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Applying for a Distillery Permit

How to Get a Distilled Spirits Plant for Your New Distillery

You need a distilled spirits plant permit (DSP) to start a new distillery. DSP permits are issued and regulated by the Alcohol and Tobacco Tax and Trade Bureau (TTB), which is a branch of the Treasury Department. The TTB has tried to create a straightforward online DSP permit application. However, complex federal rules that apply to this process can make applying for a DSP permit much more difficult than it may appear at first glance, even through the online system.

If you’re interested in starting a DSP, we suggest that you take the following steps before beginning the application process, regardless of whether you hire an attorney to assist you. As you review the checklist, keep in mind that it provides only a general overview based on our experience with the TTB. This checklist does not:

  • Cover every issue you may need to address with the TTB. Each distillery is different and the TTB may require you to provide different information and documentation based on your unique circumstances;
  • Address state or local licensing issues that you will also need to consider before starting a distillery; or
  • Provide any assurances that the TTB will approve your DSP permit application. Again, the TTB carefully considers the individual information provided by each distillery in deciding whether to approve their application.

You can apply for a DSP:

  • individually (a sole proprietor);
  • as a partnership between two people or two companies; or
  • or as a legal entity such as a corporation or limited liability company (LLC).

Selecting the right business structure is important to your business’s success. Each structure has different legal and tax implications you should consider. However, we recommend forming a business entity to operate your distillery to help you avoid personal liabilities. In addition, for more information on the different business structures and how to decide which is the best fit for you, click here.

Once you select your business structure you must form the business by filing documentation with the appropriate state entity, usually the secretary of state. The secretary of state will provide you with a certificate showing that your business has been registered. You will need to file that documentation with the TTB.

If you are opening the business with partners or other co-owners, you will also need to provide the TTB with information detailing each partner’s ownership interest and role in the business.

An EIN is a nine-digit number used by the IRS to identify your business entity. An EIN is something all business entities need for filing taxes. You will also need an EIN to apply for a DSP permit. We strongly recommend that you form a relationship with a CPA early on. A CPA will help you set up a bookkeeping system and obtain your EIN. However, you can also get an EIN yourself. Just go to: https://www.irs.gov/businesses/small-businesses-self-employed/apply-for-an-employer-identification-number-ein-online

You may want to operate your distillery under a name other than your business name. This is commonly known as operating under an “assumed business name,” a “DBA” (doing business as), a fictitious business name, or a trade name. To operate under an assumed business name, you usually must file an application with the appropriate office in your state.

There are good reasons for using a DBA. First, DBAs allow you to operate multiple businesses without having to create separate legally entities for each. They also allow you to select easily recognizable and memorable names for each business you operate. For example, Doe Family, LLC may own a brewery and distillery which they operate as Jane’s Brewpub and Janie’s Distilling, respectively. Jane’s Brewpub and Janie’s Distilling are assumed business names.

The TTB requires you to file state-issued certificates showing you registered your assumed business name with your DSP permit application.

Along with your distillery name, you should select your logo early on. Logo selection isn’t essential for filing an application with the TTB, but it is essential to developing your brand. Your name and logo are the most prominent things identifying you and separating you from your competitors in the alcohol beverage industry. You’ll almost certainly want to include them on your labels and on other products to advertise your brand.

Do not rush this part of setting up your new business. By far the most common problem we see in new distilleries after they obtain a DSP is that they realize all too late that they are unintentionally infringing another alcoholic-beverage manufacturer’s trademarks. In an industry as crowded as alcoholic beverages, this is exceedingly common.If another company uses the same or a similar logo or name, it could confuse customers or dilute your brand. Perhaps worse, a motivated competitor using the trademark before you could threaten you with litigation for infringement. That is why properly researching your prospective marks and registering them is so important. MWS Rose’s Intellectual Property practice group can help you trademark and protect your brand.

For federal permitting purposes, the following rules generally apply to the location and use of your distillery.

  • Your distillery cannot be located in a residence, or in a yard or enclosure connected to a residence;
  • Your distillery cannot be located on a premise where beer or wine is produced;
  • You cannot apply for DSP permit until you have already leased, purchased, or finished constructing the distillery;
  • Your distillery cannot be spread out over multiple locations; and
  • You cannot sell your distilled products on your DSP premises.

If you need to do one of these, your best course of action is to discuss the matter with an experienced attorney.

Wherever you locate your distillery, you will need a copy of a lease for the space or a deed for the property. You will have to show the TTB that you are legally entitled to occupy the location when the DSP permit is to be issued.

Starting a distillery can be very expensive. Rarely do we see distilleries succeed with less than $350k in initial funding, although more cash is usually advisable, especially if you plan to make products that take time to age. Thus, you will likely need to raise capital to get your distillery started. The capital you need may be in the form of equity (selling an ownership interest in your business), debt (a loan), or some combination of the two. When someone loans a business money, the business signs a legal instrument such as a promissory note or bond setting forth the business’s repayment obligations. The TTB will require you to file those instruments with your DSP permit application.

The TTB does not require you to show that you complied with state or federal securities law. However, you are still required to comply with those laws and should certainly ensure that you are doing so when you borrow money or sell equity in your business. Securities regulations are especially important when borrowing money from or selling equity to investors who will not actively participate in managing your business. If you are required to comply with any securities law and fail to do so, you could be subject to administrative, civil, or criminal sanction. Consult a knowledgeable lawyer whenever you raise money for a new business.

Federal regulations require distilled spirits to include certain ingredients and to be made a certain way. For example, bourbon whiskey is defined as whiskey produced in the U.S. that does not exceed 80% alcohol by volume, is made from a fermented mash of not less than 51% corn, and is stored at not more than 62.5% alcohol by volume in charred new oak containers.

You must provide the TTB with the following information about your products:

  • The types of spirits you plan to distill;
  • The ingredients you intend to use to make each spirit;
  • How much of each spirit you will distill;
  • How much of each spirit you will age and store at your DSP; and
  • The location and type of container you will use to age and store each spirit.

Answering these questions will also help you to decide the type and size of equipment you’ll need to start your distillery. For more information on acceptable formulas, visit the TTB’s website.

After you settle on your major pieces of equipment, you’ll need to draw a floor plan of your distillery showing those major pieces of equipment. The TTB will also want to see which parts of your distillery are used for production and storage of products on which you have not yet recorded federal excise taxes (also known as “untaxpaid spirits”). These areas need to be separated from areas accessible to the public. Some system manufacturers, such as Corson Distilling, have staff on hand to help with this process and to prepare the drawing.

You don’t need to have your equipment installed or even present at your distillery when you file your application. You will, however, be required to submit information about your major equipment such as: size, type, and serial number. We recommend firming this up with a distillery equipment manufacturer before preparing your DSP application.

The TTB does have an online permit system for DSP applicants to use. However, the system can be confusing. It requires you to accurately describe your operations, provide the information identified above, and to submit a plant floorplan that complies with the TTB’s excise tax regulations.

Starting a distillery can be complicated. We’re here to help you with your federal permitting and other legal needs. If you have questions or would like to discuss our rates or packages, please do not hesitate to contact us.

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