AAIAC

The Alliance of Alcohol Industry Attorneys & Consultants is a select organization of alcoholic beverage licensing and compliance professionals.

Tennessee Considers More Wine in Grocery Stores with Legislation

Wine in Grocery Store legislation, which we affectionately call WIGS, allowed Tennessee grocery stores to sell wine beginning July 1, 2016, with a food store license issued by the Tennessee Alcoholic Beverage Commission.

WIGS was a messy compromise.  We expected that WIGS would be revised to fix thorny issues.

A bill pending in the 2017 Tennessee Legislature will change the legal definition of wine and, in our humble opinion, allow food stores to legally sell many wine coolers and wine cocktails that are already on shelves.

Here is the problem.  Current law says that wine sold by a grocery store must be:

the product of the normal alcoholic fermentation of the juice of fresh, sound, ripe grapes, with the usual cellar treatment and necessary additions to correct defects due to climatic, saccharine and seasonal conditions, including champagne, sparkling and fortified wine of an alcoholic content not to exceed eighteen percent (18%) by volume. No other product shall be called “wine” unless designated by appropriate prefixes descriptive of the fruit or other product from which the same was predominantly produced, or an artificial or imitation wine.

Are you asleep yet?  Seriously, the definition is so hopelessly complicated that in our opinion, it is pretty much unenforceable by the TABC.

Pending legislation expands the definition of wine to eliminate the controversy.

The Tennessee ABC describes the legislative change at Sections 4, 5, and 6 – Definition of Wine  SB695-HB435 Legislation Summary

The entire bill is here.  HB0435 HB0435

Paralegal extraordinaire Vicki reminds us of a fitting Kenny Chesney song:

Mama told them Jesus loves a sinner
His daddy said that music saved his soul
Between the rockers and the band
It’s a fitting promise land

Original author: William T. Cheek III
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Tennessee Legislature Looks to Legion of Liquor Laws

The Tennessee state legislature is in session again and several changes are proposed for alcoholic beverages.  Our friends at Nashville law firm Gullet Sanford have done such a good job summarizing the biggest bill that we link to their post here.  http://gsrmalcoholicbeveragelaw.com/alcoholicbeveragecleanupbillfiled/

Here is a copy of the bill, for anyone having problems with insomnia.  http://www.capitol.tn.gov/Bills/110/Bill/HB0435.pdf

Our good friend Willa reminds us of the Eric Church classic Drink in My Hand:

To fill it up, or throw it down
I got a forty hour week worth of trouble to drown
No need to complicate it, I’m a simple man
All you got to do is put a drink in my hand

Stay tuned as we continue our coverage of the 2017 legislative session.

Original author: William T. Cheek III
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Tennessee State Legislature Proposes to Sidestep Metro Nashville Beer Board Approval for Restaurants, Hotels and Other Liquor License Holders

As we read it, a bill pending before the Tennessee State Legislature would essentially bypass the Metro Nashville beer application process for restaurants, hotels and other establishments with an on-premise liquor license issued by the Tennessee Alcoholic Beverage Commission.  Just file an application, pay the $250 fee and you can serve beer.

The legislation is here HB0351.

The law also seems to eliminate the 100 foot distance requirement from houses, churches, schools and other disqualifying uses.  Metro Nashville requirements for beer applicants would not apply, based on our take of the bill.

The classic 1975 “I’m Just a Bill” Schoolhouse Rock Saturday morning cartoon lesson is compelling:

I’m just a bill
Yes I’m only a bill,
And I got as far as Capitol Hill.
Well, now I’m stuck in committee
And I’ll sit here and wait
While a few key Congressmen discuss and debate
Whether they should let me be a law.
How I hope and pray that they will,
But today I am still just a bill.

Frankly, we hope the legislation gets stuck in committee.  We are not a fan of state laws that eliminate local laws.  Although we would love to see Metro Nashville modernize the beer laws and the beer application process, Metro Nashville can and should do so by passing a city ordinance.

We also see the legislation as yet another step by the state to eliminate local beer boards.  For decades, Tennessee law has given cities and counties considerable leeway to decide how and where beer can be sold.  Tennessee beer laws and beer boards are often cumbersome for businesses to navigate, but are an important local control over alcoholic beverages.

For example, the 100 foot distance requirement in Metro Nashville has been the subject of considerable debate.  Currently, a restaurant that is too close to a house, church or school has to publish a public notice and have their local council member introduce a city law to waive the requirement.  In our humble opinion, Nashville should decide the fate of the distance requirement.

Original author: William T. Cheek III
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Which Employees Can My Restaurant or Bar Legally Tip?

We hear lots of questions about tipping.  Can I include kitchen staff in tips?  Can food runners share tips?  What about my sushi chef?

Restaurants, bars, caterers and venues often surprise us with innovative ideas about tipping employees.  Unfortunately, tipping has not so clear laws about who can – and more importantly – who cannot share in tips.

Bone McAllester employment guru Anne Martin gives this sage advice.

There are three basic factors to consider when determining if you can share tips with an employee:

Does the employee meaningfully participate in the customer experience? Is the employee part of management, which is undefined but disqualifies tipping? Is the position customarily and regularly tipped in the industry?

Whether an employee can be tipped really depends on specific job duties.  Servers and bartenders can clearly be tipped.  Prep chefs and bus boys generally cannot.

In our humble opinion, the third factor, “is this a position that is normally tipped,” works against innovative entrepreneurs.  For example, some of our restaurant clients feature food prep as a key part of the customer experience.  Like innumerable cable food shows, watching your food being prepared is entertainment.

The roles of traditional servers and chefs, for example, have blurred in recent years.

In our experience, the law is slow to accept new practices.  Sharing tips with chefs and other food prep staff could be risky.

It all boils down to the specific facts.

We encourage folks with good questions to reach out to Anne with specific asks This email address is being protected from spambots. You need JavaScript enabled to view it..  Anne really knows her stuff and is well worth paying for staying out of trouble.

A classic Michelle Shocked tune comes to mind, although wethinks Michelle is celebrating the jam that makes Music City famous, and not so much the sweet stuff you find at Loveless Cafe:

Yeah, we have a little revolution sweeping the land
Now once more everybody’s making homemade jam
So won’t you call your friends up on the telephone
You invite ’em on over, you make some jam of your own
You’ll be making jam
Strawberry jam
If you want the best jam
You gotta make your own

Original author: William T. Cheek III
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Carding Sting for Tennessee Retail Liquor Stores Delivering Alcoholic Beverages

We recently learned of a new downside for Tennessee retail liquor stores delivering bottles of alcohol to customers.  The Tennessee Alcoholic Beverage Commission cited at least one off-premises license holder for delivering hooch to a confidential informant.

The sale to minor citation involved a call to the package store for delivery of a bottle of alcoholic beverages to a nearby hotel.  The store took the order, processed a credit card and sent an employee to deliver the booze.  We understand that the employee met the “customer” in the hotel lobby and carded the “customer.”

Unfortunately for the retail store, the employee misread the age and completed the sale by delivering the bottle to the underaged informant.  The ABC issued a citation for sale to minor.  Based on what we know, the informant presented an authentic Tennessee driver’s license with a red box around the photo, indicating that the informant was under 21.

Time and time again, we remind license holders to train employees to focus on under 21 Tennessee IDs. Please, please please. The ABC is doing a great job with underage stings.  We recently blogged about 429 ABC sale to minor citations over the past year.

Willa brings up The Police’s 1983 massive hit:

Every move you make, every vow you break
Every smile you fake, every claim you stake, I’ll be watching you

E-mail us if you would like to learn more about our Red Box Carding techniques at This email address is being protected from spambots. You need JavaScript enabled to view it..  The ABC is definitely watching you.

Original author: William T. Cheek III
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Tennessee ABC Updated Citation List Shows Seriousness of Sales to Minors

We love that the new Tennessee ABC under Clay Byrd is committed to transparency.  A huge new development under Director Byrd’s leadership is compiling and releasing comprehensive reports of all ABC citations against license holders.

The most recent report is here.  The 98 page report summarizes citations from January 2016 through the first few days of January 2017.

Our rough count shows 429 sales to minor citations in just over a year.  The Tennessee ABC has deployed well-trained agents that, based on our casual observations, are successfully targeting large chains and independent restaurants, hotels and venues.

We strongly encourage license holders to double down on carding of Under 21 Tennessee driver’s licenses, which have a red box around the photo.  We have been teaching Red Box Carding to help prevent failing ABC compliance checks and encourage readers to let us know if they want more info about this tested ID technique.

Our friend Willa reminds us of Brad Paisley’s classic song “Alcohol”

I got you in trouble in high school
And college now that was a ball
You had some of the best times
You’ll never remember with me
Alcohol, alcohol

The report also shows $771,050 collected by the ABC in fines during the past year and a few days.  That hits your bottom line.

Be vigilant and please let us know if you want to focus on Red Box Carding.

Original author: William T. Cheek III
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Don’t Expect Tennessee ABC Commissioner McDaniel to Stop Rockin’

Turnover among Tennessee Alcoholic Beverage Commissioners is inevitable.  Although the alcoholic beverage industry is relatively glamorous, as compared with morticians and auditors, for example, serving as a Commissioner is no walk in the park.  Believe it or not, we are a demanding group of constituents that often have vastly conflicting agendas.

It comes as no surprise that West Tennessee Commissioner Mary McDaniel announced her resignation at this month’s January 24, 2017 ABC meeting.  Commissioner McDaniel has served approximately six years.  And the verb “served” sums it up nicely.  Through wine in groceries, five legislative sessions and three ABC Directors.  Can someone toll the Bell for Commissioner McDaniel – well, maybe not…

In all seriousness, we thank Commissioner McDaniel for all she has done for the Tennessee alcoholic beverage industry.  Run DMC seems appropriate:

I’m the king of rock, there is none higher
Sucker MC’s should call me sire
To burn my kingdom, you must use fire
I won’t stop rockin’ till I retire

Commissioner McDaniel hasn’t let retirement slow her down.  The ABC is only one of many social endeavors blessed by Ms. McDaniel’s hard work.  Keep on rocking!

Original author: William T. Cheek III
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What to Expect During Alcoholic Beverage Recalls

Recalls of alcoholic beverage products can impact any part of the industry. Learn why the TTB may think a product recall is necessary and what you will need to do.


Last year, Constellation Brands issued a voluntary product recall for a small batch of their popular Corona Extra lager due to the potential of small glass particles in some bottles. Unfortunately, it seems to be a process the company is all too familiar with. For a massive company like Constellation Brands, a small-scale product recall is hardly damaging. But what if your brewery or distillery finds itself in a similar situation?

While you can initiate a product recall of your own accord, it usually starts when the TTB has reason to believe that an alcohol beverage is, or may be, adulterated. Before taking any recall action, the TTB first consults with the FDA. If the FDA identifies an urgent health hazard, or the TTB decides there are significant mislabeling issues, the TTB will contact the responsible party and recommend a product recall. As part of this process, you will need to create a strategy for removing affected products from the market, present this strategy to the TTB, and inform the TTB of the final results of the recall effort.

Technically, the TTB does not have statutory authority to require you to recall products, but they are far from powerless. They can notify trade associations and the public by any means they see fit, detain product shipments, and suspend or revoke permits and licenses. They can also examine financial records and other documentation relating to the manufacture, removal, or sale of the product in question. So, if they request that you conduct a product recall, it’s in your best interest to comply and act quickly.

After your recall strategy has been implemented, the TTB will follow-up by requesting a Recall Status Report to determine whether your recall efforts were effective. Generally, this report should include:

•Dates customers were notified
•Number of customers notified
•Number of customers responding
•Quantity of product returned and when this occurred
•Additional details and benchmarks attesting to the effectiveness of the recall

Once the TTB double-checks with the FDA and is satisfied with the results, they will advise you to stop your recall efforts. Unfortunately, a successful recall doesn’t guarantee that you’re in the clear – the TTB can still take administrative action against responsible parties after the recall is complete. If that occurs, you should contact a lawyer with experience in alcohol beverage law (if you didn’t already at the start of the recall process) to clarify your rights, liabilities, and which courses of action are best for your unique situation.

Original author: Robert Pinson
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Duncan Liquor Law Letter

Longtime bev alc attorney Marc Sorini of McDermott Will & Emery lead the Brewers Association Power Hour yesterday, giving a 50,000 foot view of trade practice law in the beer business. 

Marc kicked things off with a thorough rundown of the ins and outs of the federal and state laws, which we plan to report on later. But for now we're going to jump to the end of Marc's presentation where he discussed some of the current legal issues percolating in the industry. First up was category management.


You may recall that this decades-old concept came under fire last year when Kroger proposed to place alcoholic beverages in a single category under the watch of a single nationwide captain (Southern Wine & Spirits). 

WHAT THE TTB'S RULING MEANS. Shortly after Kroger's proposal, the TTB published Ruling 2016-1. The ruling says essentially all category management practices are inducements, that includes providing scan data or even following up to monitor or revise the schematic. 

"Another interesting part of the ruling," Marc said, "is it doesn't really spell out what constitutes exclusion." Generally, exclusion is defined as doing something that threatens the retailer's independence, Marc said. "But these programs are initiated by the retailer, and in today's economy the large chain retailer has the most economic leverage." So the TTB has "left us all guessing" on that one, Marc said.

He then noted an interesting observation from a number of brewers that have told him "it's actually kind of comforting that instead of having an Anheuser-Busch or a MillerCoors being the category captain, you would have Southern in charge, which frankly we don't do business with." So he's heard some people question whether Kroger's program was the one that bothered TTB the most, but he doesn't agree with that view. He thinks everybody paying one 3rd party made it materially different.

Before moving on to the next current development, Marc presented one final argument on the TTB ruling: "If you're bringing data to a retailer to help them decide on how to set up their shelf sets, isn't that truthful non-misleading speech?" 

SPEAKING OF THE 1st AMENDMENT. That argument segues right into the next current development - the Retail Digital Network case - which challenges tied-house laws as a violation of the First Amendment.

For those of you who don't know, Retail Digital Network (RDN) is a third-party company that puts video ads in retailers and takes money from bev-alc producers/distributors to do it. But when RDN went shopping around for business, the suppliers and distributors said "no thanks" out of fear that they were indirectly paying a retailer to advertise and therefore violating the state's tied house law.

RDN finally got tired of suppliers/distributors telling them "we would, but we can't" and they brought suit to challenge the ban on paying a retailer for advertising, arguing that this is truthful non-misleading commercial speech. 

9th CIRCUIT SET TO RE-HEAR THE APPEAL THIS MONTH. The District Court dismissed RDN's challenge relying on the 1986 Stroh case. But a 9th Circuit panel surprisingly sent the case back to the lower District Court (remanded) and instructed them to apply heightened judicial scrutiny to restraints on commercial speech. But the decision is not up to the lower court anymore, as a few months ago the 9th Circuit Court granted an "en banc" review meaning the entire 9th Circuit would re-hear the appeal. The appeal is now set for oral argument in a few weeks to decide whether the entire 9th circuit agrees with that panel, Marc said.

THE LATEST ON THE CRAFT BREWERS GUILD CASE. Then we have the case surrounding the Sheehan's Craft Beer Guild in Massachusetts. As you know, CBG currently has a lawsuit pending challenging the ABCC's legal position towards CBG's payments to retailer affiliates. 

THEY'VE GOT SOME "PRETTY INTERESTING" ARGUMENTS. Marc says they have some "pretty interesting" arguments. One of them is that apparently the "thing of value prohibition" is not in the Massachusetts statute. The prohibition was actually repealed in the '70's. The ABCC has since passed a regulation that in effect continued the ban, Marc said. But CBG argues that if legislators pulled the law from the books then the regulators (who are subordinate to the legislature) can't reinstate it, Marc says.

Another one of their arguments is that the anti-discrimination prohibition are all tied to post-and-hold as well as price affirmation schemes, which were struck down many years ago as a violation of the Sherman Antitrust Act. "So the vestiges of this, which is the general non-discrimination rule, are all tied to this illegal and unenforceable scheme and should be equally unenforceable," says Marc.

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How Whisky Distillers use Peat Bogs to Create Unforgettable Flavors

Many Scottish distilleries utilize peat bogs to create whiskies with very distinctive flavors. Learn how “peaty whiskies” are made in this blog post.


Similar to our local regulations regarding the production of Tennessee whiskey, Scotland has legal requirements regarding the production methodology and labeling requirements for the country’s world famous style of the spirit. The Scotch Whisky Regulations of 2009 (an update to the Scotch Whisky Act of 1988) outline everything a distiller needs to know if they’re producing Scotch whisky. Like Tennessee’s House Bill 1084, Scotland’s production guidelines grant enough leeway for distillers to create Scotch whiskies with a wide variety of flavor profiles – several of which have intense smoky/umami/medicinal-tasting characteristics. While that type of bouquet is certainly a signature of the Scotch style, the unique method by which the flavor is achieved it is not actually required by the Scotch Whisky Regulations.

Large parts of Scottish land are covered in peat bogs. Peat forms when plant matter starts to decay, then stops due to specific environmental conditions. For centuries, the Scots have cut slices of peat out of the bogs, dried them, and used them as an energy source – like coal briquettes but faster-burning. Peat is also what gives certain Scotch whiskies (especially those from the Islay region) the unique flavor profile mentioned above. Once the grains are malted, they are dried over the smoke of a peat fire for about 30 hours.

Since bogs only accumulate peat at a rate of about 1 millimeter per year, it’s a semi-non-renewable resource. I’m not familiar with the laws protecting the peatlands, but I do know that many Scottish distilleries use methods to reduce their peat consumption. For example, instead of using whole briquettes, the Bowmore distillery grinds their peat into powder that is gradually added to a fire to produce just the right amount of peat smoke. Several of the more modern and industrialized distilleries use closed systems that pass the same smoke over the malted grains multiple times to ensure none of it is wasted.

So even though it’s not a legal requirement, many distilleries make their Scotch whisky by literally incorporating the country’s land into the process. Perhaps Tennessee’s distilleries could take inspiration from Scotland and incorporate wood from the tulip-poplar tree to put a little more “Tennessee” in Tennessee whiskey.

Original author: Robert Pinson
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Space-Aged Whisky Could Soon Become a Reality

Distilleries have been aging whisky in microgravity to discover new flavor profiles. Learn how the space-aging process works in this blog post.


Whisky masters and enthusiasts are forever questing for tweaks to traditional distilling and aging methods to create unique flavors of the spirit. They’ll go to the ends of the earth in pursuit of whisky’s secrets – and when they run out of earth, they’re not afraid to head into space.

In 2011, the famous Ardbeg distillery in Scotland partnered with aerospace research company NanoRacks to test the effects of gravity (or lack thereof) on the whisky aging process by sending whisky to the International Space Station and aging it there for two and a half years. Since the available room on any space vessel is extremely limited, a traditional barrel was out of the question. Instead, newly distilled whisky and charred oak wood shavings were placed in a specially designed vial that kept the whisky and wood separated until they reached orbit and the seal between them was broken. A control sample was left back on Earth for comparison.

When the whisky returned to Earth in 2014, a battery of tests confirmed that the microgravity environment made a definitive difference. The ratio of wood extractive compounds found in the space-aged whisky was notably lower than the control sample, creating a dramatically different flavor profile. According to the results of the “organoleptic assessment” (aka, taste-test) released by Ardbeg, the space sample could summarily be described as more peaty and pungent. Whether that’s desirable or not is subjective – either way, it confirms the potential for space-aging to create an untold number of new and unique flavors for whisky.

Seemingly inspired by Ardbeg, the Suntory distillery in Tokyo sent samples of its whiskies to the International Space Station last August. Their experiment is broken up into two groups – one to be aged for a year, and the other to be aged for two or more years. The first group is scheduled to return to Earth sometime next month, but the results may not be publicized until sometime later.

Currently, outer space is identified by international law as one of the four global commons – meaning it is outside the territory and jurisdiction of nation states (the other global commons are the high seas, atmosphere, and Antarctica). So, if space-aged whisky catches on, it makes me wonder what the TTB’s regulatory response would be, if any…

Original author: Peter Beare
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Photos from Liquor Conferences

We have been remiss in not posting photos from liquor conferences.  Sorry.

Reminds us of Nirvana’s All Apologies:

What else should I write

I don’t have the right

What else should I be

All apologies

Here are photos from the 2016 annual meeting of the National Association of Licensing and Compliance Professionals.

And from the 2016 Regional National Conference of State Liquor Administrators.

Last but not least, from the Tenth Anniversary Hawaii Meeting of the Alliance of Alcohol Industry Attorneys and Consultants.

 

 

Original author: William T. Cheek III
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The Lincoln County Process and the Law

If you want to call your product “Tennessee whiskey,” it must go through the Lincoln County process. Learn how to comply with the process here.


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.

Original author: Robert Pinson
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The Rising Popularity of ‘Accelerated Aging’ among Whiskey Distillers

The Rising Popularity of ‘Accelerated Aging’ among Whiskey Distillers


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?

Original author: Robert Pinson
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Tennessee Department of Revenue Revamps Liquor-by-the-Drink Bond Process

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.

Original author: William T. Cheek III
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High Grav Beer Law Change Has Hidden Consequences for Tennessee Breweries

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

Original author: William T. Cheek III
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Ring in the New Year by Forgetting About Tennessee’s Crazy High Gravity Beer Laws

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.

Original author: William T. Cheek III
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How can I have product using contract distilling?

Contract Distilling - BeerBon Blog

Contract Distilling – BeerBon Blog


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.

Original author: Robert Pinson
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Wine is Probably a Bad Idea for a Holiday Present from a Tennessee Restaurant

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

 

Original author: William T. Cheek III
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Tentative 2017 Legislative Wish List for Tennessee ABC

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

 

Original author: William T. Cheek III
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