New Legislation Makes Business Easier for New York’s Craft Brewing and Distillery Enterprises

With over 200 breweries in operation accounting for more than 11,000 jobs, craft beer in New York is approaching a $4 billion enterprise – New York State Assemblyman Kevin Cahill

On August 14, 2015 New York State Governor Andrew Cuomo signed three bills into law, which amend the New York State Tax Law and New York State Alcoholic Beverage Control Law to make it easier for craft breweries and distilleries to conduct business. The new legislation accomplishes the following three objectives:

First: “Farm distilleries” are now specifically allowed to sell gift items including food, craft products and souvenirs.

New York’s Alcoholic Beverage Control Law now specifically allows farm distilleries to sell non-manufactured gift items such as food, non-alcoholic beverages, liquor supplies and accessories, craft products, and souvenir items on their premises.

By way of background, a “farm distillery” is any place or premises, located in New York State, where liquor is manufactured and sold and either: (a) the place or premises is located on a farm; or (b) such liquor is manufactured solely from farm and food products. Farm and food products are any agricultural, horticultural, forest, or other products of the soil or water that are grown, harvested, or produced wholly within New York State. Farm and food products may include, but are not limited to, fruits, vegetables, grain and grain products, honey, nuts, preserves, maple sap products, apple cider, fruit juice, flowers and fermented agricultural products.

The Alcoholic Beverage Control Law currently recognizes four categories of farm-based beverage manufacturers including: farm wineries, farm breweries, farm cideries and farm distilleries. Prior to the amendment, farm wineries, breweries, and cideries were permitted to sell non-manufactured gift items, while “farm distilleries” were prohibited from doing so.

Under this new law, farm distilleries now have the opportunity to increase their revenue, encourage repeat customers, and improve their business by offering a better visitor experience — which encourages further expansion of the beverage industry as a whole.

Second: Micro-breweries are now exempt from certain redundant and burdensome New York State tax filing requirements.

New York State Tax law requires all wholesalers that sell beer, wine, or liquor to file annual information returns with the New York State Department of Taxation and Finance. The information returns must include information such as the total value of certain sales made during the period covered by the return, as well as certain information regarding the vendor, operator, or recipient to whom the sale was made.

Prior to the amendment, the Tax Law exempted farm breweries, farm distilleries, farm cideries, and farm wineries from the information return requirement. However, microbreweries, meaning those breweries that produce less than 60,000 barrels of beer annually, were not exempt. The amendment to the Tax Law specifically exempts microbreweries from the information return reporting requirement, which means that such breweries are no longer required to file annual information returns with the New York State Department of Taxation and Finance.

The annual reporting requirements placed a heavy burden on small microbreweries, as such breweries are generally not equipped to collect and process the data required to complete the return. Consequently, the amendment eliminates the heavy burden that the Tax Law’s reporting requirement placed on local microbreweries.

Third: Licensed retail stores will be permitted to conduct beer, cider and liquor tastings without the manufacturer present.

Effective on September 14, 2015, licensed retail stores that sell beer, cider and liquor will be permitted under New York’s Alcoholic Beverage Control Law to conduct tastings for their customers without a manufacturer or wholesaler present. Currently, such tastings are only allowed if the manufacturer (i.e. the distillery, brewery or cidery) is present to conduct the actual sampling. However, this amendment will allow licensed retailers themselves to conduct beer, cider, and/or liquor tastings. It also shifts any liability that may stem from a tasting onto the retail licensee, rather than the manufacturer or wholesaler.

The amendment does, however, include certain limitations. Initially, it limits the sample amount with respect to beer and cider tastings to three fluid ounces, while liquor samples are limited to one-quarter fluid ounce. Further, any tastings must be conducted by an agent of the retail licensee who is over twenty-one years of age. Persons under twenty-one years old are prohibited from serving beer, cider or liquor samples. Lastly, manufacturers and wholesalers of beer, cider and liquor remain prohibited under the Alcoholic Beverage Control Law from paying any retail licensee to encourage the tasting of their products.

For many small craft breweries, cideries and distilleries, retail tastings were an added, and sometimes unaffordable, expense. This amendment to the Alcoholic Beverage Control Law gives both the manufacturers and retailers a new marketing device to increase sales and revenue. Additionally, with the increasing variety of craft brews, ciders and liquors being offered at numerous retail venues, it allows consumers to try the various products before making a final purchase.

Chip Grieco