Let’s Get Started A
rtisan Distillers do not choose their craft for the purpose
point‑to‑point (feet/inches by direction) description of the area
of making the government happy that the excise taxes are
covered by the distillery bond. TTB requires a diagram of the
paid and the product labels are in compliance with the rules. premises; nothing too fancy, just a simple drawing of the plant However, those chores are important in the scope of duties that layout, with dimensions, doors and windows. Use colored lines a distiller acquires when engaging in business as a regulated
to outline the bonded and “other” premises. The diagram has
beverage spirits producer. Before the first still run, there are a
to have the name and address of the applicant, and compass
number of steps to take involving compliance with the extensive
direction indicated (an arrow with “N” depicting North will
and challenging Federal rules governing distillers. Let’s first look
suffice). This “Bonded Premises” must be secured to ensure no
at who and what we are dealing with.
one has unauthorized access to spirits held under the Federal
The agency charged with handling the permit and tax rules for bond – see Get Bonded below. Under the Federal rules, if the distillers is the Treasury Department’s Alcohol & Tobacco Tax & DSP has a retail or tasting room, that area cannot be on the Trade Bureau, commonly known as TTB. Formerly a component bonded premises, but may be next to it. Each still, tank and of the Bureau of Alcohol, Tobacco & Firearms, the TTB was
other major piece of equipment for containing or handling spirits
established in 2003 to continue the mission of enforcing the
is to be listed: serial number, capacity and use.
permit, product and marketing rules of the Federal Alcohol Administration Act (FAA Act) as well as the registration, bonding, operational and excise taxation rules in Chapter 51 of the Internal Revenue Code (IRC). A distiller is regulated by both of these laws, which are implemented through Federal regulations found in Title 27, Code of Federal Regulations (CFR). Beginning distillers should first look at rules in Parts 1, 5, 19, 29, 30 and 31. The first item on the compliance agenda of the new distiller is to create and submit the Federal application for an FAA Act Permit and to register the Distilled Spirits Plant (DSP). Let’s look at the five most common issues that confront and can delay the distiller when putting together their permit application and registration:
Establish premises. Whether owned or leased, the distillery has to be secured, and meet state and local requirements for the type of operations planned. Our focus is on the Federal rules, which call for the plant to be secure and located in commercial premises; the law does not allow for any distillery to be located in a residence, nor in a building containing a residence. Documentation of the premises includes a copy of the lease or evidence of deed to the property. The legal description is required, along with a
Get Bonded. TTB Form 5110.56 Distilled Spirits Bond must be executed perfectly, and the operations coverage must be sufficient for the tax value of all spirits on hand at the distillery at any one time, plus bulk spirits in transit to the DSP from another DSP. The minimum Bond for a distiller who will be making, storing and bottling products is $15,000, plus additional withdrawal coverage for deferral of taxes on the products withdrawn from the DSP for sale or use as tasting samples. This amount covers about 1,100 proof gallons, or about 1,375 gallons at 80 proof/40% alcohol. Preparation and submission of that “perfect” bond to TTB is a topic worthy of its own article!
Document your Source of Funds. This can vary — if the money invested comes from personal funds, such as a loan against a retirement account, a commercial loan, or withdrawals of savings the source would be documented (i.e. statement from investment account showing withdrawals, matched to deposits in the DSP business account) and images of that documentation submitted with the DSP application. The government does this to ensure that the ownership and interest in the business is clear and correctly presented.
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