Best State in the U.S.A. to start a craft distillery ?

Discussion and plans for legalizing our hobby.

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Best State in the U.S.A. to start a craft distillery ?

Postby Mudflats » Tue Jan 03, 2017 6:10 pm

OK guys.......what state has the best laws, least excise taxes, and best help in start up businesses such as this ?

Some states are so communistic as to have such taxes enough to suffocate the beginner business !

I'd love to hear from each state on start up legal craft disilleries...and details please !

Reporting monthly ?
What price is the tax per month ?
And what if you have spirits in barrels ageing ? You still have to pay taxes on THAT ? and you have not even sold it yet ? It may not even be any good !!!!!!!!!!

I hate the way they want taxes on gallons/litres and we still have to age it & still do not know if it is marketable............
So what happens if I pay taxes on a barrel, age for 2 years & open it up to find it is off tasting ??????????????

It has been told to me that in KY & TN that the old distilleries would not be taxed the product until it was done aging & found to be marketable...............

So, I am interested in opening a legal craft distillery & wondering what state is the best, that said, I still have to consider the water, the weather, and the price of land.
Any info is appreciated !
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Re: Best State in the U.S.A. to start a craft distillery ?

Postby bhh » Tue Jan 03, 2017 8:41 pm

Great question. I think your answer is easy though. What state/states have the most craft distilleries? What state has the most 3-5+ years old? That didn't happen by accident.

I know NY has passed some pretty inviting laws and we have a very healthly and growing craft distillery community that has access to a lot of willing and eager consumers but the reality is that myself and most people are only going to be able to speak to their own states and communities.
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Re: Best State in the U.S.A. to start a craft distillery ?

Postby Truckinbutch » Tue Jan 03, 2017 8:51 pm

The state of Anonymous . :moresarcasm:
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Re: Best State in the U.S.A. to start a craft distillery ?

Postby jb-texshine » Tue Jan 03, 2017 11:58 pm

Truckinbutch wrote:The state of Anonymous . :moresarcasm:

+1
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Re: Best State in the U.S.A. to start a craft distillery ?

Postby DeepSouth » Wed Jan 04, 2017 6:25 am

This question is really too broad to answer in a single post, so I won't try. I'll tell you though that one of the best sources of info like this is the ADI forum. Every state is different when it comes to licensing, taxation, distribution, etc. The Federal rules however are the same everywhere. A federal distilling permit is free, however there are several barriers to entry.

First, you have to either have ownership or a paid lease on the property you intend to use as your distillery. They won't begin processing your application without this. You have to submit detailed financial documents on each person who has an ownership stake in the distillery. This can include bank records, tax returns, etc. and articles of incorporation or other business formation documents. You need a federal tax ID. You need a detailed distillery layout and map, all to be approved by the TTB. You have to acquire a surety bond as well to obtain your DSP. A surety bond is basically an insurance policy that covers the taxable value of any spirits you produce. For the Federal government, you don't pay excise taxes on your liquor until it is sold or leaves your distillery. While it is in storage, processing, or production at your distillery, you pay no taxes, but you have to have sufficient bond coverage for the taxable value of any alcohol on your premises. If your barrel house burns down, the federal government still gets their money, but your bond would kick in and cover that.

My distillery is in Mississippi. Our laws aren't that great to be honest. A state distilling permit is $9025 annually. Every year I get to pay the state $9k for the pleasure of just existing and being in business. We have a state ABC which serves as the distributor. Every drop of distilled liquor and wine sold in the state passes through a central state controlled warehouse before going to a liquor store, bar, or restaurant. The state of MS makes 27.5% markup on all liquor, plus an additional excise tax that works out to be about $0.50 per bottle. Federal excise tax is $13.50 per proof gallon, or about $2.14 for a 750 ml bottle at 80 proof. Say I sold a 6 pack case at wholesale in MS for $100. The state of MS would mark that case up to $127.50, plus $2.97 state excise taxes, plus $5.00 to ship it to a liquor store, for a grand total of $135.47. The liquor store will buy that case, and then mark it up an additional 25-30%. So the distillery gets paid $100 for a case of liquor that retails to the end customer at for about $170. Oh by the way, the distillery then gets to pay $12.84 to the federal government in excise taxes. So end customer pays $170 for the case, and distillery only nets $87.16 before even counting the cost of production.

This is to just illustrate that distilleries are low margin businesses, so you need to understand that right off the bat. Even in a state with private distributors instead of a state ABC, the numbers are similar. Go ahead and expect to make half or less of whatever your shelf price will be, before your expenses.

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Re: Best State in the U.S.A. to start a craft distillery ?

Postby DeepSouth » Wed Jan 04, 2017 6:30 am

This topic should probably be moved to the craft distilling section.

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Re: Best State in the U.S.A. to start a craft distillery ?

Postby Swedish Pride » Wed Jan 04, 2017 7:27 am

good info there DeepShouth, thanks for sharing, very interesting stuff.
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Re: Best State in the U.S.A. to start a craft distillery ?

Postby bluefish_dist » Wed Jan 04, 2017 9:20 am

Colorado is quite friendly for distillers. My licenses are a little less than $2k per year for a manufacturing and self distribution. I can sell directly from my tasting room or to someone with a liquor license. I can also go through a wholesaler if I choose, but it adds one step to margins. I can have up to two permanent sales rooms. So you could have one at the distillery and one in a high traffic area like Breckenridge. They have a tasting room at the distillery and another down town on the plaza.
State tax is assessed when its ready for sale at ~$.61 per liter. Doesnt matter on proof. Federal tax is due when the liquor leaves the DSP. You are liable for the tax prior to that and depending on size have to carry a bond to cover any theft of liquor while in bond. The law did just change this year and you no longer need a bond if you are less than $50k in tax per year. So that should cut a few hundred $$ from the budget.
If you are serious about the industry I recommend the class by downslope distilling. It covers a little bit of most of the aspects of the business including building codes, occupancies as those are really as much of a barrier to getting started as the federal DSP. It wont give you everything, but it has a decent base for making a decision on going forward. The reality is the feds want you to have a license since you give them lots of money. You also have to realize you will be a franchise of the government and they have to get their cut.
When I took the class they suggested it would take about $500k to get started. That is a realistic number. Yes you can do it for less, but the reality is you have to be pretty big to make enough to support more than 1 or two people.
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Re: Best State in the U.S.A. to start a craft distillery ?

Postby LWTCS » Wed Jan 04, 2017 10:44 am

This map only represents our licensed professional distillers. But it is a reasonably good reflection of where the action is.

There are some states that are really pushing to set themselves up to do business by holding down the state tax on alcohol. California, Arizona, Nevada, and Colorado (among a few others) come to mind in this regard.

Other states are making it super easy to get set up so the barriers to entry are favorable even though the tax rates may be higher. Washington, and Oregon state come to mind in this regard.

Wyoming and New Hampshire do not have any sales tax but when referring to the SD map we see very few start up distilleries in those states. One assumes this is largely due to population? Nebraska for instance has a low tax rate at $3.75 but we see little to no movement in that state. But there are only like a million people in the entire state so it makes sense that there is just not as much going on.

It will be interesting to see how the map fills in moving forward based on following states with the lowest state tax on likker.

Here is a link to tax rates for each state:
http://taxfoundation.org/blog/map-spiri ... state-2014
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Re: Best State in the U.S.A. to start a craft distillery ?

Postby LWTCS » Wed Jan 04, 2017 10:57 am

One state even has a grant program set up that made it possible to send a distiller to school, then to the ADI conference,,,,and help also pay for his distilling equipment.

Not sure if that program is still in place or if it was even aimed at distilling?
Or just "Job Creation" in general?
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Re: Best State in the U.S.A. to start a craft distillery ?

Postby Mudflats » Wed Jan 04, 2017 5:59 pm

LTWS.................what state is this who is teaching ?
How wonderful is that that the craft will be taught ?

Thanks for everyone's input....I have a biz major nephew and a daughter who imagine ME opening a craft distillery that (once established) they will come help run....
Youngin's (especially intelligent kids) are having a hard time now days, living off a McDonald's paycheck.
The other of my kids are at University, and doing biz degrees....I think a class/regimen teaching course for distillers would be so awesome !!!

I myself have learned the hard way (the old way) , that said, the only way, so I am learning new mashes & grain bills and the world is seriously exciting for new biz and new craft !
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Re: Best State in the U.S.A. to start a craft distillery ?

Postby Mudflats » Wed Jan 04, 2017 6:10 pm

I am also heavy into 2 realms: one is traditional Bourbon made from a 5 grain mash, nice and smooth...drinking straight up or with a water back,,, the other is smoked malts.......where we live, in other words, malts smoked from what you have growing around you; not what you import.
My malts are smoked with Alder, Vine Maple, Apple, and so on....
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Re: Best State in the U.S.A. to start a craft distillery ?

Postby LWTCS » Wed Jan 04, 2017 9:53 pm

Mudflats wrote:LTWS.................what state is this who is teaching ?
How wonderful is that that the craft will be taught ?

Thanks for everyone's input....I have a biz major nephew and a daughter who imagine ME opening a craft distillery that (once established) they will come help run....
Youngin's (especially intelligent kids) are having a hard time now days, living off a McDonald's paycheck.
The other of my kids are at University, and doing biz degrees....I think a class/regimen teaching course for distillers would be so awesome !!!

I myself have learned the hard way (the old way) , that said, the only way, so I am learning new mashes & grain bills and the world is seriously exciting for new biz and new craft !


Was this outfit here:

http://appalachian-moonshine.com/

Evidently the state paid for them to go to Moonshine University, ADI, and also paid for all or part of their still.

These fellers hit the ground running and have distribution in 6 or 8 states.

They are not going to win any awards for producing a fine, craft/artisan spirit but they work hard and are good folks producing jobs.

Evidently they have a lot of traction with the college crowd and their tasting room appears to be well capitalised.

I reckon they knew thing or two before being sent to Moonshine University.
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Re: Best State in the U.S.A. to start a craft distillery ?

Postby magnum49 » Tue Mar 28, 2017 1:33 am

I hear Missouri is pretty laxed to on a lot of issues


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Re: Best State in the U.S.A. to start a craft distillery ?

Postby Bushman » Tue Mar 28, 2017 4:46 am

I think there are better questions to ask if you are interested in making it a profession. We have successful craft distilleries in every state and we have had them fail in most states. Why?
My guess is:
Overhead
Marketing
Location
Quality of Product

Probably other reasons but I think you need a good product but I have seen success because some of the other reasons seem to be more important at least when starting. We have three distilleries in my state that come to mind. Two are because of overhead. One distributes now in 4 states and produces his product on his property in a converted chicken coop with one still. Another is in a small building and they made their two stills one reflux and one pot using keg boilers, That is Zymurgy Bob. The third that comes to mind is making it on Marketing with having a tasting room in a 12 month destination vacation location and making many flavored drinks including flavored tequila.

Look at how much you have to invest and don't get yourself in trouble by going bigger than you have the money to investment. This one is difficult because most don't realize the cost. Most successful distilleries will tell you to figure out how much and then at least double it. It's easy to ask questions here but most of our members have not tried to make a career out of it. I would talk to micro distilleries both successful and if possible ones that did not succeed and ask them questions. Have a great business plan, know how or have a person that knows how to distill. I can't believe how many come here and want to learn the process and then go out and make a career out of it. Although expensive but if you can swing it going to a credible school (as mentioned earlier) not only to learn how to distill but one that discusses business practices, marketing, costs, how to comply with state and federal rules/laws. Lots of decisions I haven't even covered. Joining ADI gives you access to a lot of information to get started. I know Odin and iStill offers advice and will help with a business plan and I am sure LWTCS and StillDragon would probably do the same. ADI requires a yearly membership fee, and Odin and LWTCS would help if you were buying their equipment. I have found both of them very good to work with.
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