While New York has a recently enacted a “farm distillery” category, any farm with a homestead on the property cannot have a distillery under federal law. Under the new state law, a “farm” distillery is not required to be located on an actual farm, rendering the term is more synonymous with “small producer” than anything to do with farming. However, many of the privileges granted by New York to farm distillers can’t be taken advantage of by craft beverage producers unless an exception is granted by the federal TTB. These are not always easy to obtain. Under federal law, there can be no retail sales, no tasting rooms and no restaurant located at a distillery. Federal laws restrict where you can build and operate a distillery. Some of the most important restrictions include a prohibition against locating:

• In any dwelling house, or in any shed, yard or enclosure connected with a dwelling house. This restriction has been broadly interpreted to mean land on a residential lot that is separated by a wooded area between the homestead and the proposed distillery, any outbuilding on a parcel of land that contains a farm residence, detached garages on residential property and a commercial building with mixed use that includes apartments or condominium units.
• On board any vessel or boat
• On premises where beer or wine are produced. There are alternating premises, but this situation is highly regulated. The TTB prefers that each be located in a separate building or on separate floors of the same building. If alternation of equipment is used, the law requires that the alcoholic beverage product be removed from the “shared area” and located in the permanent premises for each product respectively (e.g., wine in the winery, beer in the brewery and spirits in the distillery. Cider can be in the winery or brewery.)
• Where liquor or spirits are retailed. Unlike brewpubs and wineries, liquor cannot be sold at the distillery, at least not in the area where the spirits are being produced. By exception, if you have a wall separating the production room and the retail shop, and each area has its own entrance (access), it may be possible to locate the retail and manufacturing areas adjacent to one another.
• Where any other business is conducted. Only production, storage and processing of distilled spirits is allowed in the distillery. (Unless granted an exception, no tasting room, retail store, restaurant or banquet facilities.)

It can be difficult to reconcile state and federal liquor laws. Working with an experienced attorney can help you navigate these dangerous waters, saving you both time and money by guiding you along the right path from the outset.