Once a host and tenant have decided that an alternating proprietorship is the right structure, the next question is practical: what does TTB actually need to see?
An alternating proprietorship is not approved simply because two businesses sign a lease. Both parties generally must file documentation with the Alcohol and Tobacco Tax and Trade Bureau (“TTB”), and the tenant must qualify as a producer in its own right. The exact filing package depends on whether the arrangement involves a winery, a brewery, or a distilled spirits plant (“DSP”).
This post walks through the core documents and the commodity-specific items that most often come up.
The short answer: Both the host and the tenant must give TTB a copy of their alternating proprietorship agreement. The tenant must also qualify as a producer with its own application, organizational documents, premises diagram, and any required bond. Brewery arrangements also require alternate method requests and a tenant business plan, and the host usually amends its own filings.
What Documents Do Both the Host and Tenant Need?
TTB’s Permits Online guidance states that when two or more proprietors with different Employer Identification Numbers (“EINs”) will operate at the same premises and share space or equipment, both the host and the tenant must provide an alternating proprietorship agreement. This applies across wine, beer, and distilled spirits applications.
Beyond the agreement, an alternating proprietor is qualifying a regulated business. The tenant’s application will generally include the same core materials as any new producer, such as:
- Organizational documents (for example, articles of organization or incorporation and an operating agreement);
- Proof of signing authority for anyone who will sign or correspond with TTB;
- A description of the premises and a premises diagram;
- A lease or other proof of the right to use the premises;
- Information about owners, officers, and other persons with an interest in the business; and
- A bond, where one is required, and a Consent of Surety for alternation where applicable.
What Should an Alternating Proprietorship Agreement Include?
The agreement between the host and tenant is often the document TTB reviews most closely.
For breweries, TTB has explained that it carefully examines the agreement to determine whether the tenant is really operating as an independent producer. (TTB Industry Circular 2005-2) Among other things, TTB has said it will not approve brewery arrangements that bar the tenant from accessing the premises, and that agreements must not provide for pass-through payments of federal excise tax.
A well-drafted agreement typically addresses:
- The space and equipment the tenant will use, and when;
- Fees for rent, equipment, and any host-provided services;
- Ownership of raw materials and finished product;
- How each party’s product will be kept separate and identifiable;
- Who prepares records and reports, and under what authority;
- Tenant access to the premises;
- Responsibility for risk of loss, insurance, and indemnification; and
- Term, termination, and what happens to the tenant’s product at the end of the relationship.
How Should Premises Diagrams Show Shared Space?
TTB needs to understand what space is shared, what space is dedicated to each party, and how the premises will be alternated.
The diagram and premises description should be consistent between the host’s and the tenant’s filings. TTB’s brewery guidance, for instance, notes that diagrams for an alternating proprietorship should show areas permanently dedicated to the tenant and to the host. Inconsistencies between the two filings are a common reason for TTB to send an application back for correction.
Requirements by Industry: Wineries, Breweries, and Distilleries
1. Wineries
For wine, TTB’s Permits Online guidance requires both the host and tenant to provide the alternating proprietorship agreement. The tenant must also qualify as a bonded winery and obtain its own federal basic permit as a wine producer at the host’s location.
TTB’s Industry Circular 2008-4 addresses the independence and segregation of operations TTB expects between alternating winery proprietors, and is worth reviewing before the package is assembled.
2. Breweries
Brewery alternating proprietorships are approved as alternate methods of operation, so the filing package tends to be the most detailed. Under TTB Industry Circular 2005-2, the host’s filings generally include an amended Brewer’s Notice describing the alternated premises, a Consent of Surety where a bond applies, and requests for alternate methods related to use of the premises and to recordkeeping in place of amending the Brewer’s Notice each time the premises alternate.
The tenant’s filings generally include:
- A Brewer’s Notice (TTB F 5130.10) with a diagram of the alternated areas;
- A Brewer’s Bond and Consent of Surety, where a bond is required;
- A request for an alternate method of operation to establish the alternating proprietorship (sometimes called a “Notice of Alternation”);
- A request for an alternate method to use brewery records in place of amending the Brewer’s Notice with each alternation;
- A request for an alternate method if records will be prepared or stored at the host’s premises;
- A Power of Attorney (TTB F 5000.8) if host employees will prepare the tenant’s records or reports;
- A copy of the entire agreement between host and tenant; and
- A business plan showing the tenant’s plans for its brewing business.
TTB publishes sample alternate method requests that can be a helpful starting point.
3. Distilled Spirits Plants
For DSPs, TTB’s Permits Online guidance requires both the host and tenant to submit the alternating proprietorship agreement. Depending on the operation, the filing may also involve bond documentation, updated premises descriptions and diagrams, and requests for alternate methods or procedures.
Because DSP premises, bonded areas, and spirits accounting are more complex, DSP alternations often require especially careful attention to how premises are described and how spirits will be transferred or segregated between proprietors.
What Does the Host Need to File?
It is easy to focus on the tenant’s application, but the host is usually changing its own approved operations as well.
Depending on the commodity, the host may need to amend its registration, permit, or notice to describe the alternation, update its premises diagram, submit a Consent of Surety, and file its own alternate method requests. Hosts should coordinate their filings with the tenants so that TTB receives consistent information.
Common Mistakes That Delay TTB Approval
There are many mistakes that could delay a TTB application for an alternating proprietorship, but here are several ones that come up a lot or are fairly significant:
- Submitting an agreement that reads like a contract production or co-packing agreement;
- Diagrams that do not match between host and tenant filings;
- Missing or incomplete Consent of Surety language;
- Business plans that focus only on marketing and sales rather than production;
- Agreement terms that restrict tenant access to the premises; and
- Forgetting the corresponding state license or permit filings.
If TTB identifies an issue, it will typically return the application for correction—which adds time to the process. (We explain how to respond in our post on how to respond to a TTB permit correction request.)
Don’t Forget State Requirements
State licensing authorities may require their own filings for each proprietor at the shared premises. Some states treat alternating proprietors as separate licensees; others have specific rules about shared manufacturing premises. In New York, for example, the arrangement should be reviewed with the New York State Liquor Authority licensing requirements in mind.
Frequently Asked Questions
Does TTB Need a Copy of the Alternating Proprietorship Agreement?
Yes. TTB’s Permits Online guidance requires both the host and the tenant to provide the alternating proprietorship agreement for wine, beer, and distilled spirits arrangements.
Does the Tenant Need Its Own Bond?
Only if a bond is required for its operations. Under current TTB guidance, a bond is generally required when a producer’s excise tax liability exceeds $50,000 in a calendar year, and always for industrial spirits operations. Where a bond is required, a Consent of Surety covering the alternation is also needed.
Does the Tenant Need Its Own Labels and COLAs?
Yes. The tenant labels its product with its own name and address and obtains its own COLAs where a COLA is required.
How Long Does TTB Take to Approve an Alternating Proprietorship?
It varies by commodity and workload. TTB publishes current processing times, and a complete, consistent filing package helps avoid correction requests that add time.
How Lindsey Zahn P.C. Can Help
Lindsey Zahn P.C. assists hosts and tenants with every stage of an alternating proprietorship, from evaluating the proposed structure to drafting the alternating proprietorship agreement, preparing TTB permit applications and alternate method requests, and coordinating state licensing.
Contact Lindsey Zahn P.C. to discuss the documentation your alternating proprietorship will require.
📩 Email us at info@zahnlawpc.com 🔗 Visit our Contact Page to get started.
Disclaimer: This article is provided for informational purposes only and does not constitute legal advice. Reading this article does not create an attorney-client relationship. Because every situation is unique, you should consult qualified legal counsel regarding your specific circumstances.
This post is for general information purposes only and is not legal advice. Reading it does not create an attorney-client relationship.