120 days for review only to get rejected. Here is some relevant ADI Forum Discussion on the subject.

Ask me Anything About TTB Reporting

Important Disclaimer: The content above has been provided by Donald Snyder, Whiskey Resources LLC, and Whiskey Systems Online and are not affiliated with the TTB and answers posted are only from personal experience and personal understanding of the Federal Regulations. Individual distilleries and owners are ultimately responsible for ensuring all actions taken are compliant and follow TTB and other Federal Regulations. Advice and links posted on this site should be used at your own discretion. Donald Snyder, Whiskey Resources LLC, and Whiskey Systems Online will not be held liable for any damages resulting from advice, responses, or answers posted on this page.

I know of multiple locations where the rules above are being "bent."

Lots of Distilleries retail, I know a Micro Brewery with a DSP and retail, I know a Micro Brewery with a DSP that got the Permit in a Fed Historic Hotel.

But as others have said, the local authorities may eat you up! The historic hotel, micro brewery, DSP has not been allowed to produce/co-locate by the city they are in.

[Conejo148]

I am sort of going through this now. Here's a little back story:

My DSP is located on my personal, residential property. I was told by a reviewing agent before I submitted the permit packet 2 things:

First, direct from the email:

"§19.52 Restrictions on location of plants.

A person who intends to establish a distilled spirits plant may not locate it in any of the following places:

(a) In any residence, shed, yard, or enclosure connected to a residence;

So, essentially, a residential property should not contain a Distilled Spirits Plant. However, we deal with these on a case-by-case basis. Also, once we receive and “perfect” these applications that are on a residence, we internally forward them to our Regs and Rulings Division for an opinion."

I was told that the building containing the still had to be a minimum of 50ft from my residence. The reviewing agent said this was an absolute must, no exceptions. ^See above, case-by-case note. Now, being in a multi-use commercial property is a whole other animal. Mine is a single family home in the country surrounded by corn.

Second: For this to be approved, I had to construct a fence around the DSP building to create a permanent, defined, distinguished boundary between my private, personal yard, and the general premises of the DSP.

My packet has been passed up for legal review, in my 2nd week of waiting. I'll tell you though, call TTB and straight up ask your question. They're friendly folks who'll give you a straight answer. If there is a way to make what you want to do work, they'll be able to tell you how if it's possible/permissable

[StonesRyan]

How about a mixed use commercial space where local municipal code allows for live/ work dwellings and there are two floor-level spaces in a freestanding building that are adjoined but have separate addresses and separate egresses? 

Anyone have any any insight or experience with TTB in this regard?

[bluestar]

Other than you can not violate local code, TTB does not care about local code. In an urban environment, I have seen it allowed when there is full fire-wall separation with no passages or connections between. But keep something else in mind, you will have to also meet the local municipal fire code requirements that will allow you to have hazardous materials in the same structure. That will probably trigger a 4-hour firewall separation, if they will allow it at all.

[StonesRyan]

• Thanks, Bluestar. The space we're considering relocating to is also next to a Methodist church, which may or may not be a local issue, but the church has a preschool in it which enters another gray area as state law doesn't allow alcohol sales within 500' of a school. Is a preschool considered a school? The prefix suggests it's not to this layman. Also, the state law allows for local municipalities to reduce or eliminate the 500' rule at it's discretion. This could be moe of an uphill battle than I'm prepared for.

[dhdunbar]

There is no simple answer to the question you ask.  TTB's position, as stated in  a private letter ruling I received from Regulations and Rulings Division, is as follows:

_________________________

Section 5188(a)(1)(B) of the Internal Revenue Code (26 U.S.C. 5178(a)(1)(B)) provides that “[n]o distilled spirits plant for the production of distilled spirits shall be locted in any dwelling house” or “in any yard, or inclosure connected with any dwelling house.  TTB’s regulation in 27 CFR 19.52(a), which is promulgated under this statutory provision, provides that a “person who intends to establish a distilled spirits plant may not locate it …n any residence, shed, yard, or enclosure connected to a residence.”

TTB applies these provisions [the provisons of the IRC and on a case-by-case basis in circumstanses where a person seeks to establish a DSP on property that includes a residence in a separat structure.  When applying these provisions, TTB considers the distance between the residence and the DSP, whether any physical barriers separeat the residence and the DSP, and any other relevant factors.

_________________________

Therefore, no one can say, with certainty, that if condition A exists in both Case X and Y, then if TTB approved in Case X, TTB also will approve in Case Y.  Most simply put, in Case X, the conditions may have been A, B and C, whereas in Case Y, the conditions may be A, D and E.  Since TTB decides on a case by case basis and other relevant factors, when taken in conjunction with condition A, conditions B and C might lead TTB to approve, but conditions D and E might lead TTB to deny.   

When the connection is a common wall (ceiling or floor), the distance between the residence and the DSP is obviously minimal.  If the two are separately owned and controlled, then the distance between them is of little consequence, unless other circumstances indicate the the persons who occupy the residence have standing to assert that the curtilage of the residence extends to the DSP, or to the entry, from public space, to the DSP.   This is perhaps better stated, "Might TTB conclude that the circumstances might interfere with TTB's right of access?  It is likely that TTB will be very conservative in determining that it will not interfere.  You will have to build that case it is not contrary to law and will not lead to administrative difficulties.   

One comment on the school issue - whether a "preschool" is a "school," for the purpose of a local statute, is a matter of the intent of the legislative body that passed the prohibition.  If the intent is not clear from the language of the code, the decision will be left to the agency responsible for enforcement and, if challenged, to the court.  Indeed, there may be existing administrative provisions or case law that answers that question.  There is no alternative.  Ask and get an answer in writing.

 

 

   

 

[bluestar]

10 hours ago, StonesRyan said:

• Thanks, Bluestar. The space we're considering relocating to is also next to a Methodist church, which may or may not be a local issue, but the church has a preschool in it which enters another gray area as state law doesn't allow alcohol sales within 500' of a school. Is a preschool considered a school? The prefix suggests it's not to this layman. Also, the state law allows for local municipalities to reduce or eliminate the 500' rule at it's discretion. This could be moe of an uphill battle than I'm prepared for.

Our state has a similar prohibition, but it extends to both schools and churches. Plus, you will likely have local meetings for input before you get your local permits and zoning approvals, and stakeholders, like the church, may object.

[Southernhighlander]

dhdunder

 

My distillery is on the same property as my house.  I just got a separate address for the distillery.  Here where I am all that entailed was putting up a mailbox for the distillery and then going to the post office and getting a new HCR mailing address.  Where I live your HCR mailing address is also your physical address.   Some rural route address work the same as well.  Just one of the many advantages of starting a distillery in a rural area. 

[dhdunbar]

I think it is fair to say that TTB has an evolving position on this issue.  When I first took it on, directly, in 2012, if I recall correctly, the common wisdom, as expressed by a TTB investigator at TTB's 2009 Expo, was that the prohibition was more or less a statement of absolute prohibtion. Here is a copy of a slide from that presentation;

Whoa!  I apologize for the size, but I do not know how to shrink it and I have not made it screamingly large to try to emphasize my point.  I'd cut it down if I could.

Since that time, I have successfully obtained approval of DSP's located in land behind the wood lot, in outbuildings on the property, and in a commercial building with attached apartments or condominiums.  It can and has been done.  But the circumstances of each case are specific.  I recommend that you not rely on anecdotal evidence of approvals granted to others.  Finding that TTB objects to a label that is the same as one it had approved for others is one thing; finding that it objects to the DSP you have constructed in a premises above your residence is quite another.  And TTB does sometimes ask.  Twice this year, I have had a specialist specifically as about this.

A specialist requested, after submission and before approval, that we state how far a proposed premises was from a residence, since looking at Google Maps, it appeared to the specialist that the DSP was located in a residential area.  That was a rural area, in Maine, not a suburb, and the lots ran six or more acres, as I recall.  We were able to state that there was no residence on the property, since prior to the construction of the DSP, it was a vacant lot, and that satisfied the request (we also were able to show that the nearest residence, which was not on the property, was something like 400 feet away..

On another occasion this year I had a specialist ask that we affirm that a DSP in a commercial building in a downtown Anchorage was not in a building in which there were also residences.  Again, we could state that there were no residences. 

Those are anecdotal, but they say that TTB has not yet abandoned consideration of the restrictions on location.  It's position is evolving, not extinct.  The level of risk you feel comfortable assuming is for you to decide.  I can only report the facts as I know them.

[bluestar]

One thing to consider in wondering if you can pursue this line: the primary motivator in the prohibition is to "secure the revenue", which means a) no easy way to transfer spirits out of bond in or out of a residence and b) full public access and egress to the distillery. This all comes from the concern for revenue agents needing to both keep the product secure in bond and be able to visit the premise for inspection without inhibition. The concern, as regards a residence, is the existence of "castle laws" in many states, which give the right to owners to protect their residences with arms, and at one time that was interpreted by local and state law enforcement to mean you could keep the feds at bay ?

Just a little historical background...

[dhdunbar]

My final comments.

When I asked about the legislative history of the prohibition, a former TTB chief counsel told me I'd not find it, since it dated to the around the 1870's.  He said to look to the issue of curtilage.  I did and I have not looked back. 

Curtilage is a common law concept that got enshrined in the Constitution's fourth amendment.  The most recent case law that I find is a Supreme Court decision from 1987, United States v. Dunn (1987), 480 U.S. 294.  It was a drug case and had nothing to do with TTB jurisdictions. In that case, the court cited four factors it considered in determining whether a barn was part of the curtilage of the home located on the same tract of land.  The Court held that “Extent-of-curtilage questions should be resolved with particular reference to the following four factors, at least to the extent that they bear upon whether the area claimed to be curtilage is so intimately tied to the home itself that it should be placed under the home's "umbrella" of protection:

(1)   the proximity of the area to the home;

(2)   whether the area is within an enclosure surrounding the home;

(3)   the nature and uses to which the area is put; and

(4)   the steps taken by the resident to protect the area from observation by passersby.

For those with a serious bent toward the law, see https://supreme.justia.com/cases/federal/us/480/294/case.html

I always argue from those case specific factors, though I never cite the court case when doing so unless I'm talking directly to an attorney.  

To any attorneys following this thread, I apologize for wading into your pond.  To others, I am not an attorney and this should not be considered as legal advice. 

I recall that, on one, previous occasion, someone on a thread expressed great relief when I proclaimed that I was through commenting on an issue.  Well, I've got nothing more to contribute to the question of DSP's and residences. My well is dry.

 

 

[Southernhighlander]

drenright,

Can you have the property that the distillery is on deeded separately from the house? Maybe put it in the name of your LLC or Corp?  Here in MO that is easy.  I can simply write up a property description for the area around the distillery and take that down to the title company (they have an attorney there) and pay for them for them to deed it separately from the property that my house is on.  No land survey is necessary here to do that. It would cost me five hundred dollars at the most.  I know that because I have done it before with one of my rental properties.  

I always do everything myself.  I dropped out of school in the 9th grade to go to work in a sawmill and to start a part time business and I have never looked back.  I have owned successful businesses all my life.  To date I have never hired  a consultant and I form all of my own LLCs and I write my own LLC operating agreements, sales contracts and all of that.  I have never had a lawyer do anything that I could legally do myself.  I do pay an attorney to look things over depending on what it is.  

[Conejo148]

3 minutes ago, Southernhighlander said:

drenright,

Can you have the property that the distillery is on deeded separately from the house? Maybe put it in the name of your LLC or Corp?  Here in MO that is easy.  I can simply write up a property description for the area around the distillery and take that down to the title company (they have an attorney there) and pay for them for them to deed it separately from the property that my house is on.  No land survey is necessary here to do that. It would cost me five hundred dollars at the most.  I know that because I have done it before with one of my rental properties.  

I always do everything myself.  I dropped out of school in the 9th grade to go to work in a sawmill and to start a part time business and I have never looked back.  I have owned successful businesses all my life.  To date I have never hired  a consultant and I form all of my own LLCs and I write my own LLC operating agreements, sales contracts and all of that.  I have never had a lawyer do anything that I could legally do myself.  I do pay an attorney to look things over depending on what it is.  

You & sound a little alike as far as doing thing on our own. I rarely post here for a number of reasons, but mostly because I get tired of reading what can't be done. I did it. I'm not a lawyer, but do have business degree & a licensed DSP 100ft from my garage. Possibly the smallest in the country. I make a small profit, but have a straight day job, too, so making liquor is not an every day thing for me.

As mentioned above I have a DSP on my residential property, no rezoning required. However, I did need a township zoning variance, a new physical address and a rental agreement between myself and my LLC among other things. This was done 3 years ago, so my recollection may be fuzzy but i have since helped 2 other rural distillers get set up on the same property as their house. If you need different direction, I know of another distillery that is located on the first floor of a dual use building with apartments on the 2nd floor.

The big things that the TTB will absolutely require:

Secure the revenue, meaning a secure building to lock up the liquor WITH a separate entrance to the bonded area that leads directly outside. They do not want to know what is happening in the unknown 500sf in front, or your retail tasting area. Donot even label it on your sketch. Just write "non-bonded area" and move on.

A permanent line of delineation that is easily distinguishable and "difficult" to remove which discriminates between your residential yard and DSP, including a standoff of at least 8ft from the building containing the DSP. Driveway, fence, hedgerow...something that is not easily removed.

You will need a separate physical address. I had to contact my county engineer's office. Probably the easiest out of all these.

City people or non-rural or commercial  addresses don't need to worry about this. It's already measured in the plat book. But...measurements to the building in the nearest 6" increments from a permanent known feature. This means the surveyor's pin on your property, or closest pin to it. It has to be from the pin, no other feature will suffice. MUST BE SURVEYOR'S PIN. I can't stress that enough. It's probably on the road and may be half mile away, but you need to measure from that point, then around your building. I'm going to guess that more than 99.5% of distillers don't know how to survey and use a transit, and will have to pay for it to be done by a licensed surveyor. I am fortunate to be in the half percent who has a transit and was trained to use it. Of all things that foul "residential DSP's"  these measurements are the most critical and usually screw up the deal. Read a property description in the deed recorders office to get an idea what I mean if you're not familiar.

Your DSP must be a minimum distance from your residential structure, including attached features such as porches, decks, garage etc. That distance is between 100ft and 50ft depending on the agent, size of your DSP and time of day among other things. I'm between 50 and 100ft, but my DSP is small, and my nearest neighbor is over 1000ft away.

One last thing, callaheas. I got lucky & talked with a very nice lady who basically hand-carried my packet through, answered and questions i had, and previewed my permit app before I sent it to streamline everything. Approval to exactly 45 days, for a 1-man, no investor DSP in rural Ohio in 2015. Your mileage may vary, good luck.

[bluestar]

I think Conejo148 description is in line with what I posted, as well: if you get permission to do so, you have to do everything necessary to be sure the DSP is not in or attached to your residence, is secure, is separate, and is publicly accessible. Getting separate address, zoning, lease, etc., are all a means to do that. In essence, what he had done is make it into a building that is NOT his residence. He said it is on his residential property, but by changing zoning, leasing, address, etc., that property is actually no longer residential. It may seem to be just semantics, but actually it is a legal matter. I know other nano-distillers who set up in their rural garages or outbuildings by doing something similar.

[dhdunbar]

Okay, one final "final" comment - my message is simple  and completely in line with what others say.  It can be done; it has been done; and will be done in the future. 

Further, it "may" be done - in the sense that is allowable, not just possible by sleight of hand  - with full disclosure to TTB, if you can convince TTB that TTB's  right of access to the DSP is not infringed by the residency.  

I have tried to provide, here, a do it yourself guide to getting approval - or to a decision that it is risky to build under the circumstances you propose. 

Getting past the absolute prohibition expressed in 2009  is a battle I fought beginning in 2012.  As recently as 2015 a TTB specialist argued, in the presence of and over the objection of a TTB attorney, that the specialist would never, under any circumstances, approve collocation.  Those days, I think, are now gone.

I may or may not have had a hand in overturning the "woodlot" attitude that prevailed in TTB then.  It is equally possible that TTB had inadvertently approved enough of these that it had to find an after the fact policy that kept egg of its face.  But, how we how we got to where we got is not as important as the change, itself, from 2009's stated absolute prohibition to a" you may if you convince us that it will not cause problems" policy.

My experience is somewhat different than Conejoe 148.   I have  found no rules, like the 50-100 foot rule he cites - one person in Regulations and Rulings once told me 150 feet or less required a fence delineating.  Experience tells me that that is not always the case.  However, it is  always a possibility you must consider.

The rule is that is case by case is the rule and it is determined by the weight of the combination of attendant circumstances, including the predilectionstions of the specialists into whose hands your application falls.  I think we all agree on that.  It also depends on TTB's diligence.  I know of a case where TTB approved, without one question asked, a disclosed separation of 38 feet, with no fence or other barrier between them,  common drive, shared power, and shared water, at the same post office address.  It then approved a change of proprietorship of that DSP, again, with full disclosure , via the diagram showing both the residence and the DSP building and clearly stating the distance between them.  I sweat out that change.  

I used to play mother-may-I games with Regulations and Rulings Division.  I think it is no longer necessary to do that.  I know of at least one instance in which the NRC made a referral to R&R before it would proceed.  TTB's policy is that the NRC refers, to R&R,  questions which have not been decided, but once they have been decided, the NRC may approve or deny without going to R&R for an opinion (the NRC always had and does have the final say, but it looks to R&R for opinions). There is now considerable precedent.,

I also think it is no longer necessary to argue that collocation, per se, does not endanger the revenue.  Those arguments have been addressed.  My understanding is that TTB's field operations became gunshy of collocations when some fuel alcohol permittees started to consume product intended for their tractors.  I argued that the case was not similar for beverage DSP's, because the producer was not also the consumer, that record trails existed to customers,  and that tax evasion could as easily occur from a commercial facility located in downtown any-city-USA by carrying  the cases out the door at the loading dock and drive off, justy as a DSP would do in any commercial transaction.  That, I think, is a hurdle already cleared.  If a specialist does raise that question, remember my argument.

So go for it, but remember the guidelines I site.  Also pay attention to the experience of  the others who post here who have been down the road already.  Those are the attendant circumstances that see matter, even if the specialist has no knowledge of how that came to be.