On May 16, 2018, the Alcohol and Tobacco Tax and Trade Bureau (TTB) issued Industry Circular 2018-3, allowing proprietors of distilled spirits plants (DSPs), bonded wine cellars (BWCs) and breweries to submit a request for a variance to the typical method for storing tax-determined and non-tax-determined products. Under TTB regulations, a proprietor designates areas of the premises as bonded and non-bonded. With few exceptions, tax-determined products can only be stored on non-bonded areas of the premises and non-tax-determined products can only be stored in bonded areas.

Under Industry Circular 2018-3, proprietors may request a variance to the bonded/non-bonded designations established in existing regulations. This variance would allow an “alternation” of a specific area or multiple areas between a bonded and non-bonded designation. An “alternation” allows two practices (e.g., brewing and winemaking) statutorily prohibited from occurring at the same premise to occur through the creation of a legal fiction. The premise “alternates” between one type of premise to accomplish one task and reverts to another type of premise to accomplish another task.
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Texas craft beer distributors received an early Christmas present in 2017. On December 15, 2017, the Texas Court of Appeals for the Third District, at Austin issued an opinion in Texas Alcoholic Beverage Commission v. Live Oak Brewing Co., et al. (NO. 03-16-00786-CV) in which the court overturned a lower court’s determination that a statute prohibiting self-distributing brewers from selling the distribution rights to their products was unconstitutional under the Texas Constitution.
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