Becoming a bonded winery in California?

I am “toying” with the idea of making a barrel of wine to sell commercially in 2012. I’ve been trying to figure out how to become a bonded winery and its a mess. Is there an idiots guide to it anywhere?

On that note, are there any legal issues if you “winery” is your garage?

We just went though the process, so I have some recent notes that I can share. Honestly, for 25 cases (a barrel of wine) it’s likely not worth it. You’re better off finding 10 or so friends to split the costs in making a home wine. You’ll have to check with your city and county officials to see if it’s even possible to permit a winery in your garage. Here in San Mateo county (where I live) and San Francisco county (where the winery is) we’re pretty limited (but not as much so as other counties).

That said, below is a list of the ABC and TTB forms we were required to file. Note that the ABC wants copies of your TTB application and will need your final Basic Permit before they progress/approve the ABC license. TTB takes about 4 months, and the California ABC takes much longer (8-10 months if I remember).

ABC
ABC-140 Tied-House Restrictions
ABC-208-B Individual Financial Affidavit
ABC-211-A License Transfer Request (“Sign Off”)
ABC-211-SIG Application Signature Sheet (“Sign On”)
ABC-217 Application Questionnaire
ABC-243 Corporate Questionnaire
ABC-253 Supplemental Diagram
ABC-255 Zoning Affidavit
ABC-257 Licensed Premises Diagram
ABC-257-NR Licensed Premises Diagram - Non Retail

TTB
5000.8 Power Of Attorney
5000.9 Personnel Questionnaire
5100.1 Signing Authority for Corporate and LLC Officials
5630.5d Alcohol Dealer Registration
5000.29 Environmental Information
5000.30 Supplemental Information on Water Quality Considerations
5100.24 Application For Basic Permit
5120.25 Application To Establish And Operate Wine Premises
5120.36 Wine Bond

The TTB also provides this nice checklist of everything that’s needed http://www.ttb.gov/applications/pdf/winery_checklist.pdf

After all that’s done, you still need to apply for access to the TTB’s COLA (Certification of LabelApproval) system with form, 5013.2, COLA Online Access Request.

We also had to submit to the State Board of Equalization forms:
BOE-400-ETC - California Excise Taxes Permit Application
BOE-400-SPA - California Seller’s Permit Application

While it is possible to do this on your own, it’s better to work with someone who’s done it before and can manage the ABC and TTB process. There are many Compliance firms and Legal firms that specialize in this. Remember, this is only the process to make and sell wine in California. If you want to sell in other states, you’ll have to apply to each state’s Alcohol Beverage Control separately.

And, it doesn’t stop there… You’ll still have monthly tax reports to file with the State Board of Equalization and quarterly statements to the ABC, as well as TTB.

We make 100-200 cases that we sell in California. The paperwork and selling is what takes all our time.

Let me know if you’d like for me to send you some contacts to help you get through the process.

The following TTB tutorial from the feds is a good reference … http://www.ttb.gov/pdf/compliance-seminar.pdf . The 2011 federal 27CFR alcohol regs are online now but they are a bear to read through. The 2012 hardcopy book should be available from the feds online in January. As mentioned by the previous message if this is a once off or occasional interest the level of ongoing effort to establish yourself and remain compliant would be more than you really want to take on. However, if you are planning to make this a future business with expansion later it might no be a bad idea to get started and have the state and federal process become second nature to you instead of dealing with it when your in a higher production mode. In addition, in my state their are reasons to get sales started as it can enable farm winery status(several tax benefits including equipment sales tax savings, property tax reduction,lower diesel tax) and also open up state and federal grant and private funding possibilities. By the way there should not be an issue with location as long as you meet town, state, and federal guidelines. …Gary

You can have a bonded winery in a garage, we do, in 400 sq ft, currently hosting 19 bbls, & 4 tanks (100, 200, 200, 500 gal) with expansion space in our woodshop.

We did all the work mentioned above, but our biggest issue was Santa Clara Cty for the zoning affidavit.

Recently the county has been reaching out to try to make it easier, but so far no change in ordinances, though you may get support if you enlist Supervisor Wasserman’s office.

Another alternative is to make the wine in an existing winery and pay a fee for the use of the equipment and consulting if you need that help. It is called an AP. We have three folks dooing that with us. Then the only issue is getting your label approved.

+1. If you have a close relationship with a winery, perhaps you can make up a name and file it as a secondary brand under their bond. That way people won’t confuse your wine with that of the winery.

If you have a connection with a winery, this is the best option.

Other option is a custom crush arrangement (you file a dba under the custom crush’s bond, but promote your own wine/brand), but the success of that option is very contingent on what winery you work with.

Just use someone else’s AP and do a custom crush. One barrel is not worth jumping through all the hoops.

I believe an AP requires a full 02 license, because the wine is held under your own bond, not the host winery. You don’t have to have an AP or an 02 to custom crush, however.

Another question in the same vein - once you’ve gotten a custom crush license, how difficult is it to transfer your label to an AP or bonded winery license (outside of jumping through all of the normal hoops required for those licenses)?

I’d start by shopping around for custom crush places. Their compliance person should be able to give some guidance. Your challenge may be finding a place interested in as small a quantity as you may be comfortable with. Maybe someone who transitioned this way will chime in.

John, It’s basically a repeat of the entire process although it goes faster in my experience through ttb and ABC.

None of the above steps are really going to be your limiting issue Tim, it’s going to be your local zoning approval to get a city business license. The ttb and ABC both require that approval to proceed. It’s much easier if you are outside off any city limits and only have to deal with your county, but inside a city limit it’s going to come down to zoning. If your house is not zoned for industrial, which it probably is not, you’ll have to petition for an exception from your city planning commission. In San Jose if alcohol is involved you also need another alcohol exception that requires a vote of the city council.

Basically most cities have rules against making alcohol in an area zoned residential (as they do against running car repair, barber shops ect.) and hoops to jump through in non residential areas. It’s not impossible in most cases, but it will require lots of work with the city planning commission if you’re not in a city that’s ‘farm friendly’. You’ll likely have to convince them that there will be no waste, no traffic and no visitors. It took Jerry Anderson about 4 years to get approval from the town of Woodside and the use permit restrictions are 27 pages. ( no visitors, no traffic, no piling of grape debris things like that the town wanted restricted before they would issue a business license.) Jerry said there was less paperwork and lawyers needed in the two companies he took IPO than in getting his city business license.

Stephen, what is an “AP”? Would you mind if I asked what the arrangement is you have with the three people you are working with under your bond? Do you have any suggestions about the right way for me to contact wineries here in the Livermore Valley?

Paul - I live in Livermore, pretty much an agricultural town and I think it supportive of the wine industry. Do you know if there are limits to the amount of wine produced in a residence?

Thank you everyone for the responses in this thread. Life side tracked me after I posted it. Now I am planning to get this rolling to sell wine in 2014. I like the idea of making wine at a local Livermore winery, but not sure I will be at that scale quite yet.

Tim, not to jump in and answer questions addressed to others, but I wanted to add a couple of thoughts. “AP” =“Alternating Proprietor” Basically, what this means to the TTB is that you have a section of another bonded winery in which you alternate the use of with the host winery. Generally you are responsible for your winemaking. “Custom Crush” means you pay the host winery to make the wine for you. There are big difference in the amount of reporting required - for example, an AP is responsible for their own inventories, reporting, etc. whereas for a custom crush client the host winery of the custom crush is responsible.

If you choose to go the AP route, you need to apply for a full Type 02 license. The host winery is also a Type 02, but they’re also getting to do all of the zoning, planning, etc. with their local planners/officials. The custom crush route is a different license (IIRC a Type 17 which is a wholesale license, not a “winemakers” license). I point out these differences because they affect what you may do in the marketplace, which is important when it comes to sell and market your wine. We started as a custom crush then moved to a Type 02 AP as it just made more sense for us.

Brett’s advise above is sound, and I’ve seen it done by others. Find a friend who has a winery (likely an 02) and have them create a brand under their license. Take the P&L responsibility for that brand line and see how it goes. Grow that brand to the point where it makes sense to take on more. Or go the route to get zoning approval. Once you’re up an running you’ll enjoy it - however you choose to do it.

Tim,

An AP is an alternating proprietor, meaning the same bonded winery space is used alternately by different proprietors who share the space. So each proprietor has their own bonded winery license (02 through the CA ABC, bonded winery permit through the TTB), and they do all their ABC, TTB, state and county reporting separately. Equipment can be shared, so not every winery has to own their own press, destemmer, etc.

You should call or visit the Oakland ABC and the Alameda County planning or zoning dept. to find out if you can do this. The federal license is free, except for your excise tax, and the ABC license is $100 a year for an 02, plus your excise tax. Not sure what the fees would be to Alameda County or Livermore.

Tim, a good person to talk to is Dane Stark at Page Mill Winery. He’s always been well connected, so should be able to help you figure out if anything in Livermore would work for you.

It would seem you want to get a 17/20 and custom crush somewhere. If you plan on growing and getting an 02 to have a tasting room in the near future you should go for it but make sure you can get space somewhere to do an AP in the near term. You don’t want to get a 17/20 and then transfer to an 02 as you can have difficulties with labeling/sales if the wine is already bottled and labeled. Best to at least have a quick talk with a compliance person before making any decisions.

Ed - thank you! I need to volunteer soon, I miss you and the winery.

Wes - great idea, page mill is a stone’s throw from my house, so it would be perfect.

Jim - I can’t thank you enough for all of your thoughts on how to go about this.

Paul, thank you as we’ll! I got the city of livermore business license application and the application for a home business today. Will get those filed so I can then tackle th TTB and ABC, while parallel pathing the AP avenue.

License applications reminded me I need to decide the business incorporation. Leaning heavily towards an S Corp. thankfully my finance background has some use :slight_smile:

Evan, great thoughts, thank you! I have all of the equipment already ( 2 stainless tanks, crusher/destemmer, small bladder press, etc) so leaning more towards an 02 at this point.

That said, there is a place here in livermore that is a custom crush make a barrel of wine with your friends place. I think I need to contact them to see if there is potential. Their business model is around the experience of teaching you how to make wine, provide the equipment, let you get your hands dirty and make wine. I don’t think I would need all of their services. But, something to explore for sure.

Tim, Best of luck! It’s a brave move.