How is distillery formed?
November 18, 2013 6:40 AM   Subscribe

How do newcomers enter the spirits business when distilling without a permit and or without paying excise taxes is a federal crime? Home distilling is not a viable gateway hobby like home brewing.

Just an idle question; I have no plans to open a distillery or to do any moonshinin'.

The origin myths for most microbrews tend to recount how their founding owners loved making beer at home and mastered their recipes on a small scale--and then took the plunge, quit their jobs and became brewmasters full time.

But that small-scale production and home craft is not possible for distilled spirits, due to the pesky federal crime aspect. It's not something one simply dabbles in.

And yet, there are a number of smaller and newcomer distilleries, from Boston's Bully Boy (looks like rich bros with a story--real or not--about bootlegging in their family) to the zillion different distilleries in NYC these days. King's County Distillery, for one, is happy even to sell you a primer on moonshining.

Where are these new distillers cutting their teeth, honing their craft? How do they work up their recipes given the restrictions on entry? Are they all secretly backed by bigger players in the spirits business (e.g., new St. Elder (St. Germain knockoff) is owned by a Boston liquor wholesaler). I also remember reading a story about real NYC-based distillers who were upset that some pretenders were trucking in spirits distilled elsewhere and just bottling them in NYC--which is presumably less regulated than operating the still yourself.

What's the 100-proof story here?
posted by Admiral Haddock to Food & Drink (20 answers total) 9 users marked this as a favorite
But that small-scale production and home craft is not possible for distilled spirits, due to the pesky federal crime aspect. It's not something one simply dabbles in.

It is definitely something people dabble in. Check the Home Distiller forums to see it in action! They even have tiny stovetop stills.

Mostly you just have to pretend you weren't distilling previously when you start your professional operation, and everyone looks the other way.
posted by soma lkzx at 6:51 AM on November 18, 2013 [1 favorite]

I know several home distillers. I have distilled booze, but I don't have a still right now.

No one gets busted for running a small still in their house; it just doesn't happen. Only large bootleg operations that actively sell booze are targeted for shut down.

They treat it like home brewing.
posted by furnace.heart at 6:53 AM on November 18, 2013

The short answer is that it varies by state. Most laws regarding liquor production and sale are governed by state law. In North Carolina, where I live (and work for an alcohol distributor), you need a distillery permit even for home consumption - but a distillery permit is only $300, which is not really a barrier to entry for someone wanting to try their hand at getting into the business.
posted by something something at 6:58 AM on November 18, 2013

And as far as distribution goes, most of the smaller producers (whether wine, liquor, or beer) do start within their own geographical area before expanding to other states. So once they are set up in their home state, it's just a matter of figuring out the other state laws as they go and what the implications are for federal and state taxes.

Local craft liquor is becoming one of the hottest segments in the industry, just like local craft beer has been the last several years.
posted by something something at 7:02 AM on November 18, 2013

A friend of a friend who was home distilling in Washington state in the 00s had a permit for "alternative fuels".
posted by matildaben at 7:05 AM on November 18, 2013 [2 favorites]

Some of the "little" brands with charming back stories are really buying and bottling industrially distilled product, e.g. Whistlepig rye which is marketed as a product of a startup in Vermont is actually distilled in Canada by Alberta Premium.
posted by nicwolff at 7:10 AM on November 18, 2013 [3 favorites]

The Home Distiller Wiki discusses this issue. Here's some info about "nano"-distilling.

It looks like if you already operate a brewery/winery a permit for "alteration of premises" may be easier/cheaper to obtain.

I haven't looked into this, but perhaps purchasing a financially troubled distillery (and its permits) would also be an option.

Home distillers are, with very rare exception, just breaking the law.
posted by melissasaurus at 7:28 AM on November 18, 2013 [1 favorite]

My dad is a home distiller. He bought his still on-line from New Zealand - had it shipped in - took a few months. Its electric and uses tap water in the heat exchanger.

As long as you don't do something dumb like try to sell it or swap it or something the quantities are such that really you aren't going to get in trouble.

My view is that scale matters a lot more in distilling than it does in brewing, and for most things that you want to make aging matters a lot.
posted by JPD at 7:35 AM on November 18, 2013

You might be interested in the story of how Tito's got a distillery license in Texas.
posted by mattbucher at 7:45 AM on November 18, 2013 [2 favorites]

I've made my own whiskey, rum and vodka, along with some flavored spirits from the vodka batch. I've even served it to policemen who haven't batted an eye. The main reason is scale, It takes me a lot of work to make half a gallon of quality spirits and It is all for personal on company consumption. Therefore the federal government isn't banging down my door with a $4000/hr squad of officers to collect their $5 in excise duty. Now if I were to build a larger still and not just use something that I build myself and use on a stove and were to start selling it on the black market they might think about it.

It is the same as the supposed limit on the amount of homebrew you can make. You are only allowed 100 gallons per person per year. If you do a 5 gallon batch per week you can easily go over the "limit" but the government doesn't really care because in terms of actual taxes to collect you would still be very small fry. Once you start doing 50 gallon batches and are supplying a bar with your beer then they would get interested.

I once was offered a job at a beer festival when I was asking about what it took to get a brewer license and describing my most recent brews and they said that as long as you can show that you're not part of an organised crime syndicate and are of "good character" (aka no felony convictions) you will get one for a small fee. From the rest of this thread it sounds like the same is true for a distiller.
posted by koolkat at 7:50 AM on November 18, 2013

In my experience, they distill illegally until they're ready to tool up to a small production distillery. So, it is a viable gateway hobby, it's just slightly more illegal.
posted by craven_morhead at 8:10 AM on November 18, 2013 [1 favorite]

I am an attorney, but I am not your attorney. This is not legal advice. Anyone considering distilling spirits for personal or commercial use should consult an attorney first.

From the rest of this thread it sounds like the same is true for a distiller.

It's not. Getting a federal distillery license (in addition to the state or local licenses) is a significant undertaking. From the TTB's FAQ:
May I produce ... spirits for my personal or family use without paying Federal excise tax and filing Federal paperwork?

You may not produce spirits for beverage purposes without paying taxes and without prior approval of paperwork to operate a distilled spirits plant. [See 26 U.S.C. 5601 & 5602 for some of the criminal penalties.] There are numerous requirements that must be met that also make it impractical to produce spirits for personal or beverage use. Some of these requirements are paying special tax, filing an extensive application, filing a bond, providing adequate equipment to measure spirits, providing suitable tanks and pipelines, providing a separate building (other than a dwelling) and maintaining detailed records, and filing reports. All of these requirements are listed in 27 CFR Part 19.
Spirits may be produced for non-beverage purposes for fuel use only without payment of tax, but you also must file an application, receive TTB's approval, and follow requirements, such as construction, use, records and reports.
The separate building is going to be a real dealbreaker for any would-be home distiller. How many people do you think there are who care enough about their hobby to buy or lease (and insure) commercial property just to hold their equipment?
posted by jedicus at 8:20 AM on November 18, 2013 [1 favorite]

The short answer is that it varies by state.

There are no doubt various state laws regulating distillation, but everywhere must comply with the federal law on the subject, which is pretty onerous.
posted by jedicus at 8:22 AM on November 18, 2013 [1 favorite]

My guess is that these businesses are started by people who have the capital to get right with the feds at the outset. I'd also be curious how many small-batch spirits companies are started by people with family in the business. It's got to be a hell of a lot easier when Cousin Joe is the CFO of a distillery in Kentucky and knows the federal regulations like the back of his hand.

You can't start in your backyard, but that doesn't mean that these small-batch distilleries aren't genuinely small or artisanal. Just that they know what they're doing and likely have deep pockets.

I think the real barrier to the Brooklyn-based artisanal distilleries is things like the separate building regulation. Which is trivial to arrange if you live somewhere land is cheap. Just because it's hard to do this in San Francisco or New York City doesn't mean it's impossible, full stop.

Either way, the myth of "just a couple of guys making [foo] in the backyard, and suddenly HUGE PROFITABLE BUSINESS" is just that: a myth. Most people who start businesses like this begin with the understanding that they are starting a business. It's not a surprise.
posted by Sara C. at 9:27 AM on November 18, 2013

I've wondered the same thing as a beer homebrewer.

I went on a tour of a distillery and while I think soma lkzx is right about the "clean up your backstory when you go pro", the founders of this craft-distillery worked at a macro distillery for a while, then started their own, so thats another possible legal pathway.

They did mention that they had a really hard time getting permitted. Like took them 3 years. Then getting their property zoned, public hearings, etc, etc. They had a city council member really take up their cause and saw it as a great revitalization/tourism opportunity.
posted by fontophilic at 9:42 AM on November 18, 2013

The Feds recognize that their regs represent a significant hurdle for small-scale artisanal distillers, but they are not in the business of preventing artisanal distilling; they're in the business of licensing and are doing what they can to facilitate smaller distilleries. Here's a presentation they do to explain the process. This has some explanations of what is meant by "connected with any dwelling house" and other aspects of the "separate building" rule. You can clearly not operate in a building that has any residential use — but, you can be in the same building with beer or wine-making activities or retail as long as there is a physical separation. (Lord knows why, and I've seen winery/still/retail all happening in the same room, but I'll never tell where.)
posted by beagle at 9:50 AM on November 18, 2013 [3 favorites]

As jedicus says, it's the federal permits that are the biggest obstacle to commercial production: the small distilleries that have opened in western NC -- moonshine and applejack country -- all go through an extended process to get them, and they often share plant with brewers while upholding the physical separation that beagle mentions.

In the Appalachians at least, what you might call "folk wisdom" is invoked without it being perceived as a marketing myth. If anything, the backstory is more likely to get dirtied up: you may not admit to selling 'shine, but you've got a recipe handed down from someone who bought a lot of Mason jars and didn't do much pickling.
posted by holgate at 12:27 PM on November 18, 2013 [1 favorite]

matildaben: "A friend of a friend who was home distilling in Washington state in the 00s had a permit for "alternative fuels"."

This permit specifically requires you to distill undrinkable alcohols - in other words, the poisonous traces of methanol et al should be present.

Now, the odds of someone checking every gallon you make to ensure you're obeying the letter of the law are nil, as long as you aren't selling.

Written from the heart of the Whiskey Rebellion, where some people still offer to pay interpersonal debt with 'shine...
posted by IAmBroom at 1:01 PM on November 18, 2013

I know somebody who used to home distill, and then went legit. It was, as stated above, a huge, involved process that took several years, and I believe he was bankrolled (ie, for lawyers and application fees) by a large distillery that wanted to produce one of his recipes, and was willing to sponsor him.
posted by Nibbly Fang at 5:40 PM on November 18, 2013

A friend of a friend who distills notes that there's a much higher risk of explosion and fire with a still than there is when brewing beer. He also said that in his area, the Feds are too busy to notice until something explodes.
posted by dws at 7:43 AM on November 19, 2013

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