As more wineries look for flexible production options, two common operating models often come into focus: custom crush and alternating proprietorship (“AP”) arrangements. While both allow wineries to produce wine at facilities they do not own, they are treated very differently under federal and state law, and choosing the wrong structure can lead to licensing, tax, and compliance issues.
What is a Custom Crush Arrangement?
A custom crush arrangement generally involves a winery engaging another winery or bonded facility to perform production services on its behalf. In this model, the host winery provides services such as crushing, fermentation, storage, and bottling for a fee to the brand owner. The brand owner generally owns the intellectual property related to the wine brand.
Custom crush arrangements usually require a written agreement and proper reporting, but they do not create a separate bonded winery for the brand owner, and the host winery remains responsible for most regulatory compliance at the bonded premises. A written agreement is essential to clarify responsibilities, timelines, and liability.
Custom crush arrangements are often ideal for start-up wineries or brands with limited production needs, as they allow access to professional equipment and expertise without the expense of owning a full-scale facility. While TTB reporting is typically simpler than with an AP, the brand owner still must maintain accurate records for tax and compliance purposes.
What is an Alternating Proprietorship?
An alternating proprietorship, by contrast, allows two or more wineries to operate as separate bonded entities at the same physical location, alternating use of the same equipment and space. Each alternating proprietor holds its own federal basic permit and bonded winery registration, maintains separate records, files its own reports, and is independently responsible for tax, compliance, and operations during its alternating period. AP arrangements involve significantly more regulatory scrutiny and require advance approval from the TTB, as well as careful premises diagrams, operating schedules, and written agreements.
AP arrangements are well-suited for established wineries looking to share facilities to reduce overhead, or for facilities offering co-op-style production. However, the regulatory scrutiny is higher, and failure to comply with reporting, scheduling, or bonded premises requirements can trigger enforcement actions, fines, or permit delays.
Why the Right Choice Matters
The distinction between these models is critical. Misclassifying an operation can result in unpermitted activity, tax exposure, delayed approvals, or enforcement action. In addition, state law considerations—such as licensing, franchise laws, and direct-to-consumer shipping privileges—may further impact which structure is appropriate.
Before entering into either arrangement, wineries should evaluate their production goals, control over the product, compliance responsibilities, and long-term growth plans.
How Lindsey Zahn P.C. Can Help with Your Custom Crush or Alternating Proprietorship Arrangement
Lindsey Zahn P.C. is an alcohol beverage law firm that advises wineries on selecting and implementing compliant production structures, including:
- Evaluating whether a custom crush or an alternating proprietorship model is appropriate
- Drafting and reviewing custom crush and alternating proprietorship agreements
- Preparing and submitting TTB applications and amendments for AP arrangements
- Advising on bonded premises, reporting, and excise tax responsibilities
- Coordinating state licensing and compliance implications
- Counseling wineries as they scale production or transition between models
If you are considering a custom crush or alternating proprietorship arrangement—or need to reassess an existing setup—we encourage you to contact us to discuss the most compliant and practical path forward.
Lindsey Zahn P.C. is an alcohol beverage and food law firm advising clients on federal and state regulatory compliance, licensing, and winery operations.
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