AAIAC

For many years, the legal definition of “Tennessee whiskey” was bland and straightforward. At the federal level, the North American Free Trade Agreement (NAFTA) requires that Tennessee whiskey be “a straight Bourbon Whiskey authorized to be produced only in the State of Tennessee.” However, we can be very particular about our whiskey. With that in mind, governor Bill Haslam signed House Bill 1084 back in 2013. This state-level law outlines specific quality and production standards that a distiller must follow if they want to call their product Tennessee whiskey. One of these production requirements is that the whiskey must be “filtered through maple charcoal prior to aging” – a process more popularly known as the Lincoln County Process.

If a distiller is calling their product Tennessee whiskey, but is found to not be meeting the manufacturing requirements for the spirit, they can have their license revoked or suspended for at least a year. Naturally, every distiller wants to follow these requirements to the letter – which would explain why I get so many questions about the specifics of the Lincoln County Process. “What ratio of charcoal-to-whiskey do I need for my stills?” “How long am I required to filter the whiskey for?” “Does the wood for the charcoal have to be grown in Tennessee?”

The truth is, House Bill 1084 deliberately omits these details to give distilleries flexibility. Imparting a specific flavor profile to any whiskey is an extremely delicate process. Changing the amount of charcoal or filtering time will change the flavor of the final product – so a lack of specific guidelines for the Lincoln County Process gives distilleries the flexibility they need to make their own styles of Tennessee whiskey.

Many distilleries have unique or proprietary takes on the Lincoln County Process. Jack Daniel’s first runs their charcoal through a grinder to get consistent bean-size pellets. The pellets are packed into vats 10 feet deep and the whiskey gets filtered by trickling through. The George Dickel distillery is similar, except they chill the whiskey first and allow it to fill a 13-foot vat instead of just trickling through.

Benjamin Prichard’s Tennessee Whiskey foregoes the Lincoln County Process entirely. They can still call their product “Tennessee whiskey” because they meet the exemption requirements outlined in Section 1(c) of the legislation. Ironically, this also makes them the only distillery in Lincoln County that doesn’t use the process!

As long as your Lincoln County Process involves some form of filtering through maple charcoal prior to aging – and you meet the other requirements from the law – your product can legally be called Tennessee whiskey in the eyes of the state. If you’re worried your filtration process could be interpreted another way, or you have other concerns regarding regulatory compliance, contact me and I’ll be happy to advise.

Most whiskey distillers have a love/hate relationship with time. On one hand, time can mature whiskey into an exceptional spirit. On the other hand, it takes so much time – 12 to 24 years in many cases. New barrels (which are a legal requirement for most whiskey in the U.S.) are quite expensive and take up storage space, so a distiller has to eat those costs and wait years to see a return on investment. Faced with those obstacles, it’s no wonder more distilleries are developing ways to accelerate the whiskey aging process.

As whiskey ages, it develops subtly complex flavors by absorbing compounds from the wood of the barrel in which it’s contained. Instead of waiting for this to naturally happen over several years, speed-aged whiskey uses a variety of techniques and technology to move flavors from wood to whiskey in less time. Among the simplest of these techniques is to use smaller barrels, which increases the surface area of the wood that is exposed to the whiskey. Tuthilltown Spirits in upstate New York takes this a step further by pumping low-frequency sound waves throughout their aging storehouse. Allegedly, the sound waves “agitate” the spirit, helping their award-winning Hudson Baby Bourbon reach sufficient maturation in only four months.

The Copper Fox Distillery in Virginia takes a different approach to increasing the surface area exposed to the whiskey. To create Wasmund’s Single Malt Whiskey, they load the distillate into normal-sized barrels. Then they add a mesh sack filled with toasted oak and apple chips, which works like a teabag to impart flavor. After about 12 months, they remove the mesh bag and put the whiskey in another barrel, which is heated and rolled several times over 2 months. Despite being aged for only 14 months, this whiskey was once “Best in Class” at the American Distilling Institute.

Right in our backyard, the O.Z. Tyler Distillery in Kentucky is planning to utilize a proprietary process called “TerrePURE.” According to the patent for the process, it basically uses ultrasonic energy and oxygen and temperature manipulation to create a better tasting whiskey in a shorter amount of time. Could accelerated aging catch on among Tennessee’s distillers?

The Department of Revenue recently announced major changes to liquor bonds for Tennessee restaurants, bars, venues and other liquor license holders.  Read more here.

We expect some chaos, which at least keeps it interesting for us jaded old fools.

Speaking of old folks, chaos reminds us of this classic Cold War parody from Get Smart:

For those that hold more than one license in Tennessee, the proposed changes are fantastic.  You will only need one bond, if you file the proper election.  We will let you know when the election becomes available, probably late this year.

As we read the announcement, Revenue also says it will not change bond amounts until after September 30, 2017.  No more dreaded LBD bond audit and worrying about increasing the amount of your bond at renewal, at least for a few months.

In the meantime, we strongly encourage licensees to renew bonds, CDs and cash deposits in lieu of bonds.

We follow up our Tennessee high gravity beer news with minutia that only a serious industry member like a Brewery could appreciate.  The info in this post is compliments of Bone McAllester Alcoholic Beverage team member Rob Pinson, after consulting with reliable sources.  This is all subject to change, as the “law” is being interpreted.  We applaud Revenue for the guidance.

$100 Brand Fee

Revenue will not require this. Whether it is for new brands, existing brands, or renewals of beer between 5-8%, Revenue will not require the $100 fee (and we do not believe that the ABC has the authority to collect it either).

For beer at or below 5% ABW

Proceed as usual. Submit territorial designation form to Revenue. No renewals.

If introducing a new beer between 5% and 8% ABW

The brewery should send in the beer territorial designation form, the ABW % for the product, a copy of the COLA (if required by TTB), a copy of the label, the wholesaler contract (which is still required under the law, even though it is technically beer), and the brand registration form (ALC119). There is no fee with this registration. Revenue will register the beer brand in both the liquor brand list and the beer brand list.

If you have an existing brand that is between 5% and 8% ABW

The brewery should send Revenue a list of their brands and the ABW % for each brand. The beer brand will remain on the liquor brand list (minus wholesaler and counties) and get added to the beer brand list. Revenue is working on a letter to go out about this and we will share this when it becomes available.

For renewals

Revenue will send out renewal forms for the 5/31 renewal deadline for the liquor brand list. Breweries should follow the above guidelines to make sure they receive this in the mail. There are no renewals for beer brands at or below 5% ABW.

Beer Barrelage Tax

I have also confirmed that Revenue expects wholesalers to pay the $4.29 beer barrelage tax and not manufacturers.  Although we disagree with this interpretation of the law, we are not the Tax Man.  Tax on beer self-distributed by the brewery or sold on site is still subject to the tax and paid by the brewery.

We think of the classic tax song Fortunate Son by Creedence Clearwater Revival:

Some folks are born silver spoon in hand
Lord, don’t they help themselves, oh
But when the taxman comes to the door
Lord, the house looks like a rummage sale, yes

On January 1, 2017, the legal definition of beer in Tennessee changes from 5% to 8% alcohol by weight.  Meaning that beers with less than roughly 10% alcohol by volume no longer fall into that crazy category known as high gravity beer.

In Tennessee, beers stronger than 5% by weight or around 6.5% by volume were taxed and distributed as alcoholic beverages.  For consumers, it meant higher prices and not being able to buy a high grav beer at a grocery or convenience store.

No longer.  Although there are a few serious suds stronger than 8% by weight, the vast majority of high gravity beers will magically become regular “beer” in the New Year.  You can Kroger for high grav.  You will no longer pay the 15% alcoholic beverage tax at restaurants and bars.

The ancient and odd (at least to us) New Year’s traditional tune Auld Lang Syne comes to mind:

we’ll take a cup of kindness yet,
for auld lang syne.
And surely you’ll buy your pint cup!
and surely I’ll buy mine!

The new law fails to anticipate a number of details, which we expect will confuse industry members for some time.  But, please, everyone say thanks to the Tennessee Legislature for fixing the high gravity beer problem.

In what’s referred to as “contract distilling,” a person hires an existing distillery to make products for them. The person might provide a recipe, container specifications, and the TTB-approved label while the distillery does all the rest for a fee. For alcoholic beverage producers who want to make new products, but don’t have the permits or the capacity, outsourcing to another facility can be the perfect solution. Contract distilling can also be great way for novices to ease into the distilling business, since the zoning, equipment, and manufacturing procedures are all taken care of by the contractor.

However, contract distilling does have its downsides. The profit margins are smaller, and unlike operating your own distillery, you don’t have any control of the contractor’s operations or production schedule. To get the most out of contract distilling, it’s important to do your due diligence. Before selecting a partner, consider the following:

Licensing – This isn’t usually an issue with established distilleries expanding their capacity, but your company may need to obtain a license with your state liquor agency (even though the contracted distillery is the one manufacturing spirits). If your company will be handling the distribution, you may also need a federal wholesaler permit from the TTB and additional licenses from the state. Whether you’re an investor with a great idea for whiskey or an established distillery that wants to dabble in a new type of spirit, you should speak with a lawyer before speaking with distilleries to contract with. That brings us to our next item…

The Contract – When you partner with another distillery to create your products, you should evaluate the contract to make sure all of your bases are covered, and negotiate where necessary. Some things to account for include intellectual property, record keeping and reporting, TTB application handling, and tax responsibilities.

Evaluation – When vetting potential distilleries, some questions to keep in mind include:
• How flexible are their production scaling capabilities?
• Do they have distribution partnerships you can leverage?
• Are they fully licensed with the TTB, FDA, and state/local authorities?

In the end, try to learn as much as you can about the potential distillery, ensure both parties have their paperwork in order, and protect your interests via contract. That way, you’ll be in the best position to enjoy the benefits of contract distilling.

We often get this question during the holidays?  Can my restaurant or bar give a bottle of wine or spirits to a vendor or good customer for Christmas in Tennessee?

We recommend not.

First, we suspect that an ABC agent will presume that the restaurant is giving away alcohol for off-premises consumption, which is a huge no no.

Legally, we think that an owner of a restaurant should be able to purchase alcohol at a liquor store and give it as a gift.  The dilemma is that the owner will certainly include a card that indicates that the gift is on behalf of the restaurant.  It looks like the restaurant is making the gift.

Although you may be able to contest the citation, the gift of alcohol raises too many problems and we recommend against it.

A Christmas classic cones to mind:

Mom got drunk and Dad got drunk at our Christmas party
We were drinking champagne punch and homemade eggnog
Little sister brought her new boyfriend
He was a Mexican
We didn’t know what to think of him until he sang
Feliz Navidad, Feliz Navidad

 

We love the transparency of the new Tennessee ABC regime under relatively new Director Clay Byrd.  For example, at the regular December ABC meeting, Assistant Director Zach Blair announced the following issues for the 2017 legislative session.

Please keep in mind that this is our take on the announcement and not official positions of the ABC.

· Conflicts of interest at ABC – currently relatives of ABC staff and commissioners cannot hold server permits. The ABC wants to permit this.
· Delinquencies with wholesalers – current law requires an automatic admin hearing if more than two delinquencies occur in a given period of time. The ABC wants to remove the mandatory hearing and be able to issue citations.
· Indirect interests – the ABC wants to define this by statute, probably similar to what the draft proposed rules say.
· Underage sale citations – the ABC wants to expand the civil penalty options.
· Donated alcohol to special occasion licenses – the ABC wants to permit this expressly for auctioning off the bottles.
· Private party – the ABC wants to codify a definition for this; we are not sure what it will be.
· Seasonal closings – the ABC wants to expand the areas where this is permitted; currently only allowed in river resort districts.
· Eligibility for server permits – the ABC wants to codify the felonies that prohibit someone from getting a server permit.
· Revocations – the ABC wants to codify the draft proposed rule that surrendering a license can be treated as a revocation when there is an agreed order signed.

Special thanks to Bone alcoholic beverage team member Rob Pinson for this summary.

Brings to mind the AC/DC classic “Breaking the Rules”

Just keep on breakin’ the rules
C’mon get ready to rule
Just keep on breakin’ the rules

 

I have procrastinated too long on this, and to all reading this and all those impacted by the fires in East Tennessee last month, I apologize. This was a terrible tragedy, especially with the loss of at least twelve lives. The alcohol industry members were also impacted. Some of them suffered at least some damage and we have heard that numerous employees have lost their homes in the fire. More on this later. I am saddened to hear that homes were lost this close to the Christmas season. I have no doubt that many hidden Christmas presents were lost in the fires, as well as personal belongings, food, clothes, etc. Hearing about this loss caused me to donate money to several organizations to help relief efforts and I encourage everyone reading this to dig a little deeper into their pockets and donate at least something. It will take a while for the area to recover; however, the area has opened back up and is ready and anxious to return to its normal level of tourism. I encourage everyone to go visit the area as soon as possible and spend money in the various shops and stores. Take your kids to the aquarium in Gatlinburg and ride the Ferris Wheel in Pigeon Forge. This is one of the best and easiest ways to help the entire area recover since it is so reliant on tourism. Please do not cancel your plans to stay in the area. There is still plenty to do while visiting. I also encourage people to buy the really awesome “Smokies Strong” merchandise to further help relief efforts. http://govols.shgstores.com

Now, back to focusing on the alcohol industry. I know two industry members have set up relief funds for their employees. All amounts collected go to the employees of these companies.

Ole Smoky: Go Fund Me https://www.gofundme.com/displaced-families-of-ole-smoky

Sugarlands:

1) Monetary donations can be mailed to:

CNB, 2661 Parkway, Pigeon Forge, TN 37865

Sugarlands Employee Emergency Assistance Fund – Account Number 4036124

2) Gift card donations can be mailed to:

Sugarlands Employee Emergency Assistance, C/O Sugarlands Distilling Company,

P.O. Box 1517, Pigeon Forge, TN 37865

If any industry member has a fund to add to this list, please e-mail me at This email address is being protected from spambots. You need JavaScript enabled to view it.

The impact of this tragic event will not be fully realized for some time. I can only imagine how much production has been slowed down by the fires. And since the local members are very dependent on foot traffic for sales, the slow return of tourists will only further negatively impact these businesses. I encourage everyone to go visit the area as soon as possible and support the local economy by spending money, especially that Christmas money you got from your grandmother or that bonus money you got from your employer. Spending it in the area on something you like will benefit both you and the residents of the area.

To members of the impacted community, please let us know how to help and we are here for you. Stay Smokies Strong and have a Merry Christmas!

A small but important silver lining for moonshiners in Sevier County.  After the tragic fire, we asked the TTB to consider easing the deadlines on reporting and paying excise taxes – to give impacted distilleries time to recover.  We blogged about it here.

The announcement from TTB is great news and here is the e-mail:

The Alcohol and Tobacco Tax and Trade Bureau (TTB) recognizes that the devastation caused by wildfires in and around Gatlinburg, Tennessee, may have affected your operations. As a result, you may not be able to timely file returns or timely pay or deposit the excise taxes administered by TTB, as required by the Internal Revenue Code. TTB will consider waiving late filing, payment, or deposit penalties on a case-by case basis. Waivers will be approved based on the statutory standard of reasonable cause and a lack of willful neglect.

To qualify for such a waiver, you must:

1) Demonstrate, to the satisfaction of the appropriate TTB officer, that the wildfires or related events directly affected your ability to timely file tax returns and/or pay or deposit excise taxes; and

2) Contact the TTB National Revenue Center at

550 Main St, Ste 8002
Cincinnati, OH 45202-5215
Toll free: 1-877-882-3277
Direct: (513) 684-3334
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.

One of Willa’s favorites by Alan Jackson comes to mind:

Pop a top again
I think I’ll have another round
Set ’em up my friend
Then I’ll be gone and you can let some other fool sit down.

The new leadership at the Tennessee ABC has been issuing informal guidelines on a variety of subjects.  We love the informal rules and hope they keep coming.

At the links are FAQS for wholesalers and liquor-by-the-drink, aka restaurants, bars, hotels, venues and other on-premise license holders.

final-wholesaler-faq-12-07-2016

final-lbd-faq-12-07-2016

Made our buddy Willa think about Charlie Daniel’s hit Drinkin’ My Baby Goodbye:

Well I’m a
Sitting on a bar stool
Acting like a dern fool

Reliable industry sources indicate that miraculously, all of the numerous distilleries in Sevier County, Tennessee escaped wildfires that ravished Gatlinburg, Pigeon Forge and surrounding areas.  The fires on the strip of Gatlinburg came perilously close.  Here is a photo from the security cameras at one distillery on the strip:

At this time, we understand that a few restaurants were mostly likely destroyed by the fires, but we have no specific information.  Keep in mind that civilians have not been allowed back into Gatlinburg since the fires.

 

Although distillery facilities escaped direct impact from the fires, we expect that there may be smoke damage, difficulty with retrieving records and certainly time-related pressure for filing returns.  We have reached out to our contacts at TTB and have requested that TTB consider a procedure for late filing and payment of taxes for impacted distilleries.  You can learn more about the TTB claims process at this link:

https://www.ttb.gov/public_info/disaster_claims_packet.shtml

Rob Pinson and Will Cheek have agreed to provide complimentary legal services to assist impacted distilleries with immediate legal needs resulting from the fires.  If you have questions concerning TTB, ABC or Tennessee Department of Revenue issues from the fire, please reach out to us at This email address is being protected from spambots. You need JavaScript enabled to view it. or This email address is being protected from spambots. You need JavaScript enabled to view it..

Although distilleries escaped the worst of the fires, several distillery employees lost their homes and nearly everything they own.  Our thoughts go out to these folks and we encourage everyone to consider making a donation to help these industry members.  We know of the following assistance funds that have already been set up.

Ole Smoky:

Go Fund Me https://www.gofundme.com/displaced-families-of-ole-smoky

 

Sugarlands:

1)         Monetary donations can be mailed to:

CNB, 2661 Parkway, Pigeon Forge, TN 37865

Sugarlands Employee Emergency Assistance Fund – Account Number 4036124

2)         Gift card donations can be mailed to:

Sugarlands Employee Emergency Assistance, C/O Sugarlands Distilling Company,

P.O. Box 1517, Pigeon Forge, TN 37865

If any distillery has a fund to add to this list, please e-mail us at This email address is being protected from spambots. You need JavaScript enabled to view it..

We wish the best to our friends during this tragic time.

Obtaining a COLA (Certificate of Label Approval) from the TTB can be a time-consuming process that’s difficult to sync with the rest of your operations. But here’s a little-known fact: if you are importing alcoholic beverages for use at a tradeshow, or to give out samples for soliciting orders, you may be eligible for a COLA waiver.

COLA waivers can be requested by submitting a formal letter to the TTB. The letter must guarantee that the products in question will meet these compliance requirements before reaching a U.S. port:
• The products will be imported by the holder of a Federal Importer’s Basic Permit (you also need to include the permit number)
• All applicable taxes and duties will be paid
• The imported products will have the following labels:
o Government Warning Statement (Code of Federal Regulations, Title 27, Subpart 16)
o Purpose label (e.g. “For Trade Show Purposes Only – Not for Sale”)
o A sulfites disclaimer for eligible wines (e.g. “CONTAINS SULFITES”)

The letter also has to provide information regarding the details of the products you need waivers for, including:
• The purpose for importing and for requesting a waiver (for tradeshows or other events, include dates and locations)
• The class, type, and quantity of each alcoholic beverage product
• The country of origin for each product
• The brand name of each product

The TTB accepts these waiver requests by both email and fax (202-453-2970). To make the process even faster and easier, I recommend using this official template provided by the TTB (this opens a MS Word file you can save and modify).

Even though the primary regulatory authority for the alcoholic beverages is the TTB, the FDA does have some power in the industry. Since many alcohol manufacturers aren’t sure when or where they may be subject to FDA regulations, I thought I’d shed some light on the agency.

Currently, the TTB and the FDA operate together under a non-binding Memorandum of Understanding, which basically outlines when, why, and how the TTB refers issues to the FDA. These issues are largely related to health and safety. For example, if you submit a formula to the TTB for a distilled spirit containing an unusual ingredient, the TTB will deny your application unless you can provide documentation certifying that the ingredient is Generally Regarded as Safe (GRAS) by the FDA for use in alcoholic beverages. You may recall the big industry upset circa 2010 when the FDA declared caffeine as an unsafe food additive for alcoholic beverages.

Beyond issuing certificates and declarations, there are circumstances where the FDA has more active authority. As part of the agency’s mission to promote food items that are properly labeled and safe for consumption, the FDA can take action in cases of adulterated or contaminated food products – including domestic and imported alcoholic beverages. Specifically, if alcoholic beverages have been reported as adulterated, the FDA has the power to seize those products, refuse their importation, and actively discourage their distribution through consumer markets. Generally, this happens when a manufacturer has been slow or ineffective at implementing a product recall.

In addition to formulation approvals, food safety compliance, and product recall procedures, alcohol manufacturers may also need to interact with the FDA on issues including:
• Registration of food facilities
• Labeling of wines and ciders containing less than 7% alcohol by volume
• Labeling of beers that do not contain barley or hops
• Facility inspections

If you have any questions about FDA jurisdiction in your business or other regulatory compliance issues, I’d be happy to help.

Like any manufacturing process, the production of alcoholic beverages creates byproducts. After mashing, grains are lautered to separate the wort from residual grain. While the wort continues on in the production of the spirit, the leftover spent grains have no further use. But rather than throw them away, brewers commonly sell or donate the spent grain to farmers who use it as fertilizer or livestock feed.

This environmentally-friendly exchange has been a popular practice for centuries, and continues today. However, I still get lots of questions from newer breweries about spent grains, compliance issues, and oversight from the TTB or FDA. This confusion likely stems from the upheaval that the entire alcohol beverage industry went through during late-2013 early-2014 when the FDA proposed some new rules in an update to the Food Safety Modernization Act (FSMA).

Essentially, the FDA proposed rules to better regulate the quality assurance of animal food by requiring “that certain facilities establish and implement hazard analysis and risk-based preventive controls for food for animals.” This would place an extremely expensive and cumbersome burden on breweries across the nation to bring their facilities, processes, and staff all up to code.

To make a long story short: all the trade associations and congress members backed by breweries, wineries, and distilleries spoke out against the proposal, the FDA back-pedaled and added an exemption to section 116 of the FSMA for alcohol-related facilities, and the producers and consumers of spent grains all lived happily ever after. Coincidentally, the latest iteration of the FSMA has compliance deadlines starting this month – but it’s nothing that the manufacturers of fine spirits need to worry about any more.

I’d toast to that.

In an interesting combination of alcoholic beverage law and IP law, two breweries in the state of Florida recently butted heads over a trademark dispute. It started when Due South Brewing of Boynton Beach – which has a flagship series of IPAs which range from Category 3-5 – sent a cease and desist letter to Big Storm Brewing claiming that the Tampa-based brewery’s “Hurricane Series” of Belgian-style beers, labeled Categories 1-5, violated Due South’s common law trademark rights to the terms “Category 3” and “Category 4.”

While all beer labels must pass through the TTB before hitting the market, the TTB only makes sure that labels meet the compliance requirements on their checklist. They’re not checking for trademark infringement, so this type of dispute is not unheard of in the alcoholic beverage industry. It sounds like Due South is making a mountain out of a molehill, since a generic-sounding trademark on a completely different style of beer could have a tough time in court against fair-use arguments. But, there is a legal basis for their claim.

Firstly, Due South’s “Category” series is one of its most popular lines. The “Category” trademark is very valuable to them, so it’s in their best interest to take potential infringements seriously. If they don’t, it potentially becomes much easier in future disputes for imitators to argue that their use of the trademark is legitimate.

Fun fact: Due South’s Category 5 IPA placed in multiple categories of the Best Florida Beer Championships of 2014 and 2015. If the brewery’s trademark hadn’t expired last April, they surely would have included it in their claim.

Secondly, a trademark infringement claim must prove that the other party’s use of the trademark is likely to confuse consumers. In their cease and desist letter, Due South claims that they received more than 30 reports of “actual consumer confusion and/or diminution of consumer goodwill” in less than a week.

Fortunately for them, Big Storm made the smartest decision in this scenario: they consulted with a law firm. In a dense, six page response, they laid defensive groundwork citing fair-use, questioning the strength of the trademark, and denying the likelihood of consumer confusion. The legal exchange between the law firms representing the breweries can be read here.

In response, Due South appears to have dropped the issue for now to avoid potentially drawn out litigation. Overall, this serves as an excellent lesson for breweries and the benefits of retaining legal counsel.

UPDATE: Apparently we had a miscommunication with the ABC.  Hotels CANNOT sell spirits by the bottle.  Hotels can sell wine by the bottle in connection with food service, including room service.  There is no change in the policy.

____________________________________________________

Old dogs can learn new tricks.  Today, we found out that the Tennessee ABC has been quietly advising that hotels can sell spirits by the bottle at gift shops, with some conditions.

Tennessee law generally prohibits the sale of bottles of spirits at any business holding an on-premise liquor license, like a restaurant or bar.  You cannot order a bottle of Jack Daniels to your table at a honky tonk.  Only wine can be sold by the bottle.

Hotels are a little different.  You have a room.  What you do in your room is your own business.  The ABC apparently recognized this difference.

Here are the rules for bottle sales, as we understand them:

The bottle must be opened by a hotel employee.  Guests cannot purchase a sealed bottle. The bottles must be priced at or above cost.  Ensure that the bottle is scheduled on your price schedule filed with Revenue. The hotel must pay the liquor-by-the-drink tax. The bottle must be consumed on property. We strongly encourage hotels to post signage instructing that alcohol must be consumed in the hotel and cannot be taken off property. The hotel must ID check to ensure the purchaser is 21 or over.

It logically follows that a hotel can also sell a bottle of spirits through room service.  We are cautiously advising hotels that it is legal to sell a bottle of Jack to a room, using the same guidelines.

Instead of signage, we recommend that the room service include a card that says that alcohol must be consumed in the hotel and cannot be taken off property.  We think most hotels will prefer to include a card that says that alcohol must be consumed in your room.  Who wants guests wandering around the property with drinks from their room?

Brings to mind a Van Halen classic, Take Your Whiskey Home:

Well, my baby, she don’t want me around
She said she’s tired of watchin’ me fall down
She wants the good life (ow) only the best
But I like that bottle better than the rest

With a presidential election upcoming, you can expect tax policies to be subject to heightened scrutiny. Proposing a tax increase of any kind is usually bad for any delegate’s political career – most of the time. Specifically, I’m talking about the so-called “sin taxes” that only apply to certain industries such as tobacco, gambling, and of course alcohol.

Increasing sin taxes is more or less acceptable to the public because part of their purpose to reduce the consumption of goods and services considered harmful. In some states, sin taxes are a major source of revenue. According to cost information website HowMuch.net, the state of Texas generated more than $1 billion in revenue from alcohol taxes in 2014. The runners-up were Florida, with $452 million and New York with $250 million.

That same year, Tennessee took in almost $148 million from alcohol taxes, accounting for about 1% of the states total tax revenue. I’m no tax expert, but that sounds low to me. Perhaps the state is comparatively lenient on the alcohol industry since producers of fine spirits are part of the state’s cultural history.

But that doesn’t mean those producers have it easy when it comes to taxes. They’re also subject to federal excise taxes (FET) on distilled spirits – which account for more than one-third of the shelf price of most alcohol brands when combined with state-levied taxes. Luckily, there is a chance those FETs could be reduced if the issue is given enough support. That’s something to keep in mind during this political season.

Alcoholic beverages have had this regulatory quirk where, even though they are considered foodstuffs, they are not required to have nutritional fact labels or ingredients lists. The reason for this is because alcoholic beverages are regulated by the TTB instead of the FDA. To date, the TTB has not put any major pressure on alcohol producers to label their products – but thanks to the largest trade association in the business, you may start to see nutrition facts for alcohol becoming widespread.

Earlier this month, the Beer Institute announced “The Brewers’ Voluntary Disclosure Initiative,” which aims to label beers with nutritional information – including a list of ingredients, serving size, calories, carbohydrates, fat, protein, and ABV.

As for how these labels should look, the Beer Institute is leaving that up to the individual breweries. The guidelines indicate that nutritional disclosures can appear as a label on the bottle, a reference to a website, or a QR code. Since the information provided is meant to be voluntary, the types of information disclosed will vary. For example, I can imagine lots of breweries not wanting to include an ingredients list.

Members of the Beer Institute are being encouraged to achieve compliance with the initiative by 2020. Several major breweries have already agreed to follow these guidelines, including:

Busch MillerCoors HeinekenUSA Constellation Brands Beer Division North American Breweries Craft Brew Alliance

Collectively, these breweries produce more than 81% of the volume of beer sold in the US – so you can expect other breweries to follow suit to stay competitive in the market.

We could not help noticing the enormous amounts of money donated by liquor industry associations in the second quarter of 2016.      Nothing really new, but it confirms just how important the state political process is to the wholesalers and retailers, which were massively impacted by wine in groceries (WIGS) and scored a number of victories in the final WIGS law.

According to our friends at The Tennessee Journal, the liquor wholesalers topped the list of all PACS with $106,000 contributed in the second quarter.  Although retail liquor stores were 11th on the list at $39,500, their stellar lobbyists – McMahan Winstead – donated an additional $45,250.

In comparison, the second highest contributor are the Teachers at $63,450.  The hotel restaurant association logged $42,500.

Reminds us of one of our favorite lines from a movie – Richard Pryor in the 1970’s classic “Car Wash”

Cause money walks…..and bullshit talks…