Before 1920, distilleries were a prominent business in New York. Prohibition wiped out the industry, and the repeal of the eighteenth amendment made it financially possible for only larger distilleries to afford the costs of start-up, licensing and taxes. Over the past ten years, changes to New York State law have afforded craft distilleries the opportunity to enter the market, supporting local agriculture business and providing a new tax revenue stream to the State.
Changes to the law have been gradual and pretty recent. In 2003 and 2004, laws were passed that allowed craft distilleries to share equipment and space with large distilleries. The microdistillieries could now bypass distributors and sell their own product directly from the premises. These changes eased the financial burden imposed on the smaller businesses that had access to a lower budget and fewer resources.
In 2007, the Farm Distillery Law was passed. Like the farm wineries that were already given special licensing, a farm distillery license allows craft distillers, using primarily New York products, to produce spirits, conduct tastings and sell their products on their own premises. These microdistillieries could now operate independently from large distilleries. Farm distilleries can produce no more than 35,000 proof gallons per year and at least half of the ingredients must come from New York farms.
What craft distilleries lack in production size, they make up for in creativity and quality. The requirement that craft distilleries use more than 50% local ingredients has led these businesses to produce unique flavors and to be more selective in which products they use. Many of the farm distilleries also grow some of their ingredients. Harvest Spirits in the Hudson Valley, founded in 2007 by apple farmer Derek Grout, produces Core vodka from the surplus of apples from its own orchard and a brandy from Barlett pears. Customers can tour the orchard and distillery, then taste and purchase products. Brad Estabrooke of Breuckelen Distillery grinds and mills organic wheat on his upstate farm, then ferments, distills and bottles the product at the distillery.
The biggest obstacle for these businesses is length of time to get a license, which can take around six months. Unlike federal licensing with the TTB, it is very difficult to estimate the time it will take the NYSLA to process a distillery application. This makes it difficult for business owners to plan and coordinate the various aspects that are needed to open the business.
Although small in number, craft distilleries are joining forces. In 2009, a group of microdistillieries created the New York Craft Distillers Guild, which creates a forum to cross-market, share information, and band together to push for legal and procedural reform.
The last five years have seen more craft distilleries enter the market and grow. The State benefits in the form of taxes. Local agriculture industry is also supported as farm distilleries must use NYS products. Farm distilleries are relatively new phenomena in the life of NY liquor law. Over time, we hope to see the push for refined laws and procedures to make it easier for these small businesses to succeed and promote the local economy.