Starting a distillery can be an exciting and rewarding venture, but it’s crucial to navigate the legal landscape carefully. From licensing requirements to labeling regulations, there are several legal considerations to keep in mind. In this article, we outline the top 10 legal aspects aspiring distillery owners should address when starting their operations in the United States.
Federal Distilled Spirits Plant (DSP) Permit
Before producing, blending, bottling and selling distilled spirits, you must obtain a Federal Distilled Spirits Plants (“DSP”) permit from the Alcohol and Tobacco Tax and Trade Bureau (“TTB”). The application process involves providing detailed information about your facility, equipment, and business operations. For more information about applying for a DSP permit, contact Lindsey Zahn P.C. at info@zahnlawpc.com.
State Licensing
In addition to the federal permit, most — if not all — states will require a state level permit or license in order to operate a distillery. Requirements vary by state so it is important to review the requirements in the specific state where the proposed distilled will be located to ensure that the company’s proposed business model will be compliant with state regulations and requirements. Note as well that a local level permit, license, or other requirements may need to be obtained or folloewd as well.
Labeling Compliance
Labels of distilled spirits must comply with the federal TTB labeling requirements found in 27 CFR Part 5. Labeling requirements cover various aspects, including accurate alcohol content, net quantity, class/type statements, health warnings, and specific label language.
Formulation and Recipe Approval
Certain spirits, such as those with flavors and/or juice and/or unique ingredients or production methods, may require formula and recipe approval from the TTB. Formulas, which are similar to recipes, can be submitted to the TTB for review and approval before producing and labeling the spirits.
Excise Taxes
Distilleries are subject to federal excise taxes on the removal of distilled spirits from bonded premises (generally speaking). New distilleries must familiarize themsleves with the tax rates, reporting procedures, and payment deadlines set by the TTB.
Distribution and Sales
It is imperative to understand the distribution and sales regulations within your distillery’s state. Some states have specific requirements regarding how a distillery can distribute its products, including limitations on self-distribution, the use of wholesalers, and direct-to-consumer sales.
Trade Practices and Advertising
Once a distillery issued a permit by the TTB, it must comply with the federal regulations related to trade practices and advertising. These rules govern promotional activities, product samples, giveaways, and other marketing strategies. Before publishing advertisements — which can include social media posts — a distillery must ensure that its advertising and marketing efforts remain within the legal boundaries.
Health and Safety Compliance
Distilleries must adhere to health and safety regulations, including those concerning proper storage, handling, and disposal of hazardous materials. Maintaining a safe working environment, implementing appropriate safety protocols, and meeting all applicable health and safety standards are important for all distilleries. Many of these requirements are regulated at the state or local levels (if not both).
Trademarks and Intellectual Property
Before starting your distillery, you may wish to protect your brand by registering trademarks for your distillery’s name, logos, and product names. In the United States, the United States Patent and Trademark Office (“USPTO”) is the federal governmental body responsible for reviewing trademark applications and issuing trademark registrations. Through trademark counsel, you can conduct thorough trademark searches to avoid infringing on existing trademarks.
Environmental Compliance
Distilleries must comply with environmental regulations to minimize their impact on the environment. Check local, state, and federal environmental laws and regulations pertaining to wastewater management, air quality, and hazardous waste disposal.
Starting a distillery is an exciting endeavor, but it requires diligent attention to legal considerations. Obtaining the necessary permits, licenses, and complying with federal and state regulations is essential for a successful and compliant operation. By addressing these top 10 legal considerations, aspiring distillery owners can navigate the legal landscape and lay a solid foundation for their business.
Lindsey Zahn P.C. is a firm that focuses on alcohol beverage law and has represented a multitude of clients before the TTB, ranging from wineries to breweries to distilleries to importers to wholesalers and beyond. The firm has experience working on applications for startups to multinational conglomerates and with drafting brand new permit applications as well as drafting amendments. Our experience also extends to labeling, formulations, excise taxes, trade practices, and beyond.
Contact Lindsey Zahn P.C. to schedule an introductory meeting to discuss your needs and products and to learn more about how we can help: info@zahnlawpc.com or (929) ZAHNLAW (929-924-6529).