16 Tex. Admin. Code § 41.65 - Contract Distilling Arrangements and Distillery Alternating Proprietorships

(a) This section implements Alcoholic Beverage Code §§ 14.10 and 37.011.

(b) Alcoholic Beverage Code §§ 14.10 and 37.011 authorize contract distilling arrangements and distillery alternating proprietorships.

(1) "Contract distilling arrangement" means an arrangement in which two distilleries contract for one distillery to engage in the activities authorized in Alcoholic Beverage Code §§ 14.10(a) or 37.011(a) on behalf of the other distillery.

(2) "Distillery alternating proprietorship" means an arrangement in which two or more parties take turns using the physical premises of a distillery as permitted under the Alcoholic Beverage Code.

(c) As used in this section and Alcoholic Beverage Code §§ 14.10 and 37.011, "affiliate" means a person who controls, is controlled by, or is under common control with the holder of a Nonresident Seller's Permit, including a subsidiary, parent, or sibling entity of the nonresident seller.

(d) The parties to an agreement under Alcoholic Beverage Code § 37.011 shall consist of the holder of a Distiller's and Rectifier's Permit and the holder of a Nonresident Seller's Permit. The nonresident seller must either:

(1) own a distillery outside Texas; or

(2) have an affiliate who owns a distillery outside Texas who also holds a Distiller's and Rectifier's Permit.

(e) Pursuant to Alcoholic Beverage Code §§ 14.10(d) and 37.011(c), a distiller ("Distiller A") who manufactures, bottles, packages, or labels distilled spirits on behalf of another distiller ("Distiller B") or nonresident seller under a contract distilling arrangement may not consider the distilled spirits as being owned by Distiller A or sell those products on Distiller A's premises.

(f) A distiller who has its product(s) manufactured at a separate location under a contract distilling arrangement may not sell the product(s) directly to ultimate consumers under Alcoholic Beverage Code § 14.05 unless the distiller manufactures, bottles, packages, or labels its own distilled spirits at its permitted premises.

(g) A distiller ("tenant distiller") or nonresident seller who engages in the activities authorized in Alcoholic Beverage Code §§ 14.10(a) or 37.011(a) on another distiller's ("host distiller") premises pursuant to a distillery alternating proprietorship may not sell the product to ultimate consumers on the host distiller's premises.

(h) A distiller who manufactures its own product, regardless of whether the product is bottled, packaged, or labeled at a separate location under a contract distilling arrangement, may sell the product for consumption on or off the premises at which the manufacturing occurs in accordance with Alcoholic Beverage Code § 14.05.

(i) Prior to engaging in the privileges authorized in this section and Alcoholic Beverage Code §§ 14.10 and 37.011, an agreement signed by each party to a contract distilling arrangement or distillery alternating proprietorship must be submitted to TABC by the permit holder who owns the ultimate product. The agreement must contain provisions specifying the nature, duration, and extent of the activities authorized under the agreement and provisions delineating a separation between each permit holder's business and operations. The agency's acceptance of the agreement does not constitute approval of the entirety of the agreement's terms and is merely an acknowledgement that an agreement containing the required provisions has been submitted.

(j) A nonresident seller who enters into a contract distilling arrangement or alternating distillery proprietorship through an affiliate must submit to TABC an affidavit describing the affiliate's qualifications under subsection (c) of this section.

(k) Notwithstanding §45.26, distilled spirits manufactured, bottled, packaged, or labeled pursuant to a contract distilling arrangement or distillery alternating proprietorship may be removed from, and transported between, distillery premises as necessary to accomplish the agreement's terms.

Notes

16 Tex. Admin. Code § 41.65

Adopted by Texas Register, Volume 49, Number 48, November 29, 2024, TexReg 9746, eff. 12/5/2024