Top 5 TTB Application Tips

April 20th, 2016 • by Paul Leone
Paul Leone

Paul Leone

Paul Leone is the Executive Director of the New York State Brewers Association.

by John Szymankiewicz

April 19, 2016
Related Topics: TTBLegalFinance



Understanding the approval process will help get your business up and running faster.

As an attorney working almost exclusively with craft beverage producers, I get a lot of questions about the Tax and Trade Bureau (TTB) application process.  I often think of The Princess Bride’s Inigo Montoya (played by Mandy Patinkin); at one point in the movie, he says “You keep using that word. I no think [sic] it means what you think it means.” That’s what it’s like dealing with the TTB and (in many cases) your local ABC. Unfortunately, the TTB and ABC feel the same way about us when we submit the application (“inconceivable!”). Anyway, here’re the top five trickiest questions I get when it comes to submitting a TTB application:

1. When can I submit my application?

Ah, well, that depends. See, here’s the thing: the underlying assumption in the application process is that you are completely done with everything and are ready to brew beer, you’re just waiting on approval from the TTB. Functionally, with the average approval time running close to 120 days, you want to submit the application as soon as possible – rather than being ready to open the doors and then wait four months to get approval. So, I tell clients that at minimum, to submit your application to the TTB, you need:

  • A location (including a lease or deed that indicates you are currently in possession of the premises) – One of the way the TTB tracks permits is by location – no location, no permit.
  • Facility layout (it doesn’t have to be architectural level drawings, but they do have to show the equipment, the layout and separation of the brewery and the taproom, if any).
  • Equipment (see above).
  • Money (they’re going to ask about how you’re funded and where that money came from, so you have to have that ironed out).

2. No, really, when can I submit my application?

Listen pal, I’m your lawyer, I’m supposed to tell you what the law is! Ok, so here’s the way this boils down:

  • When you submit your application you commit that everything submitted is true and accurate under penalty of perjury. That means that whatever you submit better be what is not what might be.
  • They expect that you’ve completed construction and are submitting finished drawings of what is (as built).
  • And, technically, it also means that they can show up an inspect the facility anytime after you submit the paperwork.
  • If what you submitted and what they see when they get there aren’t the same thing, uh, that’s bad.

I can only tell you the options, not the decision. That being said, I have heard of at least one brewery that received their TTB approval, before they had even broken ground on the building for the brewery they were getting permitted for. That’s bad. TTB will revoke your permit if that happens. And, guess what, you go to the back of the line – because you have to apply all over again.

3. Can I make beer while I’m waiting for approval from the TTB? Then I can sell it after I get approval?

This one’s actually pretty easy: NO. The approval is permission to manufacture, not permission to sell. You cannot make beer commercially (even if you don’t sell it) without permission.

4.  Can I pour beer at festivals and events before I get my TTB approval?

Generally, the answer to this is “no.” You cannot produce (or serve, or charge for) commercial beer without permission from the federal government (TTB). However, before you have TTB approval, you may just be considered a homebrewer – if you’re brewing at a homebrew scale. Check with your local ABC, your festival or event coordinator, perhaps you can sample your homebrew as “the type of beer we’ll make” or “the quality of beer you can expect” when you’re a licensed brewery. But this too can be tricky. Check with your local authorities.

5.  What’s this “source of funds” stuff?

OK, so, when you submit your TTB application, they want to know how you’re funded and where the money came from. Here’s the thing: as far as the federal government is concerned, opening a brewery is not much different than opening a gun factory or a pharmacy; there’s a potential for illegal behavior and a criminal element. So, the TTB is concerned about three things when it comes to “source of funds”:

  • Are you going to pay your taxes?
    • If your finances are shaky or you’re grossly underfunded, does that mean that you might be tempted to skimp on taxes?
  • Are you laundering money?
    • You laugh, but there are stories of breweries being setup with funds from illegal or quasi-legal businesses (think “decriminalized” but not “legalized” marijuana sales/use) to clean up the funds. Worst case, you’re setting up the Topeka Cartel.
  • Are you controlled by someone who shouldn’t control you?
    • They want to see if you’re being fed money (and therefore have some responsibility to) someone that shouldn’t own part of your business – such as someone that owns a distributorship or a chain of retailers or an organized crime boss.

There are, obviously, lots of other questions, nuances, and details that come up as you fill out your TTB application, but these are the most… interesting ones I get regularly. As with anything where you’re dealing with a regulatory agency; if you’re not absolutely clear about what they’re asking for, it’s better to ask first before you do something. This is an area where it is definitely NOT better to ask for forgiveness later.