Yes, as long as the written agreement between the Host and Tenant provides for this situation. The key factors that the TTB will consider in evaluating the relationship include:
Authority of the “independent contractor” and
the degree of central/decision-making exercised by “independent contractor”
The proprietor whose product is being manufactured must exercise its own decision-making authority. The Host’s employees may be consultants to the proprietor, but may not be the ultimate decision-maker. This is especially the case for day to day operational matters such as bottles, storage and management of the operations. To be compliant, the tenant producer must issue written work orders and operational guidelines. It is acceptable for the proprietor to give limited discretion and authority to the consultant, but it must retain ultimate decision-making control for itself.
Similarly, auditors and inspectors should be able to discuss all records and reports with the principals of the Tenant business. The Tenant proprietor cannot abdicate its responsibility to an independent contractor’s employees or consultants. Doing so will be a violation for “inadequate control.”
It is important that the Tenant producer have separate records. A subaccount of the host’s records will not be adequate. The Tenant must independently have access and control of its separate records, without going through the account or records of another business. (Yes, a separate user ID is needed and will have to be purchased) Cooperation is a core value and practice within the craft beverage industry. However; the road ends here at record keeping. These duties are required of each business separately. Failure to comply is completely at the liability and responsibility of the tenant for its operations at the altering premises.
Owning and Operating a Brewery, Cidery, Distillery & Winery has become an Increasingly Nuanced Profession
Regulations, licensure and legal risks are always evolving, and working with an attorney who is up to date on the latest strategies is essential for advising you how to minimize and maximize opportunities.
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About Tracy Jong
Tracy Jong has been an attorney for more than 20 years, representing restaurants, bars, and craft beverage manufacturers in a wide array of legal matters. She is also a licensed patent attorney.
Her book Everything You Need To Know About Obtaining and Maintaining a New York Retail Liquor License: The Definitive Guide to Navigating the State Liquor Authority will be available next month on Amazon.com as a softcover and Kindle e-book.
Her legal column is available in The Equipped Brewer, a publication giving business advice, trends, and vendor reviews to help craft breweries, cideries, distilleries and wineries build brands and succeed financially.
She also maintains a website and blog with practical information on legal and business issues affecting the industry. Follow her, sign up for her free firm app or monthly newsletter.
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