Washington Brewery Guest Taps – Applying the “25%” Rule

Are guest taps legal at Washington breweries? Indeed, they are, but subject to an important restriction.
Are guest taps legal at Washington breweries? Indeed, they are, but subject to an important restriction.

Are guest taps legal at Washington breweries? If you’ve been on a brewery crawl here in the evergreen state, you know the answer has to be yes. But, are there any restrictions on what a Washington brewery can pour at its taproom? Let’s dig in.

In Washington, we’re lucky to have a fairly de-regulated market. Just look at some of the Southern states, for example (where in Alabama homebrewing only became legal in 2013, sheesh). However, it’s not a free-for-all as far as guest taps are concerned.

In Washington, the on-point law can be found in RCW 66.24.244. It provides that any properly licensed microbrewery can sell beer produced by another microbrewery (those on the craft side) or domestic brewery (the big guys), but with one major caveat. The guest taps cannot exceed “twenty-five percent of the microbrewery’s on-tap offering of its own brands.” That might seem straightforward, but let’s break it down.

First, the excerpt one more time:

“Any microbrewery licensed under this section may also sell beer produced by another microbrewery or a domestic brewery for on and off-premises consumption from its premises as long as the other breweries’ brands do not exceed twenty-five percent of the microbrewery’s on-tap offering of its own brands.”

Understanding the Washington Brewery 25% Guest Tap Rule:

  1. Under the microbrewery license, standing alone, a brewery can only have beer guest taps. Not wine, not cider, not mead. The rule only applies to beer.
  2. The 25% rule is clear, but its application may not be. It’s easiest to break it down by using a number. You might read the 25% rule and think it’s simple. Say, I have 20 taps. A quick read may suggest to you that 25% of those can be guest taps. So, then, fifteen of my own beers and then five guest taps—75%/25%, right? It’s actually a little different. What the law says is that a microbrewery can’t exceed 25% of the brewery’s own brands. So, if you have 20 of your own beers on tap, then you could have an additional 25% allocated to guest taps. That’d be 25 total taps. 20 of your own beers, 5 guest taps. Important distinction. So, if you only had 10 total taps, no more than two could be guest taps.
  3. You probably caught it in the read through, but one last note. The law permits on-premise sales and off-premise sales, too. So, the law gives Washington breweries the green light to fill growlers from guest taps as well.

Ultimately, I love a good guest tap. And, I love that this industry is so supportive of one another that guest taps are a mainstay. The Revised Code of Washington, as applied by the Washington Liquor Control Board, ensures that Washington brewery guest taps are alive and well throughout the state. However, the 25% rule prevents a Washington brewery from, say, operating a full-fledged beer bar, while only dabbling in its own on-tap offerings. (Which, for me, is a bit of a bummer. I’d love to see a nano get rolling as a great beer destination—a fun atmosphere, an awesomely curated selection—then transition over into a bit more brewing. But, alas, that’s not the law.)

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Washington Brewery Law Resources

When opening a brewery, all the laws and regulations can feel daunting. Here's a short list of key Washington Brewery Law Resources to help kickstart your understanding.
When opening a brewery, all the laws and regulations can feel daunting. Here’s a short list of key Washington Brewery Law Resources to help kickstart your understanding.

Opening and running a brewery is complicated, and Washington Brewery Law Resources aren’t necessarily all neatly gathered in one place. It can be hard to know where to look when your curiosity encourages you to start poking around. Today, I’ll do my best to help you start your research on how breweries in Washington State are regulated. There’s a bevy of laws/code/regs out there, that’s for sure. Here are some jumping off points for your legal excursions.

Keep in mind, these sources aren’t exactly written with readability as a primary objective. Important nuances pop up in all different places. That’s what we’re here for, if you’re ever not sure about something. Indeed, it’s through the code, and our understanding of it, that we can help answer all kinds of questions on the fly, such as: (1) Can my Washington brewery deliver beer to customers in Seattle?; (2) If I’m only selling beer within Washington’s borders, do I still need a Certificate of Label Approval?; (3) May those under the age of twenty-one come into my brewery without us having food service? The list of fun questions that vary from state to state goes on.

For anyone interested in checking out primary Washington Brewery Law Resources, here are some links along with my notes to help you navigate them.

Washington Brewery Law Resources – State Brewery Law

Revised Code of Washington. This is the law that the state legislature creates and revises. Primarily, you’re looking at the content in RCW 66, although keep in mind that other provisions relating to your business, potential distribution agreements, etc. all fall in other places in the code.

Washington Administrative Code. This is where administrative agencies put their regulations. In Washington, the primary administrative authority is the Washington State Liquor Control Board. They were created by the legislature by way of RCW 66 and given authority to do certain things relating to booze in Washington State. Any regulations they promulgate become part of the Washington Administrative Code. Unfortunately, this means that there are often provisions in RCW that address some of your questions, and then provisions in WAC that address other questions. It just depends on whether the legislature contemplated something or it’s LCB creating regulations by virtue of its authority.

Between those two, that’s the heart of Washington brewery law. Keep in mind there are some sanitation requirements set forth by the Washington State Department of Agriculture, and your compliance therewith is a part of maintaining your LCB microbrewery license. Further, there are some places where the County and your Municipality step in, particularly with respect to health codes and building codes.

Washington Brewery Law Resources – Federal Brewery Law

Of course, we all know that state and local government isn’t the final authority on breweries in Washington. Indeed, Uncle Sam, through the Alcohol and Tobacco Tax and Trade Bureau (TTB), has a say on a number of matters. When it comes to TTB, you’ve got to jump to the Code of Federal Regulations (CFR) to see all the regulations they’ve promulgated, and Title 27 is the place to go. Bear in mind, if you’re brewing off-the-wall beers, such as those without hops, the Food and Drug Administration (FDA) may be your labeling authority. And, very technically, FDA has concurrent authority over your brewing business—but TTB really is the place to go when you have questions of federal brewery law. Fortunately, they’ve put together helpful resources on their website to help you wade through labeling and advertising issues.

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Breweries Willing to Get Started Earlier With Their Pilot, See Benefits

Don’t wait for the big guns. There is no shame in starting small.

***NOTE: I have had two comments now from confused readers regarding my use of the term of “Pilot.” I use the term pilot to refer to a brewery’s test system – the brewing equipment used to prepare small batches of beer. My use does not include the TTB’s use in the “pilot brewery license,” which is a license reserved for educational, scientific and research purposes. That license will not allow  you to sell your beer. But using a “pilot-type” brewing system, you can obtain a normal Brewers Notice. That is my intent with this article. Hope that clears it up!

 

The past few months have been extremely exciting. My office has been inundated with calls from brewers ready to go commercial. I am very happy to announce that Reiser Legal’s flat rate licensing packages have been uber successful – and as a result we have more beer being churned out. I only wish I could help more of you in other states (sorry guys and gals).

 

A trend is seriously starting to take shape – brewers are getting the TTB out of the way early on by licensing a pilot system. Whether it’s a 10 gallon system, or its a 10 bbl commercial pilot, many are finally taking advantage of the fact that a Brewers Notice can be attained much earlier than you might have thought.

 

I have always taken the stance that the best thing a brewery can do is get licensing accomplished as soon as possible. Waiting until you have you found investors, ordered equipment, installed equipment, ordered materials, etc. – can cost you quite a bit of money in standstill operations. Remember, the TTB and state licensing processes can take several months to accomplish.

 

In the past few years, the TTB has become accustomed to the “nanobrewery.” Regularly, the TTB licenses commercial brewing operations of no more than 10 gallons of production per batch. In some instances, I have seen anything from modified stovetop assemblies to standing burner setups get their TTB licenses and begin to churn out legally-salable beer.

 

The important things to remember are that the TTB will only license a bonafide commercial operation – which means finding zoned space capable of meeting local codes. Sometimes, it might be an industrial garage and sometimes it will be a small shed in your residential backyard. But, as long as you can meet the minimum standards, your dream of opening a microbrewery might be closer than you thought.

 

Knowing these things, many brewers are getting started earlier than they had hoped. By obtaining a suitable space and a reliable pilot brewing system, brewers are able to submit their application to the TTB and state licensing agencies. Once approved, they can grow organically and obtain change of locations, change of owners and other approvals required by the TTB.

 

Want an example? The photo above is my wife’s brand spanking new pilot system. This system will be used to submit an application to get her brewing. With the licensing processes out of the way, she can begin producing and selling beer while raising the money to start a full scale production facility.

 

Don’t delay the application process. Get brewing and grow organically.

 

 

 

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Getting A Jump Start For Your Brewery Business Plan

Every brewer needs a plan. Don’t delay your business plan

 

Every brewery needs a business plan. This is a fact. Even those of you who don’t have to worry about fundraising (the very few) should have a business plan that sets projections, rules and goals. This is vital to the success of a brewery.

 

A business plan is not the “pitch plan” that many think that is. A business plan is an instruction manual for your brewery, establishing the rules and regulations with which you will operate, the financial goals that you seek to attain and the market factors that mean everything to your success. So, be sure to begin the conversation about your business plan sooner, rather than later.

 

Because I too have drafted a brewery business plan – both for clients and my own project – I know that the tast can be daunting. A proper business plan covers industry material, financials, materials supply, business operation and ownership. A lot of these things can be tough to define, and sometimes it is most difficult to figure out where to start.

 

My personal preference is to build an outline of the vital portions of the business plan. Once you have it organized, start writing. If you are hard up for materials pricing, industry numbers and other data, please don’t forget about the Brewers Association. The Association’s website has oodles of information that can be extremely helpful to you as you build your plan. For $195.00, a brewery in planning can join and get all of the same benefits that are available to existing breweries. So, please, don’t delay in joining.

 

I know that still many of you might fear getting started. There are a number of pre-written outlines available on the WWW that might be of interest to you. I have not had the opportunity to scan them all for content, but there are many out there.

 

One in particular that I think can provide a good starting point is the Business Plan for a Microbrewery published by MBA, Nat Chiaffarano. You can download the business plan documents (a fill in form) for as little as $30 and as much as $70, depending on the girth.

 

While you can always rely on a pre-written plan to get a head start, you should remember that you can benefit immensely from penning your own custom plan. But whatever you do – make sure you have a plan.

 

 

 

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I-1183 Puts Liquor Privatization Talk Back On The Table

Liquor privatization is back, with a vengeance.

 

***This was originally published on BeerBlotter.com, a Seattle based beer blog edited by my wonderful wife. I provide legal commentary to BeerBlotter.com throughout the year.***

 

We can all curse it – we can all love it. The fact of the matter is that another voter initiative is here and its hoping to break liquor from the controls of the state. Will this new one be bringing additional changes to the current alcohol regulation scheme? Yep.

 

Last year, I-1100 took Washington by storm. That voter initiative that was funded primarily by Costco and was the topic of conversation on this blog and many others for a matter of months. In the end, I-1100 lost by a fairly narrow margin of 53-47.

 

This year’s initiative took a different approach – scale back the “open market” approach, raise money for the state and file late.

 

I-1100 was an open market proposal aimed at pulling all sales restrictions on all products. That proposal drew the ire of the Washington Beer Commission who feared wholesale discounts for out of state producers, less shelf space and the emergence of tied-houses. I-1183 heard that disdain and decided not to mess with prohibitions against shelving deals, credit sales and other wholesale discounts.  Convenience stores are not going to have the opportunity to sell liquor under the new initiative – only specially licensed stores with adequate (10,000) square footage.

 

The Washington Beer Commission has not made their position public, but I suspect they will have a different response. The law simply doesn’t raise as many flags as last year’s proposal.

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