As promised, here is some additional information regarding the impact of the upcoming change in the definition of Hard Cider. (See my last blog post for further information.) This time I want to bring your attention to a potential glitch that some of you might face regarding your TTB permit/registration.
Registrations, Bonds and Basic Permits
In order to secure TTB approval to make wine or cider you may be issued up to 3 documents: bond, registration and basic permit. The bond and registration are required by the Internal Revenue Code and must be secured if you are producing, blending, bottling or storing (non-taxpaid) wine or cider. In other words, if you are operating a commercial cidery you need to have a bond and registration approved by TTB.
The basic permit is required by the Federal Alcohol Administration Act (FAA) and is required if you are producing or blending “wine”. The catch here is that “wine”, according to the FAA, contains “not less than 7 percent and not more than 24 percent alcohol by volume”. (27 CFR 1.10) This means that if you are only going to make ciders with less than 7% ABV you don’t need a basic permit, just the registration and bond.
Because I don’t like creating unnecessary restrictions I have always recommended that cideries get a basic permit so they have more flexibility. This upcoming change to allow “hard cider” to contain up to 8.5% ABV is a perfect example of when this flexibility comes in handy. In order to take advantage of the upcoming increase in allowable ABV you must hold a basic permit.
What concerns me is that some cider makers may not hold a basic permit, and they may not be aware of the problem. A little pet peeve of mine is the following question from Permits Online:
Registrations, Bonds and Basic Permits
In order to secure TTB approval to make wine or cider you may be issued up to 3 documents: bond, registration and basic permit. The bond and registration are required by the Internal Revenue Code and must be secured if you are producing, blending, bottling or storing (non-taxpaid) wine or cider. In other words, if you are operating a commercial cidery you need to have a bond and registration approved by TTB.
The basic permit is required by the Federal Alcohol Administration Act (FAA) and is required if you are producing or blending “wine”. The catch here is that “wine”, according to the FAA, contains “not less than 7 percent and not more than 24 percent alcohol by volume”. (27 CFR 1.10) This means that if you are only going to make ciders with less than 7% ABV you don’t need a basic permit, just the registration and bond.
Because I don’t like creating unnecessary restrictions I have always recommended that cideries get a basic permit so they have more flexibility. This upcoming change to allow “hard cider” to contain up to 8.5% ABV is a perfect example of when this flexibility comes in handy. In order to take advantage of the upcoming increase in allowable ABV you must hold a basic permit.
What concerns me is that some cider makers may not hold a basic permit, and they may not be aware of the problem. A little pet peeve of mine is the following question from Permits Online:
If you planned to only produce cider when you submitted your application, you may have selected the last option: Cider Producer – Under 7% Alcohol Only. Similarly, if you submitted a paper application you might not have included the basic permit form in your packet and TTB could have approved your registration and bond without question. If either of these is the case, then TTB did not issue you a basic permit and you will not be allowed to make cider with 7% to less than 8.5% ABV next year until you get a basic permit.
Solution
What can you do to ensure you can take full advantage of next year’s law change? First, determine whether or not you have a basic permit already. It looks like this (be sure the “wine” and “producer and blender” boxes are checked under #7.):
Solution
What can you do to ensure you can take full advantage of next year’s law change? First, determine whether or not you have a basic permit already. It looks like this (be sure the “wine” and “producer and blender” boxes are checked under #7.):
If you don’t see one of these in your files, you can double check on TTB’s website at: https://www.ttb.gov/foia/frl.shtml. Check under “Wine Producer and Blender Permit Lists”, or if your TTB application was approved recently check “Basic Permits Issued Since the Last Publication”. Registrations and bonds are not public information because they are tax related so if that is all TTB has approved for your company it will not appear on these public lists.
If you discover that you do not have a wine basic permit then you should get one, and I recommend applying for it soon as it takes a number of months for processing. You can do this through Permits Online, even if your original application was submitted on paper. I must admit that I have not tried this yet, but the advice I got from TTB is that you must create a new application for an original winery rather than amending your existing application. When you do this you will need to make sure TTB connects this application to your existing registration and bond, which can be done when they ask for your Related Bonds and Permits:
If you discover that you do not have a wine basic permit then you should get one, and I recommend applying for it soon as it takes a number of months for processing. You can do this through Permits Online, even if your original application was submitted on paper. I must admit that I have not tried this yet, but the advice I got from TTB is that you must create a new application for an original winery rather than amending your existing application. When you do this you will need to make sure TTB connects this application to your existing registration and bond, which can be done when they ask for your Related Bonds and Permits:
I also recommend attaching a cover letter explaining that you are an existing cidery with a registration and bond and wish to obtain a basic permit. If anyone has already gone through this process and has additional information, please let me know so I can share it.
State Issues
Keep in mind that the above information only applies to TTB, not your state licensing. Each state has its own definition of cider which may or may not mirror TTB’s definition. Even if your state’s cider definition aligns with TTB’s current definition, it will no longer be in alignment as of 1/1/17 unless/until your state changes its cider definition. (Washington has already done this with Senate Bill 6325, which took effect 6/1/16.) Depending on your state’s licensing scheme this may or may not impact your ability to take full advantage of TTB’s upcoming change.
For example, in New Hampshire a cider maker might hold a Beverage Manufacturer License. A “beverage” contains between 0.5-6.0% ABV, which is already stricter than TTB’s 0.5-7.0% range for “hard cider”. The NH “beverage” definition does go on to say, “The commission may approve…any cider greater than 6 percent.” (§175:1 VIII) In other words, as the NH law currently stands, cideries will have to seek individual approval to make or sell cider up to 8.5% ABV. This is particularly significant given that NH is a control state for wine so if the commission does not give approval for your 6.0-8.5% ABV cider to be classified as a “beverage” it will have to be sold as a wine through the state’s liquor stores.
On the other hand, here in Oregon cideries must hold a winery license, which already allows for the production of cider over 8.5% ABV. But for tax purposes, cider up to 7% ABV is classified as a malt beverage and taxed at a rate of $2.60 per barrel. Cider containing over 7% ABV is taxed as a wine, and with the small winery deduction, no Oregon privilege tax would be due for many of our state’s small cideries. So if you are a small producer making cider in Oregon and choose to begin making “hard cider” with 7-8.5% ABV next year you will benefit from both lower federal and state taxes.
I know this is a very brief summary of a rather complex issue so if you have questions, or need help getting a basic permit feel free to reach out to me. Coming up: how the new “hard cider” definition will impact labels. Thanks, Janene.
State Issues
Keep in mind that the above information only applies to TTB, not your state licensing. Each state has its own definition of cider which may or may not mirror TTB’s definition. Even if your state’s cider definition aligns with TTB’s current definition, it will no longer be in alignment as of 1/1/17 unless/until your state changes its cider definition. (Washington has already done this with Senate Bill 6325, which took effect 6/1/16.) Depending on your state’s licensing scheme this may or may not impact your ability to take full advantage of TTB’s upcoming change.
For example, in New Hampshire a cider maker might hold a Beverage Manufacturer License. A “beverage” contains between 0.5-6.0% ABV, which is already stricter than TTB’s 0.5-7.0% range for “hard cider”. The NH “beverage” definition does go on to say, “The commission may approve…any cider greater than 6 percent.” (§175:1 VIII) In other words, as the NH law currently stands, cideries will have to seek individual approval to make or sell cider up to 8.5% ABV. This is particularly significant given that NH is a control state for wine so if the commission does not give approval for your 6.0-8.5% ABV cider to be classified as a “beverage” it will have to be sold as a wine through the state’s liquor stores.
On the other hand, here in Oregon cideries must hold a winery license, which already allows for the production of cider over 8.5% ABV. But for tax purposes, cider up to 7% ABV is classified as a malt beverage and taxed at a rate of $2.60 per barrel. Cider containing over 7% ABV is taxed as a wine, and with the small winery deduction, no Oregon privilege tax would be due for many of our state’s small cideries. So if you are a small producer making cider in Oregon and choose to begin making “hard cider” with 7-8.5% ABV next year you will benefit from both lower federal and state taxes.
I know this is a very brief summary of a rather complex issue so if you have questions, or need help getting a basic permit feel free to reach out to me. Coming up: how the new “hard cider” definition will impact labels. Thanks, Janene.
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