What is a NYSLA Farm Distillery?
Article I, § 3 of the New York Alcoholic Beverage Control Act, a farm distillery in New York “means and includes any place or premises located on a farm in New York state in which liquor is manufactured and sold, or any other place or premises in New York state in which liquor is manufactured primarily from farm and food products . . . .”
If you are considering applying for one of the distillery licenses offered by the New York State Liquor Authority (“NYSLA”), the farm distillery license class D is a great option assuming that your production will comply with certain limitations. Specifically, New York State law limits the production and distribution of farm distillery licensees to a maximum of 75,000 finished gallons of New York State-labeled liquor in a single year. (To learn more about what type of spirits qualify for New York State labeling, read our blog entry Who Can Label Liquor as “New York State?”) If you anticipate meeting the production requirements and gallonage limitation, the farm distillery license offers several benefits in comparison to other distillery licenses offered by the state.
Why Should a New Distillery Consider the NYSLA Farm Distillery License?
A number of factors drive New York spirits entrepreneurs to embrace the farm distillery license. A pivotal component is the considerably lower state license fee, coupled with the absence of a mandatory surety bond. As of the date of this writing, the total fee for the farm distillery license is $937.60 for a three-year license. Other distiller licenses offered by the state can exceed this amount and may require a surety bond to be on file with the state. (Note that this is separate from what the Alcohol and Tobacco Tax and Trade Bureau may be require during the federal permit process.) For example, the distiller class A license is slightly over $50,000 (for three years). The tradeoff is that the more costly licenses typically allow for more flexibility, such as the ability to source entire ingredients and/or spirits from outside of New York State.
The distiller class A license empowers a licensee to engage in the manufacturing and wholesale distribution of distilled spirits, along with the operation of a distillery and/or rectifying plant. Notably, the class A distiller license carries an effectively unlimited production capacity. This stands in stark contrast to the farm distiller class D license (which has a production cap and ingredients sourcing limitations, as discussed above). For those embarking on a new distillery venture, the expansive production allowance of the class A license might surpass immediate needs. Because New York State has a significant number of distillery licenses, it is imperative to understand the differences between each and which license (or licenses) may be ideal for your operations.
The distiller class A license should not be confused with the distiller class A-1 license, which is the micro-distiller license. The A-1 license is considerably cheaper than the class A license (the former is $1,450 as of the date of this article) and it does not require a surety bond to be on file with NYSLA. It is most comparable to the farm distillery class D license except that the A-1 license allows the licensee to fully source ingredients from outside of the state (as opposed to the farm distillery’s requirement to produce New York State labeled liquor). Similar to the farm distillery license, the A-1 license has a production and distribution cap of 75,000 gallons per year.
What Other Benefits Exist with the Farm Distillery License?
Similar to the A and A-1 licenses, a farm distillery licensee enjoys the privilege of selling at both wholesale and retail levels. Furthermore, a class D license has the liberty to engage in bulk sales to any winery, farm winery, or holders of New York State Class A, A-1, B, B-1, or C distiller’s licenses. The class D license, in particular, opens up a spectrum of possibilities for licensees, allowing them to undertake the following activities:
Tastings and Sales of New York State-Labeled Beer: Class D license holder can conduct tastings of and sell at retail for consumption on or off premises of New York State-labeled beer (manufactured by a New York State-licensed brewer or farm brewery).
Tastings and Sales of New York State-Labeled Cider: Class D license holder can conduct tastings of and sell at retail for consumption on or off premises of New York State-labeled cider (manufactured by a New York State-licensed brewery, farm brewery, farm winery, cidery, or farm cidery).
Tastings and Sales of New York State-Labeled Wine: Class D license holder can conduct tastings of and sell at retail for consumption on or off premises of New York State-labeled wine (manufactured by a New York State-licensed winery or farm winery).
Tastings and Sales of New York State-Labeled Mead: Class D license holder can conduct tastings of and sell at retail for consumption on or off premises of New York State-labeled mead (manufactured by a New York State licensee that is allowed to manufacture mead).
Tastings and Sales of New York State-Labeled Braggot: Class D license holder can conduct tastings of and sell at retail for consumption on or off premises of New York State-labeled braggot (manufactured by a New York State licensee that is allowed to manufacture braggot).
Tastings of Other New York State Distilleries: Class D license holders can conduct tastings at its licensed premises of the liquor it manufactures as well as from no more than three other class A, A-1, B-, B-1, C, or D distilleries (with some limitations — check regulations or consult your attorney).
The above is not an exhaustive list of the benefits of the NYSLA farm distillery license. For more information, review the corresponding New York State Alcohol Beverage Control Law regulations or confer with your legal professional.
What Are the Limitations of the NYSLA Farm Distillery License?
While there are many benefits to the farm distillery, there can be two significant drawbacks depending on the company’s intentions. The first may be the production and wholesale limitation of 75,000 gallons per year. For folks who anticipate larger scale production and distribution, the farm distillery license may limit their capacities. But, for many individuals just entering the industry, this cap may be sufficient for several years if not significantly longer.
The other “limitation” may be the ingredient requirement. As mentioned earlier, the farm distillery license requires the class D licensee to produce liquor that is primarily made from farm and farm products that are grown or produced in New York State. Per Article I, § 3 of the New York Alcoholic Beverage Control Act, “farm and food products” mean the term that is defined in New York State Agriculture and Markets § 282 (i.e., “any agricultural, horticultural, forest, or other product of the soil or water that has been grown, harvested, or produced wholly within the state of New York”). Again, depending on the company’s business model this requirement may not be a limitation at all, particularly for companies wishing to embrace and highlight New York-grown ingredients.
How Can Lindsey Zahn P.C. Assist Your New York State Distillery?
If you are thinking about starting a distillery, be sure to review our article Starting Your Distillery: Top Ten Legal Compliance Considerations, which outlines several key considerations before starting a new distilled spirits business. For even more information and helpful tips on applying for a distilled spirits plant permit, see our blog entry Important Considerations for Obtaining a Federal TTB Basic Winery Permit, Distilled Spirits Plant Permit, or Brewer’s Notice.
Lindsey Zahn P.C. can assist your New York State distillery in applying for federal permits and state licenses. We can guide your business in determining whether a traditional distillery license or farm distillery license is the optimal choice for your business. Furthermore, we can address a variety of regulatory compliance questions and concerns on both the federal and state levels. Reach out to Lindsey Zahn P.C. to schedule an initial consultation and to discuss your company’s needs at info@zahnlawpc.com.