LAW

Below is a number of the current laws any brewer needs to be aware of. These are constantly changing and it is always advisable to discuss your current or future business plans with an attorney.

Federal Laws

The Small Brewer Reinvestment and Expanding Workforce Act (Small BREW Act)

(Not Enacted- Currently Referred to a Committee)

The Small BREW Act was introduced on February 5, 2013. The Act aims to amend the Internal Revenue Code of 1986 to provide a reduced rate of excise tax on beer produced domestically within the United States for brewers who produce not more than 6 million barrels per year. The Small BREW Act seeks to reduce the small brewer rate on the first 60,000 barrels by 50 percent (from $7.00 to $3.50/barrel) and institute a new rate $16.00 per barrel on beer production above 60,000 barrels up to 2 million barrels. The proposed legislation gained a total of 174 total sponsors in the house and companion legislation S.534 realized 44 total sponsors in the senate.

Minnesota Congressman Erik Paulsen, a member of the small brewers caucus and co-sponsor of the Small BREW Act, recently visited local breweries to discuss the potential benefits the Act would provide for their small businesses. For example, Lucid Brewing, which began in 2011 with only two employees (co-owners Jon Messier and Eric Biermann), now has 10 full-time employees. The tax reduction proposed in the Small BREW Act would allow them to further expand their business–creating additional jobs and helping to stimulate the local economy.

You can track the Small BREW Act’s progress by following H.R. 494 and S.917. As of February 5, 2013, the Small BREW Act has been referred to a committee and has a 1% chance of being enacted.

CFR Title 27—Alcohol, Tobacco and Firearms

Title 27 contains laws pertaining to alcohol, tobacco and firearms. Specific subparts of Title 27 are explained below.

Title 27 C.F.R. Part 7, Subpart F (Advertising of Malt Beverages)

This portion of law governs the advertisement of malt beverages. In short, a malt beverage advertisement must state who is responsible for the advertisement and the specific class of beverage. All mandatory information must be conspicuous and easily legible. An advertisement may not contain false information that may create a misleading impression and also cannot indecently criticize competitors’ products.

Title 27 CFR Part 13: Malt Beverage Labeling Regulations.

Labels of malt beverages are regulated under Part 13, of 27 C.F.R. This section of regulations set forth the information that must be on a label as well as information that must not be on a label. This section also determines font sizes and types, where information must be located on a label, and legibility requirements. To see more about this section of regulations look under Labeling.

Title 27 C.F.R. Part 25.55 (Formulas for Fermented Products)

This section sets forth the types of fermented products that require the formula to be filed. It also addresses when the formula needs to be filed and for how long the approval of a formula is valid. There are also some exceptions for specific processes and ingredients used for fermented products.

In general, a formula needs to be filed for a fermented product that is treated by a method of manufacture not common for a beer, ale, porter, stout, lager, or malt liquor, or when flavors or non-beverage ingredients (other than hop extract) containing alcohol are added. A filed formula is also required when the product contains coloring or artificial flavors, or when the product contains additional food materials.

Title 27 U.S.C. Chapter 8 – Federal Alcohol Administration Act (FAA)

The FAA contains provisions pertaining to unlawful businesses without a permit, permits in general, unfair competition and unlawful practices, bulk sale and bottling, labeling requirements, and civil penalties.

Unlawful Businesses without Permit:

Unless you have a basic permit issued under U.S.C. Title 27 § 203, it is unlawful to engage in the business of importing, producing, bottling, warehousing, or purchasing for resale at wholesale, any distilled spirits, wine, or malt beverages.

Basic Permits:

Upon application, a person is entitled to a basic permit if he/she has held a basic permit as a distiller, rectifier, wine producer, or importer on May 25, 1935. Any other applicant will be considered for a basic permit, unless the person has been convicted of a felony within the past 5 years, or convicted of a liquor misdemeanor within the past 3 years, or the applicant’s operation is in violation of state law.

Duration of a Permit

A basic permit is effective until suspended, revoked, annulled, or voluntarily surrendered. However, if the permit is leased, sold, or voluntarily transferred the permit is terminated.

Unfair Competition and Unlawful Practices:

In general, it is unlawful to create a monopoly, tied houses (retailers selling only one supplier’s products. MN has surly bill exception), or engage in bribery or consignment sales.

Labeling Requirements:

Alcoholic beverage containers must contain the government warning statement.

State Laws

State laws regulate liquor manufacturers and wholesale distributors. The state gives cities the authority to license and regulate the retail sale of intoxicating liquor.

Minnesota Statutes Chapter 340A. Liquor

This portion of laws regulates all aspects of liquor. A few important sections of Chapter 340A are set forth below. For the full list of statutes go to https://www.revisor.mn.gov/statutes/?id=340a. 

Minnesota Statutes Chapter 340A.301 Manufacturers and Wholesalers Licenses

Minnesota’s retailer license statute, Minn. Stat. §340A.402, prohibits the issuance of a retailers license to “a person who has a direct or indirect interests in a manufacturer, brewer, or wholesaler.” But there are exceptions. Manufacturers who brew 3,500 barrels or less per year are permitted to sell growlers on site.

Minnesota Statute Section 340A.311 (Brand Registration)

Any brand of intoxicating liquor or 3.2% malt liquor is prohibited from being manufactured, imported into, or sold in Minnesota unless the brand label has been registered and approved by the commissioner. Brand names must be renewed every three years. The initial fee for brand registration is $40 and the renewal fee is $30.

Minnesota Statutes Chapter 325B. Beer Brewers and Wholesalers

This Chapter regulates the relationship between the Brewer and Wholesaler. In very general terms, a brewer/wholesaler relationship may not involve any inducement or coercion. For example, the brewer may not induce or coerce the wholesaler to accept delivery of alcohol that was not ordered by the wholesaler. A brewer is also prohibited from designating the same sales territory to two beer wholesalers if the brewer informed the wholesaler they would be primarily responsible for the territory. Brewer/Wholesaler agreements are also very difficult to terminate. For a brewer to cancel, amend, terminate, or refuse to continue to renew an agreement, the brewer must satisfy the notice and opportunity to cure requirements in section 325B.05, act in good faith, and have good cause for the cancellation, termination, nonrenewal, etc. This section of laws also addresses other regulations of the brewer/wholesaler relationship.

Surly Bill/ Minnesota Brewery Pint Law Passed in 2011 (Minn. Stat. 340A.301 subd. 6(b)).

In May of 2011, Governor Mark Dayton signed the Surly Bill into law. Prior to its passage, Minnesota breweries were not allowed to serve pints of their beer on site because of the three-tiered system separating the roles of alcohol manufacturers, distributors, and retailers. Now, if the specific municipality allows it, brewers can apply for a license to sell pints at their breweries.

The Minnesota Licensed Beverage Association, the state’s most powerful liquor lobby, originally opposed the legislation in favor of the three-tier system. Eventually, they came around after lawmakers agreed to limit the law to only breweries producing less than 250,000 barrels per year.

The legislation was dubbed the Surly Bill as it allowed Surly Brewing Co. to serve pints at their proposed $20 million destination brewery. Surly broke ground on the brewery in October 2013 located in the Minneapolis Prospect Park neighborhood.

The Surly Bill was enacted through Minnesota Statute 340A.301 subdivision 6(b). The law states that municipalities are given the authority to distribute a brewer taproom license. This license authorizes on-sale of malt liquor that is produced by the brewer for consumption on the premises. Licenses may be issued only to holders of specific brewer’s licenses. A brewer may request a taproom license if they are licensed to manufacture more than 3,500 barrels of malt liquor in a year, manufacture fewer than 2,000 barrels of malt liquor in a year, or manufacture 2,000 to 3,500 barrels of malt liquor in one year. This license is not available for brewers that brew more than 250,000 barrels of malt liquor annually, or for a winery that produces more than 250,000 gallons of wine annually.  

City Ordinances

City ordinances differ depending on the city. For example, Minneapolis has the Minneapolis Title 14 Liquor and Beer Ordinance and Saint Paul has the Saint Paul Title XXIV Liquor and Beer Ordinance. All cities are subject to federal and state laws and regulations, including days of sale, hours of sale, and underage drinkers.

Days of Sale

Cities may not prohibit sales on days prohibited by statute, but cities may further limit the hours of sales. Minnesota statutes prohibit the sale of alcohol on Sundays. The statutes only prohibit off-sale licenses from selling intoxicating liquor on Sundays, Thanksgiving Day, Christmas Day, and Christmas Eve (after 8:00 p.m.).

Hours of Sale

Cities may restrict the hours of sale beyond those in the statutes via local ordinance, but the restrictions must apply equally to the sale of 3.2% malt liquor and intoxicating liquor. However, cities are not allowed to expand the hours. No on-sale of liquor may be made between 2:00 a.m. and 8:00 a.m. on Mondays through Saturdays. Plus on Sunday, unless the city has adopted a Sunday liquor law allowed by statute, the sale of alcohol is prohibited Minnesota statutes prohibit the off-sale of liquor on Sundays, before 8:00 a.m., Monday through Saturday, and after 10:00 p.m., Monday through Saturday. 

Underage Drinkers

It is unlawful for a person under 21 to consume, purchase, or possess any alcoholic beverage. It is unlawful for anyone under 21 to enter a liquor establishment with the intent of being served alcohol. A person who is 18, 19, or 20 may enter an establishment for the following purposes: to perform work for the establishment, which includes servicing alcoholic beverages; to consume meals; and to attend social functions that are held in a portion of the establishment where liquor is not sold. Anyone under 18 may not serve or sell intoxicating liquor in a retail establishment. Unless restricted by a local ordinance, minors who have reached the age of 16 may be employed to provide musical entertainment or perform busing, dishwashing, or hosting services in rooms or areas of a restaurant, hotel, motel, or resort where the presence of intoxicating liquor or 3.2% malt liquor is incidental to food service or preparation. However, a city may make further restrictions than those provided for by statute.