Reiser Legal PLLC is pleased to join as faculty for the 2nd annual Wineries, Breweries, and Distilleries seminar. This Washington-specific beverage law seminar will be held on October 15, 2015 at the Hilton in Seattle, Washington. Reiser Legal attorneys Danielle Teagarden and Doug Reiser will be co-presenting on intellectual property topics, presenting best practices for proactive brand protection as well as notes on trademark coexistence agreements. The faculty includes a range of state leaders, including voices from guild organizations as well as both state and federal regulators. Senator Maria Cantwell is an invited speaker as well. The seminar will bring together attorneys, industry members, and government officials, for a productive discourse and a look toward the future of beverage production here in Washington State. Those interested in attending and being a part of the discussion may learn more here.
Legal alcohol shipping? Congresswoman Jackie Speier of California says she’ll introduce a bill that just might make it so. Announced through her Facebook page on July 14, 2015, Congresswoman Speier would like to “tear down the last vestiges of #Prohibition” by introducing a bill that will undoubtedly be unpopular with craft beverage fans across the United States. The bill would make it legal for consumers to ship alcohol through the United States Post Office, “expanding consumer choice and keeping the Post Office solvent in the process,” according to Congresswoman Speier.
For those out of the loop, it’s currently illegal to ship alcohol through the US Mail. It’s also not okay through third-party carriers such as FedEx and UPS, although violating their rules is not as risky as the USPS’s. For example, violators of the United States Post Office alcohol shipping prohibition technically “shall be fined . . . or imprisoned not more than one year, or both.”
Don’t get too excited yet, though. This isn’t the first time a bill like this has been introduced. However, it’ll be the first time such a bill has been introduced (if it indeed is) on new Postmaster General Megan J. Brennan’s watch. Previous Postmaster General Patrick R. Donahoe, however, publicly supported previous steps to open up alcohol shipment. Indeed, he even had ideas about making shipping easier, including introducing flat-rate boxes designed to ship bottles.
For the curious, the ban on shipping alcohol through the United States Postal Service stems back to 18 U.S.C. § 1716, a federal statute that came on the books back in 1909. The statute provides that “[a]ll spiritous, vinous, malted, fermented, or other intoxicating liquors of any kind are nonmailable and shall not be deposited in or carried through the mails.” Pretty straightforward.
Opening up beer and wine shipping through US Mail won’t be without its administrative challenges, but former Postmaster General Donahoe thought they were surmountable. For example, there are issues with shipping out of and into various states (some states allow it, some do not), and further issues with preventing delivery to those underage.
With interest in craft beverages at an all-time high, this may just be the time for a bill like this to make it through. Keep in mind, however, that secondary markets, from a consumer-to-consumer sales perspective, would still be illegal—and bartering or trading could still be deemed a sale of alcohol, prohibited under many state laws. Shipping of gifts back and forth to your buddies in different parts of the United States, however, may pass muster. So, perhaps it’s a good time to warm back up to your old college friends who may be scattered about the US, and living nearby your favorite hard-to-find source. We’ll keep you posted.
And just like that the Washington State Liquor Control Board has become the Washington State Liquor and Cannabis Board. Here’s Reiser Legal’s warm welcome to the agency we know and love, under a fresh new moniker. I suppose it’s only fair, given the rise of the cannabis industry—and in this the Evergreen State, at that. Maybe few have noticed and few will ultimately care. But, I like the new name! And, mostly, I’m just glad I can still affectionately think of them as the LCB (because LMB just wouldn’t have that same authoritative ring).
For those wondering when the change happened, it looks like the confetti fell on July 24, 2015, when a number of LCB-related bills went into effect after this last legislative session. Turns out, a section of the Cannabis Patient Protection Act (Senate Bill 5052) which we hadn’t been tracking was what made the change (which, LCB reports, is the first change to the name since the Liquor Control Board was established by the Steele Act back on January 23, 1934).
Here’s a header from their homepage taken just now:
And, here’s an old snap from April or so, thanks to the Wayback Machine:
Nothing but hard-hitting news here on the Brewery Law Blog!
Breweries make beer. Wineries make wine (or, under their license, other emerging products such as cider and mead). But what about the reverse? Can a Washington brewery produce wine, cider, and mead? Or, can a Washington winery produce beer? Can either start distilling? Yes, the entity can do so. But, as you might expect, it’s critical to obtain the proper alcohol licenses to produce beverages in the other product category. Indeed, at both the state (Liquor Control Board or “LCB”) and federal levels (Alcohol and Tobacco Tax and Trade Bureau or “TTB”), different licenses are required to cross over into producing other kinds of alcoholic beverages. There are some facility setup issues to bear in mind when doing so, with separation concerns, but they’re not insurmountable. Indeed, as interest in all kinds of fermented beverages is on the rise, we expect to see more beverage businesses extending their brand into these new places.
What TTB brewer’s bond amount does a brewery need? Learn the essentials—calculating the right brewer’s bond amount, and choosing the right kind of bond.
What brewer’s bond amount does a brewery need? It’s a question that often comes up when a new brewery is completing its TTB application for its Brewer’s Notice. The TTB brewer’s bond form can look intimdating, but it’s fairly straightforward. First some background, then some guidance to frequently asked questions.
What is a TTB brewer’s bond?
A brewer’s bond is a way of guaranteeing TTB (or states that require them) that production tax, also known as excise tax on beer, is going to get paid. If a brewery fails to make its tax obligations, the bond is going to kick in and cover the deficient amount. That’s why it’s important to get a brewer’s bond amount right. In fact, if a brewer’s bond is too low for a brewery’s production, the brewery is not compliant.
How can I get a TTB brewer’s bond?
There are two kinds of TTB brewer’s bonds. A brewer’s surety bond and a brewer’s collateral bond. A TTB brewer’s surety bond is when a third party covers the brewery; it’s essentially insurance. The brewery pays a certain amount up front, and the insurance company is obligated to cover the bond. A brewery can get a surety bond by contacting an insurance agent. Many breweries go this route because the start-up brewery needs to put all of its cash toward start-up and build out expenses, and the bonds are relatively cheap. Typically $100 up front for a $1,000 bond and sometimes still just that $100 for a $5,000 bond. To avoid having to deal with a third party, and keep filing paperwork every few years, another option is a Brewer’s Collateral Bond. Instead of paying a certain amount up front for the bond coverage, with a collateral bond, the brewery itself pays its full bond amount to TTB and TTB holds onto that cash. If a brewery doesn’t mind locking up the cash, it’s an option.
What TTB brewer’s bond amount is adequate?
The right TTB brewer’s bond amount depends on a brewery’s production. How many barrels of beer will a brewery produce in a quarter, and what would the brewery’s federal tax obligation on that beer be? That’s the amount of a TTB brewer’s bond a brewery needs to have on file. If a brewery anticipates its quarterly production and, in turn, brewery tax obligation is going to go up in a quarter, a brewery needs to strengthen its bond. The first bond a brewery files is an original. A superseding bond replaces that bond. A strengthening bond strengthens the amount of the one that’s on file.
Currently, the minimum TTB brewer’s bond amount for a production facility is $1,000. For nano breweries opening today, that’s sufficient. Or, at least, it wouldn’t take much more to be sufficient. If you plan to brew more than around 12 bbl per week, the bond would need to be bigger. We’ll walk through the numbers. Tax on beer is, at the time of writing, $7 per barrel for nearly all brewers. If you’re producing below 60,000 bbl per year, it’s $7/bbl today. So, a brewery would have to produce a bit more than 142 bbl per quarter—about 48 bbl per month or 12 bbl per week—to need a bigger brewer’s bond than the minimum $1,000 TTB brewer’s bond. Showing the math, $7 * 142 = $994. That 143rd bbl would bring the quarterly tax obligation to $1001, putting a brewery over the $1,000 minimum coverage. A greater bond would be required.
Notably, if a brewery is seeking a surety bond, very frequently a brewery can pay the same up-front amount, but get a much bigger bond. If a brewery is not posting a cash brewer’s collateral bond, it’s best to get the biggest surety bond it can while paying the lowest amount. This covers the brewery for increased production, without thinking twice. A brewery can shop around for coverage, often a $5,000 bond can be obtained for the same price as a $1,000 bond—that’d be 5x the coverage, giving headroom for production of up to nearly 60 bbl per week. As a brewery expands, or makes plan to, the amount of bond coverage on file with TTB should be in the back of the brewery’s mind.
Do TTB brewer’s bonds expire?
They do. Keep in mind that a brewer’s bond expires after four years. A Brewer’s Bond Continuation Certificate, whether for a surety brewer’s bond or a collateral brewer’s bond, must be filed and accepted by TTB.
Can a brewer change its TTB brewer’s bond type?
Yes, a brewery could switch from a surety brewer’s bond to a collateral brewer’s bond, or go from a collateral brewer’s bond to a surety brewer’s bond.
Help with a TTB Brewer’s Bond or TTB Brewer’s Notice Application
We regularly help handle TTB bonds as a part of our two Brewer’s Notice federal licensing packages. The first is our Comprehensive TTB Licensing Package, where we oversee the entire licensing process, guiding a brewery through every step of the way and handling all the application drafting. The second is our TTB Application Review, which is geared toward DIY breweries who want to save money by taking a stab at the Brewer’s Notice, but want an experienced professional’s review for completeness, removal of errors that may hold up the application, and guidance on streamlining the application for an efficient TTB review. Breweries in planning may call or email for details.