The following article was posted on Sept 21, 2016. It has been reviewed and updated as necessary by the ProBrewer editorial staff. Footnotes have been included where updated content has been added.
Craft Distillation Tax structure: Craft distillers pay a federal $2.70 per proof gallon (PG) on the first 100,000 PG, $13.34/PG on the next 22,130,000 PG sold, and $13.50/PG on anything above that. More on the federal tax structure for craft distilleries here. (1) There are also state taxes which vary by state.
CQ – What additional licensing were you required to obtain in addition to the Federal Distillers Permit? Was it difficult?
Brandon Wright: “A DSP permit and extra bonds etc. It was like getting a root canal and knee surgery at the same time.”
Clark McCool: “We had to have city approval (Fire department) as well as OLCC (State of Oregon Liquor Control) licensing. I fortunately had nothing to do with the original permitting. I can tell you that it can be a difficult process, depending on the individual State regulations and local fire codes. We have since opened up a second distillery at our Cornelius Pass Roadhouse Property in Hillsboro Oregon. I was involved in the permitting process for the CPR distillery and it took a while, patience is definitely a virtue when dealing with all of the licensing paperwork and compliance for a DSP.”
Eric Howard: “We had to make sure our building was approved. We were the first distillery to go into Albany and so we had several meetings with the planning and fire department. Since we don’t have a sprinkler system, our still has to be less than 130 gallons.”
Yusuf Cherney: “Since we were the first craft distillery we had to work with them as they figured out the rules!”
CQ – Was it easier, the same, or more difficult than the licensing/permit process for your brewery?
Brandon Wright: “They are similar. I think the detail on the DSP permit forms were more detailed as I remember.”
Eric Howard: “The licensing was a lot more detailed, but it was easier since we were doing it at the same time as we were licensing our brewery.”
Yusuf Cherney: “We worked with an attorney since it was much harder than getting a brewers permit.”
TTB Label approval – Since TTB requirements are ever evolving, we recommend research on the current regulations regarding label content and restrictions begin here: Distilled Spirits Labeling Regulations
Regulatory Oversight: You will be required to get licenses from Federal, State and Local agencies. Since Craft distilling is a fledgling industry there is often inconstancy and much variation between agencies. Craft distillery pioneers report that the licensing process can be difficult and some hire lawyers to help. Record keeping and reporting in the distilling world is more detailed and regulated than in the brewing world.
Did you know:
– A Distilled Spirits plant cannot be located at any residence, shed, yard or enclosure connected to a residence.
– You cannot produce distilled spirits for personal use like you can with beer or wine.
– Before you submit your application to the TTB, the Construction of your facility must be complete and the equipment on order.
– You can not begin operations until your application has been approved.
TTB Distilled Spirits Plant (DSP) – Beverage requirements:
1. TTB F 5110.41, Registration of Distilled Spirits Plant
2. TTB F 5100.24, Application for Basic Permit
3. TTB F 5110.56, Distilled Spirits Bond
4. TTB F 5000.9, Personnel Questionnaire, (SINGLE COPY) for each • Corporate stockholder of 10% or more, officer, and director, • Limited Liability Company (LLC) manager and member, • Partner in a partnership, or • Individual owner.
This is relatively straight-forward, it does involve what is, essentially, a full background check to ensure that the applicant (and his/her family, company, and investors) is a fine, upstanding citizen.
5. TTB F 5000.29, Environmental Information
This is brief description of the applicant’s location, heat and power, utility suppliers, and how the applicant plans on disposing of the spend materials.
6. TTB F 5000.30, Supplemental Information on Water Quality Considerations
The applicant will have to describe the operations that pertain to the TTB, and how waste water is disposed of, along with the contents of the waste water.
7. Diagram of the premises
8. Signing authority. If someone will be signing the application and/or supporting documents or act on your behalf, you must submit one of the following with your application if applicable you must file: • TTB
F 5000.8, Power of Attorney • TTB F 5100.1, Signing Authority for Corporate and LLC Officials, or • Corporate resolution or specific notification in organizational documents granting this authority.
State class license: Acquiring a state license isn’t as tough once you have your federal license, but rules and regulations differ from state to state, and some states are more welcoming than others. It’s a good idea for the applicant to meet with their states local liquor control commission for regulations and zoning.
Footnotes
(1) Updated since the Craft Beverage Modernization and Tax Reform Act (CBMA) was passed in 2017 and enacted for the 2018 and 2019 calendar years in order to provide tax relief for brewers, winemakers, distillers, and importers of beverage alcohol.