distilled spirits

On July 10th, 2024, the Northern District Court of Texas issued an order in Hobby Distillers Association, et al., v. Alcohol and Tobacco Tax and Trade Bureau, et al. The Court held the federal ban on at-home distilling and other location restrictions for distilled spirits plants unconstitutional. The Court gave the Government 14 days to file an emergency appeal, which is likely.  If upheld, the ultimate impact of this ruling is the removal of most, if not all, location restrictions for U.S. distilleries as enacted in 1868. With no restrictions on the location of licensed premises, locations long unavailable for use in spirit production will be fair game. This means that industry members could get permits to produce vodka or whisky in Places such as their homes or on a seafaring vessel.

The order declares the federal ban on distilled spirits plants being “located in any dwelling house, in any shed, yard, or inclosure connected with any dwelling house, or on board any vessel or boat, or on premises where beer or wine is made or produced, or liquors of any description are retailed, or on premises where any other business is carried on” unconstitutional. Hobby Distillers Ass. v. Alcohol and Tobacco Tax and Trade Bureau, No. 4:23-cv-1221-P (N.D. Tx. 2024)  (citing 26 U.S.C. § 5178(a)(1)(B)).

Criminal penalties associated...

COVID has brought us masks, cabin fever — and plenty of renewed talk about direct to consumer shipping for alcohol beverages. In the July 2020 issue of Craft Spirits magazine, Art DeCelle lays out a path forward, to expand opportunities for DtC shipments of distilled spirits. The article appears at page 42.

Art explains:

The current legal structure has been completely undermined by the advent of digital commerce. Any consumer can go online and order beer, wine and spirits from hundreds of locations outside his or her state of residence. Searchers are likely to be besieged for weeks by pop-up ads and emails from illicit online vendors, often offering prices that undercut legal businesses. … Unlicensed businesses (or businesses licensed in other states) have devised all manner of digital subterfuge to make illegal shipments to consumers and to evade detection by state regulators. For example, legal disclaimers and terms of service attempt to place compliance burdens on consumers, who rarely read fine print. These operations are often able to avoid state license fees, excise and sales taxes, placing legitimate industry members at a disadvantage. A basic drawback of a 50-state regulatory system is that state ABCs and law enforcement agencies must invest enormous effort just to initiate an enforcement action...

While everyone in our industry struggles with the ramifications of the COVID-19 pandemic, distilled spirits plant (“DSP”) production of hand sanitizer or ethanol (whether denatured or not) for use in hand sanitizer is a particularly important topic. The Food and Drug Administration (“FDA”) and Alcohol and Tobacco Tax and Trade Bureau (“TTB”) are issuing guidance on a seemingly daily basis.

To that end, TTB released Public Guidance 2020-1A on Thursday March 26, 2020, updating its previous March 18th guidance regarding the production of hand sanitizer. This new guidance contains several important points for DSPs moving forward and is valid until June 30, 2020 unless extended by TTB.

First, a DSP may manufacture hand sanitizer without obtaining TTB formula approval if the DSP uses a formula cited by FDA in its March 23, 2020 guidance titled Temporary Policy for Preparation of Certain Alcohol-Based Hand Sanitizer Products During the Public Health Emergency (COVID-19). Although TTB tries to approve non-beverage alcohol product formulas within 10 days or so, by utilizing one of the formulas identified by FDA, DSPs can start producing hand sanitizer as soon as practical. If this saves you even a few days it can go a long way toward helping health professionals and many others who need hand sanitizer.

Second, a DSP does not need to...